April 13, 1992 course. On February 23, 1992, the People's Daily wrote that: "Recent world history teaches us that under-developed countries, in particular those with a long feudal history, must correctly use capitalism rather than simply rejecting it. We can only become prosperous and develop if we assimilate in a critical fashion those elements of Western
IN RECENT months the international press has been highlighting China's economic success and the revival of the orientation launched at the end of the 1970s, which had been modified after the Tiananmen Square massacre of 1989.
According to some newspapers, the dominant group supports the development of capitalism on a wide scale, with a big increase in the role of the private sector, both domestic and international. Paradoxically, it seems that foreign investors are more inclined to get involved in China than in Eastern Europe and the former USSR.
Last November, the Central Committee of the Chinese
Communist Party (CCP) took some important decisions, including the partial rehabilitation of Zhao Ziyang, the "liberal"
former party secretary who was sacked after the crisis of May-
June 1989, and announced the convening of the 14th party congress for the end of this year.
LIVIO MAITAN
HE CC not only confirmed the poli-
T cy of economic reforms but also announced a new push forward on this front. As a publication reflecting official views put it: "Important decisions were taken to pursue the reforms of state enterprises and step up agriculture
More precisely, there is to be investment and modernization within the context of a family-based agricultural system. At the same time the CC called for "a socialization of services and a gradual reinforcement of the collective sector of the rural economy"' as well as "a strengthening of party direction of rural work" 3 The prices of some 52% of agricultural products will from now on be regulated by the market.4
The partial rehabilitation of Zhang Ziyang is only known about through unofficial sources which the international press believes reliable. The most serious charges against Zhao — that he had "divided the party" and "supported the disorders" — have not been retained; now he is only held to have shown a "lack of vigilance in the face of bourgeois ideology".
The decision on Zhao indicates that reformist currents are making political advances.
This does not, however, mean that the Chinese leadership is considering fundamental changes in its options.
At the very moment when it gave a new push to economic reform the November central committee reaffirmed the principle of the single party and no concession on this was
4e made even verbally by Li Peng during his
International Viewpoint # 226 • recent foreign tour. Furthermore, while some political prisoners were released at the end of last year, most of those arrested after Tiananmen remain in jail. This line was confirmed and even hardened at an important meeting of the party politburo and at the recent session of the National People's Assembly.
The political bureau passed a resolution published in the party daily which stressed the need to avoid "leftist deviations" while maintaining vigilance with regard to "rightist deviations". According to the Beijing leaders, it is necessary to speed up the reforms and the opening to the outside world with the aim of stimulating the economy and advancing along the Chinese road to "socialism".
Learning from other countries
To this end the resolution explains that it is necessary to "choose and adopt the modern methods of economic management used in other countries, including in Western contries", adding that "a development is socialist or capitalist according to whether it makes possible the development of the productive forces under socialism, the reinforcement of the country's power and the improvement of the people's standard of living". To underline the solemn character of these decisions the Chinese leadership used an emphatic formula that recurs in Chinese texts: "The fundamental line of the party must stay unchanged for 100 years!"
The ancient Deng and the party paper had not hesitated in previous weeks from giving theoretical justifications for the reformist culture that are useful and not by despising them".
The session of the People's Assembly took place on the same wavelength after a keynote report from Prime Minister Li Peng Basically, the reformist orientation combined with political control by the bureaucratic centre was restated.
According to Li Peng: "We must... dare to introduce innovations and have a more audacious approach as concerns reforms and opening up". In this optic, stock markets are to be developed and public and private enterprises must compete on equal terms. But, at the same time, Li Peng insisted that it was necessary to "crush all kinds of criminal activity" and retain loyalty to Marxism, Leninism and Mao Zedong thought.
Divisions in leading circles
Not all these decisions are the common property of the main Chinese leaders. While agreement probably exists on some economic measures and even more on the need to maintain control of the political situation, there is no such unanimity on the issue of how far to go in making concessions to attract foreign investment, on how to deal with loss-making state enterprises or on the special economic zones — according to Le Monde (March 22, 1992) some at the CC called for their abolition.
A tough struggle took place before the politburo meeting of March 1992. On this occasion Deng Xiao-ping reappeared in the forefront, travelling to the south and to the special economic zones and making spectacular statements. The various leaders or currents have exploited the support of regional and provincial notables in this clash, in which survivors of the old guard have apparently played a major role.
For the moment it is the supporters of
Deng's line who seem to have the upper hand, but there will be further rounds before the forthcoming party congress. New changes of emphasis, and perhaps real changes of line, may take place, especially in the light of grave and persistent economic
While complete official figures for 1991 are not available, overall economic growth was around 7-8% (14% for industry). Grain production was maintained, despite devastating flooding. In 1991 it was 425 million tonnes as against 435 million in 1990, the latter a historical record. However these apparently rosy figures cannot conceal some disturbing facts:
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CHINA years"?
April 13, 1992
• 1991 saw a record budget deficit of 2,111 billion yuan (8-9% more than predicted);
• a significant number of state enterprises - between 30 to 40% according to some estimates — remain loss-makingó;
• by the end of 1991 the value of unsold stocks amounted to a third of Gross National Product (GDP);
• a significant proportion of products are of poor quality;
• productivity is still low and technological backwardness is far from overcome;
• inflation reached 10% in 1991;
• the imbalances between the economically dynamic coastal provinces and the rest continue to grow.
Chinese foreign policy is aimed at getting new investment and achieving large-scale
$200 $150 trade agreements. These efforts have not been fruitless: capitalists, bankers and other financiers looking for new outlets for profits are hardly worried by the lack of democracy
At the start of 1991 foreigners were allowed to take part in stock market operations by buying shares with the same rights as Chinese citizens. The stock market fever continues in Shanghai as well as Shenzen, while the opening of a new market in Guangzhou has been announced. The next free trade zone is planned for the island of Hainan with significant Japanese involvement. Furthermore, to facilitate international trade, China is planning to lift protectionist trade barriers.8
Finally, some rather dubious figures have recently been appearing in the international press on the weight of the private sector. A New York Times correspondent has written: "This year or the next will be a milestone: for the first time in the decades of the Communist Party's reign, less than a half of industrial output will come from state enterprises. "9
Two articles in the Financial Times go further: "[in 1991] less than a half of industrial production, 46.6%, came from the nationalized sector" (January 7, 1992). "The state sector now produces around 55% of the country's industrial output" (January 27,
1992). Furthermore, according to a study of the Chinese economy in 1990-91: "Public enterprises represent 56% of industrial production" 10
Private industry and still more joint ventures and foreign companies have seen and are seeing rates of growth that are far higher than those in the state sector. Nonetheless, the quoted estimates, which do not agree with those provided by official sources, seem to be significantly over-stated. The inconsistencies may be related to the characterization given of the "collective enterprises" of which the so-called township industries are a part. These enterprises are not strictly part of the state sector, but this does not mean that they are necessarily in the hands of the private sector - publications reflecting official views allow this double interpretation. $100
$180 $120 Limited weight of private sector
After recalling that under Chinese law a private firm is a capitalist private enterprise if it has more than eight employees, China Economic News (February 3, 1992), estimates that the total value of such enterprises amounts to 1% of national income. But the journal adds that, if unregistered private enterprise were taken into account, the percentage would be far larger.
Whatever the exact figure, the continuing development of the private sector must, in the short or medium term, lead to increasing acute tensions: the remaining planning mechanisms will be upset and the imbalances in the Chinese economy aggravated. And this will certainly have political consequences. Shocks and crises of all kinds are inevitable. * 1. China Economic News, January 6, 1992. 2. L'Unita, November 29, 1991. 3. China Economic News, December 9, 1991. 4. Financial Times, January 7, 1992. 5. "Bilan économique et social 1991", published by the editors of Le Monde. 6. In 1990, state industry experienced a negative rate of growth (-2.9%) whereas private indistry had progressed by 21.6% and the joint ventures by 56% 7. International Herald Tribune (HT). March 18. 1992. 8. Ibid. 9. Le Courrier des pays de l'Est, La Documentation française, November 1991. 10. IHT, December 19, 1991.
CHINA / SOUTH AFRICA