Sheila Lewis, 3 October 2007
Many Western commentators agree that the challenges facing China are numerous and varied, but focus particularly on the environmental and social threats from rapid development. Some also suggest that the economic miracle just cannot continue and that there will be a collapse soon. The Western concern is that if China cannot rise to these challenges and resolve them, the impact will be felt not only in China, but across the world. Are these anxieties justified?
Most people are now aware of China’s phenomenally rapid development and urbanisation. Over the past 30 years, China’s average GDP growth rate has been at the top of the world’s growth performance table. The number of people living in urban areas has more than doubled from the early 1980s, when fewer than 200 million people lived in urban areas, to a current figure of around 550 million, or more than 40 per cent of China’s population. Since reforms began, China has also raised more than 500 million people out of absolute poverty (Dollar 2007: 6).
Some of the main challenges facing China raised by most Western commentators include:
* Greater inequalities and the threat of increasing civil unrest;
* Environmental damage;
* Maintaining economic growth rates.
These challenges vary in importance according to the preoccupations of the observer. A brief examination of each of these challenges may help us to gain a better understanding of the extent to which China understands and is addressing these challenges and whether the West’s fears are justified.
Greater inequalities and rising civil unrest
As China has developed, so the income differences between urban and rural workers, and between urban professionals and the urban working-class, has increased. At the beginning of reforms, the Gini measure of inequality was 0.31, rising to 0.45 by 2004. The main reason for concern is that rising inequalities are considered a challenge to social justice and that inequality will affect social stability. Others suggest that China’s economic development may be affected by the huge split between rich and poor.
Rising inequality is an inevitable consequence of the introduction of the market. However, the Chinese government has made it clear throughout the reform period that economic development is paramount even at the cost of rising income disparities. The concern is that this rising inequality will lead to social upheaval and threatens China’s future. The reality is that there has been an increase in social unrest. In 2005 the number of officially recorded protests involving more than 15 people was 87,000, involving more than 3.5 million people. Group protests increased six-fold between 1994 and 2003 from 10,000 to 60,000. The number of people who attend group protests has also increased by 12 per cent yearly, from 730,000 in 1994 to 3,070,000 in 2003. Protests with over 100 people increased five-fold from 1,400 to 7,000 (Epoch Times 16.10.2006).
These protests have a range of causes linked to the rising inequalities. They broadly relate to wage disputes, social welfare problems, the restructuring of state-owned enterprises, and evictions. Protests are taking place both in rural and urban areas and government officials are certainly worried. However, the government is responding to these protests. For example, factories have been shut down as a result of protests against pollution, while others have received heavy fines. In June this year a new labour law was passed broadening workers’ rights.
Moreover, the 11th five-year plan demonstrates the government’s awareness of both greater inequalities and rising unrest, with its focus on building a ‘Xioakang’ (harmonious) society that balances economic development with social justice. Leaders are frequently giving speeches that outline the need to focus on people’s welfare. On 25 June this year, Hu Jintao highlighted that ‘the government should focus on problems of immediate interest to the public, such as education, employment, social securities and health care’ (Xinhuanet 26.6.2007). And as an expression of how seriously this is being taken in Beijing, the new property law that had been under discussion for up to 10 years was passed this year, no doubt in response to the land seizures that have sparked off many recent protests.
This illustrates that the Chinese government is clearly attempting to address the issues that give rise to many protests, although their ability to improve things is hampered by structures put in place years ago but still operating. For example, although the ‘hukou’ or household registration system has been relaxed, it still prevents many rural migrants from having permanent residence in cities, and therefore means they cannot get access to any social welfare that might be on offer from the municipal authorities. There are possibly 200 million people in this category. Similarly, as the development of cities has overtaken villages, inequalities in access to welfare provision are rife; villagers now surrounded by city development do not have access to the welfare benefits of the registered city-dwellers who now live next door. The fact that these problems are discussed fairly openly does indicate that solutions are being sought.
Very few Western commentators have bothered to undertake a qualitative analysis of the protests that take place. A cursory qualitative analysis highlights that each protest has been triggered by a specific event or parochial situation. For example, recent protests have been sparked by:
* Farmers protesting about a factory or factories polluting their farmland;
* Locals objecting to a corrupt official beating someone up publicly and getting away with it;
* A boy dying in a hospital after ingesting pesticides because his grandfather couldn’t afford the hospital bill;
* Villagers protesting about the arrest of a villager who was involved in a house demolition and relocation.
While rising civil unrest is a cause for concern, it is not threatening the downfall of the Chinese state. Protests are one-offs. At this point in time there is no political movement that fundamentally challenges or threatens the state.
In addition, it is important to keep a sense of proportion. The number of people actually involved in protests is growing, but remains very low as a proportion of China’s total population. Civil unrest is an inevitable result of the major transformation of life in China, where there are both winners and losers from the introduction of the market. In fact the scale of unrest is far less than might be expected given the pace and scale of change. China is in a period of transition and the Chinese authorities are well aware that they must address welfare and other concerns, while in the meantime using repression to prevent unrest destabilising their priority of economic growth.
The challenge to improve the environment is a real one. The OECD’s 2005 Economic Survey of China highlights that five of the 10 most polluted cities in the world are in China (OECD 2005: 25). Many of the reported farmers’ protests are the result of farmers suffering damaged or lost crops due to pollution caused by neighbouring factories.
Air pollution from various manufacturing plants has hospitalised many. In Gansu province in April last year, for example, 200 people were hospitalised as a result of mercury-laden smog from an alloy plant. China still relies on coal-fired power stations for 80 per cent of its energy, which it knows are a major cause of pollution. Recognising this, China is attempting to replace old coal-fired power stations with ‘cleaner’ energy sources - the hydroelectric power from the Three Gorges Dam being one example, but also nuclear power. Although the Chinese have incorporated nuclear power into the state electric power plan, they are also well aware of the need to develop alternative means of disposal of nuclear waste. There has been considerable debate within China about the merits of nuclear power. China has already been victim to its lack of sufficient energy production, with industry having to make choices about whether to keep on the air conditioning or the lights. In some places the local bureaucracy has turned off power to high energy consuming factories in an effort to force them to become more energy efficient. The result of this is that thousands of very inefficient generators take the place of the state electricity supply.
There have been numerous articles showing how the growth of the car is damaging air quality and the environment. China’s roads are congested and a rise in the number of cars undoubtedly adds to air pollution. But China is attempting to address the pollution caused by cars through researching and developing alternative engines and energy sources.
China is planning to spend 1.5 per cent of its GDP ($157bn, or $31.4bn per year) within the period of the 11th five-year Plan on environmental protection. In contrast, the world’s largest polluter, America, is budgeting to spend $27.6bn on environmental protection in 2007/08 (Pegg 28.6.2007). Western concerns in this regard are very selective and forgetful. Historically industrialisation resulted in pollution. Indeed, it is hard to imagine how industrialisation can occur without pollution, as inevitably development must be based upon older technologies before an economy can reach a stage where cleaner technologies can be developed. Again, contrary to Western commentators’ beliefs, the continued development of technology, highlighted as a priority in the 11th five-year plan, shows that China is on the case and aims to replace polluting technologies with new, cleaner ones.
Maintaining economic growth rates
Will Hutton, a journalist with a very pessimistic view of China’s future, has argued that although China would like to lower the current feverish growth rates it cannot use the tools available in the West, because, he argues, this would trigger protests or be ignored by provincial and state enterprise leaders (Hutton 2007).
However, other equally pro-market commentators like chief economist of Morgan Stanley Stephen Roach remain confident that China will not fail in its mission to regain control over its blistering economy (Roach 20.4.2007). The Economist, on the other hand, believes that the fears that China’s economy is overheating are exaggerated, pointing out that GDP figures reporting faster growth are in part correcting previous inaccuracies in reporting. Other symptoms of overheating, it says, have also been exaggerated. For example, reports of surging wages are misleading - manufacturing wages have risen by 15 per cent, but productivity has risen by 20 per cent. Inflation is not as bad as it seems, with a recent jump being accounted for by a rise in the price of pork and eggs. Inflation excluding food was just one per cent over the past year (Economist 26.7.2007).
There are many possible future scenarios and it is anyone’s guess as to how this will play out. It is difficult, however, not to conclude that the doom-mongers perspective is driven more by envy or fear of fierce competition than by anything based on Chinese reality. If only Western societies were facing the ‘problem’ of a 10 per cent rise in GDP growth rates!
This brief review of some of the Western commentators’ views on the challenges facing China reveals more about Western commentators than about China. It shows that predicting doom and gloom in China is itself a growth industry. For example, predicting the end of China’s rise, Gordon Chang, perhaps the most eloquent of the pessimistic forecasters, wrote back in June 2002 that the Chinese government had run out of time (Chang 2002). Five years on, despite the limitations of the political structure within China, it continues to develop and confound the Western doom-mongers.
The biggest challenge facing China is to continue to develop and maintain its ‘can-do’ attitude in the face of all the Western pessimism about the market, development and growth. Its ability to succeed lies in continued growth and experimentation, rather than in the curtailment of its ambitions.
Sheila Lewis is a part time lecturer on Modern China at the City Literary Institute.
Chang, G. G. (2002). The Coming Collapse of China. London, Arrow Books.
Dollar, D. (2007). Poverty, Inequality and Social Disparities during China’s Economic Reform. World Bank.
Economist (26.7.2007). ‘It doesn’t add up’. The Economist.
Epoch Times (16.10.2006). ‘Sharp rise in group protests in China’. Epoch Times.
Hutton, W. (2007). ‘Does the future really belong to China?’ Prospect Magazine. January.
OECD (2005). Economic surveys: China. Organisation for Economic Co-operation and Development (OECD).
Pegg, J.R. (28.6.2007). ‘US House boosts spending for environment, conservation’. Environment News Service
Roach, S. (20.4.2007) No Choice for China. Morgan Stanley.
Xinhuanet (26.6.2007). Chinese president delivers keynote speech on national development. Xinhua News Agency.