| 亲爱的组员和各位gter们，这里是eco&time 文艺类的汇总贴，大家将自己每天读到的，属于社会的文章或段落都放在这里，ddcmj会定期来总结，多余煽情的我就不说了，大家已经非常明确我们的宗旨了，丰碑丰碑啦~~~ ok ，大家每天都来吧，特别是各位亲爱的组员，已完成作业为荣哦~~~ |
Dec 17th 2008
From the Economist Intelligence Unit ViewsWire
Do the economic problems of Guangdong province show where China is headed in 2009?
Guangdong may no longer be at the vanguard of China's economic reforms, but the province's economic slowdown since the start of 2008 showed that developments there can still foreshadow where the rest of China is heading. The question now is whether Guangdong's current problems are signs of what is in store for the entire country in 2009.
A rough year
The past year has been a tough one for Guangdong, which shares a border with Hong Kong and is China's second-richest province. Official figures on factory closures are inconsistent, but industry reports point to tens of thousands of failures. Local officials are said to talk privately of some 5m job losses—one quarter of the national total. Property prices in Guangzhou and Shenzhen have plunged from their peaks in 2007, taking real-estate transaction volumes with them. The troubles in the property sector have had a major knock-on effect on investment by developers, exacerbating the economic slowdown.
Worryingly, all of this pain occurred while the province's mighty export machine was still expanding (Guangdong's exports rose 13.5% year on year in January-September, to US$304bn). This might surprise anyone who heard the cries of pain from Taiwan- and Hong Kong-invested export enterprises, which were hit by the efforts of Guangdong's new party secretary, Wang Yang, to turn the province into a showcase for the "scientific-development theory" of China's president, Hu Jintao. This agenda calls for a move towards higher value-added and less environmentally damaging industries, as well as for promotion of the service sector and of research and development. Policies advanced as part of this agenda—such as tighter regulatory standards, higher minimum wages and export-tax-rebate adjustments—seriously hurt exporting firms in low-end sectors like toys, footwear and furniture.
However, such firms were concentrated disproportionately around a few cities, notably Dongguan, and the wider provincial export sector remained pretty robust. Moreover, although lay-offs and factory closures mounted, most of the population of new industrial cities like Dongguan and Shenzhen consist of migrant workers who lack residential rights. Such closures still had an impact, of course, but with the local government able and willing to spend accumulated fiscal surpluses to smooth the process of paying overdue migrant wages and send the workers home, the process of industrial restructuring has been relatively easy. Low-end companies have also been offered incentives to relocate to less-developed parts of the province—although managerial-talent shortages there make this process difficult, and many have chosen simply to close shop.
The property-sector slowdown was also very much the result of government policy. Tighter credit conditions and a steady barrage of measures designed to deflate the property-price bubble were largely to blame. The most important was a limit on the number of houses foreigners are allowed to own (this dampened demand among Hong Kong-based investors, who form a key part of real-estate demand). As a result, it could be argued that Guangdong's problems have been deliberately induced by painful but necessary economic reforms. Many officials and businessmen have not been happy about the process, but it has had the provincial leadership's support.
That support is weakening as the economic picture deteriorates. The crucial electronics-export sector has at last begun to feel the chill of falling global demand. Leading foreign-owned exporters are planning to slash workforces dramatically, with Shenzhen likely to be badly hit. Meanwhile, the downturn is likely to knock back the early signs of an emerging recovery in housing transactions. Although parts of the province that are more focused on domestic demand, such as Guangzhou, should hold up better, the export-led chill is likely to affect the whole region. Provincial officials have thus become more proactive in supporting growth. Environmental regulations are being quietly brushed aside, and labour regulations are being enforced with a greater degree of flexibility. The authorities are also pressuring companies to take on extra workers, or at least to limit job cuts.
Outlook
Guangdong's economy is well diversified, with both high- and low-end manufacturing, as well as developed retail and real-estate sectors. However, although Guangdong's travails are likely to be mirrored to varying degrees in provinces across China, few other regions are as well placed to tackle their problems. Other export-focused provinces have a much lower proportion of migrant workers, so local economies will be worse affected by lay-offs. They also have lower levels of accumulated fiscal reserves with which to smooth the restructuring process.
Most attention, however, will be focused on the national property sector. If looser monetary conditions, laxer central-government regulations and local policy measures are able to stimulate real-estate demand, China's economic downturn next year is likely to be a mild one. But if the deteriorating global economic climate continues to undermine confidence, the outlook could be much bleaker. Outsiders will once again be looking to Guangdong to see which way the rest of China will turn.
Dec 17th 2008
From the Economist Intelligence Unit ViewsWire
Do the economic problems of Guangdong province show where China is headed in 2009?
Guangdong may no longer be at the vanguard of China's economic reforms, but the province's economic slowdown since the start of 2008 showed that developments there can still foreshadow where the rest of China is heading. The question now is whether Guangdong's current problems are signs of what is in store for the entire country in 2009.
A rough year
The past year has been a tough one for Guangdong, which shares a border with Hong Kong and is China's second-richest province. Official figures on factory closures are inconsistent, but industry reports point to tens of thousands of failures. Local officials are said to talk privately of some 5m job losses—one quarter of the national total. Property prices in Guangzhou and Shenzhen have plunged from their peaks in 2007, taking real-estate transaction volumes with them. The troubles in the property sector have had a major knock-on effect on investment by developers, exacerbating the economic slowdown.
Worryingly, all of this pain occurred while the province's mighty export machine was still expanding (Guangdong's exports rose 13.5% year on year in January-September, to US$304bn). This might surprise anyone who heard the cries of pain from Taiwan- and Hong Kong-invested export enterprises, which were hit by the efforts of Guangdong's new party secretary, Wang Yang, to turn the province into a showcase for the "scientific-development theory" of China's president, Hu Jintao. This agenda calls for a move towards higher value-added and less environmentally damaging industries, as well as for promotion of the service sector and of research and development. Policies advanced as part of this agenda—such as tighter regulatory standards, higher minimum wages and export-tax-rebate adjustments—seriously hurt exporting firms in low-end sectors like toys, footwear and furniture.
However, such firms were concentrated disproportionately around a few cities, notably Dongguan, and the wider provincial export sector remained pretty robust. Moreover, although lay-offs and factory closures mounted, most of the population of new industrial cities like Dongguan and Shenzhen consist of migrant workers who lack residential rights. Such closures still had an impact, of course, but with the local government able and willing to spend accumulated fiscal surpluses to smooth the process of paying overdue migrant wages and send the workers home, the process of industrial restructuring has been relatively easy. Low-end companies have also been offered incentives to relocate to less-developed parts of the province—although managerial-talent shortages there make this process difficult, and many have chosen simply to close shop.
The property-sector slowdown was also very much the result of government policy. Tighter credit conditions and a steady barrage of measures designed to deflate the property-price bubble were largely to blame. The most important was a limit on the number of houses foreigners are allowed to own (this dampened demand among Hong Kong-based investors, who form a key part of real-estate demand). As a result, it could be argued that Guangdong's problems have been deliberately induced by painful but necessary economic reforms. Many officials and businessmen have not been happy about the process, but it has had the provincial leadership's support.
That support is weakening as the economic picture deteriorates. The crucial electronics-export sector has at last begun to feel the chill of falling global demand. Leading foreign-owned exporters are planning to slash workforces dramatically, with Shenzhen likely to be badly hit. Meanwhile, the downturn is likely to knock back the early signs of an emerging recovery in housing transactions. Although parts of the province that are more focused on domestic demand, such as Guangzhou, should hold up better, the export-led chill is likely to affect the whole region. Provincial officials have thus become more proactive in supporting growth. Environmental regulations are being quietly brushed aside, and labour regulations are being enforced with a greater degree of flexibility. The authorities are also pressuring companies to take on extra workers, or at least to limit job cuts.
Outlook
Guangdong's economy is well diversified, with both high- and low-end manufacturing, as well as developed retail and real-estate sectors. However, although Guangdong's travails are likely to be mirrored to varying degrees in provinces across China, few other regions are as well placed to tackle their problems. Other export-focused provinces have a much lower proportion of migrant workers, so local economies will be worse affected by lay-offs. They also have lower levels of accumulated fiscal reserves with which to smooth the restructuring process.
Most attention, however, will be focused on the national property sector. If looser monetary conditions, laxer central-government regulations and local policy measures are able to stimulate real-estate demand, China's economic downturn next year is likely to be a mild one. But if the deteriorating global economic climate continues to undermine confidence, the outlook could be much bleaker. Outsiders will once again be looking to Guangdong to see which way the rest of China will turn.
Business in China
Recession's blessing
Dec 11th 2008 | HONG KONG AND SHENZHEN
From The Economist print edition
Falling Western demand is keeping high-quality Chinese goods in China
ON THE shelves of Chinese shops is the usual assortment of toys, clothing, appliances and cookware. But over the past month the quality of many of the goods on offer has improved. In part this is because scandals over toxic paint and poisoned milk have brought closer scrutiny from inspectors and hence less corner-cutting. But it is also partly because of falling demand for Chinese goods from America, Europe and the Middle East, which has given China’s manufacturers and local government a big incentive to work around the country’s formidable export-promotion policies and to sell at home.
Chinese manufacturers are well aware that they operate in one of the few large markets that is still showing a pulse. Retail sales in October were up by 22% compared with the same month in 2007—a slight drop from 23.2% in September, but an impressive figure nonetheless. That certainly exaggerates the country’s economic vigour (growth in car sales, for example, is declining), but it would be a stretch to believe that China is in recession.
As domestic consumption booms, China’s export-oriented manufacturers are under siege. Figures announced on December 10th showed that exports fell by a startling 2.2% in November, compared with a year earlier. Analysts had expected an increase of around 15%; it was the first fall in exports for seven years. The news followed a government survey, released on December 1st, that showed a precipitous decline in the fortunes of export manufacturers, confirming lots of anecdotal evidence. Every week brings fresh reports of factory closings, particularly in the industrial belt around the Pearl River delta in southern China. Unpaid workers have been staging violent protests. Diverting goods intended for export to the domestic market makes sense for factory owners, who want their firms to survive, and for local officials, who wish to maintain order.
There is, however, a problem. This scheme conflicts with government policy, which is to promote exports. China encourages the import of industrial commodities, such as oil, base metals and even quality fabrics and industrial machinery—provided goods made with them are sent abroad. Accordingly, a tax is imposed on imports, and is then mostly reimbursed when finished goods are exported. (Products brought into special zones devoted to manufacturing for markets abroad avoid the tax altogether.)
As a result of pressure from China’s trading partners, these tax rebates on exports had been contracting. But in November a new stimulus plan was announced that increased the rebates on more than 3,000 items. Evidently China’s officials hope the country can once again export its way to higher growth, despite the financial troubles in its main markets.
Given that demand is more robust at home than abroad, the market is pushing in the opposite direction to the government. But circumventing official policy is difficult. Along with the loss of the rebate, say manufacturers, comes an increase in attention from public authorities that most companies prefer to avoid. Some manufacturers therefore avoid the domestic market in China entirely; others run separate factories for domestic and foreign goods.
One solution is to route goods to the domestic market via Hong Kong, so that they qualify as exports, but this takes time and money and strikes many operators as a huge waste of both. China and Hong Kong are filled with small trading companies noted for their ability to handle these problems using one murky method or another. The sudden appearance of higher-quality goods suggests that officials are being less zealous than usual in enforcing the export rules, for fear of causing job losses.
Chinese consumers, for their part, must surely be pleased that they can buy better products at keen prices. A year ago, the boom was expected to be the means of breaking down the divide between China’s domestic and export-led economies. But perhaps a bust is what was required.
The second Long March
Dec 11th 2008
From The Economist print edition
China has been transformed by the changes ushered in by Deng Xiaoping 30 years ago. But the biggest step has yet to be dared
“ENGELS never flew on an aeroplane; Stalin never wore Dacron.” Thus China’s late leader, Deng Xiaoping, to a meeting 30 years ago that is now officially seen as the starting-point of his economic and political reforms. Deng’s words meant Maoist dogma was out and pragmatism was in. A dramatically transformed China is now commemorating the anniversary. But even as officials trot out a litany of achievements they attribute to the country’s “reform and opening” policy—200m fewer citizens living in poverty, a 6% share of global GDP compared with 1.8% in 1978, a nearly 70% increase in grain production—the world’s financial crisis weighs heavily on their minds, and their leaders are struggling with unfinished business.
Vice-President Xi Jinping, heir-apparent to President Hu Jintao, is said to have been appointed chief organiser of the celebration programme. It includes concerts, exhibitions and endless speeches celebrating the “turning point” in China’s history when Deng gained the upper hand over the Maoists. His victory was evident at two meetings held in November and December 1978. The first was a month-long “work conference” of the Communist Party’s Central Committee, probably the liveliest gathering of its kind ever held (it was here, according to some Western scholars, that Deng mentioned Dacron). A more scripted and formal plenum followed it.
Next year the country will mark its 60th birthday as a people’s republic (in Confucian tradition, 60th birthdays are particularly significant). Reform and opening has thus taken up half of China’s communist life. But officials are being careful to manage expectations of further change. Deng once suggested that direct elections to national leadership posts could be held by 2050. No one mentions that now. On the economic side huge challenges loom, among them an ageing population and a blighted environment, both of which could drag down growth.
Deng, who died in 1997, is often described as the chief architect of reform, as if the sweeping changes of the past 30 years were mapped out by him. He himself more accurately described his approach as “crossing a river by feeling the stones”. The ultimate objective has never been clear. Since 1992 it has been to set up a “socialist market economy”, but officials struggle to explain how this differs from a real one. Deng announced that year that the party’s “basic line” (party-speak for reform and opening under one-party rule) would not change for 100 years. This implies a lot more stone-groping.
Party leaders revel in this obscurity. It gives them flexibility in policymaking and makes it easier for them to forge compromises between factions. One of the most important political changes in China over the past 30 years has been a move away from the vicious factional strife of the Maoist era, a tendency that persisted well into the 1980s and fuelled the pro-democracy upheaval of 1989. In 2002, for the first time in China’s communist history, power was smoothly transferred from one set of leaders to another without killings or purgings. The new leaders express the same commitment to reform, but have a more left-wing agenda.
Papering over some of the party’s history has helped them too, damping public demands for political change. The history of the reform programme itself has been sanitised and simplified in order to minimise public questioning of leaders’ motives and actions. No mention is made, for example, of a vital part of the background to the party meetings, Democracy Wall—a 200-metre-long brick structure in front of a bus depot west of Tiananmen Square. For a remarkable four months in the winter of 1978-79, until Deng decided to shut it down and jail some of its activists, citizens plastered the wall with posters calling for freedom and democracy. The area is now a plaza flanked by shopping malls.
Party officials, preferring their heroes to be larger than life, have massaged history to imply that the meetings 30 years ago were a clarion call for reform and opening. They were not. The dismantling of the Maoist edifice after the Chairman’s death in 1976 began more by stealth. A shift of emphasis towards rebuilding the economy was already under way long before the meetings began. Political rapprochement with the West—a key part of the “opening”—began several years before Mao’s death, driven by a shared dislike of the Soviet Union.
The rule of prudence
The word “opening” did not even appear in the communiqué issued on December 22nd 1978, at the end of the two meetings. “Reform” was mentioned only once. A draft policy document on agriculture adopted by the leaders and promulgated the next year specifically rejected the idea, now considered a hallmark of China’s rural reforms, of contracting out rural land to peasants to farm by themselves. By contrast, Mao’s disastrous “people’s communes” were praised. Deng’s reformist victory was suffused with compromise, a pattern that persists to this day.
Some in the Chinese media now talk of a “Beijing consensus” as an alternative philosophy to the “Washington consensus” of liberal economics that lately seems so discredited. China’s state-run news agency, Xinhua, recently said the Beijing consensus meant “prudence in market reforms”. Deng was certainly prudent. He knew the importance of giving the Maoists some face, even as he consolidated his grip on power and allowed experiments to be carried out with precisely the kinds of changes the Maoists disliked. Rural reforms began in late 1978 in the central province of Anhui even as the party was holding its meetings in Beijing. Peasants in one commune there secretly started parcelling out land, expecting death for it, but soon gained backing from a provincial leader and Deng ally, Wan Li. Others gradually followed suit. By the time communes were formally dismantled in 1984, most had long disappeared in all but name.
Prudently, too, the government itself avoids pushing the idea of a “Beijing consensus” as an alternative to Western capitalism. It is fearful of accusations that it harbours plans to challenge American power and change the world order. It was actually an American, Joshua Cooper Ramo, who helped the phrase gain currency in 2004 with the publication of an enthusiastic pamphlet for the Foreign Policy Centre, a British think-tank. “What is happening in China at the moment”, Mr Ramo wrote, “is not only a model for China, but has begun to remake the whole landscape of international development, economics, society and, by extension, politics.”
For at least the first half of the reform period, few were so confident. Today’s soaring city skylines are mainly the product of rapid growth in the past 15 years. And much of that growth is a product of hard-nosed liberal economics rather than any magic Chinese touch. Two of the most far-reaching reforms of the past 30 years—the dismantling of tens of thousands of state-owned enterprises (SOEs) and the privatisation of urban housing—did not take off until the late 1990s. In the case of enterprise closures, massive suffering (and not a little protest) was involved as millions were left unemployed.
Pro-democracy unrest in the late 1980s played a far bigger role in turning China capitalist than either officials, or admirers of China’s supposed gradualist approach, suggest. The protests in China were ruthlessly crushed, but they—and the collapse of communism elsewhere—triggered fierce debate among Chinese leaders about the direction of reform. Some argued that a planned economy and tight social control were essential to the regime’s survival. Others said the tumult had been fuelled by precisely these strategies. Deng, at long last, decided Maoism should be dealt a decisive blow. He emerged from retirement in 1992 to put a stop to the bickering and set China on a decisive path towards a market economy. The boom was instantaneous.
In 1978 Deng showed no such clarity of thought. He astutely read the tea-leaves of public opinion but had no grand vision. The 1980s were consumed by leadership struggles. Bao Tong, a former member of the party’s Central Committee who was jailed for sympathising with the protesters in 1989, says Deng’s original plan for the meetings 30 years ago was no more than to produce a consensus on the need to focus on the economy, then in tatters after the ravages of the Great Leap Forward in the late 1950s and the Cultural Revolution from 1966 until Mao’s death. Reform and opening was not even on his agenda.
But the meetings did not proceed as expected. Deng, who was away on a foreign tour for the first few days, came back to find that discussions had been taken over by festering political grievances aired by leaders who had suffered under Mao. Delegates demanded the rehabilitation of purged colleagues and a re-evaluation of protests in Tiananmen Square in 1976, a few months before Mao’s death, which had been declared “counter-revolutionary”. For ordinary Chinese, it was the Beijing party committee’s decision, while the work conference was under way, to declare the Tiananmen protests “entirely revolutionary” that signalled the biggest change that year—not anything Deng or his allies said about the economy.
Voices from below
The party likes to gloss over this. June 4th next year will be the 20th anniversary of the crushing of Tiananmen’s more famous protests, in 1989, in which thousands may have died. As they celebrate reform’s 30th birthday, officials do not want to suggest that any re-evaluation of the 1989 unrest may one day be possible. Not that they are likely to face much pressure to do so. The bloodshed is a distant memory now.
But public opinion continues to shape the progress of China’s reforms. Liberal Chinese economists complain that the country still falls well short of what they would call a market economy. The currency is not fully convertible, so capital flows in and out of the country are controlled. So too, still, are some prices, including those of electricity, fuel and water. In January the government imposed new controls on some food prices. It lifted them again this month. Non-state-owned enterprises are now producing two-thirds of China’s manufacturing output, but SOEs dominate key sectors such as banking, telecoms, energy and the media. Between 2001 and 2006 the number of SOEs fell from 370,000 to 120,000, but this still left assets worth $1.3 trillion in state control. There is much more work to do.
But the present set of leaders headed by President Hu and the prime minister, Wen Jiabao, worry more than their predecessors did about public reaction to painful restructuring. They have reason to be cautious. In the late 1990s around 30m workers were laid off as a result of SOE reform. China Labour Bulletin, an NGO based in Hong Kong, said in a September report that millions of these workers were left barely able to support their families, thanks to widespread corruption and a lack of clear policy guidelines. Messrs Hu and Wen, with their signature slogans of building a “harmonious society” and “putting people first”, want to give the impression that theirs is a more caring kind of capitalism. A change of tack, they feel, is necessary to avert a public backlash.
Brakes began to be applied in 2004 after Larry Lang, a Hong Kong-based scholar and popular TV commentator in China, drew attention to asset-stripping during management buy-outs of SOEs, then a common form of privatisation. This struck a chord with many Chinese, who felt that factory bosses (officials, in effect) were getting fabulously rich as a result of such buy-outs, while workers were getting next to nothing. Officials responded by suspending the practice. Two years later, to stop him riling the public even more, they cancelled Mr Lang’s TV show.
Cao Siyuan, an economist who helped draft China’s first bankruptcy law in the 1980s and now runs a bankruptcy consultancy, says the privatisation of larger SOEs has now all but ceased. Talk in the 1980s of encouraging private involvement in all competitive industries, he says, has been abandoned in favour of giving SOEs privileged positions in sectors the government regards as strategic (a term liberally interpreted). Mr Cao expects about 3,000 firms, most of them SOEs, to go through formal bankruptcy proceedings this year compared with 3,200 last year. The numbers that qualify for bankruptcy are ten times higher and rising, he says, but local officials are blocking SOEs from applying in order to preserve government reputations.
The lagging land
China was highly praised around the world for dismantling the communes and for the big increase in agricultural output that followed (although raising prices paid to peasants for their grain helped, too). But the rural power structure has changed little since commune days. Land remains collectively owned, even though it is leased out to individual households to farm. This system has shut farmers out from the boom that cities have enjoyed as a result of the rapid emergence in the past few years of a free market in property.
In October President Hu chaired a Central Committee plenum that was clearly intended to echo the one held 30 years ago. But it proved an anticlimax. Mr Hu and his colleagues remain fearful that any big change in the land system will unleash an avalanche of peasants on cities already struggling with meagre social provision. Although turning peasants into city-dwellers is crucial to maintain the fast growth of the past 30 years (nearly 10% a year on average since 1978), the government wants to keep a firm grip on the process. Migrants are allowed into big cities on sufferance. During the outbreak of SARS in 2003 Beijing was all but emptied of them. Many left in August during the Olympic games, as officials put indirect pressure on them to stay away.
Thought liberation is a long way away
Like Deng and like Jiang Zemin who succeeded him, Mr Hu has paid little more than lip service to the idea of political reform. He repeats Deng’s disingenuous line that without democracy there can be no socialism or socialist modernisation. But some Chinese scholars have pointed out that even communist Vietnam—whose leaders eye with envy the success of China’s economic reforms—has done better on the political side. In an article published in May by an official journal, Reform Internal Reference, Gao Shangquan, a prominent Chinese economist, said that Vietnam had “fewer ideological obstacles than we have”—fewer arguments, he said, over what constitutes socialism and capitalism. In another article in June he noted that only last year a petition signed by 170 people (many of them former senior officials) had accused the party of leading China towards a “capitalist restoration”.
Mr Hu certainly has no plans to weaken the party’s influence, much less to allow opposition to organise. The authorities have detained or questioned several signatories to an unusually bold call for political liberalisation issued by around 300 intellectuals on December 10th to mark the 60th anniversary of the universal declaration of human rights. And Mr Hu has devoted considerable effort (and the party considerable funds) to rebuilding the party’s grassroots organisation, which was dealt a body-blow by the closure of state-owned enterprises and the rapid growth of the private sector. Party officials have sent thousands of teams to persuade private firms to allow the establishment of trade unions (which in China are controlled by the party) as well as party cells.
Their efforts have met some resistance, not least from foreign-invested enterprises. Wal-Mart, an American retail chain with around 100 superstores in China, was especially stubborn. Repeated meetings were arranged by party officials with Wal-Mart representatives in the eastern city of Nanjing in 2006 after the firm’s (reluctant) decision to allow a union branch. The officials, on instructions from the trade-union chief, Wang Zhaoguo, demanded a party cell too. Only six party members could be found in a workforce of more than 400, and those six did not feel a cell within Wal-Mart was needed. But the company succumbed, and others have followed. By the end of 2006, party cells had been established in more than two-thirds of larger non-state enterprises.
Early this year, some official newspapers published calls for a new round of “thought liberation”. Some Chinese scholars openly appealed for a new phase of reform focusing more on politics. But crises intervened—upheaval in Tibet in March, an earthquake in May that killed tens of thousands—and so, too, did the deadening impact of the Olympic games, during which the authorities tried to suppress any hint of dissent. Now Chinese officials fret about the possibility of growing unrest as the economy suffers the impact of the global crisis. Democrats must wait.
The second Long March
Dec 11th 2008
From The Economist print edition
China has been transformed by the changes ushered in by Deng Xiaoping 30 years ago. But the biggest step has yet to be dared
“ENGELS never flew on an aeroplane; Stalin never wore Dacron.” Thus China’s late leader, Deng Xiaoping, to a meeting 30 years ago that is now officially seen as the starting-point of his economic and political reforms. Deng’s words meant Maoist dogma was out and pragmatism was in. A dramatically transformed China is now commemorating the anniversary. But even as officials trot out a litany of achievements they attribute to the country’s “reform and opening” policy—200m fewer citizens living in poverty, a 6% share of global GDP compared with 1.8% in 1978, a nearly 70% increase in grain production—the world’s financial crisis weighs heavily on their minds, and their leaders are struggling with unfinished business.
Vice-President Xi Jinping, heir-apparent to President Hu Jintao, is said to have been appointed chief organiser of the celebration programme. It includes concerts, exhibitions and endless speeches celebrating the “turning point” in China’s history when Deng gained the upper hand over the Maoists. His victory was evident at two meetings held in November and December 1978. The first was a month-long “work conference” of the Communist Party’s Central Committee, probably the liveliest gathering of its kind ever held (it was here, according to some Western scholars, that Deng mentioned Dacron). A more scripted and formal plenum followed it.
Next year the country will mark its 60th birthday as a people’s republic (in Confucian tradition, 60th birthdays are particularly significant). Reform and opening has thus taken up half of China’s communist life. But officials are being careful to manage expectations of further change. Deng once suggested that direct elections to national leadership posts could be held by 2050. No one mentions that now. On the economic side huge challenges loom, among them an ageing population and a blighted environment, both of which could drag down growth.
Deng, who died in 1997, is often described as the chief architect of reform, as if the sweeping changes of the past 30 years were mapped out by him. He himself more accurately described his approach as “crossing a river by feeling the stones”. The ultimate objective has never been clear. Since 1992 it has been to set up a “socialist market economy”, but officials struggle to explain how this differs from a real one. Deng announced that year that the party’s “basic line” (party-speak for reform and opening under one-party rule) would not change for 100 years. This implies a lot more stone-groping.
Party leaders revel in this obscurity. It gives them flexibility in policymaking and makes it easier for them to forge compromises between factions. One of the most important political changes in China over the past 30 years has been a move away from the vicious factional strife of the Maoist era, a tendency that persisted well into the 1980s and fuelled the pro-democracy upheaval of 1989. In 2002, for the first time in China’s communist history, power was smoothly transferred from one set of leaders to another without killings or purgings. The new leaders express the same commitment to reform, but have a more left-wing agenda.
Papering over some of the party’s history has helped them too, damping public demands for political change. The history of the reform programme itself has been sanitised and simplified in order to minimise public questioning of leaders’ motives and actions. No mention is made, for example, of a vital part of the background to the party meetings, Democracy Wall—a 200-metre-long brick structure in front of a bus depot west of Tiananmen Square. For a remarkable four months in the winter of 1978-79, until Deng decided to shut it down and jail some of its activists, citizens plastered the wall with posters calling for freedom and democracy. The area is now a plaza flanked by shopping malls.
Party officials, preferring their heroes to be larger than life, have massaged history to imply that the meetings 30 years ago were a clarion call for reform and opening. They were not. The dismantling of the Maoist edifice after the Chairman’s death in 1976 began more by stealth. A shift of emphasis towards rebuilding the economy was already under way long before the meetings began. Political rapprochement with the West—a key part of the “opening”—began several years before Mao’s death, driven by a shared dislike of the Soviet Union.
The rule of prudence
The word “opening” did not even appear in the communiqué issued on December 22nd 1978, at the end of the two meetings. “Reform” was mentioned only once. A draft policy document on agriculture adopted by the leaders and promulgated the next year specifically rejected the idea, now considered a hallmark of China’s rural reforms, of contracting out rural land to peasants to farm by themselves. By contrast, Mao’s disastrous “people’s communes” were praised. Deng’s reformist victory was suffused with compromise, a pattern that persists to this day.
Some in the Chinese media now talk of a “Beijing consensus” as an alternative philosophy to the “Washington consensus” of liberal economics that lately seems so discredited. China’s state-run news agency, Xinhua, recently said the Beijing consensus meant “prudence in market reforms”. Deng was certainly prudent. He knew the importance of giving the Maoists some face, even as he consolidated his grip on power and allowed experiments to be carried out with precisely the kinds of changes the Maoists disliked. Rural reforms began in late 1978 in the central province of Anhui even as the party was holding its meetings in Beijing. Peasants in one commune there secretly started parcelling out land, expecting death for it, but soon gained backing from a provincial leader and Deng ally, Wan Li. Others gradually followed suit. By the time communes were formally dismantled in 1984, most had long disappeared in all but name.
Prudently, too, the government itself avoids pushing the idea of a “Beijing consensus” as an alternative to Western capitalism. It is fearful of accusations that it harbours plans to challenge American power and change the world order. It was actually an American, Joshua Cooper Ramo, who helped the phrase gain currency in 2004 with the publication of an enthusiastic pamphlet for the Foreign Policy Centre, a British think-tank. “What is happening in China at the moment”, Mr Ramo wrote, “is not only a model for China, but has begun to remake the whole landscape of international development, economics, society and, by extension, politics.”
For at least the first half of the reform period, few were so confident. Today’s soaring city skylines are mainly the product of rapid growth in the past 15 years. And much of that growth is a product of hard-nosed liberal economics rather than any magic Chinese touch. Two of the most far-reaching reforms of the past 30 years—the dismantling of tens of thousands of state-owned enterprises (SOEs) and the privatisation of urban housing—did not take off until the late 1990s. In the case of enterprise closures, massive suffering (and not a little protest) was involved as millions were left unemployed.
Pro-democracy unrest in the late 1980s played a far bigger role in turning China capitalist than either officials, or admirers of China’s supposed gradualist approach, suggest. The protests in China were ruthlessly crushed, but they—and the collapse of communism elsewhere—triggered fierce debate among Chinese leaders about the direction of reform. Some argued that a planned economy and tight social control were essential to the regime’s survival. Others said the tumult had been fuelled by precisely these strategies. Deng, at long last, decided Maoism should be dealt a decisive blow. He emerged from retirement in 1992 to put a stop to the bickering and set China on a decisive path towards a market economy. The boom was instantaneous.
In 1978 Deng showed no such clarity of thought. He astutely read the tea-leaves of public opinion but had no grand vision. The 1980s were consumed by leadership struggles. Bao Tong, a former member of the party’s Central Committee who was jailed for sympathising with the protesters in 1989, says Deng’s original plan for the meetings 30 years ago was no more than to produce a consensus on the need to focus on the economy, then in tatters after the ravages of the Great Leap Forward in the late 1950s and the Cultural Revolution from 1966 until Mao’s death. Reform and opening was not even on his agenda.
But the meetings did not proceed as expected. Deng, who was away on a foreign tour for the first few days, came back to find that discussions had been taken over by festering political grievances aired by leaders who had suffered under Mao. Delegates demanded the rehabilitation of purged colleagues and a re-evaluation of protests in Tiananmen Square in 1976, a few months before Mao’s death, which had been declared “counter-revolutionary”. For ordinary Chinese, it was the Beijing party committee’s decision, while the work conference was under way, to declare the Tiananmen protests “entirely revolutionary” that signalled the biggest change that year—not anything Deng or his allies said about the economy.
Voices from below
The party likes to gloss over this. June 4th next year will be the 20th anniversary of the crushing of Tiananmen’s more famous protests, in 1989, in which thousands may have died. As they celebrate reform’s 30th birthday, officials do not want to suggest that any re-evaluation of the 1989 unrest may one day be possible. Not that they are likely to face much pressure to do so. The bloodshed is a distant memory now.
But public opinion continues to shape the progress of China’s reforms. Liberal Chinese economists complain that the country still falls well short of what they would call a market economy. The currency is not fully convertible, so capital flows in and out of the country are controlled. So too, still, are some prices, including those of electricity, fuel and water. In January the government imposed new controls on some food prices. It lifted them again this month. Non-state-owned enterprises are now producing two-thirds of China’s manufacturing output, but SOEs dominate key sectors such as banking, telecoms, energy and the media. Between 2001 and 2006 the number of SOEs fell from 370,000 to 120,000, but this still left assets worth $1.3 trillion in state control. There is much more work to do.
But the present set of leaders headed by President Hu and the prime minister, Wen Jiabao, worry more than their predecessors did about public reaction to painful restructuring. They have reason to be cautious. In the late 1990s around 30m workers were laid off as a result of SOE reform. China Labour Bulletin, an NGO based in Hong Kong, said in a September report that millions of these workers were left barely able to support their families, thanks to widespread corruption and a lack of clear policy guidelines. Messrs Hu and Wen, with their signature slogans of building a “harmonious society” and “putting people first”, want to give the impression that theirs is a more caring kind of capitalism. A change of tack, they feel, is necessary to avert a public backlash.
Brakes began to be applied in 2004 after Larry Lang, a Hong Kong-based scholar and popular TV commentator in China, drew attention to asset-stripping during management buy-outs of SOEs, then a common form of privatisation. This struck a chord with many Chinese, who felt that factory bosses (officials, in effect) were getting fabulously rich as a result of such buy-outs, while workers were getting next to nothing. Officials responded by suspending the practice. Two years later, to stop him riling the public even more, they cancelled Mr Lang’s TV show.
Cao Siyuan, an economist who helped draft China’s first bankruptcy law in the 1980s and now runs a bankruptcy consultancy, says the privatisation of larger SOEs has now all but ceased. Talk in the 1980s of encouraging private involvement in all competitive industries, he says, has been abandoned in favour of giving SOEs privileged positions in sectors the government regards as strategic (a term liberally interpreted). Mr Cao expects about 3,000 firms, most of them SOEs, to go through formal bankruptcy proceedings this year compared with 3,200 last year. The numbers that qualify for bankruptcy are ten times higher and rising, he says, but local officials are blocking SOEs from applying in order to preserve government reputations.
The lagging land
China was highly praised around the world for dismantling the communes and for the big increase in agricultural output that followed (although raising prices paid to peasants for their grain helped, too). But the rural power structure has changed little since commune days. Land remains collectively owned, even though it is leased out to individual households to farm. This system has shut farmers out from the boom that cities have enjoyed as a result of the rapid emergence in the past few years of a free market in property.
In October President Hu chaired a Central Committee plenum that was clearly intended to echo the one held 30 years ago. But it proved an anticlimax. Mr Hu and his colleagues remain fearful that any big change in the land system will unleash an avalanche of peasants on cities already struggling with meagre social provision. Although turning peasants into city-dwellers is crucial to maintain the fast growth of the past 30 years (nearly 10% a year on average since 1978), the government wants to keep a firm grip on the process. Migrants are allowed into big cities on sufferance. During the outbreak of SARS in 2003 Beijing was all but emptied of them. Many left in August during the Olympic games, as officials put indirect pressure on them to stay away.
Thought liberation is a long way away
Like Deng and like Jiang Zemin who succeeded him, Mr Hu has paid little more than lip service to the idea of political reform. He repeats Deng’s disingenuous line that without democracy there can be no socialism or socialist modernisation. But some Chinese scholars have pointed out that even communist Vietnam—whose leaders eye with envy the success of China’s economic reforms—has done better on the political side. In an article published in May by an official journal, Reform Internal Reference, Gao Shangquan, a prominent Chinese economist, said that Vietnam had “fewer ideological obstacles than we have”—fewer arguments, he said, over what constitutes socialism and capitalism. In another article in June he noted that only last year a petition signed by 170 people (many of them former senior officials) had accused the party of leading China towards a “capitalist restoration”.
Mr Hu certainly has no plans to weaken the party’s influence, much less to allow opposition to organise. The authorities have detained or questioned several signatories to an unusually bold call for political liberalisation issued by around 300 intellectuals on December 10th to mark the 60th anniversary of the universal declaration of human rights. And Mr Hu has devoted considerable effort (and the party considerable funds) to rebuilding the party’s grassroots organisation, which was dealt a body-blow by the closure of state-owned enterprises and the rapid growth of the private sector. Party officials have sent thousands of teams to persuade private firms to allow the establishment of trade unions (which in China are controlled by the party) as well as party cells.
Their efforts have met some resistance, not least from foreign-invested enterprises. Wal-Mart, an American retail chain with around 100 superstores in China, was especially stubborn. Repeated meetings were arranged by party officials with Wal-Mart representatives in the eastern city of Nanjing in 2006 after the firm’s (reluctant) decision to allow a union branch. The officials, on instructions from the trade-union chief, Wang Zhaoguo, demanded a party cell too. Only six party members could be found in a workforce of more than 400, and those six did not feel a cell within Wal-Mart was needed. But the company succumbed, and others have followed. By the end of 2006, party cells had been established in more than two-thirds of larger non-state enterprises.
Early this year, some official newspapers published calls for a new round of “thought liberation”. Some Chinese scholars openly appealed for a new phase of reform focusing more on politics. But crises intervened—upheaval in Tibet in March, an earthquake in May that killed tens of thousands—and so, too, did the deadening impact of the Olympic games, during which the authorities tried to suppress any hint of dissent. Now Chinese officials fret about the possibility of growing unrest as the economy suffers the impact of the global crisis. Democrats must wait.
Falling apart
Dec 11th 2008
From Economist.com
China produces dreadful trade figures, in a blow to the world economy
JUST how worrying are the figures, published on Wednesday December 10th, showing that China’s exports and imports plunged in November? Exports fell by 2.2% last month from a year ago; imports plummeted by an astonishing 17.9%. One analyst sums up the news as “a shock figure”.
The gloom is spread all over the place. Exports dropped across all big traded goods and all parts of the world. Exports to America fell by 6.1%; those to the ASEAN countries, which had grown by 21.5% in October, fell by 2.4%. The faster decline in imports meant that China’s monthly trade surplus reached a record $40.1 billion. Exports last fell in 2001.
Such numbers would be nasty enough for any big economy, but they are particularly shocking because China’s racing trade has been an engine of world trade, and thus global growth. During the 1990s China’s exports grew at an annual average of 12.9%; from 2000 to 2006 that growth nearly doubled to 21.1% each year, according to the World Bank. China's rapidly rising imports have also driven growth elsewhere. The chief economist of a Chinese bank calls the latest figures “horrifying”.
The rapidity of the decline is as striking as its extent. Trade growth in October was similar to preceeding months; exports grew by more than 19% from a year earlier. A sudden drop in just a month has surprised even the most pessimistic economists. Some analysts point out that a global shortage of trade finance in November may have exaggerated the decline, but the Chinese juggernaut is definitely stumbling.
The consequences for the Chinese economy, which has seen dizzying rates of growth since economic reforms began in 1978 (growth in the 1990s averaged 10.5%), could now be dire. Its growth is unusually driven by its exports, which have made it the world’s factory. According to the World Bank, 27% of world GDP in 2006 came from exports (up from 21% in 1990). The corresponding figures for China that year show it to be particularly dependent on exports: 40% of its GDP came from exports in 2006, compared with 11% for highly open America and 29% for Britain. Thus the potential for a drop in exports to drag down China’s growth is correspondingly greater.
The World Bank’s latest growth predictions were released on Tuesday. These predict that the Chinese economy will expand by 7.5% in 2009, well under its own calculation of 9.5% growth that it reckons China needs to keep unemployment stable. But even these calculations may prove to be overly optimistic. The Bank’s prediction rests in part on the expectation that China’s exports will rise by 4.2% next year. In fact many analysts expect the slump in trade to continue and possibly worsen; UBS, a Swiss bank, predicts that Chinese exports will not grow at all in 2009.
Chinese workers, who are already restive, may find the new year increasingly difficult. Labour disputes almost doubled in the first ten months of 2008 and sacked workers from closed toy factories rioted. If export growth ceases entirely, and jobs are threatened, social responses could be more severe. An estimated 130m people have moved from the countryside to the cities, many for jobs in factories that make goods for export. Zhang Ping, the country’s top planner, has given warning of the risk of social instability arising from massive unemployment.
The latest trade figures also worsen the already gloomy outlook for the rest of the world. Some were counting on China to prop up the global economy, as much of the rich world falls into recession. Merrill Lynch had expected China to contribute 60% of global growth in 2009. But the dramatic fall in imports suggest that the Chinese can not be relied on to be the consumer of last resort.
Analysts at Goldman Sachs expect several more months of shrinking exports. Speculation that China will devalue its currency is rife, but this would have little effect if world demand is simply collapsing. The experience of South Korea is instructive: its currency has fallen by a third against the dollar this year, but this did not prevent its exports from dropping by 18.3% in November, compared with a year ago. Unfortunately, this may not be enough to deter the Chinese government from trying to push down the yuan, which has appreciated significantly on a trade-weighted basis.
Fiscal stimulus is much more important; efforts to boost domestic demand would help both China and the world. Most analysts expect announcements about new measures on top of the $586 billion package already announced. Interest rates and taxes are likely to be cut further.
Most-respected businesses
Good company
May 6th 2009
From Economist.com
Which companies have the best reputations around the world?
FERRERO, an Italian chocolate-maker,
has come out top in an annual survey
of the world's most reputable companies. Based on perceptions of the companies in their home markets, the Reputation Institute, a research firm, has asked the public to rate the world's 600 largest firms
according to trust, admiration and respect, good feeling and overall esteem. Despite the economic turmoil, respect for business is still generally quite high. But some sectors have suffered. Banks and other financial institutions, which commanded reasonable repect in years gone by, have slipped alarmingly, though they still do better than tobacco companies.
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