China: A Startling Insight

Business World: Jan 31, 2005

In Depth-China's New Left

The magazine has come out with a new insight into the invisible effects of China's scramble to economic powerhouse status. And the simmering in the cauldron is beginning to get critical.

This is a country "caught between the two extremes of misguided socialism and crony capitalism, and suffering from the worst of both systems," says Wang Hui, a professor of literature at Beijing's Tsinghua University, whose passionate denouncements of China's market reforms are partly credited with energising China's New Left intellectuals. "We have to find an alternate way. This is the great mission of our generation."
Questions like this have led to more than 50,000 protests rocking China in the past year, for causes as diverse as cuts in social services, unpaid pensions, and
illegal demolitions. Emboldened by such tumult, Wang and other Chinese intellectuals in the New Left have stepped up their criticism of China's market reforms. Their message is simple:
China's failed 20th century experiment with communism cannot be undone in the 21st century by embracing 19th century capitalism.

And the startling reality about China's economic fundamentals and boom of exports.

"(This is a government) more focused on helping export manufacturers than agriculture and rural welfare," which affect far more people, says Cui Zhi Yuan of Tsinghua University. "The largest expenditure item in (China's) budget is not education or healthcare or even the military, but tax rebates to exporters. So essentially, the government is returning money to (domestic and multinational) exporters while cutting welfare programmes."
Such incentives have swelled China's exports to 30 per cent of its GDP, as opposed to about 15 per cent in the US and Japan. With many domestic manufacturers essentially being suppliers to exporters, some economists estimate that exports account for almost 60 per cent of China's GDP. That has brought wealth to about 300 million of China's 1.2 billion people, but it has also meant the Chinese government is less concerned with raising domestic consumption and domestic wages of the other 900 million, Cui says.

To know more, grab a copy of this Business World issue (31st Jan).

On behalf of FINAX
Abhishek Tripathi