VIEW:US decline is China’s opportunity — II—S P Seth - Tuesday, July 27, 2010

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There is a wide chasm between rural and urban China in terms of incomes and socially, creating a lot of resentment and protests in different parts of China. There are reportedly more than 100,000 cases of protests and demonstrations in China annually

Although China was hit by the global financial crisis with a significant fall in its exports, the situation has largely been retrieved. Even though western economies are in bad shape, they have no real options except to buy cheap goods from China. Therefore, the US and European countries have been pressing China to revalue its currency to (1) regain the competitiveness of their manufactures and (2) to reduce their respective trade deficits with China.

China has lately responded with some small appreciation of its currency but, unless the Chinese currency appreciates significantly, it will not make any dent in China’s trade surpluses with much of the world. And there is no sign that China will significantly appreciate its currency to the satisfaction of the US and its other western trading partners. However, China wants to reduce its dependence on exports and has taken some steps to stimulate its domestic economy. But there are dangers that this could create inflationary pressures. This has been evident in the real estate market where prices have simply ballooned to make it unaffordable for most Chinese people except the very rich.

Notwithstanding its counter-measures to rein in the economy, the hybrid nature of China’s capitalist economy and the Communist Party’s (CP’s) monopoly of power is creating serious contradictions. It is difficult to reconcile the two irreconcilable elements. For instance, an uncomfortable nexus has developed between the CP and the new economic class spawned and controlled by the CP. Some of the major strategic industries, like power, transportation, etc, are either owned or controlled by the children (dubbed ‘princelings’) of the top former and present party leadership.

A similar picture is replicated at the lower rungs of the power structures in regions, local areas and so on, which has led to widespread nepotism and corruption nationally, causing great resentment among the people, even though dissemination of such information defaming China’s power elite is prohibited, except in cases where the defamed party leaders have fallen foul of the dominant power group at different levels. Which brings up the question of lack or absence of accountability, leading to the perpetuation of the same old rot for want of remedial avenues through open airing of corruption in relevant political and judicial structures.

Another serious problem arises from a relatively depressed rural sector of the economy. Indeed, the first sector to gain from a relatively open economy in China was the agricultural sector where communes and collectives were dismantled, with peasants energised to work on their farms (though still owned by the state) with increased production and improved earnings. However, from the 1990s, the emphasis shifted to an industrial economy, with the rural sector providing a supportive role. In other words, the farming sector increasingly came to subsidise the urban economy.

The primary shift to an industrial economy affected the rural sector in a number of ways. (1) There was the relative neglect from the state, with very little new investments in the rural sector; (2) this led to depressed economic conditions with no new employment opportunities; (3) the influx into urban areas of rural migrant labour with no legal status and hence denied whatever state benefits accrue to those with legal urban residency; (4) cheap migrant labour, with staggered and delayed wages, and (5) the perpetuation of urban tales of rising crimes attributed to the new rural work force.

China is believed to have a floating rural migrant workforce of anywhere between 120 to 150 million and always on the move. Worst still, because of the needs of urban construction of housing and industrial plants, more and more rural land has been acquired legally with grossly insufficient compensation, or simply illegally, depriving its occupants of their living and occupations. In other words, there is a wide chasm between rural and urban China in terms of incomes and socially, creating a lot of resentment and protests in different parts of China. There are reportedly more than 100,000 cases of protests and demonstrations in China annually.

Out of China’s total population of 1.3 billion, its rural proportion is estimated at around 800 million. And these are the people who have either missed out or only partly gained from China’s industrial transformation, and are not terribly happy about the glaring inequalities and inequities of new China.

While China has opened up economically and socially in so many ways, its political system remains tightly controlled. The CP has largely co-opted the urban middle class into the glitter of moneymaking and upward mobility, thereby neutralising its political aspirations and thus leaving the party to exercise its political monopoly. But almost all Chinese people hate the systemic and ever-growing corruption involving the party bureaucracy and political elite. There is, therefore, always the danger of a spontaneous combustion of popular anger at some point in time.

However, as things stand today, China is increasingly emerging as a new superpower, although the US still remains the world’s most powerful military power, with the world’s largest economy. The US economy, though, is plagued with all sorts of problems, with China emerging as a major creditor by investing close to one trillion in US securities. Indeed, China is emerging as a creditor to a number of countries, including some European countries.

China is investing and making deals all over the world (Africa, Middle East, Asia, Latin America) to secure the supply of oil, gas, metals and other resources to keep up the momentum of its growing economy. These deals sometimes reek of a neo-colonial pattern. For instance, these countries will not receive any share of profits until all the Chinese loans have been paid off with the newly discovered resources. At the same time, China is developing new markets in these countries for its manufactures, with damaging effects on local industry.

Such dependent relationships, where even labour is exported from China to work on Chinese-funded projects, is already creating resentment in some countries. But China has the ready money, and is not concerned about the nature of the political regimes it is cultivating. This gives Beijing an edge over the US and other western countries, enabling it to expand its economic presence and political influence at the expense of the US and Western Europe.


The writer is a senior journalist and academic based in Sydney, Australia

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