China's experiences of gradually introducing market features into its economy, to build socialism with Chinese characteristics, provides some important lessons for South Africa, writes Supra Mahumapelo.
The opening up and economic reform of the Chinese economy was a decision taken by the Chinese Communist Party (CPC) after a very careful analysis of the objective balance of forces and its own objective and subjective strengths and weaknesses.
As the most populous country on the globe (with 1.2 billion people) and among the very few countries implementing a socialist economic policy, China formally opened up its economy in 1978. This approach was based on the theory developed by Deng Xiaoping of building socialism with Chinese characteristics.
Embedded in this theory is a relentless effort by the CPC to strive for the emancipation of the mind, the practice and courageous exploration of the spirit of seeking truth from facts as posited by Li Tieying during his input at the international symposium of "The Market Economy of China" in 1993.
This approach by China seeks to reject in practice a dogmatic approach of which some of the organisations propagating socialist policies often become victims. The country and its leadership have developed the art and capacity to continue to critically analyse the national and global conditions within which they seek to pursue socialist objectives.
In practice, China understands that the conditions within which they pursue the objectives of a socialist state are neither of their making nor desire.
Hence, the understanding and acknowledgement of seeking truth from facts by, among other things, gradually and very sequentially introducing elements of the market as part of increasing the possibilities to build vibrant socialism.
The Chinese economy has some similarities with the South African economy in the sense that there is a far more advanced and efficient urban economic base, with rural conditions that compel people to move from the periphery to the centre in search of better opportunities by exchanging their labour for wage income.
As we reflect on these matters of socialism and the market economic system of China, we must not lose sight of the reality that economies are not static; they change all the time.
As Cox puts it "small, independent producers existed in all the old-regime societies, along with a degree of commodity trade in basic necessities. In old regime China, there were small cultivators and artisans, and in the old-regime Islamic societies, a flourishing artisan production. Merchants accumulated wealth by trading in commodities produced by the artisans and farmers, although they did nothing to change the methods of and organisation of production..."
Chinese Socialist Market Economic Framework
Since adopting policies of economic reform, China has enjoyed some enviable and commendable dynamic economic development. There has been rapid growth of the economy (in the double figures), continuous industrial output value, more investments have been attracted partly due to the desire by investors to access and provide services to China's huge population.
The Chinese socialist market economic approach is still undergoing gradual introduction and, in some instances, it is inevitable that there will be some degree of friction between the old and the new approaches (between centralised commandist planning and marketism). This dualism leads to contradictions that the Chinese seem to be managing well without creating unnecessary political resistance that would shift focus away from the most urgent fundamental political challenges.
Any new policy approach is bound to be characterised by concomitant challenges. In China, the infrastructure necessary to respond to the needs of such a rapidly growing economy is not yet fully capacitated to meet the demands of development. There are real challenges around the financial sector that include increased irregularities in financial management and a rapid increase in prices. To respond to these challenges, measures have been undertaken by the government including raising interest rates for macroeconomic stabilisation.
The sequential and gradualist approach implemented by China arises from the lessons and experiences of countries in Eastern Europe and the former Soviet Union characterised by radicalism and shock economic transformation.
Change from the old to the new is bound to create some uncertainties and discomforts. It is up to the leadership of any institution or organisation introducing such changes to bring certainty and some degree of predictability. The CPC has played this role very well.
Firstly, China had to face the challenge of taking its people along because the people were used to a system which had been in practice for many years such that the economic system had become their way of life and to an extent part of their culture.
Secondly, there was no historical precedent that China could follow. That is why they say that their system is socialism market oriented with Chinese characteristics.
Thirdly, contradictions emerged as employees in government earned lesser salaries than those in the private sector.
Fourthly, as everyone has a right to participate in the economy, some government employees started their own private enterprises to earn extra income.
There are many other challenges, which include increased potential for corruption, and a possible stampede arising from competition to participate in business and accumulate more.
Responding to some of these challenges, Deng Xiaoping always alluded to the need to educate the masses and put in place the necessary legal regime as a control measure. The Chinese themselves acknowledged that this would not be an overnight process.
In October 1985, Deng Xiaoping summarised the essence of socialism and marketism by positing that "there is no fundamental contradiction between socialism and a market economy. The problem is how to develop the productive forces more effectively. That is why we have been drawing on some useful capitalist methods".
The challenge for South Africa is whether this understanding can become part of the necessary lessons we can usefully take along as we unfold and propel the National Democratic Revolution.
The objective reality is that as things appear today, China is on a growth path to become a global economic superpower. However, one of the pertinent challenges facing China is inflation as the economy continues to grow in an unprecedented manner.
Similar to South Africa, the People's Republic of China faces the inevitable challenge of having to strike the necessary balances of cooperation between the national, provincial, regional and local spheres of government.
The country also has to urgently continue to tackle the challenges of the transformation and correct positioning of state-owned enterprises, which have to be managed in a manner that will not only make profit but ensure they become sustainable.
As noted by Cho Soon, "the problems facing the country are unique and there are no historical precedents that are available for emulation. China must find its own solutions to the problems; the country must traverse virgin ground".
Among the practical implications facing China as far as the need to traverse of virgin ground is concerned, is to do some experimentation along the way because the global economic situation is in a constant state of change. Thus some mistakes are bound to be made.
The advantage with China is that because they are acutely aware of this danger, they have adopted a cautious gradual approach carefully analysing the environment and deciding when to aggressively accelerate and when to slow down or do a quick review.
China acknowledges that even if great efforts have been undertaken to teach people to always be selfless and serve the country, at the same time people have been given the opportunity to prosper, and the new milieu has brought up some cases of graft, corruption and the abuse of power. In this regard, the Chinese leadership believes that the education of the people on the new conditions of struggle has to be intensified and that the rule of law should be strengthened.
The Chinese believe very strongly that the superiority of socialism can only succeed if this is done through relentless efforts to ensure that the productive forces of the economy are well developed. This requires a national consensus and national efforts.
There is an outright acknowledgement by the Chinese that the manner in which they used to approach economic management and development through commandist central planning was not helpful because the productive forces couldn't be effectively developed.
Deng Xiaoping said, "we have been drawing some useful capitalist methods".
It is important to emphasise that drawing useful lessons from the capitalist countries does not make one capitalist as China has not become a capitalist country. They do a very careful analysis of the capitalist system and select capitalist methods that will be useful for them in pursuit of their strategic objective of achieving the superiority of socialism.
The approach by China in implementing the combination of socialism and capitalism (marketism) is a very simple one. The leadership of the country ensures that the public sector of the economy is always predominant, strives for common prosperity and the necessity to ensure that the new approach does not lead to unnecessary polarisation.
An important lesson that South Africa and other progressive countries can learn from China is their acknowledgement that some regions and individuals within the country will inevitably prosper faster than others. The difficulty is then that there is hope that those who prosper will assist the less prosperous to become more prosperous. The implication of this is that there are challenges of income and lifestyle gaps within society.
The CPC and its trade union accept that this is an objective reality and they do not as a consequence of this label one another as 'compradors', 'right-wingers' or 'sell-outs', as others in progressive countries are tempted to do. There is general discipline and convergence of views and approach on the strategic objective.
As Deng Xiaoping said: "China has no alternative but to follow this road.
It is the only road to prosperity."
The difference with South Africa is a necessary conclusion by the ANC that in the current phase of the National Democratic Revolution (NDR) a route similar to the Chinese one is the most viable. South Africa does not claim that it is the only route to prosperity. There is an understanding that the complex solutions to complex challenges of the economy should not be predetermined, but must be informed by ongoing dynamic conditions.
On employment
In 2004 about 9.8 million new jobs were created in China. This is just a drop in the ocean compared to China's population. The creation of these new jobs created a possibility for the re-employment of 5.1 million laid-off workers.
Concomitant with this development around issues of job creation, there were still about 1.53 million laid-off workers in state-owned enterprises.
Workers without jobs are registered at the re-employment centres and all receive a basic subsistence allowance and social security.
Chinese people who, for instance, suffer from serious diseases or are disabled and have no source of income are guaranteed a minimum standard of living.
On an ongoing basis the country has to contend with a changing employment environment and they work closely with the trade union movement to resolve these complex matters. The Chinese Trade Union is part of the solution to these complex problems rather than mobilising against the opening up strategy.
The decrease of unemployment annually is a small percentage. For example, in 2004 and the preceding year, unemployment decreased by 0.1%.
As recently as 2004 China had a trade surplus of $32bn. Among other things, the volumes of accumulated foreign capital (foreign reserves) also continued to increase due to the opening up. The country had improved the possibility of accumulating more foreign capital because of the opening up strategy.
The exchange reserves had reached $609.9bn at the beginning of 2005 and this represented an increase of $206.7bn in comparison to 2003. China's Gross Domestic Product (GDP) in 2004 was 13.65 trillion yuan ($1.65 trillion), an increase of 9.5% on the previous year.
In agriculture, achievements include:
The industrial and construction sectors continued to maintain high levels of growth. In 2004, the total output of primary energy production reached 1.85 billion tons of standard coal equivalent. The electricity production for the whole year was 2,187 billion kW and crude oil output was at 175 billion tons.
It is important not to lose sight of difficulties that accompany the measurement of GDP. As Mohr puts it, "various conceptual and measurement problems are encountered, it is often difficult to define precisely what should be measured, and the information is often inadequate".
The speed and aggression with which the Chinese economy is growing cannot be ignored, nor can the fact that it has adopted characteristics of a market economy and mixed them with socialist approach.
As Lau notes, "it is found that after an initial period of adjustment, the Chinese economy will continue to grow at a steady pace of approximately 8% per annum, on average, between now and the year 2020, based on the assumption that the economic reform policies and mercerisation will continue to become a major engine of growth for the economies of East and Southeast Asia, through the consumption, investment, and raw material demands".
* Supra Mahumapelo is the ANC North West Provincial Secretary.
References
Cox R.W. Production, Power and World Order (1987).
Mohr P. Economic Indicators (2004).
Lau L. The Market Economy and China.
Deng X. Selected Works Vol II.
Tieying L. The Market Economy and China.
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