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Expect long, hard road to recovery

By You Nuo (China Daily)
Updated: 2009-01-12 07:31

At times, people face a dreadful dilemma. It is like what the herbal doctor would face in traditional Chinese medicine: To save a dying patient, someone with many sets of internal disorders, a dangerous treatment would be in order.

Ferocious medicine, or as the Chinese would say, "tiger-and-wolf" drugs, must be prescribed. But the treatment would be ferocious in both ways - to kill the disease, and to consume, if not entirely, the body system.

If the life of the patient is saved, what follows would be a long time of recovery - accompanied by milder medicines and nourishing food.

Now, however, we face a world dominated by the more "scientific" Western medicine - as it is called in this part of the world. Quick solutions are desperately sought for any problems, including the financial crisis that has made the world's strongest economies slow down.

In many countries, more money is being printed in the hope that it would generate fiscal stimulus for economies where credit flow has gone dry and many businesses are grinding to a halt.

No one is arguing against quick reactions to a crisis, especially when there have already been delays in the current one. Nor does it make much sense to argue whether the reactions promised are powerful enough or not, for the totality of the problem is still hard to quantify.

But even though there must be quick reactions, people have to be clear that they may not necessarily amount to quick solutions - even if they all get quick approvals and have quick starts - and even less a quick recovery.

If we agree with economists who are telling us that this crisis is different from most of the minor ones in recent history, and that it is essentially a break-off from the past, we may get the feeling that the crisis is not going to be like a bout of flu, which one can get rid of by just having a few pills and a good night's sleep.

Following the same logic, if China's problem is primarily structural, and one that requires the discarding of the export-led development model that it picked up 30 years ago but is no longer working very well, then it is hard to expect the government's fiscal stimulus, however enormous, to do all the job. The effort has to come from the entire society, not just a few sectors.

In fact, all the government-designed fiscal stimulus programs are just like the ferocious dose in traditional Chinese medicine - only enough, if lucky, to prevent the worst-case scenario. At the moment, it is only out of necessity that the government is printing more money, to bail out companies with dwindling export revenues, to finance the creation of new jobs, and to stabilize the economy.

But just as the so-called ferocious dose may at times be mixed with a controlled amount of poison, extreme interference from the government cannot be used for too long, and be mistaken for the only way out of the woods. No matter how fiscal stimulus is to come down, "jump start" is only a euphemism, and it certainly does not amount to an economy's rebuilding.

So it is premature to debate whether a government stimulus plan is adequate. It cannot be so by nature. What makes more sense is to ask what kind of second-tier and third-tier programs (and changes) are needed to follow up the costly initial stimulus. For there will have to be a stage, longer than many commentators are ready to face, of delicate readjustments - just like a patient, after being saved by some "tiger-and-wolf" measures, recovers on a daily diet of chicken soup and fresh vegetables.

That would be a stage when industries will be slowly re-mixed, business ties re-connected, government roles re-defined, and old products and services replaced.

As in the Chinese case, that would inevitably require a renewal in the everyday market in the nation's usual business hubs - such as the Yangtze and Pearl River delta regions, and in the millions of small- and medium-sized enterprises from Beijing and Shanghai all the way to county towns in Sichuan province.

E-mail: younuo@chinadaily.com.cn

(China Daily 01/12/2009 page4)