China currently has the second largest economy in the world in terms of (PPP) dollars and is on way to becoming the largest in about a quarter century from now. China's priorities today are economic and technological development.
Everything else can wait. Its sight is fixed fully on becoming the world's biggest economy, and ultimately a superpower to contend with, while at the same time endeavouring to transfer the fruits of massive economic growth to the Chinese people.
To think that China would in future assume the role of a kind of leader and advocate of Third World interests, however, is a vain hope of many people in the Third World, that bears no relationship to how events are unfolding at present.
In the changed post-Cold War world, China is no different from any other power out to safeguard and pursue its own national economic self-interest. Western commentaries depict China's development as being solely due to its 'liberalization' and 'opening up' its economy to foreign capital.
Under this self-serving logic, they want to show that the capitalist path to development is the correct one. This does not appear to be an objective assessment. China has certainly been participating in economic globalization by successfully inducting big MNCs to set up their operations in China, and the latter have obliged because they see advantage in establishing manufacturing plants in a country where labour costs are low, there is little trade unionism and consequently few labour problems.
Above it, it has a huge market of over a billion consumers. China has also resorted to limited transformation into a market economy. But the main reason appears to be that the Chinese industry has already had its birth and apprenticeship under socialist planning, under which basic heavy industry was set up, and essential infrastructure and skilled manpower developed.
Since 1978, China's policy towards foreign investment has been favourable. But the reforms China undertook to allow a degree of free enterprise and some private ownership have been cautious and gradual, not abrupt.
It has thus been able to tide over initial difficulties of transition to a new policy. Under this policy, limited private enterprise emerged in China in the 1980s, following the state's decision to expand the economy and carry out reforms.
China's GDP growth rate has averaged 9 per cent a year and annual growth in foreign trade has been 15 per cent during the last 25 years. ["Behind the Mask: A survey of Business in China."
The Economist: March 20, 2004, p. 3.] China has refused to allow any country to link trade and investment issues with political questions such as 'human rights', and democracy etc.
and does not succumb to US pressure on questions of tariff and trade. Yet, among the trade partners, it has the largest trade surplus (with US), and also happens to be, after Japan, the second largest holder of US treasury bills. The latter fact, while it subtly benefits the US economy, also gives it some leverage with the US.
China's growth is so fast that, as the Fortune magazine recently wrote, it is now the world's foremost raw material guzzler, and consumes the highest amount of copper, aluminium and cement, besides being the world's number one market for mobile phones and second largest for personal computers.
The down side is that "... by western standards, not one Chinese bank is solvent, the country's stock exchanges are dens of thieves, planning is incoherent and often contradictory, and corruption is rampant. Once the most egalitarian of societies, China now has one of the world's widest gaps between rich and poor." [Fortune. European Ed. October 11, 2004. Vol. 150. No. 6, p.16.]
Western media's attitude towards China's gains and pains during the current transition is ambivalent, though western business and industry are keen to exploit the opportunities afforded by the huge Chinese market and western MNCs are queuing up to 'invest' in China.
But as Fortune magazine's above comment shows, they have to admit that China's was formerly one of the 'most egalitarian of societies.' This would have been unthinkable a few years ago.
When they try to judge China's working by western standards and values, they find much that is incomprehensible and often label it 'wrong.' This is not to say that corruption and mismanagement are non-existent in China. In as massive an effort as currently being done in China, some problems are inevitable. But they seem mightily set on the road to industrial and economic development.
Paradoxically, when the West talks of increased Chinese demand for oil, they become conscious of the 'pressure it puts on crude prices.' They are worried that such high oil prices would cool global economic growth. (Matthew Forney: "China's Quest for Oil." Time, October 25, 2004, p. 35.) Strange stuff when it comes from those whose own appetite for oil is insatiable.
The United States particularly has been consuming huge quantities of oil to run its vast military machine and fuel its wastefully high standard of living. Western companies rushing headlong to invest in China have reported a host of problems with their sponsors, local partners, and the bureaucracy. Many of the problems are cultural, and are incomprehensible to the western business mind that values profit above all else.
Tim Clissold, who ran the American company Asimco that entered the Chinese market of car components and breweries in the 1990s, has mentioned in his recent book "Mr. China" how his company was cheated, often by its Chinese managerial employees and by rivals.
Some western businessmen are amazed that the Chinese attach more importance to 'face,' honour, or prestige than to a good business deal! According to The Economist, Bill Young, an American who has worked in China since 1985, originally for McDonnell Douglas and who now runs a boiler business in Shenyang, claims that deception to 'wrong-foot an opponent' is an accepted form of business negotiation in China: "in one round of talks with a customer, 'the stenographer in the corner' turned out to be the company CEO." ("A Disorderly Heaven." A survey of Business in China." March 20, 2004, p. 12. )
However, the very fact that the Western companies and businesses continue to flock to China to invest and do business in ever-larger numbers, is proof enough of the advancement of the Chinese economy.
The ultimate test of 'progress' and development is the translation of gains into a better life for the people. This is taking place gradually but steadily. The IMF-sponsored experts assigned to developing countries like Pakistan and their fellow travellers constantly sermonize on the blessings of sacrificing social welfare schemes to lay the foundation of future prosperity, but in case of China, they constantly harp on the Chinese workers' plight, lack of labor regulations, social welfare and so on.
China has in fact already laid an industrial base for a prosperous future, and is deftly using 'foreign direct investment' to foster transfer of technology wherever needed, but without surrendering initiative in economic matters or its sovereignty.
Yet, gradual introduction of elements of the market economy has also resulted in massive unemployment. In fact, one of the reasons that the Chinese are reluctant to cut off subsidies to some state-owned enterprises (SOEs), close down unprofitable firms or engage in wholesale privatization is that such steps would lead to 40 per cent of workers employed by SOEs losing their jobs.
Presently one quarter of the Chinese population is dependent upon people employed by SOEs. Such consideration is conspicuously absent from the thinking of planners in Pakistan.
Although China, unlike Russia and some other former Soviet states, has adopted a gradualist approach, its rapid growth is not without problems such as increasing crime, growing social inequality and environmental degradation. In the developed world, the change was spread over a much greater time span, sometimes over centuries. The challenge for rapidly growing developing countries is much greater.
Private enterprise: The architect of the reforms in China was Deng Xiaoping, who survived two purges before succeeding Mao Zedong. Under Deng, limited enterprise was permitted under his famous dictum: "It does not matter whether the cat is black or white, as long as it catches mice."
By this he emphasized the objective-economic development. Whether it is done through socialism or incorporating elements of the free enterprise system is immaterial. The real ultimate aim is overcoming poverty, and improving the people's material and cultural life.
Limited private enterprise was recognized in 1987 and incorporated into the constitution in 1988. It was defined as a privately owned profit making organization employing eight or more people. At the third plenary session of the 14th CPC Central Committee in November 1993, it was resolved that a 'socialist market economy' would henceforth be established in China.
Collective enterprises named cooperatives were another form of private enterprise, which could be set up by four or more persons pooling their private capital. They were formally classified as publicly owned, which entitled them to enjoy advantages such as lower taxes and easier access to bank loans.
State-run companies and local governments and administrations set up many. This resulted in three major components coming into being in the economy: the state, the collective and the private sectors.
There are self-employed individuals and family based economic units as well, developed in the 1970s to supplement the centrally planned economic system and help provide jobs for surplus labour in the agricultural, rural population. The commune system was abolished in the 1980s and regulations developed to create a market for the resulting products and services.
These self-employed individuals include artisans like carpenters and electricians or small businessmen employing up to seven workers. These policies provided opportunities to workers to compete and advance socially.
The development of limited private entrepreneurs is partly a response of the Chinese government to meet the challenges of globalizing forces, and to enhance competitiveness.
In cultural context, the secularized version of Confucianism known as Popular Confucianism, that derives values in the lives of ordinary people from Confucianism, has been identified by many scholars as the spiritual or ideological source of inspiration for successful indigenous transformation to development in the initial state of most of East Asian modernization.
Its key ingredients are: an ethical worldly approach-non-fatalistic, and positive-and belief in natural equality and intrinsic value; plus acceptance of meritocracy and mobility. This culture does not worship western-style individualistic ideals and gives maximum importance to one's relations and obligations.
Pragmatic but collectivist would be the best description of the Confucianist approach, which emphasizes the virtues of self-improvement and rewards individual effort by social advancement. Chinese entrepreneurship is a creation of the state in China.
They urge support for Chinese entrepreneurs on grounds of their economic and social utility and their contribution to nation building. China federation of industry and commerce publishes biographies of distinguished private entrepreneurs in which they emphasize their virtuous character and moral behavior, and their generous donations to projects of local community development and nation-wide infrastructure building, poverty relief, care and honoring of the elderly, welfare of the handicapped and other general charity work.
The idea is to show that they are giving back a part of the wealth earned from opportunities provided to them by state and society. Perhaps this model is better for developing countries to emulate than one that lays stress on glamorizing power and pelf and glorification of individual achievement. China's economic development is moving ahead rapidly under a unique combination of individual effort and hard work, and a collectivist approach.
The West is eyeing the Chinese market covetously, as indeed it always has through history. 'Globalization' offers them the hope of fulfilling these wishes, as western multinationals invest in its industry, and take advantage of cheap Chinese labour and relative openness since 1992.
Consequently, over $400 billion in the form of FDI have poured into China during this period, as the United States and Europe vie for the Chinese market. Pakistan is yet to make headway in utilizing the great opportunities of trade and investment opening up in its 'best friend's' economy.
