CHINA VISIT – II

Big Economic Successes

Sitaram Yechury

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.  In Beijing, it is difficult to recognise the streets which once appeared familiar.  The skyline keeps constantly changing and so does the façade 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 nineties, 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 $20.64 billion in 1978 to $509.77 billion in 2001. In 2001, it attracted foreign direct investment of $69.2 billion.

China's top leaders, many of them engineers and social scientists by profession, 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 at travelling at 430 kilometers per hour; 1000 kilometers of superhighways, four new railway lines; water transportation project from the south to the north; and so on.  Modern China is constructing world's largest dam, longest bridge, fastest train and highest railroad.  By 2005, China plans to add 13,600 kilometers of railroad and a $22 billion high-speed track from Beijing to Shanghai.

China reached the strategic goal of "two steps" it had set in the early eighties, that is, 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:  full-fledged modernisation and a per capita income at the level of moderately developed countries by the middle of the 21st century.

REFORMS IN CHINA

Despite the outbreak of SARS, which for some time threatened to slowdown the economic growth, the CPC leaders informed our delegation that they had overcome the situation. Our delegation congratulated them on the quick and effective manner in which this epidemic was contained.  We were told that only two SARS patients are there in the hospitals now (July 24, 2003) and they are out of danger.  Medical and health check-up at all entry and exit points in China continue to be strictly implemented. 

They expect a growth rate of over 8 per cent, once again, this year. They repeated and reiterated that the reform process is accompanied by the adherence to the four cardinal principles -- socialist road; leadership of the CPC; Marxism-Leninism and Mao Zedong thought; and 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.  Many an Indian, notably the likes of Chandrababu Naidus and Arun Shouries challenge the CPI(M) for opposing  the liberalisation's economic policies in India while the Chinese, they claim, are going full throttle ahead with liberalisation. By alluding to China, these sections seek to enlist the CPI(M)'s support for their  domestic privatisation and liberalisation drive.  According to these sections, 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.  According to Li Tieying, member of the Political Bureau of the CPC and president of the Chinese Academy of Social Sciences, 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.

China has the world's largest mobile phone users.  (Over 20 crore mobile phones compared to much less than one crore in India.  And, there are over 20 crore land phone connections, i.e., over 32 phones for every 100 people!)  Yet, both the companies providing these facilities are fully State-owned.   China has over a dozen airline companies – all of them State-owned –competing with each other.  This makes a mockery of Arun Shourie's claim that competition can improve only by privatisation.  Unlike in India, all the key sectors remain under State control in China. 

Contrast this with the privatisation that Chandrababu Naidus and Arun Shouries spearhead in India.  The privatisation of the power sector has already heaped misery and tremendous burdens on the people with sharp escalation of electricity charges. Instead of keeping the control of the strategic and core sectors of the society with the State, the public sector has not only been sold for a song, but areas like defence production and telecommunications so vital for the country's security, have been thrown open to the predatory loot of foreign capital. 

With regard to the labour laws, it must be repeated that socialist China has in place what they term as the "two guarantees" policy, i.e., 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 73 crores in 2001.  Out of the 73 crores, 12 crore jobs are in the private sector including private businesses, retails trade, catering, tourism etc.  Out of the State sector employment of 51 crores, (the other 10 crore coming from the collective sector) around 2 crore employees were laid off due to obsolete technology and restructuring. Between 1996 and 2000, more than 4 crore jobs were created out of which a large proportion of jobs have gone to laid-off workers.  Around 40 lakh laid-off employees receive basic living allowances every month.  (Beijing Review, October 31, 2002)

In addition, they have an unemployment insurance programme, which guarantees a basic livelihood for those who may become unemployed.  By the end of 2001, a total of 10.35 crore staff and workers participated in such a programme.  Some 31.2 lakh workers received the insurance allowances when rendered unemployed.  The basic living conditions of more than 90 per cent of the laid-off workers from State-owned enterprises were guaranteed.  A total of 1.12 crore urban residents whose income was below the national standard received relief allowances.  The index of per capita net income of rural Chinese rose from 100 in 1978 to 503.8 in 2001 and the per capita disposable income of urban residents increased to 416.3 during the same period – an increase of 8.5 per cent and 4.2 per cent respectively in 2001 over 2000.

Contrast this to the compulsory retirement scheme being forced on many workers, especially of the public sector, in India. A majority of the employees of various public sector units in India who have been reduced to the status of unemployed without any social security or  support.   Trade unions estimate that over 6 lakh private units are currently "locked out" and over 4 lakh public sector employees have been rendered unemployed.

FOREIGN INVESTMENT

The reasons why China attracts a high degree of foreign investment does not lie in the claims made by the liberalisation pandits in India and the consequent disinformation about China. The fact remains that 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 a foreign investor decides to invest, he looks 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. 

Contrast this with India where the State increasingly withdraws itself from economic activity and abdicates its responsibility to develop the social and economic infrastructure. China's success lies not in the logic of globalisation and liberalisation peddled in India through 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.  The total investment in fixed assets, or capital investment, as we in India refer to, the most crucial element determining the health of the economy and its future potential has constantly been increasing in China. In 1985, such investment was 254320 million yuan.  This rose in 2001 to levels of 3689840 million yuan. Of this, in 2001, 85.6 per cent came from the public sector!  So much for Arun Shourie's `disinformation'. Once again, he confirms that he is more a minister of disinformation than disinvestment.

In addition, the social infrastructural expenditures, in socialist China, in terms of health, education, housing etc has contributed tremendously in increasing labour productivity.   Compared to India, China has a larger 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. In fact, according to the New York Times, quoting World Bank statistics, an average Chinese worker earns double the income of a typical Indian worker ($890 against $460). With the highly subsidised educational, health (free to a large extent) and housing facilities, the per capita living space in urban China is over 10 square meters and in rural China, it is nearly 26 square meters!  (In 2001 alone, China has created an additional 540 million square meters of residential buildings in urban areas and 740 million square meters of rural residences!)  Compare this with the alarming growth of privatisation and commercialisation of education and health facilities in India, virtually making them inaccessible to the vast majority of Indian people.  Together with the reports of the menacing growth of homelessness, this defines the much lower levels of India's labour productivity.

Thus, the confusion being spread by  Naidus and Shouries notwithstanding, China's success is, in the main, due to the fact that it follows policies that are contrary to what the Indian  ruling classes adopt, which constitute the virtual loot of India's economic resources in the name  of reform.

PROBLEM AREAS

As noted earlier by our Party, this 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 combated. 

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 in 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, scholarship 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 specific responsibility of 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, 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, as argued by us in the Party Education Series: On Party Programme, (Refer "Experience of Socialism in the 20th Century, the Struggle for Socialism in the Future" by Sitaram Yechury) the contradiction between socialist China's attempts to use foreign capital and technology to strengthen socialism with Chinese characteristics and the foreign capital’s desire to undermine socialism in China will determine the direction and scope of future of Chinese economic development and socialist  construction. Many new flash points can emerge, like that of 1989 Tiananmen Square developments, in the unfolding of this contradiction. However, we, in the CPI(M), can only wish the Chinese people  under the leadership of the CPC, all success in their efforts to strengthen  socialism in China overcoming the connected problems.