Chinese Economic Reform (4177 words) Essay Example For Students

Chinese Economic Reform (4177 words) Essay Chinese Economic ReformTwoyears after the death of Mao Zedong in 1976, it became apparent to many ofChinas leaders that economic reform was necessary. During his tenure as Chinaspremier, Mao had encouraged social movements such as the Great Leap Forward andthe Cultural Revolution which had had as their bases ideologies such as servingthe people and maintaining the class struggle. By 1978 Chinese leaderswere searching for a solution to serious economic problems produced by HuaGuofeng, the man who had succeeded Mao Zedong as CCP leader after Maosdeath (Shirk 35). Hua had demonstrated a desire to continue theideologically based movements of Mao. Unfortunately, these movements had leftChina in a state where agriculture was stagnant, industrial production waslow, and the peoples living standards had not increased in twenty years(Nathan 200). This last area was particularly troubling. While the grossoutput value of industry and agriculture increased by 810 percent and nationalincome grew b y 420 percent average individual incomeincreased by only 100 percent (Ma Hong quoted in Shirk 28). However,attempts at economic reform in China were introduced not only due to some kindof generosity on the part of the Chinese Communist Party to increase thepopulaces living standards. It had become clear to members of the CCP thateconomic reform would fulfill a political purpose as well since the party felt,properly it would seem, that it had suffered a loss of support. As Susan L. Shirk describes the situation in The Political Logic of Economic Reform inChina, restoring the CCPs prestige required improving economic performance andraising living standards. The traumatic experience of the Cultural Revolutionhad eroded popular trust in the moral and political virtue of the CCP. Thepartys leaders decided to shift the base of party legitimacy from virtue tocompetence, and to do that they had to demonstrate that they could deliver thegoods. (23) This movement from virtue to competence seemed to mark aserious departure from orthodox Chinese political theory. Confucius himself hadposited in the fifth century BCE that those individuals who best demonstratedwhat he referred to as moral force should lead the nation. Using this principleas a guide, China had for centuries attempted to choose at least itsbureaucratic leaders by administering a test to determine their moral force. After the Communist takeover of the country, Mao continued this emphasis onmoral force by demanding that Chinese citizens demonstrate what he referred toas correct consciousness. This correct consciousness could beexhibited, Mao believed, by the way people lived. Needless to say, that whichconstituted correct consciousness was often determined and assessed by Mao. Nevertheless, the ideal of moral force was still a potent one in China evenafter the Communist takeover. It is noteworthy that Shirk feels that the ChineseCommunist Party leaders saw economic reform as a way to regain their and theirpartys moral virtue even after Maos death. Thus, paradoxically, bydemonstrating their expertise in a more practical area of competence, theleaders of the CCP felt they could demonstrate how they were serving the people. To be sure, the move toward economic reform came about as a result of achanged domestic and international environment, which altered theleaderships perception of the factors that affect Chinas national security andsocial stability (Xu 247). But Shirk feels that, in those pre-Tienenmendays, such a move came about also as a result of an attempt by CCP leaders todemonstrate, in a more practical and thus less obviously ideological manner thanMao had done, their moral force. This is not to say that the idea of economicreform was embraced enthusiastically by all members of the leadership of theChinese Communist Party in 1978. To a great extent, the issue of economic reformbecame politicized as the issue was used as a means by Deng Xiaoping to attainthe leadership of the Chinese Communist Party. Maos successor, Hua Guofeng, hadtried to prove himself a worthy successor to Mao by draping himself in themantle of Maoist tradition. His approach to economic development was orthodoxMaoism with an up-to-date, international twist (Shirk 35). This approachwas tied heavily to the development of Chinas oil reserves. hen estimates of the oil reserves were revised downward commitments toimport plants and expand heavy industry could not be sustained (Shirk 35). Deng took advantage of this economic crisis to discredit Hua and aim forleadership of the party. Reform policies became Dengs platform againstHua for post-Mao leadership (Shirk 36). Given this history of economicreform, it is evident that under the present system economic questions arenecessarily political questions (Dorn 43). Once Deng and his faction hadprevailed, it was necessary for some sort of economic reform to evolve. Theinitial form the new economy took was not a radical one. China was still astate in which the central government retain the dominant power in economicresource allocation and responsible local officials work for the interest ofthe units under their control (Solinger 103). However, as time passed,some basic aspects of the old system were altered either by design or via theprocess of what might be called benign neglect. As Shirk points out, in ruralareas, decollectivization was occurring: decision making power from collective production units (communes, brigades , and teams) tothe family (38); purchase prices for major farm products were increased(39). In 1985, further reforms were introduced. For example, long-term salescontracts between farmers and the government were established. In addition, inan effort to allow the market to determine prices, city prices of fruitand vegetables, fish, meat, and eggs, were freed from government controls sothey could respond to market demand (Shirk 39). Most importantly, asurge of private and collective industry and commerce in the countryside(Shirk 39) occurred. This allowed a great percentage of the populace to becomeinvolved in private enterprise and investment in family or group ventures. Theconditions also allowed rural Chinese to leave the villages and become involvedin industry in urban centers (Shirk 40). The economy grew so quickly thatinflation occurred and the government had to reinstitute price controls. Chinaseconomy retains these characteristics of potential for growthand inflationtothis day . Another important aspect of Chinese economic reform was the decisionof China to join the world economy. Deng Xiaoping and his allies hoped to effectthis 1979 resolution in two ways: by expanding foreign trade, and by encouragingforeign companies to invest in Chinese enterprises. This policydenoted theOpen Policy (Shirk 47)was a drastic removal from the policies ofMao Zedong and, in fact, from centuries of Chinese political culture. The OpenPolicy, which designated limited areas in China as places withpreferential conditions for foreign investment and bases for the development ofexports (Nathan 99), was extremely successful in the areas where it wasimplemented (Shirk 47). However, it was looked upon by many Chinese as nothingless than an avenue to economic dependency (Nathan 50). Indeed, whenthe policy was first implemented, many Chinese seem to fear that Dengspolicies drawing China back toward its former semi-colonial status as amarket where the imperialist countries dump their g oods, a raw materialbase, a repair and assembly workshop, and an investment center. (Nathan51) It is interesting to note the symptoms of a national character that wouldsubscribe to the above sentiment. In an article written in 1981, just two yearsafter the Open Policy was first proposed, Andrew J. Nathan noted the almostpathological resistance to foreign intervention in the Chinese economy:Some Chinese fear that reliance on imported technology will encourage adependent psychology Chinese perceive joint ventures as a costly formof acquisition. Some people worry: Wont we be suffering losses by lettingforeigners make profits in our country?' (52). The Chinese were asvociferous about issues of sovereignty. Nathan maintained that the Mao-ledrevolution, which culminated in victory in 1949, had been fueled by anintense patriotism: once China had stood up, no infringement on itssovereignty, no matter how small, should be permitted (53). These feelingswere manifested in denying foreign bu sinessmen long-term, multiple entry visas,resisting increased foreign economic contacts and alteration ofcurrent ways of doing things, and disinclination to become involved ingovernment-to-government loans and joint ventures lest Chinese become exploitedin some way (Nathan 53-55). Given these hesitancies on the part of the Chinesesociety vis-a-vis foreign relations, it is impressive that Deng and his allieswere able initially to create and implement the Open Policy since many membersof the society at large were resistant to becoming involved in a policy soantithetical to the Chinese national character. However, once the successes ofthe Open Policy were apparent, resistance to the plan by the populace waned. Time Management for College Students EssayNeedless to say, exclusion from WTO would be disastrous for any country, butparticularly for an emerging market such as China. Even on a day to day basis,Chinas economic leaders seem unable to understand how some aspects of a marketeconomy work. In discussing the status of the Shanghai Stock Market, forexample, one stock dealer referred to it as crazy (StocksSurge D2). Moreover, American analysts have been amazed to discover in theShanghai market the lack of regulation and the poor disclosurerequirements. Some companies have been listed for two or three years and havenot issued an annual report (Hansell D2). It is no wonder that Chineseinvestors become anxious about their investments. The issuance of shares in theShandong Huaneng Power Development Company also demonstrates the lack ofexpertise on the part of the Chinese in the modern world market. In fact,according to one Hong Kong investment analyst, he company wasntreally a company. It wa s just a bunch of discrete plants that they tied a bowaround and wrote a prospectus on' (Zuckerman D6). The prospectusguaranteed a fifteen percent annual return on investments. In fact, the returnwill no doubt be less than that because of prevailing currency exchange ratesand debt that the company will have to assume. To be sure, the problems of theShandong Huaneng Power Development Company and the Shanghai Stock Exchange maydemonstrate only the problems of an immature economy. Nevertheless, if Chinawishes to become a viable member of the world economic community, suchshortcomings will have to be eliminated quickly. These apparent problems mayalso be the result of an economic system that is run by the state. Certainly,one thing that the CCP has attempted to do is create a market economy whileretaining a state controlled system. This structure may be possible but it doeshave its critics. Steven N.S. Cheung, in an essay written in 1989, argued forthe creation of private property by ma ndate (31), feeling thatprivatization in China would lead to necessary additional investment in thesocietys infrastructure and the establishment of a judicial system thatis based firmly on the principle of equality before the law (Cheung 32). Echoing Cheungs sentiments, James Dorn saw problems in the areas of Chinesebanking and finance. In this arrangement, Dorn argued, the state controlsthe bulk of investment resources. The lack of a private capital market hashandicapped economic development in China and hampered rational investmentdecisionmaking (43). In order to become a modern economic state Dornargued for the necessity of circumventing Chinas ruling elite who opposethe dismantling of state monopolies and who benefit from price fixing andnonprice rationing (51). Xu Zhiming also saw the necessity for a revampingof the Chinese system: We must throw off the traditional systemcompletely (249) in order for economic reform to thrive. Communist Partymembers, of course, articulate a different position. In a recent interview thatappeared in the Beijing Review, Feng Bing, Deputy Secretary General of the StateCommission for Restructuring the Economic System, spoke to the issue of economicreform in China. It is striking that Feng spoke of the benefits that thepopulace has received as a result of the economic reform now occurring in China. That is, his comments appeared to demonstrate the beneficence, or the moralforce, of the Chinese Communist Party vis-a-vis economic reform. He noted thatsuch reform involves the essence of socialism: to liberate and developproductive forces; to eradicate exploitation; to remove polarization; and toattain the goal of common prosperity (Official 12). Thus, CCPleaders still appear to see their roles as representatives of a moral force. CCPmembers and leaders wish economic reform not to be judged on just its practicalmerits, but also as an effect of the moral force of the leadership. Economicreform, then, becomes nothing less than a moral crusade and it is thus easy tosee why, for example, China has staked its national prestige on becoming afounding member of the World Trade Organization (Gargan 14). Will Chinasucceed in taking its place among the nations of the world market? Will the CCPsucceed in retaining its political power given the drastic changes in thesocietal makeup of China th at are occurring due to the changing economicrealities? I would suggest that the chances are better for the former than forthe latter. Once the Chinese attain more sophistication relative tointernational and national markets, institute a more manageable banking system,and make a good faith effort to insure acceptable human rights, the country maywell become the richest economy in the world within the next 25years (Gilder 372). However, whether or not these conditions can occurwithout a weakening of the state controlled system is problematic. The mostimpressive and far-reaching display of moral force by the CCP may well have tobe a voluntary reduction of its power over the people. Paradoxically, byweakening itself politically, the party may demonstrate its true moral force byliberating, politically and economically, one billion Chinese citizens. BibliographyBoeing Planning to Invest $100 Million for China Plant. New YorkTimes: 9 August 1994, D4. Bradsher, Keith. Bill to Restrict ChinasImports Loses in House. New York Times: 10 August 1994, A7. Cheung, StevenN.S. Privatization vs. Special Interests: The Experience of ChinasEconomic Reforms. Economic Reform in China: Problems and Prospects. Ed. James A. Dorn and Wang Xi. Chicago: University of Chicago Press, 1990. 21-32. China cracks down on dissent after trade threat lifted, report says.Hartford Courant: 29 July 1994, A13. China Stock Is Most Active. NewYork Times: 5 August 1994, D5. Dorn, James A. Pricing and Property: TheChinese Puzzle. Economic Reform in China: Problems and Prospects. Ed. James A. Dorn and Wang Xi. Chicago: University of Chicago Press, 1990. 39-61. Du Pont Plans Increase In Chinese Investment. New York Times: 10August 1994, D2. Gargan, Edward A. U.S. May Thwart Chinas TradeGoal. New York Times: 24 July 1994, 14. Gilder, George. Let aBillion Flowers Bloom. Economic