Chinese government warning: Welfarism is bad for your economic health
Enzo_Michelangeli
Novembre).
China's top man in Hong Kong las night made a scathing attack on the
Government's pension plan, warning of financial dangers and erosion of
business confidence.
Zhou Nan, local director of Xinhua (the New China News agency), warned
that transplanting a Euro-socialist pay-as-you-go concept into the
territory - referring to the Government's old age pension scheme -
would be too costly for Hong Kong both now and after 1997.
Without mentioning the pension scheme, he said the territory's
successful policy of low tax and balanced budget would be jeopardised
"if we drastically expand budgetary deficits and overcommit ourselves
with regard to benefit payments and other expenditures in the
transition period".
Mr. Zhou, speaking at the Hong Kong Management Association's annual
fellowship dinner, was making an address in English for the first time
since he took over Xinhua in 1991.
His criticism of the pension scheme was by far the clearest sign from
the Chinese Government that it will oppose the scheme when it is
tabled for discussion at the Joint Liaison Group.
Government officials have strongly hinted that they would drop the
plan if China said no.
Under the scheme announced in July for consultation, all eligible
residents would get a monthly pension of HKD 2,300 (USD 295) in 1994
dollar terms, when they reached 65. The money would come from a
proposed contribution of 1.5% of the employee's monthly income, paid
by both employees and employers.
Despite the collapse of the "through-train" arrangement, Mr. Zhou
argued that China's decision to disband the three tiers of government
in 1997 was "instrumental in reducing the uncertainties over Hong
Kong's political transition".
Mantaining economic prosperity, the Xinhua chief said, was beginning
to figure more prominently as 1997 approached.
Citing the dynamic growth of the mainland economy, he said the "China
factor" was a positive one that could not be removed or replaced.
"However, there is a possibility that another key element in Hong
Kong's economic success, namely, it's economic structure, might be
changed on purpose." Mr. Zhou said.
"In my view, it will be ill-advised for anyone to attempt this for
sake of one's political positioning.
"We are seeing disconcerting signs of attempted changes, proposed in
the name of lofty causes. These will definitely bring serious impact
on the future of Hong Kong.
Although Hong Kong needed to develop new infrastructure projects and
care for the poor and the old, Mr. Zhou said this must be done
carefully, taking into account "the cost to the taxpayer, the cost to
budgetary balance and the cost to Hong Kong's overall economic
structure and its free market orientation".
Referring to a World Bank report on pension schemes released in
September, Mr. Zhou said the "pay-as-you-go" pension strategy in some
Western countries had a history of grossly under-estimating
liabilities and grossly over-estimating funding projections.
"The World Bank's statistics and analysis are not irrelevant to Hong
Kong's situation", he said.
"I remember dining in a Chinese restaurant in New York many years ago.
After dinner the waiter served fortune cookies, and a message that I
got read: `The person sitting right next to you isn't going to pay for
his meal'.
"This American-made practical joke has an ironic sense of reality in
today's Hong Kong.
"Drastically expanded benefit payments and benefit commitments are
being offered in the disguise of a free meal. The departing colonial
authorities are not going to foot the bill. The taxpayers of Hong Kong
will.
"All the `beneficiaries' will see money being shifted from one pocket
into another, with a government bureaucracy serving as
value-subtracted intermediary", Mr. Zhou said.
He indicated that the price to be paid by the Special Administrative
Region would be "budgetary imbalance, tax hikes, reduced financial
market liquidity which will result in eroded foreign investors'
confidence".
"We must watch very closely every spending move made by the [Hong
Kong] authorities, either in cash or in terms of committments. Hong
Kong's future will depend on our vigilance and our perception, and
most of all, on our desire and ability to uphold the Basic Law", he
said.
Noting the concerns raised by local people over the "massive spending
package", Mr. Zhou sad "an accountable government should give such
considerations a high priority".
--
<a href="http://www.fareast.com/~enzo/"> Enzo </a>
--- Internet Message Header Follows ---
Path:
exnet2!cam.news.pipex.net!pipex!howland.reston.ans.net!news.hk.net!hk.net!enzo
From: en...@hk.net (Enzo Michelangeli)
Newsgroups: soc.culture.italian
Subject: Chinese government warning: Welfarism is bad for your economic
health
Date: 17 Nov 1994 02:47:22 GMT
Organization: Hong Kong Internet & Gateway Services, Wanchai, Hong Kong
Lines: 106
Message-ID: <3aeg7q$6...@news.hk.net>
NNTP-Posting-Host: hk.net
X-Newsreader: TIN [version 1.2 PL2]