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.