Wednesday, September 30, 2009

China at 60: Taking stock

Here is an assessment of China, by Kent Deng, who is the chair of China studies at the London School of Economics. The article "How far has China come?" was published in the Indian Express newspaper on 30 Sept 2009.
The history of the People’s Republic so far can be divided into two periods of about 30 years each: Maoism from 1949 to c.1979, and the post-Mao period from 1979 to 2009.
Maoism, 1949-79
  • Seen in a positive light, Mao made China diplomatically independent. China succeeded in building its modern arsenal with nuclear weapons.
  • Seen in a negative light, Mao spent about 80 per cent of his time and energy purging Chinese society. No social stratum or individual was left untouched.
  • Cultural Revolution alone cost China 800 billion yuan, equivalent to China’s total capital stock of the state-owned enterprises in 1979. Mao’s rule left China with a third of its population officially illiterate (as in 1979).
  • During the 1959-62 Great Leap Famine, about 30 million people died. There was no record of effective famine relief by the Maoist state. In 1965, on the eve of the 10-year long turmoil of Cultural Revolution, China’s infant mortality rate was as high as 165 per 1,000 births.
Post-Mao, 1979-2009
  • When Deng Xiaoping took over the party and state, he faced the carnage of 30 years of Maoist practice. Deng’s rescue plan, known as “socialism with Chinese characteristics” had the following goals:
    • To re-build law and order,
    • To resume supply of well-educated bureaucrats,
    • To resume economic incentives and freedom for ordinary people,
    • To ease tension with foreign powers,
    • To promote foreign trade and FDI,
    • To build “comfortable material life for all” in exchange for the party’s legitimacy to rule
  • In rural China, farmers were re-incentivised, by the state’s permission to keep some of their output, through legal contracts (“the Household Production Responsibility Scheme”). This was a great success. China’s per capita food consumption soon returned to the 1930s level at around 3,000 kilocalories per day.
  • In urban China, Special Economic Zones were set up, fully compatible with Western capitalism, to attract foreign capital, technology and market sales.
  • In 2004, with over US$ 60 billion of foreign capital invested, China surpassed the United States and became the largest FDI recipient in the world.
  • From 1978 to 2000, the total value of China’s foreign trade increased 110 times.
  • But there is a downside to the post-Mao growth: environmental damage and social inequality.
  • China is now one of the most polluted countries in the world. The estimated damage to China’s soil, air and water systems is worth US$ 60 billion, the same as China’s total FDI intake.
  • In terms of energy efficiency, to produce per unit of GDP, China used 2.5 times as much energy as India, 4 times as much as the US and 7 times that of Japan (as in the 1990s).
  • The greater problem is income inequality between the urban and rural sectors, and between the coastal regions and the interior. China’s Gini coefficient has jumped from 0.28 (as in 1983) to an alarming 0.48 (2000), which has made contemporary China one of the least equal societies in the world.

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