More help from the government

Beijing—I just completed a journey by train from southern China during which I passed through some of the areas hardest hit by the disastrous snow in early January. The destruction is easy to spot - the villages, paddy fields and normally evergreen hills festooned with bamboos and firs are blanketed in white, reminding me of the snowy scenes I used to see when I worked in Xinjiang.
And the impact of the calamity lingers on, even as the severe weather may have passed its peak. It was a disaster of a continental proportions, hitting 20 province-level territories, or around two-thirds of the country. Among them, Henan, Anhui, Hubei and Hunan - the very center of the nation’s main transport arteries (both railways and highways) - occupy an area equal in size to Germany, the UK and Switzerland combined.
Meanwhile, the national insurance companies have reportedly paid a little more than 1 billion yuan ($139 million) in indemnities to their clients. If we add in the money and aid materials from the Ministry of Civil Affairs, there is some 2.1 billion yuan in circulation.
Of course, there has been an enormous mobilization of other resources, which can all be counted in monetary terms. But if we compare the figures to the size of the area hit by the deep freeze and then factor in the unprecedented nature of the disaster, too little has been done.
If the disaster is not viewed as an isolated case, and if the would-be impact of climate change is also to be considered, then a huge commitment must be the next item on the agenda. In monetary terms, there must be a huge and long-term investment in public infrastructure to help the nation avoid future climate disasters.
In the near term, China’s southern power grid will need some massive repair work, and some major transportation facilities will have to be redesigned and rebuilt. Urban development should also be remapped, with buildings and pipelines more resistant to cold weather, which will also lead to a recalculation of energy supplies.
Small enterprises will have to be provided with greater incentives to revive their operations. Local governments could be allowed to furnish some tax cuts and rental subsidies.
It would be a good thing if such an infrastructure renewal and business revitalization program could be included in the premier’s government report to the annual session of the National People’s Congress, planned to start on March 5.
Such a program could benefit the economy in other ways. For example, it could maintain employment as exports slow due to the credit crunch in the United States and the RMB’s valuation increases. And domestic consumer spending could always use financial stimulation.
It is not always true that governments must refrain from spending in order to avoid inflation. Some southern provinces are key economic powerhouses. Without measures to help them pick up steam, China may face a more serious bout of inflation.
Grocery prices have already gone up in the southern cities where local supplies were destroyed by the freeze-up. And northern cities are still counting on them for much of their supplies of consumer goods.
Having said this, it is obvious that contrary to some observers’ predictions of a noticeable dip in China’s 2008 GDP growth, the country’s priority should not be a single-minded chase of small price rises, but instead, a more comprehensive and balanced approach.
Of all economic factors, development should always carry more weight than inflation. So the government should increase its spending to help the southern provinces generate more development.

—The Daily Mail, China Daily news exchange item