CHINA'S ECONOMY: A PROGRESS REPORT

BACKGROUND

Before 1949, more than 90% of the people in China lived in severe poverty, more than 80% were illiterate, the average lifespan was 35, few people owned land, and the risk of death from famine had been an annual threat for more than two thousand years. In fact, most rural Chinese were treated as if they were beasts of burden and not human.

Today, about 13% live in severe poverty and those people mostly live in remote, rugged, difficult to reach areas of China.  The lifespan is now about 73 years andHelen H. Wang writing for Forbes.com (February 2011) reported that China's middle class is already larger than the entire population of the United States and is expected to reach 800 million in fifteen years (2026). In addition, no one has died of famine since 1961.

TRANSPARENCY
China, the world's strongest economy, requested and has just received a checkup from the world Bank.

By doing so China opened its books to an institution that is dominated by the USA and Europe.

The Bank predictably recommended that China follow America's example, but the significance lies in the invitation itself.  That the world's fastest-growing, second-largest economy would subject itself to 'foreign' scrutiny and examination is remarkable. Let's hope that the USA follows China's example.

Another of the Bank's recommendations, that China avoid the "middle income trap" represents a remarkable misreading of China's ambitions.  Deng Xiaoping's stated goal, reiterated by his successors, is a "moderately prosperous country" (小康; pinyin: xiǎokāng: a Confucian term describing a society of modest means) for two reasons:

1. The planet's resource limits will not afford more than that for an additional 1.3 billion people.
2. It is un-Chinese, vulgar, and antithetical to the Tao.

INDIVIDUAL INEQUALITY
When Deng launched the Opening Up reforms, he warned that "some flies get in when you open the windows" and that one of those 'flies' would be inequality.  This, remember, was at a time when China had the best coefficient of equality--as measured by the GINI index--on earth.

Since then, the growth of China's economy accelerated dramatically.  But so has inequality.  (The growth of the United States' economy has slowed during that time and its GINI ranking has fallen steadily, to the point where the 2012 figures will probably be worse than China's, and close to Brazil's).

China is now addressing the problem head-on.  After years of public discussion, the Central Committee just added a new evaluation criterion for local governments:  how much has your province improved its GINI score in the past year?  (Remember that provinces have populations of upwards of 100,000,000 people: larger than most countries on earth).

Provinces, which have also been discussing this for years, are already responding. Chengdu is leading the way with an interesting approach to low-income housing that is is financed partly by increased taxes on high-income housing.  We will see much more innovation as this program gets rolling.


REGIONAL INEQUALITY
China's inland provinces have lagged behind their coastal cousins in economic development since the Opening Up program began, causing annual mass migration and disruption of family life in the inland provinces.

The CCP has been working to ameliorate this situation for years, by constructing infrastructure for the inland provinces that would support development there: railways, subways, highways, airports, pipelines, fiber optic cables, power stations, universities, and even the relocation of entire industries.

Those efforts are now bearing fruit.  While annual growth in the coastal provinces has slowed to 5-6%, inland growth is accelerating, with key provinces growing 15-17%. This has led to labor shortages (and dramatic wage rises) in coastal areas as more and more inlanders stay home and find good-paying jobs nearby.  Isn't it interesting what honest, competent governments can accomplish?

DEMOCRACY: Premier Wen says China needs political reform, warns of another Cultural Revolution without it.

The premier said he knows the people take an interest in not only what he has to say and what his ideas are, but also what results his efforts can bring.

“Even with a single breath, I’m still prepared to dedicate myself fully to advancing China’s reform and opening-up cause,” Wen said.

The premier said China will unswervingly implement the rural villagers’ self-governance system and protect their legitimate rights of direct election.

The practices at many villages showed farmers can succeed in directly electing villagers’ committees, he said.

Wen said if the people can manage a village well, they can do well in managing a township and a county. “We should encourage people to follow the path to experiment boldly and withstand tests in practice,” he added. “I believe China’s democracy will develop in a step-by-step manner according to the national circumstances and the trend is unstoppable by any force.”

Those efforts are now bearing fruit.  While annual growth in the coastal provinces has slowed to 5-6%, inland growth is accelerating, with key provinces growing 15-17%. This has led to labor shortages (and dramatic wage rises) in coastal areas as more and more inlanders stay home and find good-paying jobs nearby.  Isn't it interesting what honest, competent governments can accomplish?

Wen said if the people can manage a village well, they can do well in managing a township and a county. “We should encourage people to follow the path to experiment boldly and withstand tests in practice,” he added. “I believe China’s democracy will develop in a step-by-step manner according to the national circumstances and the trend is unstoppable by any force.”--Xinhua



OVERVIEW
For an excellent discussion of the "China model", Chinese governance, and democracy in China, watch this interview with Eric Li at the Aspen Institute.