Chinese President Hu Jintao told his fellow communists that his country was losing its competitive edge and that the worsening financial crisis will push the country’s growth down tremendously in the coming months and year.

Where China’s economy grew with 11.9% last year, it is only expected to do so with 9% this year. That still makes China the fastest growing major economy on earth, but Chinese leaders nonetheless fear that the drop in growth could very well signal a new era. An era in which the Chinese have to struggle, like most others, to grow their economy.

“External demand has obviously weakened and China’s traditional competitive advantageis being gradually weakened,” Hu said, according to the Communist Party‘s official People’s Daily newspaper.

As Hu told his fellow leaders, they have prided themselves in their ability to politically and socially oppress people while bringing about major economic growth (and more economic freedom) nonetheless. The current crisis and China’s competitiveness are posing a major challenge to the country’s communist regime. As Hu put it: “Whether the pressures can be turned into a driving force and the challenges turned to opportunities … is a test of our ability to control a complex situation, and also a test of our party’s governing ability.”

The country’s government has to do more to develop and modernize the country as a whole, and especially its rural areas, Hu rightfully said. It has to ‘ raise living standards, use resources more efficiently and develop rural and urban areas’ and ‘reform its economic growth model to achieve development that is sustainable.’

If China wants to establish ‘sustainable growth’ it will have to make sure that its own people have enough money to buy consumer goods. Although many living in the big cities in China do have enough money for ‘extras,’ the far majority of the people who live in rural areas do not. As a result, Hu’s plans to develop these areas makes sense. If China continues to ignore the poor peasants the country’s economy will suffer in the long run.

On the other hand, if China develops its rural and urban areas, and if the average income of the Chinese people increases significantly, China will lose its competitive edge even more. This means that the Chinese will have to find a way to increase living standards without doing destroying their ability to compete.

Thus far, not many governments have succeeded in doing so; America, for instance, has lost its competitive edge in the last few decades, losing millions of jobs or having to subsidize entire industries in order to keep them artificially alive. If the Chinese are not careful they will follow in America’s and especially Europe’s footsteps in this regard.