By JOHN RICHARD SCHROCK
There was an Asian financial crisis in 1997-98. Due to currency speculation, the value of money in Southeast Asian countries plummeted, some by half. But China had pegged the value of its currency to the U.S. dollar at a ratio of 8.3 RMB to the dollar in 1994 and held it there until 2005. While most Asian countries suffered from inflation and job losses, China held steady and prevented additional speculation. This stabilized the Asian economies. Asia recovered due to China’s holding the line.
The “Great Recession” of 2008 originated in the U.S. due to our banks making subprime mortgages (home loans to borrowers with poor credit) and then spread worldwide. While this occurred at the end of President Bush’s administration, President Obama had to restart the economy by providing an economic stimulus, such as funding “shovel-ready” projects. This gradually restored the U.S. economy, beginning the 11-year recovery that just ended with the current pandemic.
However, political resistance kept the amount of U.S. stimulus low. But China cut loose with far more stimulus money. China’s year-over-year increase in GDP did fall from nearly 20 percent to eventually 6 percent. The number of lower class folks entering the middle class slowed. But construction continued and modernization moved ahead. Some economists credit that major input into China’s massive economy with preventing a Second Great Depression.
Today, every Western country is expecting a decrease in annual GDP compared to last year.
But South Korea, Taiwan and China may be exceptions. While China brought its factories, schools and population to a complete standstill in the first quarter of the 2020 year, public cooperation and cell phone tracking ended the pandemic in all but a few “border” regions: illegal migrants from North Korea into Jilin, from Siberia into the Harbin area, uncontrolled movement into the Western Xinjiang Province, and airline passengers bringing the European COVID-19 strain back into the Beijing airports.
According to Keith Bradsher of the New York Times, China’s factories began re-opening in late February and early March. “Exports soared in July to their second-highest level ever, nearly matching the record-setting Christmas rush last December.”
Because other manufacturing nations are to some extent shut down, China is the world’s major producer of medical supplies that are desperately needed. Even with an average 25 percent tariff placed on U.S. imports from China, purchases of all of their products have not significantly declined.
New calculations based on near-record production in the April-June quarter would increase China’s total year GDP to two percent over last year!
Another very important factor in recovery is school funding. In the United States, after including both the federal coronavirus relief packages and schools’ state rainy day funds, an analysis by the National Education Association anticipates a 20 percent reduction in the education workforce. American schools are primarily financed by state and local taxes and the economic slowdown means substantial reductions in tax revenue. And in our schools, the major budget line is salaries.
But in China, provincial and national support for schools will continue at regular levels. They will not cutback educational funding for their K-12 students, unlike our tax-based system. In addition, the older Chinese on average save over half their income. Thus their 2-3 month lockdown did not result in hunger, eviction from apartments and other tragedies. And although Chinese higher education is heavily tuition-based, the family support mostly remains intact for students to continue their college.
We should be glad that the Far East economy is mostly up and running. They will not only be able to supply the medical and digital supplies that the world needs, but they will be able to buy beef and pork and other exports that support our economy. They have a middle class much larger than ours and their return to normal will help our economy eventually return to normal as well.
Over two decades ago, David M. Lampton of the National Committee on US-China Relations stated: “If most Americans had even the foggiest idea of the change that has occurred in China, they would be cheering [instead of looking for ways to punish China].”
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John Richard Schrock has trained biology teachers for more than 30 years in Kansas. He also has lectured at 27 universities in 20 trips to China. He holds the distinction of “Faculty Emeritus” at Emporia State University.