China Shortchanges Its Poor

The IHT reports that while China is expected to continue its unprecedented streak of double digit economic growth, the communist nation has neglected vital social programs. The Organization for Economic Cooperation and Development issued a report that noted China's surging tax revenues have been outrunning growth in social spending. In particular, China has been engaging in a significant arms buildup aimed at Taiwan that has diverted tremendous resources from the rural poor.

The OECD predicts that China's surging exports will create an even larger trade surplus next year than its current record levels. This has enormous implications in the form of China's massive foreign reserves. Because the country has been sopping up excess liquidity by building foreign exchange reserves to prevent foreign direct investment from creating inflation, China has more than $1.2 trillion in foreign exchange.

China has recently committed itself to investing $3 billion in a US private equity group and talks about creating a national investment firm to invest its foreign exchange abroad in order to acchieve a higher rate of return.

China is an emerging economy with tremendous monetary resources. Nonetheless, in a country with hundreds of millions of people barely above subsistence levels, China could surely direct those resources more profitably toward its own citizens.