The Guardian October 22, 2003


China's big economic success

A delegation form the Communist Party of India (Marxist) 
recently visited the People's Republic of China. It was led by 
Sitaram Yechury a member of the Political Bureau of the CPI (M). 
Here are extracts from his report on his return from that visit. 
It was published in the CPI (M) newspaper People's 
Democracy.

A visit to China after a gap of three/four years always leaves 
one with amazement. The hectic all around economic activity and 
the construction of buildings, offices, factories and residential 
quarters is at such a pace that seems unlikely anywhere else in 
the world. The skyline keeps constantly changing and so does the 
facade on the ground.

China's economic growth has often been termed, by many, as a 
miracle. Since December 1978, when the Communist Party of China 
(CPC) adopted the course of reform in order to build socialism 
with Chinese characteristics, the economic growth has been simply 
stupendous.

The gross domestic product in 2000 was, in parity pricing terms, 
6.4 times that of 1978, with an average annual growth rate of 
9.52 per cent.

During the decade of the '90s, China emerged as the largest 
producer of grain, cotton, oil seeds, coal, iron and steel, 
electricity, chemical yarn, domestic electrical appliances, etc 
in the world.

Its volume of exports and imports increased from US$20.64 billion 
in 1978 to US$509.77 billion in 2001. In 2001, it attracted 
foreign direct investment of US$69.2 billion.

China's top leaders have undertaken many mega projects for the 
development of the country. These include: (1) the Three Gorges 
Dam to generate 22,400 MW power and solve the problems of 
drought, floods, irrigation and navigation; (2) the 4000 km 
pipeline project to facilitate easy transportation of oil from 
the western part of the country to the eastern part; (3) the 
magnetic levitation (without wheels) train project which is aimed 
to travel at 430 kilometres per hour; 1000 kilometres of 
superhighways, four new railway lines; the water transportation 
project from the south to the north; and so on.

Modern China is constructing the world's largest dam, the longest 
bridge, the fastest train and the highest railroad.

China achieved the first two steps of the strategic goal it had 
set itself in the early '80s, that is, that by the year 2000 
China would quadruple its 1980 per capita GNP and provide a 
"fairly comfortable" life for its people.

Starting from 2001, China began its march towards the third of 
the strategic goals: fully-fledged modernisation and a per capita 
income at the level of moderately developed countries by the 
middle of the 21st century.

Reforms in China

China's leaders expect a growth rate of over eight per cent, once 
again, this year. They repeated and reiterated that the reform 
process is accompanied by the adherence to the four cardinal 
principles  the socialist road; leadership of the CPC; Marxism-
Leninism and Mao Zedong thought; and the people's democratic 
dictatorship.

Such tremendous economic growth, which continues even in a period 
when the world capitalist economy is in the midst of a severe 
recession, is explained away by many as due to the adoption of 
the economic policies of globalisation and liberalisation by 
China. Some claim that China has adopted a successful private 
market economy; has flexible labour laws of hire and fire and is, 
therefore, able to attract an astoundingly high dose of foreign 
direct investment. Let us examine these claims.

In 1978, the State ownership in the national economy was 78 per 
cent and an additional 20 per cent was in the collectively owned 
sector.

By 2000, the State and collective owned sectors of the economy 
constituted over 75 per cent of the national economy while the 
private economy grew from over one per cent in 1978 to nearly 25 
per cent in 2000. This figure includes the joint ventures of both 
public and private Chinese companies with foreign capital.

The public sector, therefore, continues to remain the dominant 
sector of the economy. Apart from continuation of such dominance 
by public ownership, strategic sectors like defence, 
telecommunications, power generation and all other areas of 
social and economic infrastructure continue to remain 100 per 
cent in the public sector.

This makes a mockery of the claim that competition can improve 
only by privatisation. All the key sectors remain under State 
control in China.

With regard to the labour laws, it must be repeated that 
socialist China has in place what they term the "two guarantees" 
policy that is, providing basic living conditions and health for 
all its citizens.

According to the Chinese Ministry of Labour and Social Security, 
the number of people employed in various sectors of the economy 
in China totaled 730 million in 2001.

Out of the 730 million, 120 million jobs are in the private 
sector including private businesses, retail trade, catering, 
tourism etc. State sector employment is 510 million, (the other 
100 million coming from the collective sector). Around 20 million 
employees were laid off due to obsolete technology and 
restructuring.

Between 1996 and 2000, more than 40 million jobs were created out 
of which a large proportion of jobs have gone to laid-off 
workers.

Around four million laid-off employees receive basic living 
allowances every month. (Beijing Review, October 31, 
2002).

In addition, they have an unemployment insurance program, which 
guarantees a basic livelihood for those who may become 
unemployed. The basic living conditions of more than 90 percent 
of the laid-off workers from State-owned enterprises were 
guaranteed.

Foreign investment

The reason why China attracts a high degree of foreign investment 
does not lie in the claims made by the liberalisation pundits. 
Foreign investment, for that matter any investment, moves into 
areas where it sees profit.

An essential pre-requisite for profit generation is the 
availability of adequate infrastructural facilities. Before 
foreign investors decide to invest, they look for the 
availability of power, communications, access to ports and 
airports etc. Only when these are in place does investment flow.

In China, it is the socialist State which provides this 
infrastructure and ensures that all the required needs are in 
place before the foreign investment comes in. China's success 
does not lie in the logic of globalisation and liberalisation 
peddled in statements like "it is not the government's business 
to be in business".

As economic development takes place, the State in China has 
become the most dominant and determinant economic player in 
providing the required social and economic infrastructure.

In addition, the social infrastructural expenditures in socialist 
China, in terms of health, education, housing, etc have 
contributed tremendously in increasing labour productivity. China 
has a large, well-educated and a healthy labour force. It is not 
so much the cheapness of wages that attracts foreign investment 
but it is basically the ability for higher levels of labour 
productivity.

Problem areas

The process of reforms in China has its attendant problems. The 
Chinese leaders and the Chinese journals candidly discuss these 
problems and the ways of resolving them. During the course of our 
discussions with the Chinese leaders, they pointed out four 
problem areas that are continuously being combatted.

First, though corruption has been brought under some degree of 
check with exemplary death sentences awarded to top leaders who 
were caught on this score, the problem has not been completely 
eliminated.

Secondly, unemployment resulting from the restructuring of the 
public sector enterprises is not completely solved. The 
retraining and redeployment of such workers is being undertaken 
on a big scale but problems remain.

Thirdly, social inequalities continue to remain with some people 
growing rich much faster than the rest. Special measures to 
narrow the gap, they say, have been initiated (like those earning 
less paying lower house rent, health charges, scholarships for 
higher education, etc).

Fourthly, regional inequalities, though reducing, still pose a 
problem that needs to be resolved. Backward regions and regions 
with difficult physical terrain are being focused upon. The more 
prosperous regions and some public sector enterprises have been 
given the responsibility for specific regions with time-bound 
targets. This, they say, has helped in reducing such disparities, 
but more needs to be done.

On the whole, the Chinese leadership appeared satisfied with the 
overall economic performance while tackling certain adverse 
developments. Agriculture, however, continues to remain an area 
of concern when the demand for food articles is on the rise and 
the cultivable land available is on the decline due to rapid 
industrialisation, even in rural areas.

This is attested by the fact that between 1990 and 2001, the 
number of rural households increased from 222.37 million to 
244.32 million, while the number of rural labourers declined from 
895.9 million to 482.3 million! Much of this labour was absorbed 
in the agro-industries set up in a planned manner in the rural 
areas, called Township Village Enterprises (TVEs). They are 
concentrating in the area of further increases in productivity on 
land.

In the final analysis the contradiction between socialist China's 
attempts to use foreign capital and technology to strengthen 
socialism with Chinese characteristics and the desire of foreign 
capital to undermine socialism in China will determine the 
direction, scope and future of China's economic development and 
socialist construction. Many new flash points can emerge, like 
that of the 1989 Tiananmen Square incident in the unfolding of 
this contradiction.

However, we, in the CPI (M), wish the Chinese people under the 
leadership of the CPC, all success in their efforts to strengthen 
socialism in China overcoming the connected problems.

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