China’s Economic Bonanza
On the cusp of the 20th century the Celestial Empire saw itself as the center of culture and enlightenment, surrounded by infidel barbarians. It would not be correct to infer that the Empire suffered ostracism from the civilized world at that time. The prototype of modern-day China just treated its neighbors with an insouciant disregard. Indeed, even when the communist coup swept Mao Zedong to power, the newly established People’s Republic of China (PRC) continued regarding the limitrophe states (save for the USSR) as pawns that clustered around the Chinese nucleus on the geopolitical chessboard. However, it was not until the demolition of Mao’s cult of personality edifice that the PRC emerged from a cocoon. Domestic political environment created by Mao Zedong and consolidated by his celebrated successors rendered introduction of the market-oriented economic reforms impossible. Effectiveness of the existing reforms was further diluted by the activities of every arm of the sophisticated Chinese bureaucracy. Nevertheless, due to the geopolitical changes of the late 1970s, the PRC started gradually discarding the Communist Party’s traditional tenets, which hindered any economic progress. The initial reforms at the end of 1978 were geared towards the agricultural sector. 1989 was the most pivotal year, as it ushered in a new stage in the economic development of China. The Tiananmen Square Massacre of 1989 became a harbinger of the shift away from central control of the economy. The fledgling authorities settled on a strategy of altering the Chinese leviathan. Transition to the capitalist form of society was slow, but at the same time jarring for Mao’s pertinacious henchmen.
Even though the firm grip of the Communist Party of the PRC on the economy is still evident, the party’s foremost politicians do not inveigh against such economically sound ideas as privatization and private entrepreneurship as vigorously as they used to three decades ago. Cheap labor, unfathomable bounty under the vast Chinese terrains, and a handful of prudent and well-timed economic reforms billow the sails of the Chinese economy. A phalanx of experts surmises that the PRC may be undervaluing its birthright when it allows all foreign companies to operate in the Chinese territories. They further opine that the projected economic bonanza of China will fail to materialize. Still, China managed to overtake Japan as the world’s second-largest economy a few years ago. In all likelihood, these alarmists will not have ample grounds to elicit schadenfreude from the state of Chinese economy in the nearest future. Indeed, the pace of economic growth in China has somewhat slowed down recently, but it is still astonishing. Nowadays, there is another popular tendency in the international arena. Certain scientists maintain that any single country will not be able to duplicate the PRC’s outstanding economic exploit in future. However, a clutch of reform-minded maximalists from the countries with emergent economies and vibrant societies like those in India and Brazil would eagerly oppugn the validity of such a statement. By and large, this paper concludes that China’s economic miracle is worth lauding, but dispels the myth that its economic growth and transformation will not be repeated in the nearest future.
Numerous figures of China’s unparalleled economic growth have been bandied about over the course of the last 20 years. This phenomenon has even earned a special soubriquet “economic miracle”. The adoption of the registration law was the first step of the Communist Party on the way of development. Previously, all citizens were officially divided into peasants and townspeople. If a person was born in a peasant family, they could not change their status ever. This law significantly curtailed civil rights and liberties of rural residents as compared to the townspeople. Buttressing this statement by facts, it would be wise to recollect that the Chinese peasantry was denuded of the rights to receive higher education, pension, and medical treatment insurances, as well as other forms of social security. Moreover, taxes that the government levied on the peasantry were much higher than those imposed on the townspeople. It should be noted in this regard that China is an agricultural country, as farmers constitute more than 65% of the population. Having adopted the registration law, the Chinese authorities have actually transformed the bulk of the Chinese population into the mere labor force that was willing to “work for peanuts”. Recasting the last sentence in a more formal wording, the Beijing government has enshrined savage labor exploitation and abject poverty in law.
Realizing that grinding and widespread pauperism would prevent the Communist Party’s leadership from increasing state revenues, the Communist Party had no choice but to lift its analog of the “iron curtain”. In order to reinvigorate domestic demand, it embarked on the policy of reforms and transparency. Some of these reforms were effective, while others backfired. Cheap labor led to a decrease in the cost of goods. The country quickly became the world’s factory. Western investments started inundating Chinese businesses, which in its turn resulted in the mass production of goods for export. As the exports were surging, an influx of money flowed into the Communist Party’s coffers. After a series of unsuccessful political campaigns such as the Cultural Revolution, the Great Leap Forward, and others, credibility of the party turned out to be significantly undermined. The country’s leadership decided that they must bestir themselves to remedy this deplorable state of affairs. To this end, the Communist Party tried vigorously to hammer the paramount importance of the undertaken measures home to the populace. In order to repair its battered credibility in the international arena, the government began to invest the lion’s share of the profits in the acquisition of a developed country’s paraphernalia.
It was at this time that skyscrapers, hotels, and stadiums started mushrooming out. By the same token, the Communist Party sped up development of the infrastructure as well as introduced the latest achievements of scientific and technical breakthrough. In essence, the Communist Party effectively copied the most salient trappings of the developed world. That is how China obtained magnetic levitation trains, garish public toilets, high-speed Internet, authorization to host numerous international exhibitions, etc. Moreover, the mainstream Western media often report about Chinese millionaires and billionaires, the number of which is growing despite the global economic crisis.
In fact, it turns out that the population of China is working for the development of only a small part of the country. Due to the peculiarities of the mentality, Chinese workers perform their responsibilities with a special combination of diligence, gusto, and panache. Having lived in extreme poverty for a long period of time before and after the horrors of the Cultural Revolution and the artificial famine begotten by the Great Leap Forward, a thumping majority of the Chinese acquired a fear of poverty on the psychological level. As the ill luck would have it, the acquired fears of the parents are transferred subliminally to the offspring. This tendency is further exacerbated by the fact that the bulk of the workforce receives only a modicum of a certain company’s income, insufficient to maintain a hand-to-mouth subsistence. Regardless of income, every Chinese person puts by a portion of each wage for a “rainy day”.
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According to official data of the Chinese authorities, 10% of the richest people in the country have 50% of all income, while the poorest 10% of residents have only 1.4% of income. The Gini coefficient, which reflects the gap between the rich and the poor, is constantly growing in China. In 2006 it amounted to 0,496 (the Gini index vibrates from zero to one, with normal being less than 0.3). In juxtaposition to the PRC’s figures, the Gini coefficient of India have stood at 0.32 points for the last 20 years. In terms of GDP per capita, China is not even in the top hundred countries. Hence, those politicians who constantly intone pieties about the staggering success of the Chinese economy ignore the fact that the fruits of this success are shared only by the vested interests. According to the consulting firm McKinsey & Company, less than 1% of Chinese households have income equal to or exceeding the average income of the American households.
Furthermore, the Chinese authorities spare no effort in order to propagandize all their achievements, presenting them as the attributes of a “new China” created by the Communist Party. However, if one chose to lift the veil from over the indicators of the incredible economic growth in China that are plentifully strewn about by the Chinese officials as well as from over the showcase cities that are extensively demonstrated to the Westerners, the Chinese authorities would not be able anymore to fool the world with its veneer of economic ascendancy. The events that have taken place in China over the course of all these years cannot be referred to as development of the country, for the ruling elite was not originally confronted with the task to raise the welfare of the people. On the contrary, this model of development implies that the vast majority of people in the country should be poor if “economic miracle” is to happen. The Chinese leviathan has always been preoccupied with the task of strengthening its authority, enriching the pivotal figures of the Communist Party and consolidating its grip on the population. This set of convictions does not resonate among the majority of the Chinese population, but the Communist Party apparatchiks run roughshod over any opposition and often cow people with militant tactics.
By and large, the Communist Party cannot afford to lose its main source of income, namely cheap labor of the peasants. This means that as long as the present system holds valid, this group of people will remain below the threshold of poverty. The statistics demonstrates this point clearly. According to official data, the incomes of the rich Chinese citizens are 11 times higher than those of the poor. According to the Beijing National Economic Research Institute, the gap is even more yawning. The middle class is an all but extinct feature of the Chinese society. Policy chosen by the Chinese authorities established a system in which social and other problems are often solved only by means of improving statistics. This means that the official statistics in China does not reflect the real situation. Local officials write positive reports, but the real problems remain unresolved and are constantly deteriorating. This is exactly the reason why both the number of popular protests and magnitude of public commotions are on the rise in China. Even though the Communist Party lashes out at any dissent and nips the overwhelming majority of small-scale socio-economic upheavals in the bud, the Chinese recalcitrants take to the streets and orchestrate wildcat strikes ever more often. According to official data of the Chinese authorities, in 2008, the country saw more than 80,000 public disturbances, which is 10 times more than in 1993. Various kinds of economic perturbations are inherent in the outbreaks of public discontent, for workers constitute the bulk of the protestors. Thus, it is quite obvious that the Chinese “economic miracle” will not last long. Being a driving force behind China’s economic upsurge, unfair and dishonest policy towards the peasantry is one of the country’s biggest problems at the same time.
One way or the other, progressive transformations in China are firmly on the mind. However, blind imitation of capitalism poses a plethora of potential risks for the Chinese economy. Indeed, the numerous inherent cobwebs and pitfalls characterize the transition of China towards the market-oriented type of capitalism. The country’s recent problems with the so-called “fortune management bank products” corroborate the idea that even seminal reforms in the financial sector of China’s economy cannot guarantee an unmitigated success without the establishment of the appropriate regulation bodies. Nonetheless, China’s rapid growth should not eclipse the need for economic development in this country. According to the International Monetary Fund, at some point between 2020 and 2025, China will approximate the so-called “Lewis turning point”, when a mother lode of the low-wage workers will be exhausted, while such factors as labor mobilization will exert little influence on the economic growth. Consequences of the irrational use of capital, inevitable in a centrally planned economy, will come to the fore as a result of the imminent decrease in the amount of raw materials and demographic resources. The recent practice in China shows that economic transformations may lay bare old problems as well as create the new ones. Ironically, China may need powerful state planning in order to transmogrify itself from a state controlled economy in to a market economy.
It is not significant that China’s GDP has surpassed that of Japan. It is not even important that GDP of a modern-day relic of the Celestial Empire still have chances to exceed GDP of the United States. All this is mere symbolism, and some retrospection bears this claim out. For instance, the so-called “South Asian tigers” (Japan, South Korea, Taiwan, Singapore, Hong Kong) dominated the world’s economic agenda in the 1970s. Their supremacy was supplanted by the astounding success of the People’s Republic of China. The PRC had been at the fore of the world’s economy during the 1980s. In the early 1990s, it forged ahead of the rest of the world, innovating and reforming its economic sector. Nowadays it seems like China is too close to embedding itself in a wall. This means that the baton of leadership is going to be passed to other nations soon. This hypothesis poses an interesting conundrum to many analysts, because it is next to impossible to indicate the world’s next economic turbo-charger with pinpoint accuracy. The highest chances of occupying this niche are divided equally between the countries that have just accomplished the economic transition, or those that are still proceeding along the path of transition, as well as those nations that are hard-wired to perceive pragmatism of the economic rebound. These are India, Indonesia, Vietnam, and Malaysia. Curiously enough, a multitude of large-scale companies have started moving their industrial production facilities to these countries even from China. Dampened economic growth of the PRC does not retain a latent capability to menace the world economy, as it will be countervailed by the economic progress of the “new Asian tigers”. China is not a shell of its former self yet, but it is about to yield to the pressure of the new “economic miracles”.