Chinese Sphere: Financial Crisis Hits Home

At the outset of the financial crisis, many China-based media commentators were exuding a sense of self-satisfaction toward the troubles the U.S. economy was going through and looking forward to a reconfigured international order with a weakened U.S. and stronger China. However, with recent news this past week of rising unemployment and factory closures in China, the media has dialed back its triumphal declarations and is, instead, calling for businesses to do the right thing and keep their workers on the dole.

In an editorial titled, “Committing to No Layoffs Is an Expression of Corporate Social Responsibility,” the Chinese government’s official Xinhua News Agency writes, “In the face of economic crises, corporations, especially privately-run businesses, can choose to layoff workers in order to reduce risk and costs and achieve the goal of self-preservation. This is a common approach taken by corporations in developed Western nations. However, a responsible corporation should look after the overall interests of the nation and society. It should tightly tie its own fate to that of the nation and the people. … The greater the crisis, the tougher will be the test of a corporation’s moral fiber and social responsibility.”

With Singapore now officially in a recession and one of its largest banks announcing layoffs, leading Chinese-language daily Lianhe Zaobao is also using similar language in pleading for businesses to go easy on the layoffs: “Corporations may pursue profit, but they must also be socially responsible. They should care for the welfare of their employees and their families. … In the midst of the rapidly deteriorating global economic situation, it would be unrealistic to expect companies not to engage in any layoffs at all. … However, we sincerely hope that during these difficult times company managers will be able to think carefully and long-term. Value and respect the labor-management-government tripartite negotiation channels and make use of its special advantages. Adopt a ‘tripartite’ approach in dealing with issues such as crisis response and employee lay-offs in order to set a good example of a manager.”

An economic policy consisting of entreaties to businesses to refrain from taking measures perfectly consistent with free market principles would be received with ridicule in Taiwan, so the government can only hope to use fiscal measures to soften the impact of the global economic downturn. However, President Ma Ying-jeou’s administration has resorted to a curious combination of both massive government spending and large tax cuts in hopes to stimulate the economy.

The Taiwan-based China Times writes, “Cutting taxes is like smoking opium. In some situations tax cuts may have a stimulatory effect, but they also have very obvious negative consequences: they decrease government revenue, worsen the nation’s financial state, add to the debt burden of future generations, seep away funds for infrastructure development, and weaken the investment environment. Overall, it causes long-term damage to economic fundamentals. Short-sighted political hacks get caught up in the applause over tax cuts, but they ignore the after-effects of shocks to government debt and infrastructure development. … When our government officials wish to adopt the most appealing policies of America’s Democratic and Republican parties by both increasing spending and cutting taxes, does President Ma not feel the least bit of discomfort? Is there such a thing as a free lunch?”