-
- "The pace of China's industrial development and
trade expansion is unparalleled in modern economic history."
-
-
- When Beijing entered the World Trade Organisation (WTO)
in December 2001, it undertook to remove most of the remaining barriers
to the operation of foreign corporations inside China by 2006. The resulting
flood of investment into the country has given rise to glowing predictions
in international financial circles that China is emerging as the new industrial
powerhouse of world capitalism.
-
- The October issue of the British-based Economist magazine,
for example, lauded the southern Chinese province of Guangdong, which is
adjacent to Hong Kong, and the country's major export region, as "the
contemporary equivalent of 19th century Manchester-a workshop of the world".
-
- In similar vein, the Los Angeles Times enthused: "Poor
and isolated 30 years ago, China is emerging as the world's factory floor.
The country's middle class, though just a sliver of the population, is
estimated at more than 100 million and growing rapidly. Even now, China
buys more cell phones than any other country. Its expanding industrial
sector is becoming a major buyer of raw materials, machinery and high-tech
equipment."
-
- Nicholas Lardy, a professor from the US-based Brookings
Institution, told the Los Angeles Times: "The pace of China's industrial
development and trade expansion is unparalleled in modern economic history.
While this has led to unprecedented improvements in Chinese incomes and
living standards, it also poses challenges for other countries."
-
- The Wall Street Journal noted that some 50 percent of
cameras, 30 percent of air conditioners and televisions, 25 percent of
washing machines, and 20 percent of refrigerators in the world are now
being produced or assembled in China. Andy Xie, a Hong Kong-based economist
for the investment house Morgan Stanley, told the newspaper: "China's
rise as a manufacturing base is going to have the same kind of impact on
the world that the industrialisation of the US had, perhaps even bigger."
-
- But the claim that China is undergoing an economic transformation
analogous to Britain in the 19th century or the US in the 20th century
ignores some basic facts. The impressive rates of growth and statistics
on industrial output are dependent on a huge flow of foreign direct investment
into the country and a flood of cheap manufactured goods out of the country.
Far from being the new workshop of the world, China is more like a giant
sweatshop for the world's major corporations.
-
- The high rates of economic growth in China during the
1990s were not driven by the expansion of an internal consumer market or
native industrial development. The combination of plentiful labour, low
wages, low taxation and brutal police-state repression made China one of
the most attractive investment sites for transnational corporations.
-
- Since the early 1990s, more than $US800 billion have
been invested, overwhelmingly in a string of free trade zones located along
China's coast. The US retail giant Wal-Mart Stores, for example, purchased
about $14 billion in products from its Chinese subsidiaries last year,
which represents about 13 percent of total US imports from China. The electronic
conglomerate Philips operates 23 plants in China and exports $5 billion
worth of goods each year to Western markets.
-
- Foreign firms now account for 81 percent of China's technology
exports-a global market share of 54 percent of DVD players, 28 percent
of cellular phones, 13 percent of digital cameras, 30 percent of desktop
computers, 12 percent of notebook computers and 27 percent of colour televisions.
Transnationals and their local contractors also dominate in other major
exports such as machinery and textiles.
-
- Up to December, China's volume of foreign trade increased
by 21 percent from 2001 to $620 billion, ranking it as the world's fifth
largest trading nation. China's exports stood at $266.2 billion for the
year to December and its imports at $212.6 billion, a 17.2 percent increase.
However, the character of China's trade is demonstrated by the fact that
more than half the imports were associated with export processing-in other
words, the materials or ready-made components needed for manufacturing
export goods.
-
- A study published on January 15 by a US-based think tank,
Hale Advisors LLC & China Online, noted: "Fifteen years ago, intra-Asian
trade inflows were simple. Capital goods and components were shipped from
Japan to newly industrialising countries for processing and then re-exported
to industrialised countries. The opening of China has added a new link
to this chain. Capital goods are now shipped to Taiwan and Korea, which
in turn send capital-intensive inputs to China and [South East] Asia for
labour-intensive processing and assembly before re-export to developed
markets."
-
-
- Social costs
-
- The chief function of the Stalinist bureaucracy in Beijing
has been to offer terms and conditions that have transformed China into
the world's most attractive sweatshop. Many transnationals have shifted
their labour-intensive operations to China from South East Asia or Latin
America, because of favorable labour costs and other financial concessions-with
devastating results in many countries. Mexico, for example, is estimated
to have lost 230,000 manufacturing jobs since 2001, most of them to China.
-
- At the Association of South East Asian Nations (ASEAN)
meeting in November, many governments and business leaders expressed hostility
to China's cutthroat competition for investment and export markets. Two-thirds
of Chinese people are living on less than $1 a day and the average factory
wage is just 40 US cents an hour-one-sixth that of Mexico and one-fortieth
of the US.
-
- As an article in the Financial Times noted: "In
Singapore, Malaysia and other South East Asian countries, wage inflation
followed as labour resources were stretched. In China, the supply of labour
seems almost inexhaustible." This "inexhaustible" labour
supply has been created at enormous social cost. Over 40 million workers
once employed in state-owned enterprises have been sacked due to restructuring
or bankruptcy. Millions more have been made redundant by the entry of foreign
competition into virtually every area of the domestic market.
-
- In rural China, the deregulation of agricultural prices
and production has forced tens of millions off the land since the mid-1980s.
In the largest internal migration in human history, an estimated 150 million
rural Chinese have flooded into urban areas in a desperate search for work-at
any wages. At the same time, five to 10 million youth graduate from schools
each year, joining the labour market.
-
- Despite its huge population, China's internal market
remains relatively small, as most people are unable to afford the goods
being produced. Only a small social layer has profitted from the exploitation
of the world's largest cheap labour force. According to official figures
released last November, there are now just over two million private firms
in China, employing 70 million workers and with an output of $232 billion-compared
to only 800,000 private companies in 1988.
-
- While the average annual urban income is just $1,200,
some five to seven percent of the Chinese population-predominantly the
owners of small businesses, well-to-do farmers, professionals and state
functionaries-earn between $3,000 to $12,000 a year. One percent-some 12
million people-earn over $20,000. An even smaller number of capitalist
entrepreneurs, those with close ties to the global corporate giants and
also to Beijing, have amassed staggering levels of wealth. There are now
some 10,000 individuals in China whose assets exceed $10 million.
-
- Urban and rural inequalities are also widening because
88 percent of foreign investment occurs in the coastal cities of China's
south and east. Only 9 percent goes to the underdeveloped central region
and 4.6 percent to the west. As a result, 57 percent of China's gross domestic
product is produced in the east, compared to only 26 percent in the central
region and 17 percent in the west.
-
- China's economic development is completely geared to
the requirements of foreign corporations. In fact, the domination of foreign
capital over economic life is assuming dimensions far greater than when
China was a semi-colony of the major capitalist powers in late 19th century
and early 20th centuries.
-
- A senior economic official commented on China's economic
dependency in the Peoples Daily on September 3, saying: "First is
the great technological dependence on developed countries. Second, China's
manufacturing is still at a low level. Third is the lack of resources and
a big demand for foreign material supply. Among these are 100 percent of
fibre optics imports and integrated circuits, 80 percent of oil and oil
processing and 57 percent of mechanical products. Fourth is a lack of large
international [China-based] enterprises."
-
- China's dependency on international capital was the overriding
reason for opening up its domestic markets to foreign investors as part
of the WTO agreements. Beijing is desperate to ensure that the rate of
foreign investment does not fall. In the first nine months of last year,
the Chinese government approved 24,771 foreign investment projects, a 33.4
percent increase over the same period of 2001. The official figures of
the Ministry of Foreign Trade and Economic Cooperation valued new foreign
investment in the last 10 months at a record $55 billion.
-
- The owners of foreign-financed companies operating in
China are reaping huge profits. Their owners were paid $27 billion in dividends
in 2002 compared to just $6 billion in 1996. Transnationals now dominate
the domestic markets for a range of industries-from auto and mobile phones
to retail.
-
- China's entry into the WTO has dramatically increased
the ability of foreign firms to operate in its stock and financial markets.
The previously protected domestic A-index shares for China's largest domestic
companies are now open to overseas investors. These include large, flagship
industrial corporations in "strategic sectors" such as energy
and natural resources. The State Administration of Foreign Exchange announced
in late November that it was setting an investment minimum of $50 million
for China's stock exchanges-a measure that directly favours the major global
investors.
-
- China is highly vulnerable to any international downturn.
Already analysts have pointed to a plunge in the growth of China's exports
following the collapse of the US stock market bubble-from 27.8 percent
in 2000 to just 6.8 percent in 2001. Growing economic difficulties in US,
Japan and the EU are expected to see further falls in world demand and
a sharp contraction in China's export sectors. Cong Liang from China's
State Statistics Bureau told the Dow Jones Business News last month that
he predicted a drop in the official economic growth rate to 7.5 percent
this year from 7.9 percent in 2002 due to "a US war with Iraq, as
well as rising unemployment and weak consumption by the rural population".
-
- Any economic slowdown will rapidly expose the myth that
China is the world's new industrial powerhouse and have far-reaching economic,
social and political consequences. Above all, it will bring to the surface
the underlying tensions created by the vast social gulf between the impoverished
masses and the tiny minority who have benefitted from the regime's embrace
of international capital and its needs.
-
- Written by John Chan of wsws.org--Posted 1/31/2003
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