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China's path to market economy will have the initial hiccups
Lau Guan Kim Updated: 2004-04-07 17:49
When China joined the WTO (World Trade Organisation) there were some qualms in well-concerned circles the 'subjugate' role China would have to play to placate the West and the US in terms of trade practice.
Both the West and the US were in a catch-22 dilemma. To deny China membership to WTO would let loose a maverick player in the world scene, who, by its sheer size and population, could absorb all the punches and go it alone with its own huge home market.
The West and the US very much want a slice of the market, for was it not the intention of Europe and the US in the aftermath of the First Opium War (1839-1842) that it was the 400 million Chinese consumers that they were really after? England felt if every Chinese just lengthened their sleeves by one-inch, it would keep the textile factory in Manchester humming all the time!
That was the dilemma. China out of WTO could cause other members problems, and China in WTO might not want to play by the rules, albeit more reined in.
So grudgingly, they conceded, covertly or overtly, that it was far better to have China in the WTO where they could tighten the screws with its rules should China play a disruptive role as 'maverick' and 'renegade'.
But before conceding, they went to all extent to make it so tough for China that it was a grey line whether they were apprehensive of China's acceleration to an economic powerhouse that could challenge their hitherto dominant role; or just wanted to cross the t's and dot the i's before suffering the presence of the unknown China, a most overwhelming quantum, to say the least.
Why, after the ascendancy of the CCP in China, Mao Zedong decided to leave GATT (General Agreement on Tariffs and Trade), which changed its name to the present WTO?
With some hindsight, that was a bad and rash move by Mao Zedong, and look what it did to China? It had no access to redress any unfair trade practices imposed upon her; most importantly it had denied itself a platform. It totally became a hermit, with no access to the trends and improvements of trade and economic learning curve. Most damaging of all, there were no inflow of Western technology, and China's manufacturing enterprises had to make do with obsolete machineries that were not serviced (if at all) and repaired (ever so often) until well beyond their lifespan.
China was no fool to fight for fifteen long years to get back to WTO (after GATT). It wanted Western and US investments, and what was more, it needed that technology transfer so far hamstrung or denied by them, and one which would give a jumpstart not only to the outstanding economy, but accelerate its path to modernity in the shortest possible time.
This was by no means unique of China. Japan's Meiji Restoration 明治維新 (1868) which in less than thirty years was able to build up a modern navy, based on the British Navy, to defeat China in 1894 - culminating in the humiliating 1895 Treaty of Shimonoseki 下關條約 (日清講和條約1895), a period of less than thirty years.
By 1904, it astounded the world with another victory over the Russian Pacific Fleet, all in a total of thirty-six years. Much more confident, and when pushed to a corner, Japan felt obliged to take on the US in 1941, seventy four years after the Meiji Restoration.
Japan modernised fast because she copied and welcome Western participation in her quest for parity with Europe. The army and air force were trained and borrowed from France, and the navy from England. By 1931, she could go it alone in improving what she already learnt.
China is following that well trodden path, and it is a conservative estimate that China will catch up with the US by 2050, though some feel this is much sooner - by 2030.
In adopting this course, China has to do away with many unwanted baggage, such as the unprofitable SOEs (State-Owned Enterprises) and the lethargic pace of "iron rice bowl" employment where redundant workers were kept at state's expense because under communist ideology, it was not the thing to do to retrench a worker. What happened was there was no incentive to improve oneself, as there was no competition.
We have two schools of thoughts on economics. One is the Anglo-American and the other the German.1 The former theorises that individuals are selfish and greedy, and any control by the state will not bring out the best in people. It advocates no plan and control to allow such individuals to compete and eliminate each other to bring out the best in them. In this way the state benefits, albeit these individuals primarily seek to aggrandise themselves. This runs counter to the latter's belief that the state must have some control.
As opposed to command economy or central planning, market economy favours the Anglo-American concept. The advantage of a market economy is you are free to sell to whoever can give you a better term and price without being coerced.
But all is not smooth sailing with America when China's leadership tries to demonstrate that it can have a powerful economy without the 'human rights'.
At that time Jiang Zemin said China's gains were small because of the population factor. As profits slumped by 85.4 per cent in the first half of 1996, and some 46 per cent of SOEs were running at a loss,3 steps were taken to dismantle these SOEs, resulting in some sixteen million laid off workers.
The tenure of Jiang Zemin then rested on two questions:
(1) Would the economy advance sufficiently to satisfy people's desires and ensure stability?
(2) Would the transition to a market economy and political liberalisation create groups which would challenge the political monopoly of the political system?
It was the second question that needed to be addressed. How this would effect the implementation of market economy depended on Jiang Zemin's and the fourth generation successor Hu Jintao's hold on power after 2003.
| The above content represents the view of the author only. |
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