China at 50: A View from the South by Walden Bello
(A shorter version of this piece came out in the author's column "Rethinking Asia" in the Far Eastern Economic Review, Oct. 14, 1999.)
When I, as an Asian economic analyst, contemplate the People's Republic at 50, two things immediately come to mind: China, because of capital controls, managed to escape the Asian financial crisis, and the rest of us in Asia are in some measure in debt to the Chinese government for not devaluing the yuan and turning a crisis into a catastrophe.
The American environmentalist Lester Brown may be filled with foreboding when he sees hundreds of millions of Chinese climbing up the food chain by becoming meateaters, thereby putting more pressure on the world's food supply. And western pundits may be filled with loathing as they survey China's human-rights record. But I would wager that for most of us from the South, China--warts and all--is still one of the success stories of the century.
China is one of the world's most dynamic economies, growing between 7- 10% a year over the past decade. Its ability to push a majority of the population living in abject poverty during the civil-war period in the late forties into decent living conditions in five decades is no mean achievement. That economic dynamism can't be separated from an event that most of us in the South missed out on: a social revolution in the late forties and early fifties that eliminated the worst inequalities in the distribution of land and income, and prepared the country for economic take-off when market reforms were introduced to the agricultural sector in the late 1970s.
China likewise underlines the critical contribution to future economic development of a liberation movement that decisively wrests control of the national economy from foreign interests. China is a strong state, born in revolution and steeled in several decades of wars hot and cold. Its history of state formation accounts for the difference between China and other emerging markets such as Thailand, the Philippines, Brazil, and even South Korea.
The difference is underlined by China's relationship with foreign capital compared with most countries in the South. Beijing is tough on foreign investors and has the upper hand in its relationship with the international business community. Yet foreign investors are scrambling to get into China, restrictions and all.
Foreign investors will always scream about investment controls chasing away foreign capital. But the case of China, which now accounts for about a quarter to a third of total investment going to emerging economies, shows that where there is money to be made, investors will live with the restrictions.
In contrast, foreign investors can blackmail other governments to dilute their investment rules. Investors know that they can ratchet up their demands because weaker governments inevitably will give in, like the Estrada government in the Philippines, which has gone so far as to propose amending its constitution to make it 100 per cent investor-friendly.
Respect is what the Chinese government gets from investors. Respect is what our governments don't have. When it comes to pursuing national economic interests, what separates China from many of our countries is a successful revolutionary nationalist struggle that got institutionalized institutionalized into a no-nonsense state.
Western commentators often engage in ideological opportunism when it comes to China. Not a week passes without some report on how China's rapid development is creating economic inequalities that eventually may destabilize the country. Not a week also passes without some negative comment on China's state enterprises. Yet a connection between the caution shown by Beijing in reforming the state enterprise sector and its desire to avoid destabilizing social conflict that could be triggered by the massive layoffs of millions of workers is seldom made in the doctrinaire editorials that urge China to rapidly phase out ailing state enterprises.
US economic authorities and politicians are just as opportunistic. On one hand, Charlene Barshefsky, Washington's trade representative, regularly blasts China for distorting market forces through continued government intervention in the economy. On the other hand, U.S. President Bill Clinton and Treasury Secretary Larry Summers plead with Beijing not to devalue the yuan for the sake of global financial stability, even when the same market forces are pushing down the currency's value.
Many of the same voices calling for a greater role for market forces today were also the ones calling on the government to liberalize the capital account before 1997. Many of the same people were, in the early 1990s,urging the government to do away with gradualism and apply to China the Russian-style shock therapy that eventually gave birth to the dominance of mafia capitalism throughout Eastern Europe.
Thank God, the Chinese didn't listen.
But China does have pressing problems, though state intervention in the economy is not at the top of the list.
It goes without saying that China must pay urgent attention to environmental degradation and not be put off by the ethnocentric environentalism of people like Lester Brown. Here, the Chinese must start reexamining, indeed discarding, the foreign capital-intensive model of development that they uncritically adopted from the World Bank.
Another top priority for the state must be containing the social inequalities that have been generated by this model over the last two decades of rapid growth. Large numbers of people have been left behind, particularly in the great Chinese hinterland. According to the United Nations Development Program, about 29.4% of the population lives under the poverty line. And the World Bank estimates the gini coefficient (a measure of income inequality) to be 41.5--a figure that is far higher than that for India, Indonesia, Egypt, and Pakistan, and now approximates that for the Philippines and Thailand.
But certainly, at the very top of the list is the urgent need for greater democratization, and here, many of us in the South should be speaking more loudly in favor of human rights in China, in the same way we scream about it in Indonesia and Burma. At the same time, democratization, we must remind our friends in the West, will come to China with its own rhythm and timetable, and in forms that might not be exact reproductions of western liberal institutions.
The People's Republic at 50 underlines for us in the South the critical importance of a careful balancing of the state and the market, of a strategy of selective, measured, and discriminate integration into the global economy. But the greatest challenge is still to come, and that is how the Chinese government can accommodate its citizens playing an active role in both political and economic decision-making. Only by genuinely bringing the masses into the process of determining their destiny--the leitmotiv of China's revolutionary heritage--will this great country escape the pitfalls of the road ahead.
(Walden Bello is executive director of Focus on the Global South and is a professor of Public Administration at the University of the Philippines.)
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