People's Democracy

CPI(M) DELEGATION’S VISIT TO CHINA

Spectacular Progress, Formidable Challenges – (3)

Ashok Dhawale

IN this penultimate article of the series on the CPI(M) delegation’s visit to China, it would be useful to sum up and generalise our observations about the spectacular progress made by socialist China and to take stock of the formidable challenges that it faces.

ALL-ROUND

PROGRESS

In our visit, we actually saw for ourselves and learnt about the all-round progress made by China in several fields of human endeavour. But instead of quoting from official Chinese sources, let us begin with some extracts from the internet encyclopedia, Wikipedia. It states:

“The socialist market economy of China is the world's second largest economy by nominal GDP and by purchasing power parity after the USA.  It is the world's fastest-growing major economy, with growth rates averaging 10 per cent over the past 30 years. Between 2007 and 2011, China's economic growth rate was equivalent to all of the G7 countries' growth combined.

“China is the largest manufacturing economy in the world, outpacing its world rival in this category, the service-driven economy of the US. In 2010 China contributed 19.8 per cent of the world's manufacturing output and became the largest manufacturer in the world, after the US had held that position for 110 years.

“China is the world's largest trading power, with a total international trade value of US$3.87 trillion in 2012.  It is the largest exporter and importer of goods in the world. China’s foreign exchange reserves reached US$2.85 trillion by the end of 2010, by far the world's largest. Holding over US$1.16 trillion in US Treasury bonds, it is the largest foreign holder of US public debt. 

“China is the world's third-largest recipient of inward foreign direct investment  (FDI), attracting $115 billion in 2011 alone. China also increasingly invests abroad, with a total outward FDI of $68 billion in 2010, and a number of major takeovers of foreign firms by Chinese companies.”

Some other China indicators quoted by independent sources are as follows:

China ranks first worldwide in farm output. With a total grain output of 571.21 million tonnes in 2011, it fed 22 per cent of the world's population (now 1.3 billion) with only 6 per cent of the world's arable land. It is the world's leading producer of pigs, chickens and eggs, and it has sizeable herds of sheep and cattle.

The national life expectancy at birth rose from about 35 years in 1949 to 74.8 years in 2012, and infant mortality decreased from 300 per thousand in the 1950s to around 15.6 per thousand in 2012. 

China set the long-term goal of providing compulsory basic education to every child. The government provides completely free nine-year education, including textbooks and fees. The central budget for national scholarships was tripled between 2007 and 2009, and US$28.65 billion of extra state funding was allocated to improve compulsory education in rural areas. As of 2010, 94 per cent of the population over age 15 is literate, compared to only 20 per cent in 1950.

China has spent over US$100 billion on scientific research and development in 2011 alone. Chinese technology companies such as Huawei and Lenovo have become world leaders in telecommunications and personal computing, and Chinese supercomputers are ranked among the world's most powerful.

The Three Gorges Dam over the Yangtze river is the world’s largest power station, and the Qinghai-Tibet railway is the world’s highest railway. Both these are unparalleled engineering feats of the 21st century. The Chinese space program is a major source of national pride. In 1970, it launched its first satellite. In 2003, China became the third country to send humans into space.

China currently has the largest number of active cell phones of any country in the world, with over 1 billion users as of May 2012. It also has the world's largest number of internet and broadband users, with over 591 million internet users as of 2013, equivalent to around 44 per cent of its population. 

By the end of 2011, China's expressways had reached a total length of 85,000 km. China possesses the world's longest high-speed rail network, with over 9,676 km of service routes. In 2011, China produced its first high-speed bullet trains built entirely without foreign assistance. The Chinese rail network carried an estimated 1.68 billion passengers in 2010 alone. As of 2012, China is the world's largest constructor of new airports, and the government has begun a US$250 billion five-year project to expand and modernise domestic air travel.

China hosted the impressive 2008 Summer Olympics in Beijing, where it won 51 gold medals – the highest gold medal tally - and a total of 100 medals.

REASONS FOR

STUNNING SUCCESS

What are the reasons for this unparalleled all-round success? The Chinese comrades whom we met stressed that this was the success of the unique model of socialism with Chinese characteristics that had been followed since 1949.

At every point in our visit, they underlined the fact that ever since the Chinese Revolution, all land in China was owned either by the State (in the cities) or collectively (in the villages) and that this was an integral part of their socialism.

This public ownership of land also gave the State the leeway to use that land for developmental projects that were designed to achieve the common good. In fact, one of the most impressive and striking aspects of everything in China is the meticulously planned development process seen everywhere – the beautiful lay-out of roads, highways, bridges, buildings, factories, parks, gardens and trees.  

Nationalisation of Land:  This first point about collective ownership of land and its relationship to socialism has been effectively made by the renowned Marxist intellectual Samir Amin in a penetrating article titled “China 2013” in Monthly Review. He writes:

“I must emphasise the quite specific nature of the response given to the agrarian question by the Chinese Revolution. The distributed (agricultural) land was not privatised; it remained the property of the nation represented by village communes and only the use was given to rural families. . . . .

“Why was the implementation of the principle that agricultural land is not a commodity possible in China (and Vietnam)? It is constantly repeated that peasants around the world long for property and that alone. If such had been the case in China, the decision to nationalise the land would have led to an endless peasant war. . . . .The attitude of the peasants of China and Vietnam (and nowhere else) cannot be explained by a supposed ‘tradition’ in which they are unaware of property. It is the product of an intelligent and exceptional political line implemented by the Communist Parties of these two countries. . . . .

“Mao drew the lessons from this history (of the Russian Revolution) and developed a completely different line of political action. Beginning in the 1930s in southern China, during the long civil war of liberation, Mao based the increasing presence of the Communist Party on a solid alliance with the poor and landless peasants (the majority), maintained friendly relations with the middle peasants, and isolated the rich peasants at all stages of the war, without necessarily antagonising them. The success of this line prepared the large majority of rural inhabitants to consider and accept a solution to their problems that did not require private property in plots of land acquired through distribution. . . . .

“This ‘Chinese specificity’ -- whose consequences are of major importance --  absolutely prevents us from characterising contemporary China (even in 2013) as ‘capitalist’ because the capitalist road is based on the transformation of land into a commodity.”

Taking account of the post-1978 developments in Chinese agriculture, like the introduction of the Family Contract Responsibility System, Samir Amin writes, “The fact remains that the inventive diversity of forms of using commonly held land has led to phenomenal results. First of all, in terms of economic efficiency, although urban population has grown from 20 to 50 per cent of total population, China has succeeded in increasing agricultural production to keep pace with the gigantic needs of urbanisation. This is a remarkable and exceptional result, unparalleled in the countries of the ‘capitalist’ South. It has preserved and strengthened its food sovereignty, even though it suffers from a major handicap: its agriculture feeds 22 per cent of the world’s population reasonably well while it has only 6 per cent of the world’s arable land. In addition, in terms of the way (and level) of life of rural populations, Chinese villages no longer have anything in common with what is still dominant elsewhere in the capitalist third world. Comfortable and well-equipped permanent structures form a striking contrast, not only with the former China of hunger and extreme poverty, but also with the extreme forms of poverty that still dominate the countryside of India or Africa.”

SOEs - Backbone of the Economy: The second point to note is that even today, large state-owned enterprises (SOEs) are the backbone of China's industrial economy in strategic sectors like mining, petroleum, gas, steel, coal, energy, telecom, railways, ports, shipping, water resources, aviation, banking and insurance.

Next to the US with 132 corporations, China with 89 corporations occupied the second place in the Fortune Global 500 list of 2013. Out of these, over 90 per cent were SOEs. In the top 10 world corporations of this Fortune Global list of 2013, 3 were Chinese corporations and they were all SOEs like Sinopec, China National Petroleum Corporation and State Grid Corporation of China. In the Fortune Global 2013 list of the 10 most profitable corporations in the world, 4 were Chinese and they were all SOE banks like Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China.  In the Fortune China list of 2013, all the top 10 places were occupied by SOEs. In 2011, the total assets of China’s 121 centrally administered SOEs amounted to US$2.9 trillion, up from US$360 billion in 2002.

As per the recent figures released by the Chinese finance ministry, China’s SOEs saw profits rise 9.7 per cent year on year in the first eight months of 2013. SOEs administered by the central government saw profits rise 16.6 per cent from a year earlier to 1.12 trillion yuan. The total profits of Chinese SOEs amounted to 1.53 trillion yuan (US$248.62 billion) in the first eight months of 2013. Business revenues of the nation’s SOEs stood at 29.59 trillion yuan in the first eight months of 2013, up 11 per cent from the same period last year.

However, the other side of the picture should also be clearly stated. The World Bank has given the following information: "In China the state sector’s share in the total number of industrial enterprises (with annual sales over 5 million yuan) fell from 39.2 per cent in 1998 to 4.5 per cent in 2010. During this same period, the SOEs share in total industrial assets fell from 68.8 per cent to 42.4 per cent, while the SOEs share in employment was slashed from 60.5 per cent to 19.4 per cent. The SOEs share in China’s exports fell from 57 per cent in 1997 to 15 per cent in 2010. As a result, the non-state sector has become not only the main generator of output (an estimated 70 per cent of GDP) and employment and the strongest engine of growth, but also the most active sector for innovation."

FACING THE GLOBAL

FINANCIAL CRISIS

The Chinese comrades stressed that with the financial crisis in the advanced capitalist countries, which broke out in 2008 and which was still continuing, definite limitations were imposed on the export-led growth trajectory that had been followed by China since the 1980s. Although efforts had been made by the Chinese government even earlier to boost domestic demand, this aspect was now brought to the forefront. They stressed that they were “making expansion of domestic demand the basic starting point and greatly increasing government spending to boost consumer demand.”

To deal with the global financial crisis, in November 2008 the Chinese central government announced an unprecedented 4 trillion yuan stimulus package. Of this, the central government would contribute 1.18 trillion yuan and local governments another 1.23 trillion yuan. The rest would be bank loans to SOEs.

In sharp contrast to the capitalist world, which dealt with the financial crisis by giving massive bail-out packages to the corporates (who had brought about the crisis in the first place) and by imposing harsh austerity measures on the workers and peasants, the composition of the Chinese fiscal stimulus package was very instructive and it was as follows: Major Infrastructure (mainly railways, expressways, airports and electricity grid) – 1500 billion yuan (37.5 per cent), Post-Quake Reconstruction in Sichuan province- 1000 (25 per cent), Low Income Housing - 400 (10 per cent), Rural Development - 370 (9.3 per cent) Industry and Technology - 370 (9.3 per cent), Environment - 210 (5.3 per cent), Health, Education and Culture - 150 (3.8 per cent), Total Spending - 4000 billion yuan (100.0 per cent).

As Vineet Kohli of TISS, Mumbai, has pointed out in his research note The Fiscal Stimulus Package in China: “Apart from the 4-trillion-yuan package, China will cut tax by 600 billion yuan, raise the old-age pension for retired workers, hike the salaries of 12 million teachers, increase farmers’ income and provide more subsidies for them. Additionally, China is planning to undertake the expenditure of nearly US$125 billion till 2011 as a part of an overall programme to universalise health by 2020. This expenditure was also not accounted for in the stimulus package announced in November 2008. If only the tax cuts and half of the total amount meant for extension of healthcare are added, the total size of China’s stimulus package for 2009 and 2010 increases to 5.02 trillion yuan, or US$757 billion.”

Everywhere that we went – whether it was in Beijing, Shanghai or Lanzhou – there was tremendous construction activity and the building of infrastructure in the form of buildings, factories, roads, highways, bridges, parks – and a large part of this expenditure was borne by the central or provincial government. For instance, in the Bei Cai township of Pudong in Shanghai, we were told that 2,50,000 square metres of land was developed as real estate every year. This was in fact a general phenomenon in all urban areas. We saw the Chinese stress on developing renewable energy sources from the fact that on almost every building, there invariably was a solar energy panel. China is the world's largest investor in renewable energy technology like solar and wind energy.

Yet another interesting feature that we learnt in Shanghai was that apart from the large contribution of the central government for developmental activities, developed cities like Shanghai and Beijing, and developed provinces on or near the East Coast also regularly made large financial contributions to the rapid development of relatively backward cities and provinces in Central and Western China. This in turn greatly improved the living and working conditions of the people in these backward areas and expanded domestic consumer demand.

(To be continued)