Walker's World: China's revolutionary shift

By Martin Walker UPI Editor Published March 8, 2006

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China has embarked on a revolutionary shift in social and economic priorities in an attempt to repair some of the damage done to the environment and social system by two decades of breakneck economic growth. The new five-year plan now being presented to the current session of the People's Congress, the nearest China has to a parliament, sees a marked shift of resources to the lagging rural sector, to neglected social problems like health care and pensions and to the country's badly battered environment. These sweepings reforms may be coming in the nick of time, as public unrest starts to grow, particularly in the disadvantaged rural regions, and as serious economic problems of corruption, over-production, wasted investment and a banking crisis all loom menacingly. "Some deeply seated conflicts that have accumulated over a long time have yet to be fundamentally resolved, and new problems have arisen that cannot be ignored," Premier Wen Jiabao told the 3,000 Congress delegates. "We must pay more attention to social equity and social stability so that all the people can enjoy the fruits of reform and development." "Building a 'new socialist countryside' is a major historic task," he went on, reflecting Beijing's mounting alarm at the growing gaps between rich and poor and between urban and rural areas. The government's own findings recorded 87,000 protests and "other incidents of discontent" last year. China's economy has over the past decade and more been doubling in size every 8 years, but the fruits of this surging wealth have been distributed very unevenly. Minxin Pei, a Chinese scholar with the Carnegie Endowment for International Peace and author of the forthcoming book "China's Trapped Transition: the limits of developmental autocracy," claims that one percent of the population control more than 60 percent of the country's wealth. Pei, a leading academic critic of the continued dominant role of the state and Communist Party, suggests that China is already facing social crisis because of the way investment priorities changed in the country's surge to get rich. He notes that the government has slashed welfare spending. In the 1980s, government paid for 36 percent of all health spending, but that had plunged to 15 percent by the year 2000. Beijing provides only one percent of the funding for rural education, while the already squeezed peasantry has to pay 78 percent of the cost. "To most Western observers, China's economic success obscures the predatory characteristics of its neo-Leninist state. But Beijing's brand of authoritarian politics is spawning a dangerous mix of crony capitalism, rampant corruption and widening inequality," Pei writes in the latest issue of Foreign Policy magazine, in an essay that foreshadows his book. "Dreams that the country's economic liberalization will someday lead to political reform remain distant. Indeed, if current trends continue, China's political system is more likely to experience decay than democracy," Pei adds. "The very policies the Party adopted to generate high economic growth are compounding the political and social ills that threaten its long-term survival." The Chinese government's latest five-year plan implicitly accepts some of the charges made by Pei. It pledges that basic public services are to be sharply improved. Public education is to be increased to an average of nine years schooling for all by 2010. The basic endowment insurance, an attempt to provide at least a skeleton system of pensions and health care, is to be expanded to cover 223 million people in urban areas. A system of new rural health cooperatives is to provide basic medical coverage to over 80 percent of the rural population. The environmental crisis, which threatens Beijing with a serious water shortage, is to be tackled with a government pledge to improve the efficiency of using resources. One goal of the five-year plan is to cut the energy consumption per unit of GDP by 20 percent. Water consumption per unit of industrial added value is to decline by 30 percent. Irrigation water use efficiency is to increase by 50 percent. Industrial solid waste recycling and conserving rate is to grow by 60 percent. These targets at least reflect official intentions, and the significance of these new state-mandated goals is that former targets for raw output and production have been scrapped to make way for these new targets aimed at cutting waste and rationing the use of resources. In short, the levers of the command economy are being moved from production at all costs to production with due regard for ecological costs. For the first time, the new five-year plan uses the term "Sustainable Development" as an important social goal, and the government's powers will be deployed accordingly. China's total population will be controlled to stay below a ceiling of 1.36 billion. Despite the mushrooming and hitherto uncontrolled growth of new housing and factories, the total amount of arable land will be maintained at 120 million hectares. Main pollutant discharges are to be reduced by 10 percent and forest coverage is to be enlarged by 20 percent. Another crucial feature of the former strategy to promote headlong economic growth is to be scrapped. Instead of setting a target for doubling the GDP (Gross Domestic Product, or the total sum of all goods and services produced), the new target focuses on GDP per head, a symbolic shift that takes account of population growth and that seeks to emphasize that economic growth is meant to benefit the people rather than becoming a goal in its own right. Bai Hejin, a former head of the Macro-economy Research Institute who helped draft the new plan, told Beijing daily that the goal is to increase GDP per head from $1700 in 2005 to $2400 in 2010 -- a goal that could be reached with only 4 percent of GDP growth a year. But the economy is expected to grow at 7 to 8 percent a year, and the difference is to be used "on the one hand to prevent an overheated economy, and on the other to fully seize the present good opportunity for development." The difference is also to be used to boost the resources for rural China. Will this shift in resources succeed? Minxin Pei is dubious, noting that China's future economic growth is far from guaranteed, with 30 years of the one-child policy distorting the demographic pattern so that China is now one of the fastest-aging countries in the world, and is threatened with "growing old before it becomes rich." He also warns that the economy is highly vulnerable to a financial crisis, citing World Bank estimates that up to one-third of China's investment decisions in the 1990s were misguided, and key industries like steel are now massively overproducing. State-owned enterprises, still the backbone of the economy, are getting a very low rate of return on investments of around 1.5 percent. One in three loses money and 15 percent are technically bankrupt, with more debts than assets. "China is the only country in history to have simultaneously achieved record economic growth and a record number of non-performing loans." Pei notes. Technorati Tags: china, revolution, environment