Walden Bello on China at 50

Louis Proyect lnp3 at SPAMpanix.com
Fri Dec 3 10:01:23 MST 1999



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.)


Louis Proyect

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