CHINESE POLITICAL ECONOMY IN AN ERA OF GLOBALIZATION

 

Dr. Ghazala Yasmeen*
Dr. Babar Shah**

Abstract

The decade of 90s witnessed public opinion playing a trivial and limited role in China. The intellectual ambiance became considerably more conservative and nationalistic during this period, which helped the government to safeguard the socio-economic stability. There was great interaction between government and intellectual circles as each tried to influence the other. From 1994 to 1997 the role of public opinion was very insignificant. The conflicting trends of elite and popular opinion reached a new level of intensity in 1997as Jiang*a (annexure) tried to put his imprints on the post Deng*b(annexure) era, only to face another wave that grew up around the issue of China’s entry in to global economy through WTO. However, the political and economic situation had changed notably. What is more, the mounting problems of state owned enterprises were becoming increasingly difficult to deny. In 1996, for the first time, subsidies to state owned enterprises actually outweighed their contribution to national budget1. The changed political atmosphere and the crises faced by the economy forced Mr. Jiang to openly criticize the lefts and laying out his rational to reform the ownership structure2. “Here is no way out if we study Marxism in isolation and separate and set it against vivid development in real life” (Jiang Zemin)3. Hence the reforms in china were inexorable, however erratically, to move forward. The inability of the lefts to design a viable economic policy forced political leadership to turn towards economic reforms, and to allow private economy to expand rapidly. This further resulted in encouragement for public enterprises to issue shares and attract unprecedented level of foreign direct investment. So the national as well as international political and economic arena formed the trends towards globalization of Chinese economy. Now china has transformed itself from the world’s greatest opponent of globalization into a committed member of those who advocate globalization. All of china’s economic success is associated with economic liberalization and globalization, and each aspect of globalization has brought China further success. Never in the world history have so many workers improved their standard of living so rapidly. While many nations were increasingly wary of globalization, China's President Hu Jintao had a very different perspective. As he saw globalization as the key to economic development and securing a better future for it’s 1.3 billion people. Surging economic globalization, China and Asia are quickly becoming a new growth engine for the world.

Introduction

China is an ancient civilization with a history dating back over 5,000 years. The Chinese people have made a major contribution to human progress by creating the splendid Chinese civilization with hard work and ingenuity. The city of Beijing, with its long history of over 3,000 years, stands testimony to that effort. It became the nation's capital over 800 years ago. Beginning in the mid-19th century, China was reduced to dire misery as the country suffered one humiliating defeat after another and the people languished in poverty and starvation as a result of brutal foreign aggressions and corrupt and incompetent feudal rulers. Refusing to submit to a fate of agony and woe, the Chinese people fought back persistently and finally built up a New China under the leadership of the Chinese Communist Party. Since 1949, when the New China was proclaimed and particularly since the implementation of reform and the opening-up program pioneered by Mr. Deng Xiaoping in 1978 — China has undergone a profound transformation never seen in the country before. In a short span of 26 years from 1978 to 2004, China's GDP increased from $147.3 billion to $1.6494 trillion with an average annual growth rate of 9.4%. Its foreign trade rose from $20.6 billion to $1.1548 trillion, averaging an annual growth rate of over 16%. China's foreign exchange reserve increased from $167 million to $609.9 billion. The number of rural poor has decreased significantly from some 250 million to 26 million. The overall national strength of China has increased remarkably and the quality of life of its people improved steadily. While inheriting and carrying forward their proud past, the 1.3 billion Chinese people are writing a new chapter in history as they march of one mind on the road of building socialism with Chinese characteristics. China is focused on economic development as a central task, making development top priority and facilitating an all-round progress in economic, political and cultural aspects and in the building of a harmonious society. China’s basic policy is of opening up to the outside world, building a more open marketplace and allowing the country to participate more broadly in international economic and technological cooperation and competition with wider and higher dimensions. Hence China is following a new course of industrialization, endeavor to overhaul the economic structure, quickly transform the ways of economic growth by improving its quality and efficiency, vigorously develop the circular economy and build a resource-effective and environment-friendly society. By the end of 2004, China had attracted a total of $562.1 billion in FDI (direct foreign investment), approved the establishment in China of more than 500,000 foreign-funded enterprises and created a huge import market of some $560 billion annually4.

Socio-Economic Reforms During Deng’s Era

The depiction of reforms in terms of opening up, and the relative balance of power between Deng Xiaoping and other reformers on the one hand and Chen Yun*c (annexure) and ideological economic conservatives on other, contested the basic issues in Deng’s regime. However government led by Deng continued to back open market reforms and growing role of private sector and increasing integration into global economic world order5. The entrenched revolution of the significance of open economy was the result of Deng Xiaoping trip to the Southern China in 1992 and then following the convocation of the Fourteenth Party Congress. Deng’s trip to south had set off new round of rapid economic growth and reforms. In 1994, 44% of the “State Owned Economic Enterprises” were losing money, and about 88% of State Owned Economic Enterprise’s income went to debt service. The same year, the Statistical Bureau issued a report showing that Chinese economy was at the verge of entering red zone6. These multiple macro economic troubles geared up Chinese leadership to opt for socio- economic reforms. This further prompted the formation of hundreds of “joint stock companies”. At the same time local areas continued to open up “developmental zones” in the hope of attracting foreign capital7. This gave an auspicious start to the private sector in China. China witnessed rapid growth in direct foreign investment and it was more than doubled, from $11.3 to $27.8 billion from 1992 to 1994.     
From now, the role of direct foreign investment was growing rapidly: foreign capital accounted for 20% of all investments in fixed assets in China, Foreign Invested Enterprises accounted for 39% of China’s exports8. These dramatic socio- economic changes have had the effect of producing a nouveau rich class, which changed the nature and role of culture in Chinese society by commercializing it and diversifying it.

Economic Reforms During Jiang Zemin’s Era

Following the death of Dengs in February, 1997 Jiang Zemin moved to join power. Jiang dropped the hint that he had some thing more in mind than just continuity. He emphasized the liberal traditions in Sino-US economic podium. This further promoted enterprise reforms and tailored better relationship with U.S. Jiang declared “there is no way out if we study Marxism in isolation and separate and set it against the vivid development in real life” (Jiang’s Interview ,1996)9. The Share Holding System Jiang declared can be used both under capitalism and socialism. Large and medium sized state owned enterprises were recognized into standard corporations with clear ownership that were genuinely independent of state control. Jiang also called for the development of diverse form of ownership, a formulation that had permitted development of the private economy. Together these reforms allowed room for massive restructuring of Chinese economy in the subsequent years. At the same time Jiang devoted considerable space to political and legal reforms; he avowed, “without democracy, there can be no socialism.” It was the introduction of liberalism to China that China began to “go towards the world, go towards modernization, and go towards globalization.”
Furthermore Jiang recognized the importance of improving relationship with the United States for both domestic reforms and world affairs. As gaining China’s international acceptance as one of the great powers of the world can lessen the lingering effects of isolation.
Along with the plan to reorganize government and streamline industry, there was also intent to wed the Chinese economy more closely to the global economy. It was in spring of 1998, as details of President Clinton’s forthcoming trip to China was being planned, when China expressed renewed interest in joining the World Trade Organization (WTO). Jiang was a great supporter of China’s entry into WTO, as a way both of tying Chinese economy more closely to the worlds and demonstrating enhanced Chinese status as world power.10
Jiang stated, “We have to gain a complete and correct understanding of the issue of economic globalization and properly deal with it. Economic globalization is an objective trend of world economic development, from which none can escape and in which every one has to participate”.

Zhu and WTO

In March 1998, Zhu Rongji*4(annexure) replaced Li Ping as premier. At first it seemed to make little difference. Zhu principally focused on domestic economic and social reforms. Zhu was clearly possessive of his power as a premier, and moved for control over economy. In the fall of 1998 the issue of WTO was on the agenda. This was the issue that could blast the Sino- US relationship. By January 1999, Chinese were clear enough about their stand on WTO. This led Zhu to tell that China has work for 13 years to enter WTO. At the same time Chinese leadership also recognized Sino – US relationship. On November 15, 1999, Sino-US agreement was developed about chinese movement towards WTO.

Globalization & China's Economic Growth in New Millennium

Chinese accession to globalization and opening up brought an unlimited fortune for Chinese economy through huge foreign investments. Hence China alone succeeded to obtain US$50 billion foreign investment in the year 2003. Chinese were at large great beneficiaries of globalization because they have also effectively improved not only their taxation system but also invested in their infrastructure, which has contributed pleasurably to foreign investment. The development research council of the State has sponsored a conference about the “Economic Development Issues of China”. More than 100 world-class scholars, international organizations and entrepreneurs have attended this conference. The meeting concluded with the findings that:

• China has not only attracted foreign investment at international level but it had also attracted regional investment through enterprise development.
• China absorbed large amounts of foreign capital in comparatively shorter span of time because it is also boosting research and development activities. The R&D centers developed by the foreign investors rise above 700.
• If China stays with its policy of opening up and globalization it will attract more foreign capital that will be used in better and improved channels and will consequently help China in capturing world market.
• For this china has to look up its rules, regulations and legislations about foreign capital and investors that will help management in reconstructing economic setup and establishing better enterprise linkages with rest of the world business economy.

Chinese Policy Regarding Globalization

The Chinese policy is actually an active adjustment of the internal resources to the pressure exerted by WTO. Beijing has made active efforts to adjust Chinese integration in world economy. So for China developed strategies in the following areas:

Public sector enterprises: They have minimized the administrative intervention by party and government agencies into enterprises. In this framework considerable number of large and medium manufacturing units were converted in to joint stock companies.
Social Security Plan: Chinese government has introduced social security system based on health insurance, unemployment fund and pension scheme in urban areas. In this regard private investors are also encouraged.
Human Resource Development: Policies were framed to attract well-educated and well-trained human capital particularly skilled Chinese in overseas. In addition varied programs have been carried out at gross root level to provide skill base trainings and education to develop human resource.
Restructure the institutions: Fundamental changes have been brought to increase the effectiveness of administrative work and to strengthen cooperation between the authorities.

Conclusion

Unrelenting social, economic and political reforms enthused China in decade of 90s. The inability of Chinese conservatives to tailor a vivid economic policy during this period meant that political leadership was forced not only to turn once again to economic reforms but also to accelerate its reforms allowing private economy to expand rapidly, encouraging State Owned Enterprises to issue shares, and attracting unparalleled levels of Foreign Direct investment. In addition, Chinese leadership also acknowledged the significance of improving relationship with the United States for both domestic reforms and world affairs. In a nutshell, domestic environment and international atmosphere shaped China’s attitude towards globalization and liberalization in response to its domestic requirements and global milieu. 

References Cited

• Bai Mu, (1999), Foreign Winds’ Invade China, Chinese Sociology and Anthropology, 31 (4).
• China Warns Off Foreign Investment in Internet, Financial Times, Sep 4, 1999.
• Commentator, Thoughts Derived from Joint Venture in Beer Production, Jingji ribo, June 20, 1996.
• Deng Xiaoping, (1993), Selected Work of Deng Xiaoping, Beijing: Renmin chubanshe.
• Deepak Bhattasali, Chief Economist of World Bank, China Development Forum's 2004 annual meeting.
• Jiang’s interview, by Xinhua, May 29, 1996.
• Jiang Zemin, Memorial Speech at Dengs Xiaoping’s Memorial Meeting.
• Joseph Fewsmith, (2001), China since Tianeanmen: The Politics of Transition, Cambridge University Press, and USA.
• Ling Zihijiun, (1997) Turmoil: A Record of China Economic Reforms, Shanghai.
• Liu Junning, (1999), The Political Meaning of China’s Entry into WTO, (www.chinesenewnet.com).
• President Hu Jintao's speech at the Fortune Global Forum on May 16, 2005.
• Ren Zhongping, (1998), A Powerful Political Guarantee for Economic Reconstruction and Social Development, Renmin ribao, April 1, 1998.
• Said, Edward, (1993), Culture and Imperialism, New York: Knopf.
• South China Morning Post, October 27, 1994.
• Xinhua, (1997), Sep 13, 1997 in FBIS-CHI.
• Xiang Jingquan, (1999), Review and Prospects of China’s Economic Development, Guang ming ribo, Trans.

Annexure

*a: Jiang Zamin

Zamin born on 17 August 1926, in Yangzhou, Jiangsu Province, China .Jiang earned a university degree in electrical engineering and began his career in the Communist Party while still a student. He participated in the students' movement led by underground CPC organizations around 1943 and joined the CPC in April 1946. He graduated from the Electrical Machinery Department of Shanghai Jiaotong University in 1947. After the liberation of Shanghai, he served successively as deputy engineer, chief of the works section and concurrently head of the power workshop, Party branch. He worked as a trainee at the Stalin Automobile Works in Moscow in 1955. Upon returning to China in 1956, he worked as deputy chief of the dynamic mechanics division. After 1962, he served successively as deputy director of the Shanghai Electrical Equipment Research Institute. After 1980, he served as vice chairman and concurrently secretary-general of the State Administration Commission on Import and Export Affairs and the State Administration Commission on Foreign Investment and a member of the Leading Party Member Groups of the two commissions. After 1982, he served as first vice minister and deputy secretary of the Leading Party Member Group of the Ministry of Electronics Industry and minister and secretary of the Leading Party Members' Group of the Ministry. After 1985, he served as mayor of Shanghai and deputy secretary and secretary of the Shanghai Municipal Party Committee. He was elected member of the CPC Central Committee at the Twelfth CPC National Congress in September 1982. In November 1987, he was elected member of the Political Bureau of the CPC Central Committee at the First Plenary Session of the Thirteenth CPC Central Committee. In June 1989, he was elected member of the Standing Committee of the Political Bureau and general secretary of the CPC Central Committee at the Fourth Plenary Session of the Thirteenth CPC Central Committee. In November 1989, he was elected chairman of the CPC Central Military Commission at the Fifth Plenary Session of the Thirteenth CPC Central Committee. In March 1990, he was elected chairman of the Central Military Commission of the People's Republic of China at the Third Session of the Seventh National People's Congress. In October 1992, he was elected member of the Political Bureau, its Standing Committee and general secretary of the CPC Central Committee and chairman of the CPC Central Military Commission at the First Plenary Session of the Fourteenth CPC Central Committee. In March 1993, he was elected president of the People's Republic of China and chairman of the Central Military Commission of the People's Republic of China at the First Session of the Eighth National People's Congress. In September 1997, he was elected member of the Political Bureau and its Standing Committee and general secretary of the CPC Central Committee and chairman of the CPC Central Military Commission at the First Plenary Session of the Fifteenth CPC Central Committee. In March 1998, he was reelected president of the People's Republic of China and chairman of the Central Military Commission of the People's Republic of China at the First Session of the Ninth National People's Congress. In November 2002, he was reelected chairman of the CPC Central Military Commission at the First Plenary Session of the Sixteenth CPC Central Committee. On March 15, 2003, he was reelected chairman of the Central Military Commission of the People's Republic of China.

*b: Deng Xiaoping

Deng, born in Sichuan province into a middle-class landlord family, joined the CCP as a student in Paris, where he adopted the name Xiaoping (‘Little Peace’) in 1925, and studied in Moscow in 1926. After the Long March, he served as a political commissar to the People's Liberation Army during the civil war of 1937-49. He entered the CCP Politburo in 1955 and headed the secretariat during the early 1960s, working closely with President Liu Shaoqi. During the Cultural Revolution Deng was dismissed as a ‘capitalist roader’ and sent to work in a tractor factory in Nanchang for ‘re-education’. Deng was rehabilitated by his patron Zhou Enlai in 1973 and served as acting prime minister after Zhou's heart attack in 1974. On Zhou's death in January 1976 he was forced into hiding but returned to office as vice premier in July 1977. By December 1978, although nominally a CCP vice chair, state vice premier, and Chief of Staff to the PLA, Deng was the controlling force in China. His policy of ‘socialism with Chinese characteristics’, misinterpreted in the West as a drift to capitalism, had success in rural areas. He helped to oust Hua Guofeng in favour of his protégés Hu Yaobang (later in turn ousted) and Zhao Ziyang. His reputation, both at home and in the West, was tarnished by his sanctioning of the army's massacre of more than 2,000 pro-democracy demonstrators in Tiananmen Square, Beijing, in June 1989. When Deng officially retired from his party and army posts, he claimed to have renounced political involvement, but in 1992 publicly announced his support for market-oriented economic reforms. A subsequent purge of military leaders was later claimed to have been carried out at Deng's instigation.

 

*c: Chen Yun

A native of Qingpu (now part of Shanghai), Chen was one of the few Communist Party organizers from a working class background; he worked underground as a union organizer in the late 1920s, participated in the Long March, and served on the Central Committee from 1931 to 1987. He was also active in the field of economics, despite receiving no formal education after elementary school. As a typesetter for the famous Commercial Press of Shanghai, Chen played a prominent role as a younger organizer in the labor movement during the early and mid 1920s, joining the CCP in 1924. Following the May 30 Movement of 1925, Chen was an important organizer under Zhou Enlai and Liu Shaoqi. After Chiang Kai-shek turned against the CCP in 1927 he fled to his home town, but soon thereafter returned to Shanghai, working underground. He served on the Central Committee in the Third Plenary Session of Sixth Central Committee of CPC in 1930 and became a member of the Politburo in 1934. In 1944 Chen became responsible for financial affairs in the communist-controlled "Shan-Gan-Ning" border region government. In March of 1979 Chen once again became head of the State Council’s Finance and Economics Affairs Commission. In 1982 Chen Yun, 77 years of age, resigned from the Politburo and Central Committee and from his active administration positions.

*d: Zhu rongji

Zhu Rongji, born Oct. 23, 1928, Changsha, Hunan province. He joined the Party in October 1949. After graduation from the prestigious Qinghua University where he majored in electrical engineering, he served as deputy head of the production planning office of the Northeast China Ministry of Industries. He then worked in the State Planning Commission and the State Economic Commission for years, where he was acknowledged as an official who "knows economics. In 1987, Zhu was appointed mayor of Shanghai, China's largest industrial and financial city. His three-year term as Shanghai mayor saw tremendous changes in the development and opening-up of Pudong, and in telecommunications, urban construction and communications. For these he won confidence inside and outside the Party and acclaim from the common people. In 1991, Zhu was appointed vice-premier of the State Council and director of the State Council Production Office. Zhu Rongji has focused his attention on tackling tough economic problems in industry, agriculture and finance. He was appointed premier in 1998. In the face of the Asian economic crisis at the end of the 1990s, he worked to drastically cut back the size of the government bureaucracy. Zhu, whose economic policies have been both praised and criticized, stepped down as premier in 2003 and was replaced by Wen Jiabao.