The Rudd strategy Part II: just how good is China's economy?

There is also China's rapidly widening rural-urban wealth gap. About 600 million Chinese live on less that US$2 per day. National per capita income is about US$2,000. There are no pensions, social security net or adequate health care for this category. Any cash not used on bare essentials is hoarded for medical care and old age.

Despite China's proclaimed massive exchange reserves, little is done to improve health care infrastructure or provide for a basic national social safety net.

Declining domestic consumer demand

Even if current growth was maintained, pre crisis domestic consumer spending represents only 40 per cent of China's GDP, well below that necessary to maintain China's planned growth rates. Developed nations spend about 65 per cent.

Disposable income suffered severely from the stock market slide as shares lost 60 to 70 per cent of their value, leaving investors across China with huge losses and many in debt.

The property market slide compounded the problem.

Billions evaporated from the domestic spending purse.

Pre crisis, consumer spending leapt 23 per cent, before plummeting.

Burnt by the stock market, property crash, restricted credit and looming unemployment, China's consumers are bunkering down to conserve cash and hang onto jobs as employers shut the doors or cut staff.

The casualties

These include real estate, cars, computers, mobile phones, TVs, entertainment systems, household appliances, electronic gadgetry and home furnishings. The travel industry is suffering and China's expanded airlines are running low on passengers.

The property sector employs about 10 per cent of the national labour base. Recent government initiatives to boost the property market and construction industry are being ignored despite heavy discounting and finance.

China's three major domestic consumers of steel all cut back, forcing further reductions in steel production.

Unemployment

The Chinese Communist Party (CCP) is paranoid about "social harmony" employment the number one priority.