CHINA: WAITING FOR NEW GOVERNMENT AND MAJOR REFORMS

By Roberto Savio Reprint | | Print |

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XIAN, Dec 5 2011 (IPS) - A recurrent prediction of western politicians says that China, with its economic development, will inevitably transform itself into a democracy. Nonetheless, after five weeks traveling around the country, I have no doubt that if there were elections today, the Communist Party (CCP) would win elections with a wide majority.

The profound influence of Confucianism, which praises respect toward authority and obedience as the foundation of a harmonious society, was reinforced by the dramatic experience of the Cultural Revolution (1966-1976) where all dissidence was harshly repressed. In 1949, a profoundly feudal society was transformed into one of absolute equality and severe austerity, which then started a phase of savage capitalism beginning in 1979 always being under the direction of the CCP, which maintained all of its power during the process of accelerated economic growth.

This economic system is fundamentally an import of western models and the idea of democracy has obviously made its entrance. In the face of this turn after 1979, the reaction of the young generation has been of complete individualism and unrestrained consumerism. According to recent estimates, no more than 1 million people are interested in politics; this in a country of 1.3 billion people.

Add to this the fear of division within this gigantic society, when unity is essential to sustain growth. This is a primary fact: given that each year at least 8 million Chinese come out of poverty, the failure of the UN Millennium Development Goals (reducing poverty, increasing education, improving the condition of women, etc) seems less blatant.

Since the first Qin dynasty in China (221 BCE), emperors were deposed if there were famines or natural disasters, indicators that they failed in their function as bridge between celestial harmony and the earth. The CCP obtains its legitimacy through an exceptional growth process, which makes citizens hope that their living standards will improve. Only if this process enters a crisis will the CCP see its legitimacy questioned.

This is the CCP government’s support and at the same time its straitjacket. In order to keep up with poverty reduction the country needs to grow at a rate of no less than 8% annually. One lever of achievement is the so-called State Capitalism. Citizens? savings in banks has a negative interest rate; for example, if the inflation is at 6% it only gets 3%. The State uses the difference to finance infrastructure projects by giving cheap credits to investors who will share their profits with state institutions.

This process is very difficult to control. The government decided to allocate 448.900 hectares to build highways, railroads and other projects in 2011, but the local authorities are using more than a million. Land in China is the property of the State. Local authorities negotiate with investors to finance public works. In this way, the local authorities increase their income and comply with the five-year plan. But arable land is decreasing, displacing thousands of farmers in the midst of great corruption.

A fundamental problem is that the current CCP is very different from the CCP of Mao. In its interior coexist many positions and regional interests, which weaken the control over local powers. In theory, the local governmental structure must apply Beijing?s positions, but they only do so when it’s convenient. This is the reason for the ecological disaster that has reached such dramatic dimensions; regulations were ignored and the speculative investments that aggravate ecological and sustainability problems have proliferated.

The model of State Capitalism is creating more problems than solutions, according to numerous Chinese economists. They advise to reduce speculation, increase loans to small and medium sized companies, expand the internal market, adopt a firm ecological policy, decrease inequality and increase funds for research and development (which are only 1,2% of the gross domestic product, compared to the 2,5% of the other Asian countries). Besides some companies such as Haier, first world manufacturer of domestic appliances, PC manufacturer Lenovo and Huawei who specializes in telecommunication equipment, China has only been profitable under low manufacturing costs that export cheap merchandise. With the crisis in the western markets and the rise in the price of labor, this economic model of exportation will enter a crisis.

Nevertheless, in only three years, China became the leading country in solar energy and wind power because the State, alarmed by the deterioration of the environment caused by the excessive use of carbon, designated them as strategic sectors.

Therefore, China has the possibility of changing the course, and the last congress of the CCP clearly indicated that they are conscious that there is a problem. But the transformation from State Capitalism into real capitalism, accompanied by measures to decrease the social deficit, is politically dangerous. The current government is about to conclude its mandate and the new one will assume power in 2012. Will it wantand know howto carry out reforms with such profound implications? (END/COPYRIGHT IPS)

(*) Roberto Savio, founder and President Emeritus of the news agency Inter Press Service (IPS).