Business Spectator (Australia)
August 27, 2010
by John Lee
China has always been the place for the world’s biggest anything: the Great Wall, Tiananmen Square, the South China Mall in Dongguan, and now the world’s biggest traffic jam along the Beijing-Zhangjiakou Highway in China’s north-east. Many of us are a little voyeuristic when it comes to major traffic jams because most of us have endured one at one time or another. But there is more to this traffic jam than meets the eye. It gives us some insight into a number of things that is good and bad about how China actually works today.
The traffic jam on the Beijing-Zhangjiakou Highway puts any congestion we have – such as on Sydney’s M5 or Melbourne’s Monash Freeway – to shame. It began on August 13 and stretches 100 kilometers from the outskirts of Beijing to the border of Inner Mongolia. Vehicles are moving along at about 400 meters each day. Amazingly, traffic authorities believe that the traffic jam will continue until at least September 17 when new traffic lanes will open up following significant road construction. Unsurprisingly, almost a fortnight after it began, vehicles are spilling on to smaller feeder roads when they have a chance, meaning that the impasse is spreading to surrounding areas.
What does this monstrous traffic jam say about modern China? Let me first point out the bad and then the good.
On the face of it, this appears to be a story about the breakneck development that is taking place throughout the country. For example, adding together Chinese building construction throughout the whole country equates to building a city the size of Brisbane every month. Around 20 million new people – a number just less than Australia’s population – are moving from rural to urban areas every year (meaning that the rate of urbanisation is increasing by around 1.5 per cent each year, which is far slower than we are sometimes led to believe). And car sales are rising by around 20 per cent month-on-month. (Bear in mind that car petrol usage is rising by only 3-5 per cent during the corresponding period. This lends support to rumours that local state-owned-enterprises are purchasing new Chinese made cars and leaving them to languish in massive warehouses to pump up consumption figures.)
Yes, China is also busily building highways. But more cars mean more traffic, especially when extensive construction work is taking place in parts of the highway in order to deal with rising driver demand. The traffic jam seems to fit into this narrative.
This is surely a large part of the explanation for the congestion. But there is something else that has made congestion on the highway just a little bit worse. Take a closer look at the pictures of the stalled vehicles – the unusual and inordinate number of trucks is a dead giveaway for locals.
China relies on coal for around 70 per cent of its energy needs. About half of this is local coal, a large proportion coming from the small and inefficient mines that litter inland China. For many years, thousands of small and illegal coal mines in Shanxi province (west of Beijing) supplied the capital and surrounding towns with cheap coal. Given the lack of investment by mine owners in safety, compounded by the poor implementation of standards by local authorities, these mines are the most dangerous in the world. It is estimated that around 2,500 people died from exploding or collapsing coal mines each year, although the number fell to 1600 in 2009.
Over the past couple of years, residents have successfully lobbied authorities in Shanxi province to close down around 1600 of the 2600 coal mines in the area, many of which were illegal. However, eyeing a new opportunity, many businessmen in collusion with local Chinese Communist Party officials have opened or reopened hundreds of illegal (and undoubtedly unsafe) mines in Inner Mongolia which is situated directly to the north of Shanxi province.
Since there are no checkpoints when entering from the north, the thousands of trucks carrying illegal coal from Inner Mongolia have little need to spend further money bribing officials like they use to do with illegal Shanxi province coal. Residents living close to the Beijing-Zhangjiakou Highway have observed a massive increase in the number of trucks joining the freeway from the northern feeder roads into the Beijing-Zhangjiakou Highway – the same trucks that stretch for miles in the current traffic jam.
But this 100 kilometre traffic jam has also demonstrated the enormous entrepreneurial spirit in the country. Also sensing the emergence of a new albeit transient opportunity, thousands of street vendors have set up shop selling food, drinks, clothes, books and magazines, and even jewellery to bored, frustrated and static drivers – the perfect captive market. Others have even set up temporary sleeping depots to allow tired drivers to rest, and some enterprising businesses offer ‘relief drivers’ to vehicles on an hourly basis.
It is worth noting that this is the same spontaneous entrepreneurial spirit in the Chinese people – exercised in tens of thousands of towns - that drove Chinese growth in the first ten years of reform (1979-1989). Given permission to use their allotted land as they wished, millions of small businesses spontaneously sprang up – a happy revolution that Chinese reformer Deng Xiaoping admitted was “completely unplanned, unforeseen but began (China’s) path toward growth”. Eighty per cent of the poverty reduction that has occurred in China since 1979 took place in the first 10 years. Because growth was driven by millions of private households from the bottom-up, household incomes were rising at the same rate as GDP growth.
In contrast, China’s state-led model – with a heavy bias towards the state-controlled sector – only took flight after the 1989 Tiananmen protests when the CCP deliberately retook control of the economy. Since the 1990s, private household incomes have risen three to four times slower than GDP growth, while the state sector is experiencing growth that is 50 per cent higher than national GDP growth on average. It is no wonder that from 1979-1989, domestic consumption was around 60 per cent of GDP. Almost two decades after the introduction of the state-led model, it is now around 32 per cent of GDP.
One can learn a lot from a traffic jam if we look hard enough. And if you find yourself stuck on the M5 anytime soon, spare a thought for the Inner Mongolia coal truck driver who may not be home until mid-September.
John Lee is a Hudson Institute Visiting Fellow and an Adjunct Associate Professor and Michael Hintze Fellow for Energy Security at the Centre for International Security Studies, Sydney University. He is the author of Will China Fail? (CIS, 2008).
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