The paramountest leader

By Economist.com

Hu was best for China's economy?

THIS week Hu Jintao, China’s president, stepped down as leader of China’s Communist Party. His economic record would be the envy of most leaders elsewhere in the world, but how does it compare with that of his predecessors? He inherited an economy that had grown by 9.6% a year on average during Jiang Zemin’s time in office and almost as quickly during Deng Xiaoping’s years in charge. Rather than try to match that pace of expansion, Mr Hu promised a more balanced path of development in pursuit of a more “harmonious” society. As things turned out, growth was even faster under Mr Hu than it had been under his predecessors. Growth this year has slowed to less than 8%. But that is still fast enough to fulfil Mr Hu’s target, announced last week, of doubling income per person from 2010 to 2020. Has this hectic growth also been more harmonious?

China’s development has traditionally favoured the city over the countryside and the coasts over inland regions. By the time Mr Hu assumed office, China’s coastal provinces accounted for 61% of the country’s economic output. Heavy investment in inland provinces has helped to arrest that trend: the coasts’ share of GDP was 58.5% last year. Urban incomes also outpaced rural incomes under Deng’s rule and in the latter half of Jiang’s reign. By 2008 rural incomes averaged less than 30% of urban disposable incomes. Since then, according to official figures, rural incomes have regained some ground. Mr Hu also sought more balanced growth. But his efforts to expand the role of household consumption failed. Its share of GDP averaged an astonishingly low 37% from 2003 to 2011, compared with 46% during Mr Jiang’s term. In his defence Mr Hu can say that the consumption ratio rose in 2011 and in the first nine months of 2012. Consumption has lagged partly because China’s capital-intensive, monopolistic state-owned enterprises (SOEs) have raked in profits rather than driving down prices or bidding up wages. The SOEs shed tens of millions of jobs under Mr Hu’s predecessor, but their share of urban employment has stabilised on Mr Hu’s watch. In his speech at the party congress, Mr Hu described public ownership as the “mainstay of the economy”. Unfortunately that sentiment is not in harmony with balanced growth.