Contradiction Between Market Economy and Political Structures in China.

Conclusion

Socialism with Chinese characteristics tends to develop into capitalism. As the Chinese market economy develops, economic interests have been increasingly diversified, and thus the ideological discourses are also changing. There will be further theoretical and policy-related debates over whether or not China should adhere to socialism. Rightist elites will undoubtedly wage new wars against SOEs and propose furthering privatization.
For the Chinese Communist Party, an enduring social compact with its people is still a long way off. When it comes to economic management, though, the assumption is that China’s authoritarian leaders are streets ahead, since they have to deliver prosperity to remain in power.
The problem is not the growth level itself, since the world’s second-lar ...

Content

Introduction 3
1. Economic and political structure of China 4
2. China market economy 13
3. Radical political economics in China 16
Conclusion 29
Literature 30

Introduction

China, the fourth largest country in area after Russia, Canada and USA has experienced manifold changes in its economic system which has seen it become the second largest economy in the world after USA if measured on the Purchasing Power Parity (PPP) scale. But still considered as an emerging economy as per capita incomes fall in the lower-middle level, China is making its presence felt in the global stage by taking big strides in opening up its economy to international trade.
China has been achieving an impressive rate of development of its economy and increase in its regional/global economic and political influence. There has been speculation about its future potential to act as a major driver of the global economy, and whether its methods will provide the model that othe rs will now seek to emulate.

The Congress has identified the period up to year 2010 as the key period for China's modernization drive. China is expect to actively promote fundamental changes in the economic structure, to establish a socialist market economy that is able to sustain steady and rapid development of the economy. These will lay a solid foundation to realize the country's modernization in the middle of the next century.
The highest leading bodies of the Communist Party of China are the national Party congress (which is held once every five years) and the Central Committee elected at the national Party congress. The Central Committee holds a meetings at least once a year. The Central Political Bureau (Politburo), the Politburo's Standing Committee and the general secretary of the Central Committee are elected at a plenary session of the Central Committee, which decides on members of the Central Secretariat. The Central Bureau and its Standing Committee exercise the functions and powers of the Central Committee when it is not in session. The Central Secretariat attends to the day-to-day work of the Politburo and its Standing Committee. The Central Committee's general secretary is responsible for convening meetings of the Central Political Bureau and its Standing Committee, and directs the work of the Central Secretariat. Hu Jintao is the current general secretary.
China Revolutionary Committee of the Kuomintang. Founded in January 1948, the party has more than 60,000 members. The current Central Committee chairman is He Luli. It is for the most part composed of former Kuomintang members and those who have historical connections with Kuomintang.
China Democratic League. Founded in October 1941, it now has more than 144,000 members, mostly intellectuals at fairly senior levels. The current Central Committee chairman is Ding Shisun.
China Democratic National Construction Association. Founded in December 1945, this party has more than 78,000 members, most are from the economic field or academic specialists. The current Central Committee chairman is Chen Siwei.
China Association for the Promotion of Democracy. Founded in December 1945, this party currently has more than 74,000 members. Its membership is mainly drawn form intellectuals working in educational, cultural, scientific and publishing fields. The current Central Committee chairman is Xu Jialu.
Chinese Peasants and Workers' Democratic Party. Founded in August 1930, it currently has more than 74,000 members, most of whom work in the fields of public health, culture and education or science and technology. The current Central Committee chairman is Jian Zhenghua.
China Zhi Gong Dang. Founded in October 1925, this party currently has more than 18,000 members. Most of them are returned overseas Chinese, relatives of overseas Chinese, and representative individuals and specialist and scholars with overseas connections. The current Central Committee chairman is Luo Haochai.
Jiusan Society. Founded in December 1944, this party currently has more than 78,000 members. They are mostly high-and-medium-level intellectuals working in science and technology, culture and education, public health. The current Central Committee chairman is Han Qide.1
2. China market economy

The main difference between a market economy and a command economy is that a market economy is generally free from government control while a command economy is planned at practically every stage by governmental forces. In a market economy, production levels and prices for goods and services are determined by the producers themselves based on the demand for those goods and services. By contrast, elements like production levels, prices, and even wages in a command economy, also known as a planned economy, are determined by government overseers. Most economies in the world actually possess characteristics of both types and are known as mixed economies.
Essentially being a closed economy since the days of Mao Zedong, the Communist state of China experienced a transition from a planned economy to a market economy when Deng Xiaoping came to power in 1978. Since then, China has seen a more than ten fold increase in its GDP (Gross Domestic Product) from that year. But the question still remains at large whether the Chinese economy has been able to shed off its previous image of excessive state controls and moved to a stage of total efficiency in its market economy.1
A recent study showed that the Chinese economy has achieved a level of 73% marketization of its economy judged by the parameters perceived important by the USA and the European Union. The stability of the equity market and the stock exchange scenario, the interest rate and currency are some of the features that prove the country has been doing well on the economic front over the last quarter of a century. The increased autonomy given to the State Owned Enterprises (SOE’s) and freeing them from the clutches of excessive government control is also a positive sign that the economy is picking up. That the domestic private enterprises are also doing well is evident from the fact that most of them are now listed in bourses in the cities of Shanghai and Shenzhen in southern China. Another feature essential to the improved performance of the market economy in China has been the removal of monopoly from the traditionally government controlled sectors such as telecommunication, electricity supply, railway transportation and civil aviation and allowing for more domestic and foreign equity participation. Besides, the diversified banking system and sale of equity of state-run banks to foreign investors in international exchange and bond markets show that China is on path to rapid economic expansion.1
China is now the investor’s destination with more and more foreign investors coming to the region because of its socio-political and economic stability. Stable interest rates have also meant that 'capital flight' is now minimal from the Chinese economy. Foreign investment has produced millions of urban jobs and institutional infrastructure which gas helped in domestic technological innovation. China is now the one of the largest exporters in manufactured electronic goods and textile products. Internet usage has grown so rapidly that internet users crossed 100 million in 2005. As a mark of its improved performance, China also revalued its currency by 2.1% against the US dollar in July 2005 and moved to a new exchange rate system which references a basket of currencies. China also had the largest recorded current account surplus in 2006 of nearly $180 billion.2
But the effect of the market economy in China is still only restricted to consumer goods whose prices are market determined with the remaining still in the purview of a planned economic system. More so, the labor market not yet totally regulated with many inter-state controls on the movement of labor still present. Wage rates are not totally market determined and issues like Intellectual Property Rights protection are inadequate for supporting technological innovation. China needs to adopt the policy of market economy 'heart and soul' as one Chinese government official said.1
The tragic feature of the Chinese economy is the presence of 'surplus labor' in rural areas. Agriculture still employs about 45% of the population with only 12% accounting for its GDP share. Growth with foreign capital has been limited to coastal provinces with the government failing to sustain the rural poor. About 10% or 130 million of the Chinese population still lies below the poverty line. Industrial production is rising at the healthy rate of 22% with inflation rate at consumer prices being restricted to 1.5%.
The challenges that thus lie in front of the Chinese government is to check the increase in rural unemployment with large areas of arable land falling prey to industrialization and ensuring sufficient job creation for new entrants to the labor-force and people laid off from state enterprises. The Chinese economy has been accused of corruption prevalent among government officials who think they are superior to the common man. Efforts should also be taken to check the environmental deterioration-especially air pollution, soil erosion and steady fall of the water table in areas of North China.
Thus as the Chinese premier Wen Jiabao said recently that 'market economy can exist within Socialism too, the socialistic ethos should be upheld such that every individual gets his due share in this era of one sided economic prosperity.'2
3. Radical political economics in China
The recent round of debate over China’s state and private economy has fundamentally touched upon whether or not China should abandon or strengthen the socialist elements within the market economy.
In 2009, two large cases of business reconstruction caught much attention in China. One was the takeover of the private Rizhao Iron and Steel Mill by the state-owned Shandong Iron and Steel Group; the other was the nationalization of small private coal mines in Shanxi Province. At the same time, while the recent global crisis heavily hit China’s private economy, China’s four-trillion-yuan ($585 billion) stimulus package has focused almost exclusively on the state sector. These events triggered a new round of attacks from the rightist elites on the state econ-omy, followed by a wide-ranging debate among Chinese intellectuals, policy advisors, and government officials (2012). 1
The most sensational arguments against state-owned enterprises (SOEs) were put forward in a 2011 report on China’s SOEs published by the Unirule Institute of Economics, China’s most influential non-governmental economic think tank. The issues of contention were whether or not SOEs are efficient, monopolistic, and/or deteriorating the income distribution. People were sharply divided between the right and the left.The debate intensified in early 2012, when the World Bank and a Chinese Cabinet think tank  published a new report titled “China 2030,” which called for further downsizing the share of SOEs in industrial output from twenty-seven percent in 2010 to around ten percent in 2030 (World Bank 2012). This was, by no means, a new prescription. Fifteen years ago, along with the report titled “China 2020” also from the World Bank, China witnessed a full-scale privatization of SOEs and market liberalization.
However, today the resistance against privatization has  become much stronger than before. At the “China 2030” press conference, Du Jianguo, an inde- pendent scholar, stood up and denounced the World Bank policy with his leaflets titled “World Bank, Go Home with Your Poison.” This open protest has so far received enormous support from the left as well as denouncements from the right.In what follows, we will consider the implications of the debate by focusing on three sets of questions. First, what is the nature of the debate, and how can we understand it in the context of Chinese reform? Second, what are the likely changes for SOEs considering the current political and economic situation? Third, how can we transform SOEs towards socialism so they can better represent the people’s interests?1
When Chinese leaders initiated the reform towards marketization in 1978, they claimed that the goal was to rejuvenate and improve the socialist system in China. Some important steps of the reform were developing private enterprises, attracting foreign investment, and offering private and foreign enterprises conditions more favorable than those given to SOEs and domestic enter- prises. In the process of dismantling the planned economy – especially in price reforms, the establishment of capital and land markets, and SOE reforms – some party members and cadres in enterprises and government started to accumulate capital through both legal and illegal means. The weakening of central planning made the national economy increasingly reliant on market expansion and monetary incentives; various contradictions springing up during the reform were expected to be solved by further marketization. Under the name of reform, education, health care, housing, and the social security system, which were operated publicly as representatives of socialism before the reform, have been marketized continuously.The objective of the reform was declared to be the creation of a socialist market economy. However, in the 1990s, the key issue changed into being the transition to a generally market- based economy. While the path and means of this transition became a priority of theoretical discussions and policy designs, the aftermath of this transition – he resulting economic model and its nature – was largely absent from discussions, consciously or unconsciously.
In the thirty years since 1978, time has revealed that China’s “crossing the river by touching stones” was actually a move towards an American-style market economy. In this process, the socialist ele-ments of the Chinese economy have been reduced only to SOEs and macroeconomic control. The state-owned economy has largely been regarded as the basis for state intervention, but has not functioned as models for other parts of the economy to follow (Song and Sun 2010). Worse, many SOEs were privatized or simply shut down.During the mid-1990s, massive privatization of SOEs took the form of “grasping the large and letting go of the small” (zhuada fangxiao), under which all medium- and small-scale SOEs and  part of large-scale SOEs were privatized. The beneficiaries included governmental officials, former SOE managers, private capitalists connected with government, and transnational corpora-tions (2011). From this process has emerged, unsurprisingly, a new capitalist class composed mainly of private proprietors and multinational capital and its related interest groups. As the size and wealth of this emerging capitalist class grew larger and their power grew stronger, they would necessarily demand abandoning the socialist legacy which might impede their further accumulation of wealth.
Meanwhile, tens of millions of former state-owned and collective unit workers were laid off and impoverished. Besides the urban labor force, migrant workers from China’s rural belly have been the dominant source of labor supply for industrial sectors. The rising working class has organized a significant amount of petitions, protests, and strikes against the new capitalist class (Lee 2007).However, so far direct and violent capital-labor conflict has not been the dominant form of class struggle in China. First, the proletarianization of rural migrant workers is yet to be complete, because despite working in cities, the reproduction of their labor power still highly relies on the countryside where they own use rights of land and other productive resources (2009).1
Second, although a rising tide of strikes has been conspicuous recently, most of them have  been sporadic, localized, and focusing on immediate economic demands such as higher wages and better working conditions, hoping to draw attention and help from the government. These labor protests have shown that China’s new working class is still largely a class-in-itself, not a class-for-itself.Instead, class struggle in the ideological sphere has been very significant. As Marx writes, “theory … becomes a material force as soon as it has gripped the masses”. In the top-down reform led by the Communist Party, society was successfully inculcated with the reform ideology which soon became hegemonic in discourse.
Moreover, because the economic structure is the basis of politics and ideology, the changes in ownership structure and class structure that have accompanied the rise of capitalist private enterprises have been inevitably reflected in theoretical, ideological, and policy levels. The capitalist class has also taken advantage of ideological tools, like higher education and new media, to advance their interests.
First, as the national economy has been geared to the American style, economics education in China has also been “Americanized.” Many economists trained in neoliberal economics in the United States have been invited to China and granted the power to reform economics education in top academic institutions. The popularization of neoliberal economics has worked along with the marginalization of Marxist economics, and a generation of young scholars with blind faith in neoliberalism has also been brought up (Cohn 2011). For them, the inefficiency of SOEs has become a tenet of faith, which indirectly negates the socialist elements in the market economy. In this process, socialism has been theoretically weakened and further reduced to abstract concepts such as “equality” or “fairness,” whilst capitalist features of the reform have been significantly strengthened. Second, before 1978 socialism in China was generally equivalent to a combination of public ownership, a planned economy, and distribution according to work.
As reform proceeds, a  planned economy and distribution according to work have been replaced with a market economy and distribution according to factor (mainly capital) contribution; and the dominant position of  public ownership has been replaced with the controlling power of state ownership. As a result, SOEs have become the last resort for socialist elements of the market economy. This is why denouncing or defending SOEs has become the focal point of theoretical and ideological debates in China since 2004.
Third, Chinese rightist elites are already experienced in transforming a topic into a public consensus via the media under their control. In this way, they have pressured the government to redesign policies in their favor. For instance, during the 2000s and 2010s, the rightist elites started a series of debates like the debate on SOE management buy-outs in 2004, on Chinese economics education in 2005, on the orientation of Chinese reform in 2006, on democratic socialism in 2007, on universal values and the “08 Charter” in 2008. Although topics differed, these debates all revolved around whether China should persevere with or give up socialism. Moreover, each was halted by party and state officials out of fear of challenging the legitimacy of the economic system too much; each was ended by the authority as a compromise to balance the left and the right. However, the way of compromise, in fact, always leaves the door open for further ideological manipulations by rightist elites who oppose socialism and embrace privatization.
As Michael Burawoy argues, “when struggle takes place on the terrain of ideology, the con-sequences of struggle must be understood through an examination of the actual relations behind ideology….Where interests are taken as given, ideology becomes a resource that people manipulate to advance their ‘interests’ or a cement that contains conflict or minimizes strain”. Also as Marx suggests, through ideological forms people become conscious of the conflict  between the productive forces and the superstructure, and fight it out. At  present, the debates on SOEs reveal the continuation of privatization and ongoing class struggle in China. Rightist intellectuals, policy advisors, and government officials, as well as the media, initiated these debates in order to influence the next leadership of the central government and policy making in general. Their ultimate goal is to eliminate public ownership, legitimize managers’ embezzlement of public wealth by privatizing SOEs, allow transnational capitals to control the Chinese economy, and thus eliminate all remaining socialist elements.