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Conflict among desperate Chinese revisionists

Posted by Indian Vanguard on September 26, 2007

Intro note:

In a recent “Open Letter” in China (of 12.07.2007), reproduced today in a message to the MLL mailing list (whose description among other things says, “We stand in the tradition of Marx, Engels, Lenin and Stalin, and we are proud of this.”), some representatives of the ruling revisionists in China who apparently are holding relatively high posts among them have expressed a relatively quite strong dissatisfaction with the policies of the main ruling revisionists there.

In the below, I’m reproducing that message, so as further to contribute towards making that document from China known. It’s a quite interesting and tell-tale one, in my opinion.

Some excerpts from that document were brought already, for instance, by the UK Conservative newspaper The Telegraph in an articleNews with brief comments” (NWBC), the next day. on 18.07, which I commented on in item 285 of my series ”

This “Open Letter” is a clear sign of how very hard pressed are all those traitors to socialism in China, the new exploiters and really fascist-type oppressors there, by the vast majority of people in China, and by the vast majority of people on the whole globe too. It’s a sign of how desperate their situation already is, despite their regime’s being massively supported and held under its arms by all the forces of international imperialism.

The persons who signed that “Open Letter” even pretended, in it, to be “adherents of Marxism-Leninism Mao Zedong Thought”. They of course are not that, as can clearly be seen in that document of theirs. If they were, they would be calling for the overthrow of the revisionist, fascist regime in China – and such a just and necessary call in the conditions now reigning there of course can only be disseminated “underground” and at the risk of most severe persecution. Most probably such calls have already been put forward in China too, perhaps in many places there, but the imperialists, to whom support of the present arch-reactionary regime in China is vital, of course are doing everything they can to prevent any such from becoming known to the masses of people in other countries.

The desperate fear of the Chinese revisionists precisely of Marxism, Leninism and Mao Zedong Thought is manifesting itself internationally for instance in the fact that, in fascist manner and with the support and active co-operation of the US and other imperialists too, they have erected a “Great Firewall of China” – see a website also called by that name and bringing information about that “Firewall” – which blocks many websites from even being accessible from within The People’s Republic of China itself.

Furthermore, the Chinese revisionists several times recently have engaged in their fascist-type activities, intended to suppress the dissemination of information and of criticism against the reactionaries, also internationally, by massively attacking with technical disturbance actions such an important website as the Marxists Internet Archive (MIA) in order to prevent everybody on earth from accessing it. (See for instance my NWBC item 241 .) In this manner, the regime of the revisionists in China even is acting as a spearhead, in a certain respect, of the entire present-day international system of capitalist-imperialist oppression.

The authors of the recent “Open Letter” in China are adherents and representatives of that regime too, for instance openly lauding that infamous traitor to socialism in that country, even the main perpetrator of the overthrow of it, in 1976-78, Deng Xiaoping, calling for his – likewise arch-reactionary – policies to be followed and openly vilifying that massive resistance against them by the people which was expressed in the countrywide demonstrations in May-June 1989. (On that overthrow, see above all Info #270en Subjects in postings” section under “China, the overthrow of socialism in”.) and also other Infos listed in my homepage’s “

Here follows that message to the MLL mailing list which reproduced the recent “Open Letter” in China.


Datum: den 9 augusti 2007 02:49 [CET]
Ämne: [MLL] Chinese Maoists speak up


Chinese Maoists speak up against the economic policies of the Party and government

Our Views on the Black Brick Kiln and Other Incidents and Recommendations for the 17th Party Congress

by Ma Bin, et al.

Let us refer to a famous poem by Mao that stirs excitement among us all: “A cuckoo is crying in the midnight until she throws up blood; she believes that her crying can bring the east wind back!” We deeply hope our respected leaders will stir up the east wind!

General Secretary Hu Jintao and the CPC Central Committee Political Bureau Standing Committee Members, Members and alternates:

In your June 25 speech at the Central Party School, you highlighted the importance of strengthening inner-party democracy, asking all party members to increase their awareness of anxieties. According to this call, we make the following recommendations.

The Shanxi black brick kiln incident has been uncovered, and some similar cases are still being discovered. For us communists, it is neither right nor possible to treat or even speak of such incidents as inevitable phenomena of the primary stage of socialism. This was obviously a capitalist scene, incorporating certain scenes of cruel exploitation, and the tragic, dog-eat-dog world of primitive accumulation under feudalism and slavery. The mission of The Communist Manifesto and of the CPC is to eliminate exploitation and to liberate all mankind, and these incidents are totally contradictory to our philosophy.

The Shanxi black brick kiln case shows that there are many dark sides of our country that run completely counter to the socialist system and communist ideology. For example, mining accidents that have occurred constantly for years have claimed the precious lives of many good workers. The private coal mine owners take advantage of these workers to squeeze out millions and millions to fund their own luxury cars and residences — some of the large enterprises owned by the wealthiest men increase by billions every year. If these things continue to develop unhindered, will what we are building still be a socialist system? For instance, the state-owned enterprises, which many of us have worked hard for several decades to build, have been undermined by a variety of methods, sold off or even given away for nothing, becoming what is euphemistically called collective enterprises, although they are in fact private. Former party secretaries and plant bosses become big capitalists, while continuing to act as party members and secretaries. Is this consistent with The Communist Manifesto and the Communist Party’s founding principles? Needless to say, in the whole country, the vast majority of SOEs were also developed bit by bit through the hard work of hundreds of millions of working people under the leadership of the CPC Central Committee.

Now, the majority of property rights does not belong to the people and have become the property of private owners. Those manual workers, migrant workers, and even child laborers in the private sector, workshops, mines, and shops receive low wages to do extraordinary work while others suffer the injustice of unpaid labor in dark environments. We are afraid that this is not the only instance of black brick kiln abuses, and there may be many similar cases in other places. We eliminate pornography and illegal publications every year, but it is said that millions of women are forced to engage in the cruel physical ravages of prostitution. As a result, a number of parents and children of these families suffer through life. Do we really have no way to deal with these problems? Must we take a “laissez-faire” approach?

We still have a lot of large and medium-sized state-owned enterprises that can be managed well. There is no reason to be auctioned to foreign enterprises only for them to grip our domestic market and squeeze our national economic development. The media recently reported that the state will allow foreign capital to enter the Chinese military industrial enterprises and purchase shares in joint ventures. Even if the approval was granted only for the production of ancillary equipment and parts, it is still very disturbing and should be opposed. Without reliable auxiliaries, how can we expect reliable weapons? Regardless of the weapon, it only takes one problem with parts to make normal operation impossible, and any explosion can cause fatal accidents! In addition, they will steal our intelligence, know our capabilities, and encroach upon our entire military production system!

We have a number of provincial, municipal, and county leaders who do not highly regard national wealth and property and will do nothing when it is cheaply sold to others. Compared to domestic private enterprises, joint ventures, and wholly foreign-owned enterprises, how much of China’s current GDP is produced by state-owned enterprises? Can our basic economic institution, which is underlined by public ownership, withstand the test of time? Why have state agencies, including the Department of Statistics, not announced the statistics on proportion among different ownership sectors in the economy for many years? Workers and farmers have lost their status as masters, and the workers are either temporarily laid off or permanently unemployed with modest compensation. New land exploitation of the farmers and rich peasants, which we uprooted in the 1950s, has already begun to occur in rural areas.

In the process of economic reform, the top-down style of growing corruption, degradation of many leading cadres, and betrayal of the motherland and the people run rampant. The above issues are indeed shocking and infuriating. But every time, issues are only highlighted separately during a specific period of time. Soon after, big issues are turned into little ones and little ones turned into nothing at all. There have been very few instances where the problem is dealt with in a manner appropriate to its severity. None of the major leaders are held accountable for their actions and are dismissed or prosecuted. Only a few extremely severe cases of corruption have resulted in a few years of imprisonment, or death penalty with reprieve at most. Corrupt officials are seldom sentenced to death. In the past, a lot of these cadres might have been good, and it was only wrong ideological tendencies that caused them to betray the party and people.

There are countless concerns and troubles occurring every day, and the list goes on: bubbles in the stock market, increased prices, removal of factories without guidance, resettlement of people, speculation of real estate, soaring prices. In addition, the low-end exporting policy has led to low wages and exploitation of workers, high energy consumption and heavy pollution, etc. More seriously, some localities defy central orders and do not report to the central government or simply ignore instructions from above. The illegal black brick kiln scandal exposed us to very serious problems regarding the future of the Party and the country, which we should now face without hesitation. This is the “cause” we are working for. Is it possible that we have digressed to the wrong road, which will lead us elsewhere?

Now, the expanding social gap has become one of the largest in the world. According to recent World Bank estimates, China’s GINI index of 0.469 has already surpassed the U.K., the U.S., and Japan, and even developing countries such as India, Indonesia, and Egypt. Comrade Deng Xiaoping once said that, if reform and opening leads to polarization, it is obvious that we are digressing. Digression is nothing but a mistake and the road of capitalism. Reform and opening have already been occurring for so many years, and yet the above social issues are only becoming more serious with development. Why do we still insist on the wrong things?

On the surface, some skyscrapers have been built, along with a lot of joint ventures or foreign-owned enterprises, and state-owned enterprises have merged and expanded. But if we look past appearances to the truth, we see that the problems are growing, especially the above-mentioned dark issues. How should we respond? Can we say on the surface of the facade is the road to a better-off life? Foreign bourgeoisie and the capitalist state leaders are secretly delighted about two things: the surface of the facade and speech that sidesteps and covers conflicts. Our people see that these negative issues have not changed after all, and are anxious and fearful about the Party, country, the peoples’ future and destiny, and worry that they themselves will eventually have no one or anything to depend on.

The tragedy of the Soviet Union’s and socialist Eastern European countries’ collapse and the lessons from the decline of the international communist movement that took place after the 1980s are still fresh in our minds. Imperialism, capitalism, and their agents, have encircled and suppressed us in the areas of politics, ideology, economic and political finance, educational methods, national defence and the military, diplomatic, and national issues, and religion. They have penetrated very deep. However, we see that the effects are not great, and their measures are not effective. Although we often talk about peace, cooperation, and harmony, there are indications that they are doing whatever they can to prepare the military siege against us, ready to launch a war of aggression or the threat to use force. We can currently say that the Party and government have seriously detached themselves from the people. Precarious is China’s socialism! The Chinese people have reached another extremely critical time!

Faced with this kind of domestic and international situation, the majority of party members, especially the old comrades who had received Party education for many years, were are all burning with anxiety, waiting for the Central Party to take effective measures and act quickly and courageously to resolutely lead the whole party, the armed forces, and the people from the “evil path,” the danger of which Comrade Deng Xiaoping warned of long ago.

We hope in the near future it is necessary to convene the 7th Plenum of the 16th Party Congress, which should, from the black brick kiln incident as the breakthrough, summarize and reflect upon our political ideology and basic guidelines in order to, again, uphold the truth and correct the mistakes. In the 17th Party Congress we should make the decision to establish Marxism-Leninism Mao Zedong Thought as the political ideology that meets the needs of the majority of people. We sincerely recommend to the Party Central Committee that the brick kiln incidents are not excluded. We cannot talk about this issue superficially while doing nothing (the just-concluded 28th meeting of the NPC Standing Committee adopted a “Labor Contract Law,” yet the media did not show the chairman, vice chairman, and members of the Standing Committee saying a word of the Shanxi black brick kiln incident). It should be seen as a very important breakthrough and an alarm calling for the whole Party to correct the wrong path we are on.

Chairman Mao said: “the Communist Party is the core power leading our activity, and Marxism-Leninism is the guiding principle of our thought, whether our ideological and political line is correct decides everything.” This is the undeniable truth. Comrade Hu Jintao said: “at any time and under any circumstances, we must always hold high the great banner of Mao Zedong Thought.” This is completely correct. We fully and strongly support such reform and eagerly look forward to implementing it practically and effectively in the future.

Our party has a glorious tradition, which is: be open and upright, do not engage in machinations; breed unity and not division; unite under the correct determination. In the interests of the people, we overcome difficulties and strive for a greater victory. Therefore, to have a fully democratic environment, the Central Committee must set an example for the entire party, and create a new situation of freedom that allows party criticism of fine traditions and cadres’ ability to speak their minds. The CPC Central Committee needs to listen to the majority of people, especially the workers and peasants, concentrated in line with the correct Marxist views, and establish the 17th Party Congress as one which opens a correct path, achieves united victory, and is of great historical significance. We must adhere to the truth without hesitation, and be ready to correct mistakes, which is a very arduous task.

We recommend that we launch a study of Marxist theory before the 7th Plenum of the 16th CPC Central Committee and the 17th Party Congress. The central government should decide to select some important documents of Marxism-Leninism, Mao Zedong Thought, such as The Communist Manifesto, Anti-Duhring, The State and Revolution, Imperialism, the Highest Stage of Capitalism, “Serving the People,” “Yu Gong Yi Shan,” “Study Bethune,” “Combat Liberalism,” “On the Correct Handling of Contradictions Among the People,” and other works of Chairman Mao, as well as the full lyrics of two songs, “The International” and “The Three Main Rules of Discipline and Eight Points for Attention,” and have members of the Central Committee Central Commission of Discipline Inspection and representatives of the 17th Party Congress to run classes of seriously study. We should also organize and help all of the Party members to study as long as they have the ability to read.

We recommend that, before the 7th Plenum of the 16th Party Congress of the CCP and the 17th Party Congress, we should begin to criticize democratic socialism, socialist revisionism, and bourgeois liberalization according to Marxism. Without abolishment, there is no establishment; without difficulty, there is no success. Without criticizing these erroneous ideas, it is impossible to truly uphold Marxism as the guiding principle and political guideline, and it would even undermine the construction of socialism. At the turn of spring and summer in 1989, because of bourgeois liberalization, a counterrevolutionary riot broke out. Comrade Deng Xiaoping pointed out that the nature of the riot was “bourgeois liberalization and opposition to ‘The Four Basic Principles.’ The goal of the riot was to “subvert our country and our party.” The most important lesson is that “we address the importance of the ‘The Four Basic Principles,’ ideological and political work, anti-bourgeois liberalization, and anti-spiritual pollution, but we lacked consistency, action, or did not tackle these problems adequately.” He also pointed out: “In the 6th Plenum of the 16th Party Congress of the CCP, I said that we needed 20 years more to fight against bourgeois liberalization. Now it seems that it will be more than 20 years. The rampant spread of bourgeois liberalization will lead to extremely grave consequences” (Selected Works of Deng Xiaoping, the third volume, 305, 374).

Today the spread of bourgeois liberalization is greater than ever. In addition to the aggressive propaganda of bourgeois liberalization, there is another thought of bourgeois liberalization disguising itself as Marxism, and that is democratic socialism. It seriously distorts Marxist scientific socialism and denies the fundamental principles of scientific socialism — public ownership of instruments of production and dictatorship of the proletariat. It is attempting to turn China into a bourgeois country, which is the vassal of Western countries. It may confuse people because it disguises itself under the cloak of Marxism. We should seriously criticize it.

In short, we must thoroughly criticize all wrong anti-Marxist thinking, and establish order from this chaos to ensure the guiding status of Marxism. We suggest that the 17th Party Congress make decisions to restore the party as a vanguard of the working class, correct the wrong ideas of “dual vanguards”, and change the erroneous regulation that allows capitalists to join the party. The vanguard nature of the working class has been clearly regulated since The Communist Manifesto. As early as in 1879, when the heads of the social democrats, Bernstein, and others opened the doors of communist parties to the “educated, philanthropic” assets, and attempted to change the Party into a “full party,” Marx and Engels immediately denounced the idea, and said that if they persisted in this thinking, they would have to resign or at least remove themselves from Party leadership positions (see The Complete Works of Marx and Engels, the third volume, 367). Since the establishment of the Communist Party of China, we have been maintaining the fundamental principle that the CPC is the vanguard of the working class. On June 9, 1952 the CPC Central Committee stressed in a document that: “No party members should be allowed to exploit others (regardless of whether it was feudal exploitation or capitalist exploitation). If they are reluctant to give up exploitation, or continue exploitation through kulak or other forms, they should be unconditionally expelled from the party.” On September 16, 1956, Deng Xiaoping, on behalf of the CPC Central Committee, pointed out that “in the report on the amendments to the Party constitution, Party members must engage in labor and not exploit the working people. We must make every Party member firmly draw a line between labor and exploitation.” These fundamental principles had been maintained until the 16th Party Congress. Since the 16th Party Congress, there has been a closer relationship between the Party and bourgeoisie but a more distant relationship between the Party and workers, peasants, and working intelligentsia, and this is quite dangerous. We recommend that the 17 Party Congress restore previous regulations about the characteristics of the Party and the requirements for membership, readopting the correct Marxist stance.

For those capitalists who have already become Party members, we can give them two options: 1. Continue to be Party members by ending exploitation, returning the instruments of production currently used for exploitation to the Party and People’s government, and becoming laborers that depend on themselves; or 2. Automatically resign from the Party and continue to be capitalists, but love the country, obey laws, and make contributions to the motherland. Some of them may join democratic parties on a voluntary basis.

Looking at the current facts, we have to confess that China’s reform is heading towards changing public ownership to private ownership and socialism to capitalism. If the 17th Party Congress continues firmly down this path, a Yeltsin-type person will emerge, and the Party and country will tragically be destroyed very soon. However, since the specific conditions in China are different from the former Soviet Union’s, the Chinese version of Yeltsin may not publicly announce the dissolution of the Communist Party, change the name of the country, or sell our territory. Rather, they will use Marxism-Leninism and the five-star red flag to disguise themselves and deceive the people. How did this problem begin? The answer lies in 20 years of implementing the wrong policy guided by wrong ideology.

We cannot solve the fundamental problems only by adding a few social welfare policies and imprisoning some corrupt officials if we are not able to break ideological restraints, correct the privatization of the reform policy, and change the wrong regulation that allow capitalists to become Party members. Without these changes, we will face endless disasters. We hope that the Central comrades in leadership can truly understand the significance of these issues.

We sincerely hope and suggest that we thoroughly deny the wrong theories and paths, thinking and approach routes to completely break away from the wrong theoretical ideas. We should take firm action to return to the revolutionary road and list Marxism-Leninism Mao Zedong Thought as the Party’s sole guiding ideology, rather than only airing another wave of words. As long as we implement the above policies faithfully, all the serious problems existing in politics, theory, ideology, culture, education, economy, agriculture, industry, military, national defence, diplomacy, foreign trade, government officials, corruption, and the elimination of pornography, illegal publications, and gangs will be fundamentally resolved.

Faced with such a grim situation and in this extremely important historical juncture, we also recommend that the Central Standing Committee and the Politburo consider the best options, eliminate the various negative factors, and overcome adversity to change the current negative situation. The CPC Central Committee Political Bureau should call on the entire party to relate the reality of China today with Marxism-Leninism-Mao Zedong Thought on the proletarian revolution and proletarian dictatorship, the history of the Communist Party of China, the history of the international working class struggle, colonial history, and study them. Leading cadres should not worry about personal gains or losses, but rather ensure that all true views of Party members can be expressed.

Given the long absence of inner-Party Democracy and rigid hierarchy, Party leaders have detached themselves from the people, and erroneous working styles, such as bureaucratism, sectarianism, formalism, opportunism, and liberalism run rampant. Most of the people have acclimated to taking cues from the boss rather than speaking their own minds or putting forth different ideas. If this problem cannot be solved, the Party Congress and NPC will not have positive results.

Therefore, we recommend that the CPC Central Committee makes an official decision and informs the whole party that the Central Committee members, Central Commission for Discipline Inspection members, representatives of the 17th Party Congress, and all of the Party members criticizing the government or putting forth different ideas should not be blamed, placed in prison, supervised, or killed, and their relatives and friends must be kept safe. We must enable everyone to speak the truth. It is imperative to recall and carry forward the spirits and lessons of the Zunyi Meeting during the Long March and Yanan Rectification Campaign in the 1940s.

Meanwhile, our Party should make a decision to welcome the retired former Party and state leaders to support the Party Congress and NPC. As for the propaganda that has been proven wrong, related comrades should, following the Party’s discipline, actively avoid any restatement of these expositions and be wary of making historical mistakes. The central leaders should hold high the great banner of Marxism-Leninism Mao Zedong Thought as a guide, and take the lead in conducting self-criticism. They should seek truth from facts and adopt the attitude of “speaking the truth without caring about losing face” to systematically and comprehensively summarize the experience of reform and opening in the past 30 years — what progress or error has been made and what lessons can be learned in order to uphold the truth and correct our errors. We should make policies that truthfully consider the principles of socialism and the interests of workers, peasants, and the people. Regardless of how principles and policies are made or who is responsible for them, as long as they are anti-Marxist, they are inconsistent with the interests of the people previously mentioned and should be totally rejected.

The economy may be temporarily impacted, but it will gain the sincere support of the broad masses, and will therefore greatly promote political and economic unity, as well as greater development. We have friends all over the world, and we will develop.

On the issue of how to select candidates for the 17th Party Congress, we suggest that the Central Committee adheres to the principle of meritocracy. The candidates must be the ones who uphold Marxism-Leninism Mao Zedong Thought, become close to the people, contribute to peoples’ interests, as well as the cause of Communism, dare to maintain truth, correct mistakes, and have high moral standards and ability, and are self-disciplined rather than caring too much about personal gain or loss.

We suggest that the Central Committee adjust the name list according to the situation of the 7th Plenum of the 16th Party Congress and 17th Party Congress. The decision should be made through competitive elections regulated by the Party Constitution, which was the case in the 7th Party Congress.

We suggest that the Central Standing Committee of the Political Bureau and the General Secretary be elected by all the representatives of the 17th Party Congress or the Central Committee in direct competitive elections.

We firmly believe that if the leading comrades of the Party Central Committee can make up their minds, realize the problems we face, and truly return to the Marxist-Leninist Mao Zedong revolutionary stance without fear of pain, shame, evil, or pressure, we can summon the spirit of revolutionary struggle, work together to overcome difficulties, turn the tide, captivate the world, and firmly correct the direction of socialism.

We can also unite the whole Party and all the comrades who participated in the 17th Party Congress and make correct Marxist and Socialist policies through study, discussion, debate, and united understanding, thinking, and action.

Only through the above actions can the 17th Party Congress be a successful, united, and historically important one, which holds high the great banner of Marxist-Mao Zedong thought and follows the correct path. The Chinese people and our friends from all over the world will support and praise us. The Beijing Olympic Games and Shanghai World Expo will also be successful. We will certainly be able to build a better country, and the Chinese people will be able to have a better future.

Finally, let us refer to a famous poem written by Mao that stirs excitement within us all: “A cuckoo is crying in the midnight until she throws up blood; she believes that her crying can bring the east wind back!” We deeply hope our respected leaders will stir up the east wind!

Please deeply consider the above proposals and adopt them.

Ma Bin (former consultant, State Council Development Research Center)
Zhou Chuntian (former director, Guangxi Zhuang Autonomous Region Advisory Committee)
Li Chengrui (former director of the State Statistics Bureau)
Qin Zhongda (former minister of the Chemical Industry Ministry)
Mao Linchun (former deputy minister of the metallurgical Industry Ministry)
Wu Fanwu (former State Department Bureau of Foreign Experts)
Yang Shouzheng (former Chinese ambassador to the Soviet Union)
Hua Guang (wife of Zhang Haifeng, former Chinese ambassador to Romania, and former minister of political affairs at the Chinese Embassy in Romania)
Han Xiya (former alternate secretary of the All China Federation of Trade Unions)
Zang Naiguang (former deputy chief executive of the Bank of China)
Xu Chengzhi (former director of the Political Affairs Department of the PLA Railway Corps)
Long Guilin (former chief of staff of the PLA Railway Corps)
Bai Xuetian (former political commissar of a People’s Liberation Army tank division)
Chen Xiao (former deputy director general of the Political Affairs Department of the PLA Navy)
Yu Quanyu (member of the CPPCC National Committee, researcher at the Chinese Academy of Social Sciences)
Xu Fei (associate professor of the Communication University of China)
Mo Mengzhe (editor, Institute of Contemporary China )

July 12, 2007

Translation by Nicole Dabney, Ying Zhang, and Guanhui Dai. This open letter was posted to A-List by Henry C. K. Liu, who says that it is “creating much debate in Chinese political circles.”

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China: Is High Growth – High Risk Liberalization the Only Alternative?

Posted by Indian Vanguard on September 17, 2007

James Petras

China’s drive toward economic superpower status in the world economy has accelerated in recent years. As China’s economy becomes globalized, fundamental changes in its financial markets have opened opportunities for overseas expansion as well as increasing risks of financial crisis. . 09.10.2007


Dynamic growth, large-scale financial speculation and overseas expansion are accompanied by deeper and more pervasive social and economic problems, which can undermine sustained growth and political stability.

China’s Dynamic Economic and Financial Growth

By now the world is aware of China’s unprecedented prolonged double-digit growth rates in GDP, exports, manufacturing and other economic sectors. Economists and Central Bankers have taken notice of China’s $1.5 trillion dollar reserves, $3 trillion dollar savings and the rapid growth of millionaires and billionaires. Moreover, despite US and European financial market turbulence in mid 2007, China’s trade balance for July 2007 was a near record $24.4 billion dollars, its exports grew by 34% despite rising oil imports and reductions in rebates to exporters and interest rate increases. China’s GDP is expected to grow at nearly 11% for 2007 (Financial Times July 20, 2007), the highest rate of growth in the new millennium.

While US politicians, pundits and trade union bosses continue to fume about China’s low wage advantages (cheap labor) and ‘unfair trade’, Beijing is moving on to a new advanced stage of capitalism – large-scale, long-term investment in research and development (R&D), large-scale private and public overseas investments in Africa, Asia and the United States and big investments in high tech industries linked to manufacturing. China’s major banks and corporations are ‘going public’ – offering shares to private investors and raising $52 billion dollars in the first 6 months of 2007- making China the world’s leading center for share offering (Financial Times, July 5, 2007). Over $1,300 billion dollars of Chinese savings are about to flow into global bond and equity markets as liberalization spreads (Financial Times, August 28, 2007). Today the Chinese stock market (including Hong Kong) is bigger than Japan (FT August 29, 2007). China’s capital markets are moving toward integration with the world market and its multinationals and investors are prepared to challenge US-EU domination in the commodities sector. Over the next decades Chinese companies will compete with Boeing and Airbus in the production of commercial aircraft. Despite the protectionist bombast emanating from the leading Democratic Presidential candidates, Chinese imports grew from $512 billion dollars in 2004 to $792 billion dollars in 2006 and will reach $1 trillion dollars by 2007/2008. China is second only to the US in investments in technology, allocating $134 billion dollars in 2006. As a percentage of GDP (4.9%) China leads the US several times over.

Clearly China’s macro-economic successes and its ability to reduce the gap separating it from the older imperial powers like the US and European Union, has aroused hostility, anxiety and efforts to undermine its competitive advantages. By raising complaints which apply equally or more to the West and Japan, concerning the environment, product safety and trade union rights (over 91% of US private sector workers are non-unionized and most public-sector workers have highly restricted or no right to strike), both the US and EU are attempting to block China’s emergence as a world economic power. China’s sustained growth, despite stiff competition from low wage areas and high tech countries, political pressure from the outside and social tensions on the inside, has raised issues which thus far have not been addressed by its outside critics (predicting unsustainable catastrophic consequences) and internal celebrants of the current economic model.

The new challenges are precisely due to the economic successes of the regime as it climbs up the economic ladder from labor intensive, low value-added production to high tech, skilled and semi-skilled production and services. As China moves from assembly plants and high dependence on industrial inputs to fully integrated manufacturing based on endogenous technology, its unskilled, migrant surplus work force becomes redundant at the same time that the scarcity of skilled workers increases their bargaining power.

As China diversifies its trade, it becomes less dependent (and vulnerable) on the US and more integrated into the Russian-Asian-African-Latin American-Middle Eastern economies. As China’s financial sector expands domestically and globally and it shifts from being a capital importing to a capital exporting country, it faces new challenges and risks. Volatile stock markets, high-risk overseas investments can lead to big gains or steep losses, which can have serious consequences on China’s ‘real economy’. These risks grow as the Chinese government’s liberalization program accelerates and embraces all sectors of the economy.

China’s financial Liberalization and US Foreign Economic Strategy

There is no question that the impetus for China’s liberalization policies from the late 1970’s to the present are a product of internal political decisions taken at the highest spheres of the government. Nevertheless, outside forces, principally the US government, have exerted pressure on China’s economic polity especially since the 1980’s. US policy has pushed, pressured, threatened, cajoled and secured incremental but cumulative changes in China’s economic policies and structures over the last quarter century.

To summarize US policy goals and relative successes and failures:

1.Opening China to large-scale, long-term foreign investments and majority ownership.
2.Large-scale comprehensive lowering of trade barriers.
3.Patent and licensing agreements and defense of ‘intellectual’ property rights and their enforcement.
4.Restrictions on Chinese investments in specific lucrative US economic sectors.
5.Labor legislation to increase wages and the costs of production.
6.Efforts to restrict China’s economic expansion in Africa (Sudan), Southwest Asia (Iran), Middle East (Gulf States) by selectively raising human rights issues.
7.Sustained massive pressure to lower barriers to the US penetration of China’s financial markets, banks, savings, loans and investment houses.

US financial entry and expansion is the long-term and strategic goal of Washington’s foreign economic policy to China. In fact most of the other US complaints and demands on China can be seen as bargaining chips in securing a decisive opening of China’s financial sector. Summarizing US imperial financial strategy, the first step is to secure China’s acquiescence in an ‘opening’ for financial groups to buy shares and secure a ‘beach head’ in each sub-sector: banks, financial houses and investor consultancies among others. This would be accompanied by further ‘liberalization’ of offshore investments as well as ‘in shore’ investments (buy-outs) by big US private equity funds. The third step would involve US financial giants exploiting their access to hundreds of billions of local savings (public and private) to invest in local manufacturing, commercial, technological and financial enterprises – leading to control over China’s strategic economic sectors. Finally having secured financial leverage over the economy through buy-outs and mergers and acquisitions to exert direct pressure on the political regime to serve US imperial interests.

The financial sector is the dominant economic sector in the US economy and the most politically influential. It is no surprise that the former CEO of Goldman Sachs, US Treasury Secretary Paulson, serves as the point man and the leading economic strategist of the US Empire in the Far East. Paulson’s tactic is to raise the protectionist demands of US manufacturers and demagogic politicians as a bargaining tool to secure Chinese concessions with regard to ‘opening up’ its financial and banking sectors to US penetration and eventual control. Today leading members of financial, banking and related ‘services’ have replaced manufacturers as the dominant group in the US ruling class. Paulson’s entire career is linked to Wall Street – and he has demonstrated his loyalties (and self-interest) by pursuing greater liberalization of China’s financial markets both as a CEO for Goldman Sachs and as the economic czar of US economic policy. Wall Street and the US imperial policy-makers all agree that the strategic goal is to liberalize China’s financial sector in order to gain access and eventual control over China’s foreign reserves, savings and investment capital via a direct institutional presence in China and via indirect influence by managing funds held by Chinese overseas investment agencies.

China’s Liberalization of Financial Markets

China’s economic policy makers have taken numerous gradual small steps toward opening its financial markets to US and foreign capital. The liberalization of the financial sector has been fraught with debate and opposition, but over time and more recently, the ideologues of liberalization have been gaining ground. The progress in liberalization has been incremental but accelerating despite the high risks involved. The highly negative results of financial liberalization evidenced by the Japanese crisis of the 1990’s, the huge Asian crisis of 1997 and the open-ended US-EU crisis which began in July 2007 has failed to deter Chinese liberalizers who believe that China is immune to crises. China was not affected by the previous financial crises precisely because of capital controls, limits on foreign financial ownership and prohibitions on hot (speculative) funds. Despite the salutary effects of state-regulated financial controls, the Chinese liberalizing elites promote financial liberalization by arguing that:

1)Foreign bank entry will increase financial efficiency, lessen corruption, integrate China into international financial networks and, in general, upgrade China’s financial practices and organization.
2)Foreign ownership of Banks will be in partnership and under supervision of the state and thus will have to comply with Chinese laws and serve the national interest.
3)Investing Chinese foreign reserves overseas in private equity will earn more for the Chinese state than by holding US Treasury bonds. In any case ‘only’ $200 billion of the $1.3 trillion dollars in savings is allocated for equity investment.
4)By investing overseas China can secure its supply chain of vital energy, raw materials and food stuffs as well as reducing its trade surplus and negative political pressure from the US and EU.
5)By opening up the financial sector China can secure the support of Wall Street and the City of London against the protectionists, especially in the US, pitting Paulson and Bernake (Central Bank Head) against Senators Clinton and Schumer and other Democratic Presidential demagogues.

These arguments in favor of liberalization of the financial sector have deeply influenced Chinese policy-makers. China has increased foreign access to China’s booming stock market. In May 2007 Beijing agreed to allow new securities joint ventures and increased the range of activities these firms can participate in (Financial Times, May 25, 2007). Foreign banks are now allowed to issue credit and debit cards. Foreign financiers are now allowed to invest up to $30 billion dollars in domestic financial markets, triple its previous ceiling. For now China is resisting US pressure to lift ownership caps on foreign investment in domestic banks and to permit foreign companies to buy into domestic brokerages. However given the growing US and EU presence, experts expect China’s liberals to lift these restrictions in the near future.

China has given the green light to worldwide expansion, mergers and acquisitions and investments in minority shares of foreign equity companies (FT, May 31, 2007). China has recently opened its corporate bond market by eliminating quotas, and allowing bond prices and interest rates to be set by the market (FT, June 15, 2007). In 2006 the Chinese investment banking sector was opened to Morgan Stanley, Goldman Sachs and UBS they have benefited from a 10 fold increase in the stock market in 2007 (FT, June 6, 2007).

China’s promotion of private equity investments has led to a doubling of investments in mainland companies to $7.3 billion dollars in 2006, over 2005. However the private equity investment sector has been dominated by giant US-owned funds, such as the Carlyle Group and Texas Pacific Group. In June 2007, Beijing opened the door to foreign buy-outs (FT, June 7, 2007).

China’s banks have pushed into wealth management, attracting more high net worth clients – while ignoring micro credit, low-income farmers and small producers.

China has virtually lifted all restrictions on foreign investment in Chinese private companies—leading to foreign penetration of several key sectors. During the first 5 months of 2007 overseas banks profits grew by an annualized 43% — $400 million dollars (FT, July 7, 2007).

The opening to private equity firms in China has been subject to continuing restraints – limiting purchases to minority shares. The US Carlyle Group has established an $800 million dollar toehold in financial services, media and manufacturing. Once established as minority shareholders, the big Western financial houses can move toward greater controls. Some equity funds and bankers have taken majority shares in small provincial banks – avoiding the political opposition, which results in attempts to grab majority shares in larger coastal banks. The key tactic is to establish firm economic and political links and leverage initial ties into wider spaces and larger profits over time (August 27, 2007). The key concern of the entire Anglo-American financial elite is to secure a clear path to capturing savings from retail banking customers. Barclay Bank has taken another route to entry into the Chinese financial market by selling 3.1% stock to the China Development Bank. Barclays now has an influential Chinese financial partner to facilitate buyouts in the China market.

China’s liberalization is leading to the export of capital via three state channels, which have loosened overseas investment restrictions. Starting with $90 billion dollars in one agency and $200 billion in another, Chinese capital provides an extremely lucrative field for international advisers to ‘create’ investment products to attract the nearly $300 billion dollars coming into the global market. The US and Europeans have already indicated they will block Chinese investment in what they will choose to describe as ‘strategic sectors’, as occurred in 2006 when Washington vetoed China’s purchase of UNOCAL Oil Company.

Western and Japanese finance capital enter China’s market via a two-step liberalization process. First the state privatizes energy, telecoms, manufacturing, and banking sectors. Under the new liberalization process, this is followed by initial private offerings (IPOs), where stocks are sold to investors, via listings in overseas stock markets. Big US banks and investment advisory groups, like Morgan Stanley, reap hundreds of millions in fees organizing IPOs. All the major IS investment banks including Merrill Lynch, Goldman Sachs and others are set for lucrative fees assisting the financing needs of China’s private sector. The rapid growth of China’s private sector provides a major breakthrough for Western finance capital especially investment banks. If and when the big state companies decide to list in overseas stock markers, mega-billion fees are in the offering for Wall Street and the City of London.

Liberalization: The Risks

The financial opening in China increases its risks to international financial and market volatility: the risks of investor contagion resulting from sudden downturns in overseas markets will affect Chinese overseas listings. Within China, liberalization has led to a growing speculative bubble as stocks have gone up nearly 200% over two years, without any commensurate growth in the earning power of the firms targeted. The stock price/earnings ratio is four times what is considered reasonable. Sooner rather than later the bubble will burst and scores of millions of retail investors will lose their savings and likely express their losses via public protest.

The incremental quantitative openings to foreign financial investors can lead to cumulative qualitative changes over time. There is a high probability that loosening quotas on foreign investments will lead to greater leverage for foreign capital to move through local Chinese proxies or ‘straw men’ toward dominant positions. While that is in not the picture today, it could easily become so if current liberalization policies deepen and extend over sectors with time. The fact is that foreign finance capital has the funds, organizational power and market command to out-compete local Chinese banks and bankers in any ‘open market’.

Similar serious risks exist with regard to Chinese overseas investments: Decisions by US and British investment banks and advisory units, apart from receiving lucrative fees, have already cost China’s Investment Corporation (CCIA) a $400 million investment loss in one month in one of its earliest overseas ventures: Blackstone’s IPO attracted $3 billion from CIC at $31 dollars a share. Its top CEOs Steve Schwartzmann and Peter Peterson cashed in their stocks capping over a half billion in profits. With the insiders’ sell-off, Blackstone’s stock dropped to less than $25 dollars a share ($23 by the end of August 2007) and the Chinese state lost in a very big way from what was deemed a legal but questionable operation by Blackstone’s top leadership. China’s short career in foreign equity ownership has resulted in a 22% loss. This CIC exercise in high-risk/ big loss investing at the hands of US financial moguls is only the tip of the iceberg. The entire liberalization process both with regard to inflows and outflows of capital puts in jeopardy the entire edifice of China’s industrial growth. As Chinese finance capital speculates on funds from China’s export surplus and buys into risky financial instruments, millions face greater economic insecurity. Meanwhile hundreds of millions excluded from the inner financial circles continue to suffer the consequences of low-wages and the high cost of privatized education and health care. While middle and upper class Chinese can afford the luxury of winning or losing their discretionary earning on the stock market or converting their savings to offshore accounts, most Chinese workers and peasants – the backbone of China’s high growth –suffer the consequences of high volatility from the irrational behavior of the market gamblers.

Alternatives to Greater Liberalization

Liberalization of China’s financial sector is the strategic goal of US economic Czar, Hank Paulson. As the Financial Times emphasized, “The prize of access to the world’s fastest growing economy for US financial service groups has been one of the US Treasury Secretary’s most visible single pursuits, sparking criticism that he was beholden to the industry’s ambition to reach China’s 1.3 billion consumers.” (FT, April 24, 2007) Leading US financial analysts agree. Robert Nichols of the Financial Services Forum underlined this point: “Secretary Paulson has put financial services on the agenda in our economic relations with China in a big way.” (Ibid) As we have mentioned in our text, Paulson has successfully pushed liberalization on a number of fronts: China has removed constraints on new foreign companies investing in brokerages and raised the quota for what foreign investors can invest directly in the Renminbi-denominated domestic market from $10 billion dollars to $30 billion dollars.

China has facilitated the licensing for foreign insurance companies – opening up a multi-billion personal insurance market to big western insurers. Beijing has also allowed foreign securities firms to expand operations to include property trading and fund management (FT April 24, 2007). China has opened the multi-billion dollar credit card sector to foreign banking by allowing foreign invested banks to open their own brand of Renminbi-denominated credit and debit cards.

As financial liberalization moves Wall Street and the City of London closer to achieving their ‘prize’ – massive entry and control of China’s financial markets – the Chinese financial sector runs a multiplicity of growing risks. The risks from deepening liberalization include: loss of control of economic policy via the growth of foreign control over financial levers; risks from making overseas investments based on inexperience, lack of information and collusion between investment advisory agencies and corporate enterprises.

China’s risks of big losses by investing overseas in ‘highly rated’ securities, bonds and stocks is illustrated in the current world financial crisis ignited by the sale of ‘sub-prime’ mortgages and now extending throughout the prime mortgage and other securities markets.

The general truism that political power follows economic penetration is applicable to China. As the US and European financial sector enters in ‘partnership’ with Chinese banks, they will likely use their leverage over their counterparts to co-opt, bribe and pressure local and state officials to further liberalize and extend foreign access to Chinese stocks, bonds, securities, savings and eventually full ownership of strategic financial sectors.

In contrast to the high risks of losing political and economic control and investment losses – evidenced by the $400 million dollar loss in the CIC investment in Blackstone – China has sound, low-risk investment opportunities in the domestic economy which will enhance long-term, large-scale growth.

China each year suffers serious economic losses due to the dismantling of its public health system. One of the biggest casualties of the transition to capitalism has been the privatization of health care and the loss of all medical coverage of China’s hundreds of millions of poorest peasants and rural migrants. (Financial Times, August 30, 2007). A fifty billion dollar investment in free rural public health program, staffed by professional doctors and nurses, low-cost drugs and basic medical technology would increase productivity and consumer spending (currently saved for medical emergencies), reduce troublesome trade surpluses by increasing imports and increase living standards. (OECD China 2005, page 12). This would also lead to a decrease in female infanticide, because the insecurity of access to medical care after retirement is one of the main reasons rural families prefer to have only sons.

China’s primary and secondary school system has been privatized – as local and state governments have introduced fees. The result is a growing dropout rate among tens of millions of poor Chinese children. “Over the last five years, the number of Chinese who cannot read and write grew by 30 million to 116 million, wiping out years of gain,” (China Daily, April 2, 2007). China’s move from a low skill, labor intensive economy to a more advanced technological society will be hampered by lack of basic educational skills. Public investment of at least $20 billion (from the $200 billion investment funds) is low risk, highly productive and employment generating. Investment in universal free public education will employ millions of teachers, principals, school workers and construction workers in building and maintaining schools and related facilities, expand the domestic demand for manufacture of books, computers and school materials.

Every major environmentalist group, national and international political leaders, tens of millions of Chinese workers and residents have pointed to the high cost of pollution both in terms of unhealthy population, loss of productivity and losses of cultivated land, drinkable water and safe air. China could invest $100 billion dollars in alternative energy usages, energy efficient buildings and the regulation and closure of industrial and chemical polluters. According to the World Health Organization, 705,000 people die prematurely every year in China because of filthy air and water (World Book Report March 2007, quoted in Financial Times July 3, 2007). For every early death, we can assume at least several hundreds of thousands who are temporarily or partially incapacitated by pollutants. While top leaders have urged local officials to act and even established environmental criteria in their performance evaluations, pollution continues to grow. China’s decentralized political structure allows local official to violate national directives and encourages them to continue to promote local polluters. Only national directives and funding administered by local democratically elected environmental committees, which include independent consumer and environment specialists with police powers, can break the power of the alliance of local/state officials with the public/private polluters.

China’s dependence on foreign markets and offshore investments is a result of the weakness of the domestic market, largely the product of the low salaries, wages and dismal consumer power of workers and peasants. The weakness of the domestic market for mass produced goods is the result of the great concentration of wealth and income in the upper 10% of the population, China has (with Nepal) the worst inequalities of any Asian country. Inequalities in China are greater than Japan and 50% greater than in Taiwan or South Korea (FT August 9, 2007). Enforcing minimum wage, limiting working hours and occupational safely legislation will increase the purchasing power and available shopping time for hundreds of millions of consumers who are marginalized from the domestic economy. China will become less dependent on exports, social unrest will decline and potential political upheavals will decrease. Investing in raising income will reduce profits, conspicuous consumption by the economic elite and stock market speculation. Wage increases will also reduce the trade surplus and the search for risky overseas investments.

China is at the turning point: Continued liberalization leads to high risk overseas investments, loss of domestic market control, greater inequalities and pollution, leading to greater political and social unrest.

Political and social reforms re-orienting investments to the domestic market and rebuilding the entire public educational and health system is central to ‘constructing socialism with Chinese characters.” Intervening through locally elected community based environmental assemblies to liquidate polluters is necessary to modernizing China and preparing it for a more advanced economy.

Raising income and corporate taxes on the emerging foreign and domestic corporate elite is necessary to lessening inequalities and controlling luxury imports. Lessening the power of the state and private ruling class avoids high-risk foreign takeovers of strategic economic sectors via ‘joint ventures’.

China’s giant economic leap forward via public-private investments has opened a vast, far-reaching internal debate over its future direction: The choice is between accelerated liberalization and open doors for foreign financial capital, as US Treasury Secretary Paulson argues, or profound rectification and re-orientation toward low-risk, large-scale investment in the domestic market, as many Chinese workers demand. Will China follow a path of neo-liberal reform with Western characters or a socialist model with Chinese characters?

Sept 2007

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China’s Nandigram

Posted by Indian Vanguard on September 6, 2007

Human Rights in China (HRIC) has learned of serious harassment, threats and brutal assaults over the past month against villagers in Liaoning Province who are protesting attempts by local officials to forcibly seize farmland for industrial development.–Here again as in West Bengal we see communists turned capitalists seizing good agricultural land for industrial capitalists. In the past Mao seized peasant land in the name of collectivist communism and now the Party is doing it in the name of consumerist capitalism. The more things change the more the remain the same.–WPA

September 4, 2007

Sources in China told HRIC that township and village officials wanted to attract investors to build steel factories in Zhaodaban, a village in Fuxin Town in the Fuxin Mongolian Autonomous County, Fuxin City, Liaoning Province. Approximately 100 mu (about 16.5 acres) of land in the village was already fallow and available for development, but the scale of the proposed project required local officials to obtain another 500 mu (about 82.33 acres) of land that is currently under cultivation and supports around 80 households. In June 2007, the Fuxin township government and the Zhaodaban village committee offered to acquire land for a payment of 500 yuan per year per mu for an indefinite period. When a majority of the villagers rejected the offer, the township government reportedly sent out unidentified individuals to threaten and harass them. Even so, by late August, more than 30 households had still refused to sign the agreement.

According to HRIC’s sources, local officials then stepped up their harassment of villagers who refused to give up their land. On the evening of August 22, people wielding iron rods smashed the windows of villager Wang Yuge’s home and ransacked his belongings. Wang’s 13 year-old daughter was so terrified that she had to be admitted to a hospital for treatment. Wang Yuge reported the incident to the vice squad of the Fuxin County police on August 23, but the police said there was insufficient evidence for a criminal case.

Sources say that on the morning of August 25, Zhao Wenliang, secretary of the Fuxin Town Political-Legal Committee, arrived at Zhaodaban Village along with the son of township Party secretary Wang Haiou and some 200 firefighters and 100 other unidentified individuals. The group destroyed 400 mu of corn seedlings that were almost ready for planting, and villagers who attempted to intervene were harshly beaten. Villagers Zhang Yuting and Zhang Youzhi were reportedly beaten senseless and then dumped along a road a few meters away. Police officers who were present at the scene reportedly did nothing to stop the beatings, which were witnessed by hundreds of villagers, and calls by villagers to a public security hotline brought no response. Some villagers had the injured men taken to the county hospital, where they were still receiving treatment at last report.

Sources say that on September 3, township officials went to Zhang Youzhi’s home and offered to settle the dispute by giving him money for medical treatment, on the condition that he sign the land acquisition agreement. Zhang’s family refused the offer.

Following the violent confrontation on August 25 and subsequent threats, most villagers agreed to sign land acquisitions agreements. However, the households of Zhang Yuting, Zhang Yude, Zhang Youzhi, Wang Yusheng, Wang Yuge and one other have still refused to sign. Local officials have since mobilized friends and relatives of the recalcitrant villagers to try to change their minds, and Wang Yusheng was reportedly told that hundreds of thousands of yuan have been offered as a reward for taking his life. The six households have reported the situation to the online complaints system of the Central Committee for Discipline Inspection, but the only reply they have received is that the Committee “requires the Fuxin Mongolian Autonomous County, Fuxin City, Liaoning Province, to solve the problem.”

A representative of the six remaining households outlined their demands to HRIC: they do not want the annual payments of 500 yuan, but want the government to return their land and compensate them for the destroyed seedlings; they want the government to punish the individuals who attacked villagers on August 25, and to pay damages and medical costs to those who were injured; they want an apology from the government, and punishment of those who arranged for the destruction of the villagers’ seedlings.

HRIC deplores the use of physical violence, harassment and threats to force villagers to accept compensation in land acquisition deals imposed on them by the local government. Illegal land grabs by local officials in China have continued to increase in recent years, and are notable for the use of extra-legal forces to intimidate farmers and villagers. HRIC is concerned over reports that the Fuxin County police refused to record and properly investigate the damage to Wang Yuge’s house, or to intervene in the beatings of Zhang Yuting and Zhang Youzhi. HRIC calls on the Fuxin township government to immediately halt these tactics, which violate the villagers’ rights and detrimentally affect their livelihoods. HRIC also supports the efforts of the Zhaodaban villagers to obtain appropriate compensation for their land, and redress for the attacks on their persons and property

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China, Capitalist Accumulation, and Labor

Posted by Indian Vanguard on September 1, 2007

by Martin Hart-Landsberg & Paul Burkett
Most economists continue to celebrate China as one of the most successful developing countries in modern times. We, however, are highly critical of the Chinese growth experience. China’s growth has been driven by the intensified exploitation of the country’s farmers and workers, who have been systematically dispossessed through the break-up of the communes, the resultant collapse of health and education services, and massive state-enterprise layoffs, to name just the most important “reforms.” With resources increasingly being restructured in and by transnational corporations largely for the purpose of satisfying external market demands, China’s foreign-driven, export-led growth strategy has undermined the state’s capacity to plan and direct economic activity. Moreover, in a world of competitive struggle among countries for both foreign direct investment and export markets, China’s gains have been organically linked to development setbacks in other countries. Finally, China’s growth has become increasingly dependent not only on foreign capital but also on the unsustainable trade deficits of the United States. In short, the accumulation dynamics underlying China’s growth are generating serious national and international imbalances that are bound to require correction at considerable social cost for working people in China and the rest of the world.1

Significantly, many on the left (including those who acknowledge that China is now predominately a capitalist country) find these criticisms of the Chinese experience largely beside the point. They see China as a viable and praiseworthy example of economic modernization.2 For them, the relevant counterpoint to China’s economic achievements is the long-run development crises experienced by countries in Africa and Latin America. These countries have failed to develop the productive forces necessary to generate significant long-term job opportunities in the “formal labor market,” with the result that the overwhelming majority of workers in Africa and Latin America are forced to eke out an existence in the relatively unregulated and non-institutionalized “informal sector” or in subsistence (or below-subsistence) agriculture. In contrast, China, with its dynamic industrial development and manufacturing export activity, is assumed to have made great strides toward overcoming such problems.

Although this assumption about the progressive nature of Chinese growth and employment creation seems beyond challenge, unfortunately it is false. In fact, the labor market outlook in China (and in the East Asian countries that are most closely integrated with China) is rapidly approaching a crisis situation similar to that found in much of Africa and Latin America. And this is not because capitalism has ceased to be a dynamic mode of production. Far from it: the emerging employment crisis is a direct outcome of transnational capital’s dynamic shaping and integration of China and a number of other East Asian countries into a regional system of export-oriented production.

Regrettably, the celebration of these countries as development successes has led many on the left to defend the position that (properly regulated) capitalism remains a historically progressive mode of production. But this ignores the possibility that the basic dynamics of contemporary capitalism themselves constitute the main barrier to sustained improvements in working and living conditions on national, regional, and global levels. Demonstrating that workers in China and throughout East Asia are increasingly suffering the very same labor outcomes as workers in Latin America and Africa offers a powerful argument against current celebratory accounts of the China–East Asia system.

China’s Economic Transformation

Beginning in 1978, the Chinese state launched a reform program that has produced an impressive growth record. According to the International Labor Organization, “Between 1990 and 2002, GDP per capita grew at a rate of 8.3 percent per annum. This phenomenal growth was driven by an industrial revolution that has made China a manufacturing powerhouse.”3

Underlying this program was a set of state policies that has, over time, led to the privileging of market forces over planning, private production over state production, and foreign enterprises and markets over domestic ones. One consequence is that Chinese economic activity has become increasingly dominated by transnational corporations. For example, the share of foreign manufacturers in China’s total manufacturing sales grew from 2.3 percent in 1990 to 31.3 percent in 2000. From 1998 to 2003, the share of industrial value added produced by state enterprises in the non-resource based industrial sector fell from 17.3 percent to 6.7 percent, while the share accounted for by foreign enterprises rose from 11.4 percent to 17.1 percent.4

Another consequence is that China’s economic growth has become increasingly dependent on foreign produced exports. Approximately 46 percent of foreign manufacturing production is exported, compared with only 16 percent for domestically owned manufacturing firms. Foreign firms now dominate China’s export activity; their share of China’s exports grew from 2 percent in 1985, to 30 percent in 1995, and 57 percent in 2004. As a result of these trends, the ratio of exports to GDP has steadily climbed from 16 percent in 1990 to 36 percent in 2003.5

Numerous studies have found that the contribution made by transnational corporations to China’s growth is substantial and increasing over time. For example, an analysis published by the National Bureau of Economic Research concluded that approximately 30 percent of China’s growth over the period 1995–2004 was due to transnational corporate activity, with the foreign contribution rising to over 40 percent in 2003 and 2004.6

In terms of expenditure categories, the two main drivers of Chinese growth are exports and fixed investment—with much of the investment undertaken in support of export activity. Stephen S. Roach (managing director and chief economist of Morgan Stanley) estimates that investment and exports account for approximately 80 percent of Chinese GDP.7 As table 1 shows, the growing importance of gross capital formation and net exports has come largely at the expense of private (household) consumption, which fell as a share of GDP from 51.1 percent in 1988 to 38.9 percent in 2005.

This focus on export-oriented capital accumulation highlights China’s growing external dependence. China’s exports are largely directed toward the U.S. market. According to one analyst, if one includes goods that are re-exported from other countries (especially Hong Kong), China’s exports to the United States account for about half of its total exports. “Thus export growth is largely determined by the growth of US demand. Because almost all of China’s exports are consumer goods, personal consumption demand in the US drives China’s export growth.”8

Moreover, even China’s fixed investment is heavily dependent on external forces. Foreign direct investment is one of the main determinants of investment in the country’s manufacturing sector. It also strongly influences Chinese spending on “domestic infrastructure, such as power generation, ports, and road and rail transport, which is critical to expanding manufacturing and export capacity. Finally, external demand also influences China’s domestic investment in real estate, which is necessary in securing locations for new manufacturing and power plants, as well as housing for employees.” According to one estimate, “external demand directly and indirectly drives about 65% of all domestic investment in China.”9

Table 1. Structure of demand, percent of GDP at current prices
1988 1990 1995 2001 2002 2003 2004 2005
Private consumption 51.1 49.1 46.1 47.2 46.5 44.9 46.6 38.9
Government consumption 11.6 12.1 11.4 13.4 13.2 12.6 16.9 14.2
Gross domestic capital formation 36.8 34.7 40.8 38.5 40.2 43.9 50.5 44.1
Net exports of goods and services 1.0 2.7 1.7 2.3 2.7 2.3 3.0 4.6
Source: People’s Republic of China, Key Indicators of Developing Asian and Pacific Countries, Asian Development Bank, updated July 21, 2006, .

Supporters of China’s growth strategy tend to minimize the significance of the country’s reliance on foreign investment and exporting. Rather, they emphasize that China’s reform strategy has enabled the country to steadily upgrade the sophistication of its industrial activities, thereby demonstrating that the country is indeed making major strides towards development. One of the most commonly used measures of this progress is China’s growth as a producer and exporter of electronics and information technology goods. In fact, “After almost a decade of explosive growth in its electronics sector, China has overtaken the United States as the world’s biggest supplier of information technology goods, according to a report by the Organization for Economic Cooperation and Development.” These exports now account for more than 28 percent of total Chinese exports.10

Although impressive, this accomplishment is misleading as a measure of China’s national technological development. One reason is that China’s electronic and information technology products are generally of lower technological sophistication. For example, China’s main high-technology exports are in consumer electronics, office equipment and computers, and communications equipment. Within these categories, China’s leading products are DVD players, notebook computers, and mobile telephones, respectively. As two leading China observers, Lee Branstetter and Nicholas Lardy, point out, “Each of these is a high volume, commodity product sold primarily by mass merchandisers of electronic products….The huge volumes and low unit costs of these products undermine the argument that these are high-tech products.”11
Perhaps more revealing of China’s ongoing foreign technological dependence is the fact that China, as Branstetter and Lardy note, “does not in any real sense manufacture…[high-technology] goods. Rather it assembles them from imported parts and components. For example, domestic value-added accounts for only 15 percent of the value of exported electronic and information technology products. All the rest is import content. In short, for many of these products it is doubtful that China is supplying anything but the labor required to produce these goods.”12

Finally, not only is China’s high-technology production dependent on imported technology, it is largely carried out by foreign-invested firms (most of which are wholly foreign owned). For example, in 2003, foreign-invested firms accounted for approximately 90 percent of China’s exports of computers, components, and peripherals and 75 percent of its exports of electronics and telecommunications equipment. Not only do foreign firms dominate China’s high-technology export activity, they are also coming to dominate China’s domestic markets. For example, between 1998 and 2002, foreign firms increased their share of total domestic high-tech sales from 32 percent to 45 percent.13

Moreover, the foreign domination of this sector continues to grow. According to China’s Ministry of Information Industry, the percentage of foreign ventures in China’s electronic information industry rose from 58.7 percent in 2000 to 77.4 percent in 2005. And, in the first two months of 2006, these foreign firms were responsible for 86.9 percent of China’s total exported electronic products.14

Although committed to a program that has emphasized market liberalization and reliance on foreign capital, the Chinese state simultaneously tried to promote a few “national champions” in an attempt to ensure the establishment of a domestically rooted industrial base. Among the most important are: Huawei (which produces telecommunications equipment), Haier (consumer appliances), Lenovo (computers), TCL (televisions), and Baosteel (steel).

However, despite the fact that many of these companies have grown quite large, few have succeeded in becoming internationally competitive or profitable. In addition, these leading firms have done little to advance national interests in terms of technological development. Most continue to rely on imported foreign equipment to stay competitive and spend little on indigenizing their purchased technology. They have also done little to support the development of national technology supply networks. In fact, “China’s best firms are among the least connected to domestic suppliers: for every $100 that state-owned electronics and telecom firms spend on technology imports, they spend only $1.20 on similar domestic goods.”15

Unfortunately for Chinese planners, the reasons for such failures are largely found in the very logic of the country’s economic reform strategy—specifically its direct and heavy reliance on transnational corporations. In this regard, the Chinese growth strategy has differed greatly from that employed by Japan, South Korea, and Taiwan. As a Brookings Institute economist observes, those countries “relied almost exclusively on domestic firms to manufacture and to export commodities; China has largely relied on FIEs [foreign invested enterprises] to produce exports, and virtually no domestic Chinese companies control significant export networks.” The Economist adds that because “the central government has allowed foreign companies into China at a much earlier stage of its development…these [firms] now control the bulk of the country’s industrial exports, have increasingly strong positions in its domestic markets and retain ownership of almost all technology.”16

In sum, China’s post-reform policies have produced an economy that is increasingly dominated by foreign capital and foreign produced exports. This development has undermined the state’s capacity to plan and direct economic activity. It has also greatly increased the economy’s dependence on the ability of the United States to sustain ever greater trade deficits.

The East Asian Transnational Production Network

East Asian economies are also going through a major transformation, one that has largely proceeded in concert with China’s restructuring. Most economists view this development positively, crediting China’s import dependent growth for generating ever expanding markets and new production possibilities for the other countries in the region. However, this framing masks the real nature of the transformation. In reality, China’s post-reform economic activity and the resulting economic restructuring of other East Asian countries cannot be adequately understood in national or even international terms. Rather, East Asian economies, including China, are being linked and collectively reshaped by broader transnational capitalist dynamics, in particular by the establishment and intensification of cross-border production networks by transnational corporations.

As part of this transformation, all East Asian economies have become more trade oriented, with exports playing an increasingly central role in driving growth. For example, from 1990 to 2004, net exports as a percent of GDP rose from 2.1 percent to 21.4 percent in Malaysia, and from –7.6 percent to 5.1 percent in Thailand. One reason for these large increases is that, unlike in China, growth has not been supported by investment. In fact, as the Asian Development Bank notes, “outside the PRC, widening [trade] surpluses are more closely associated with stunted levels of investment….With the exception of Cambodia, PRC, and Viet Nam, investment rates in East Asia and Southeast Asia are still well below their average pre-crisis levels.”17

More importantly, the transformation has also involved significant changes in both the geographical direction as well as the nature of East Asian manufacturing export activity. As table 2 shows, over the period 1992–2003, Greater China (defined as the mainland and Hong Kong) shifted its export orientation from East Asia, especially developing East Asia, to NAFTA and the EU. Specifically, the share of Greater Chinese exports to developing East Asia fell from 53.8 percent to 30.4 percent. Over the same period, the rest of East Asia shifted in the opposite direction. For example, the six listed members of the ASEAN Free Trade Area (AFTA) increased the share of their exports to East Asia from 36.8 percent to 48.0 percent. And, as table 3 shows, East Asian trade in manufactures is becoming increasingly narrowed to the export and import of parts and components rather than final goods. Looking just at the AFTA countries, trade in parts and components accounted for approximately half of the group’s total increase in manufactured exports and 70 percent of its total increase in manufactured imports over the period 1992–2003. China stands out as one of the few countries whose exports remain largely final goods.

This development reflects the rise of a transnational corporate structured regional production system, with China largely functioning as the final production platform. In other words, the region’s growing focus on trade in parts and components is largely a consequence of China’s new position as an import-dependent producer of high-technology exports. Thus, in 2003, semiconductors and other electronics components accounted for approximately 40 percent of the region’s total exports of parts and components. Adding parts and components related to telecommunication equipment and office and automated data processing machines brings the total to 90 percent.18

Table 2. Destinations of manufactured exports (percent of total exports by region or country)
Exporters Years EA Japan DEA GCH AFTA NAFTA EU
EA 1992 36.6 4.7 31.9 17.1 11.5 30.3 19.6
1996 43.8 7.4 36.5 16.4 15.9 27.6 16.6
2003 45.6 7.4 38.2 22.2 11.6 25.8 15.7
Japan 1992 25.1 25.1 9.0 11.2 32.7 20.8
1996 34.4 34.4 10.7 17.0 30.8 16.2
2003 35.9 35.9 17.8 11.5 28.7 14.9
DEA 1992 44.0 8.6 35.5 23.2 11.0 25.9 17.1
1996 46.8 11.5 35.3 19.0 14.4 24.1 16.0
2003 47.3 10.1 37.2 23.2 11.2 23.7 15.4
GCH 1992 56.4 2.7 53.8 45.3 6.5 19.1 14.7
1996 46.2 8.8 37.4 26.5 7.5 25.9 18.8
2003 39.1 8.7 30.4 19.0 6.9 27.7 20.9
AFTA 1992 36.8 8.8 28.0 7.1 19.3 27.2 19.7
1996 45.0 11.1 33.9 8.2 23.6 23.5 16.0
2003 48.0 10.0 38.0 13.5 21.3 20.7 14.2
Note: The country groups are as follows: EA is East Asia (Japan, China, Hong Kong SAR, Republic of Korea, Taiwan, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam); DEA is Developing East Asia (East Asia excluding Japan); GCH is Greater China (China plus Hong Kong SAR); AFTA is the ASEAN Free Trade Area (Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam); NAFTA is the North American Free Trade Area (United States, Canada, Mexico); EU is the European Union (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Greece, Portugal, Spain, Sweden, United Kingdom).
Source: Athukorala & Yamashita, “Production Fragmentation and Trade Integration,” 243.

Japan remains the main driver of the region’s production sharing operations, providing a dominant share of the region’s parts and components. In 2001, for example, 70.5 percent of Indonesia’s regional imports of parts and components came from Japan; the corresponding figures were 53.8 percent for Korea, 52.5 percent for the Philippines, 50.5 percent for Taiwan, 48 percent for Thailand, and 43 percent for China. China’s unique role as the region’s ultimate production platform is highlighted by the fact that it is the only country in the region that runs a regional trade deficit in parts and components. In 2001, for example, Greater China (defined here with the substantial intra-trade between Hong Kong and China netted out) ran a regional parts and components trade deficit of $17.6 billion, split almost evenly between Japan and the rest of East Asia. Japan’s unique position is highlighted by the fact that it ran a regional parts and components trade surplus of $29.3 billion, while the rest of East Asia recorded a regional parts and components trade deficit of $5.8 billion (because its collective deficit with Japan was larger than its surplus with Greater China). Thus, the mirror image of China’s growing surplus in trade with the United States, and secondarily the European Union, is its growing deficit in trade with East Asia.19

Table 3. Parts and components (P&C) in manufacturing trade, in percent
Share of P&C in mfg. exports
Contribution of P&C to growth of mfg. exports
Share of P&C in mfg. imports
Contribution of P&C to growth in mfg. imports
Hong Kong
Rep. of Korea
Note: See the note to table 2 for country groupings.
Source: Athukorala and Yamashita, “Production Fragmentation and Trade Integration,” 239–40.

Overall, East Asia’s growth has become increasingly dependent not only on the export of parts and components, which are largely detached from any national base of production, but also on a select few products in a select few industries as determined by the changing needs of transnational corporations. This development has led to a serious misreading of East Asian economic dynamics. As two prominent Asian trade analysts observe, the growth in the intra-regional trade of parts and components causes a significant double-counting of trade “because goods in process cross multiple international borders in the course of their production sequence. The total amount of trade involving the goods while in process can be a multiple of the final value of that good.” Thus, although total trade figures show a rise in the share of intra-regional trade thereby suggesting greater regional self-sufficiency, figures for final goods show quite the opposite trend. For example: the intra-regional share of final manufacturing trade for Developing Asia fell from 44.6 percent in 1992 to 35.2 percent in 2003. Therefore, along with China, the entire region’s growth is becoming ever more dependent on external sales, especially to the United States and the European Union.20

Moreover, although this regional production system appears to promote higher value added production, it in fact offers limited gains in value added to the various countries that compete with one another to participate in it. For example, an UNCTAD study found that “participating in international production chains” often leaves the host country “locked into its current structure of comparative advantage…thereby delaying the exploitation of potential comparative advantage in higher-tech stages of production.” These limitations have “been causing concern in recent years, even in some of the East Asian countries which have been more successful in exploiting various advantages associated with TNCs [transnational corporations].”21

China’s Labor Dynamics

Although some analysts have begun to acknowledge the problems highlighted above, especially those related to the region’s growing dependence on sales to the U.S. market, few have examined the labor market implications of East Asia’s accumulation dynamics. By contrast, it is widely recognized that in Latin America and Africa, employment growth has been inadequate, so that growing numbers of workers in these regions have been forced to accept irregular work. As the IMF has noted:

With slower GDP growth in the latter part of the 1990s, employment also suffered, particularly for wage earners. The quality of new jobs deteriorated, with many concentrated in micro-enterprises or self-employment at relative low wages. The share of the informal sector—defined as employment without access to social benefits or unemployment protection—rose to about 50 percent of total employment in Latin America.22

It is widely assumed that the situation is different in East Asia where capital accumulation remains robust, especially in China. However, the reality is quite the opposite; workers in China and the rest of East Asia are being forced to battle conditions very similar to those in Latin America. Here we focus on the situation in China.

Before looking at job creation, it is important to comment, at least briefly, on employment conditions for those with jobs. For many, including those employed in Guangdong, where approximately one-third of China’s exports are produced, these conditions are far from satisfactory. For example,

base assembly-line wages in the Pearl River Delta, the province’s manufacturing belt, have been virtually frozen at about $80 per month for the past decade, according to a recent survey by the Ministry of Labor and Social Security. Factor in inflation over roughly the same period, and average pay in real terms has declined by as much as 30%. The reason: China’s rise as a manufacturing power has contributed to a surplus of global production capacity for all kinds of goods, from sneakers to DVD players to plastic lawn chairs. With the price of raw materials rising and factory profit margins shrinking, blue-collar workers are at the losing end of a long chain of supply and demand.23

The situation in Guangdong is far from unique. Migrant workers, who make up a growing share of the country’s industrial workforce, are increasingly responding to these conditions by initiating job actions (including strikes) or quitting and returning to their home villages. Worried companies have been forced to raise wages, but according to one estimate, “even after doubling between 2002–2005, the average manufacturing wage in China was only 60 US cents an hour, compared with $2.46 an hour in Mexico.”24

The central government has begun issuing decrees calling for local governments to raise local minimum wages in line with inflation. But, according to Anita Chan, “in reality the wages of the migrant industrial workers are often considerably lower than the official standards. For one thing, the minimum wage, set by the month, does not reveal the illegally long hours worked by migrant workers to attain that minimum. According to a survey I conducted in China’s footwear industry, the average workday there amounts to about 11 hours each day, often with no days off—that is, about an 80-hour work-week.”25

Moreover, many migrant workers are not even being paid what they are owed. At least one government survey found that 72.5 percent of the country’s nearly 100 million migrant workers are owed wages, especially those employed in the construction and coastal export sector. Non-migrant workers employed by state owned enterprises are not immune from these developments; they are routinely told by their managers that “they must accept a decline in conditions and welfare or be replaced by migrant workers from the countryside.”26

Those analysts that do acknowledge the difficult conditions under which Chinese workers labor, generally view them as a temporary cost that must be paid as China continues its industrial forward march.27 As they see it, what is critical is that, in contrast to much of Africa and Latin America, China’s industrial growth continues to draw more and more Chinese into formal labor-market relations, thereby advancing modernization and a progressive process of development. However, they are wrong.

Recently, several international organizations have reworked sometimes inconsistent Chinese government labor data to create a more reliable picture of Chinese employment trends. Here we rely on the work of the International Labor Organization (ILO).28 The ILO began its study by organizing Chinese enterprises into seven different categories: state and collective enterprises, joint ownership enterprises, limited liability corporations, share holding corporations, foreign owned and operated enterprises, small-scale private registered enterprises, and individual registered businesses. The first five comprise the formal urban sector and the last two the informal urban sector. The ILO then used these enterprise forms to establish four different employment categories: regular formal wage employment (for those employed in urban formal sector enterprises), regular informal wage employment (for those employed in small-scale private registered enterprises), regular self-employment (for those running individually registered businesses), and irregular employment (for those engaged in casual-wage employment or self-employment—often in construction, cleaning, and maintenance of premises, retail trade, street vending, repair services, or domestic services).

Significantly, regular formal wage employment in China’s urban sector actually declined at an annual average rate of 3 percent over the period 1990–2002. Total regular (formal and informal) wage employment remained basically unchanged over this period, registering a zero average rate of growth. Only irregular employment grew, increasing at an annual average rate of 18.5 percent.29

Table 4 provides a more detailed view of these trends. In particular, employment in state and collective enterprises (what the ILO calls the traditional formal enterprises) fell by 59.2 million over the thirteen year period. Despite the country’s rapid growth and the government’s support for new, non-state forms of enterprise, the new emerging formal enterprises (cooperative enterprises, joint ownership enterprises, limited liability corporations, shareholding corporations, and foreign-funded enterprises) generated only 24.1 million jobs. The result was an overall decline in formal sector employment of 34.1 million. Even with the employment contribution of the informal urban sector (registered small privately owned enterprises and individually owned enterprises), the Chinese economy managed an overall increase in regular employment of only 1.7 million workers over the thirteen year period. This was far from sufficient to match the growth in labor supply. Thus, growing numbers of Chinese workers have been forced to accept irregular employment which, with an increase of 80 million, now comprises the largest single urban employment category. A growing share of this irregular work is accounted for by China’s burgeoning sex industry. While the Chinese government says there are 3 million prostitutes nationwide, independent estimates put the figure at up to 20 million (with sex work accounting for up to 6 percent of China’s GDP) once sex laborers in massage parlors, entertainment establishments, and even barber shops and beauty salons are properly included.30

Table 4. Urban employment by type, in millions
1990 139.1 1.6 0.6 6.1 15.3 162.7
1991 142.9 2.2 0.7 6.9 13.7 166.4
1992 145.1 2.8 1.0 7.4 14.1 170.4
1993 143.1 5.2 1.9 9.3 22.6 182.1
1994 141.0 7.4 3.3 12.3 18.3 182.2
1995 140.4 8.7 4.9 15.6 17.0 186.4
1996 139.0 9.4 6.1 17.4 23.9 195.8
1997 135.9 10.8 7.5 19.4 30.5 204.1
1998 107.2 16.3 9.7 22.6 56.8 212.6
1999 99.9 17.8 10.5 24.1 68.2 220.5
2000 93.3 19.3 12.7 21.4 81.3 228.0
2001 86.5 21.4 15.3 21.3 91.4 235.9
2002 79.9 25.7 20.0 23.5 95.3 244.4
Note: TF is employment in traditional formal enterprises (state and collective enterprises), EF is employment in emerging formal enterprises (cooperative enterprises, joint ownership enterprises, limited liability corporations, shareholding corporations, and foreign-funded enterprises), EP is employment in small-scale private registered enterprises, ES is employment in individual registered businesses, and IRR is irregular employment.
Source: Ghose, “Employment in China: Recent Trends and Future Challenges,” 27.

This massive increase in irregular employment is even more shocking when one realizes that growing numbers of workers have actually been leaving the urban labor market. For example, the labor force participation rate of urban residents fell from 72.9 percent in 1996 to 66.5 percent in 2002. In addition, outright unemployment also remains a serious and growing problem. As the ILO explains: “A major consequence of the reforms of the 1990s has been the emergence of open unemployment in China’s urban areas.” Official government figures seriously understate the seriousness of the problem in part because of the narrow definition used. For example, the urban unemployed are limited to those persons “with non-agricultural household registration at certain working ages (16–50 years for males and 16–45 years for females), who are capable of work, unemployed and willing to work, and have been registered at the local employment service agencies to apply for a job.” Using more commonly accepted international definitions, the ILO estimates that the 2002 unemployment rate for long term urban residents was in the 11–13 percent range.31

Table 5. Regular manufacturing employment by type, in millions
TF EF EI Total
1990 51.7 1.3 0.9 53.9
1991 52.6 1.8 1.3 55.7
1992 52.8 2.3 1.3 56.4
1993 50.3 4.3 1.8 56.4
1994 48.4 5.9 2.7 57.0
1995 47.5 6.9 3.4 57.8
1996 45.7 7.2 4.0 56.9
1997 42.5 8.3 4.5 55.3
1998 26.2 11.5 5.6 43.3
1999 22.7 12.3 6.0 41.0
2000 19.3 13.1 6.3 38.7
2001 16.2 13.9 7.2 37.3
2002 13.3 15.8 8.2 37.3
Note: TF is employment in traditional formal enterprises (state and collective enterprises); EF is employment in emerging formal enterprises (cooperative enterprises, joint ownership enterprises, limited liability corporations, shareholding corporations, and foreign-funded enterprises); and EI is employment in emerging informal enterprises (small-scale private registered and individual registered enterprises).
Source: Ghose, “Employment in China: Recent Trends and Future Challenges,” 29.

The situation in manufacturing is much the same. As table 5 shows, despite the growing importance of manufacturing over the period 1990–2002, overall regular (formal and informal sector) manufacturing employment actually fell by 16.6 million workers. Once again, employment activity in the new emerging formal and informal enterprises was not sufficient to compensate for the enormous declines in state and collective employment.

Unfortunately, China’s employment crisis is likely to get much worse very soon. Along with the massive pools of job-seekers generated by rural underemployment and state-sector layoffs, the number of jobless university and high school graduates is increasing rapidly. Of the close to 5 million university graduates projected for 2007, nearly 1.5 million will be unable to find work, according to the Chinese Ministry of Education. Similarly insecure prospects are in store for the great majority of the country’s approximately 50 million high school graduates who enter the job market each year.32 In short, it is increasingly difficult to see a fundamental difference in terms of labor market trends between China, a country with dynamic capitalist accumulation processes, and Latin America, a region with acknowledged economic difficulties.

East Asian Labor Dynamics

The employment problems highlighted above are not unique to China. According to the Asian Development Bank, research shows that “employment elasticities across the region are low and that, in general, they decreased in the 1990s vis-à-vis the 1980s.”33 As table 6 illustrates, among the eleven countries examined, seven showed a decline in their employment elasticities, one remained relatively constant, and only three showed an increase. Thus, the employment contribution of growth is clearly diminishing. The negative trends for China, Malaysia, Thailand, and Taiwan are especially striking.
The Asian Development Bank describes the importance of the results for China, “the world’s fastest-growing economy year after year,” as follows:

While in the 1980s it took a 3% growth rate of output to induce a 1% increase in employment, in the 1990s a growth rate of almost 8% was needed to achieve the same result. Estimates by the PRC’s National Development and Reform Commission reveal the challenge that is involved: in 2006 the country will need to generate about 25 million urban jobs to accommodate new entrants into the labor market, workers laid off from state enterprises, and rural migrants. However, urban areas are expected to be able to generate only about 11 million jobs.34

Conditions are far worse than even these low and declining elasticities would indicate since these studies do not distinguish between formal and informal employment. While countries generally have different criteria for what constitutes formal as opposed to informal sector work, what is striking is that the gains in employment in most of these countries, as in China, have largely been in the informal sector. Indeed, the ILO estimates that approximately two-thirds of all new jobs currently being created in Southeast Asia are in the informal sector. Thus, in the region with the most dynamic capital accumulation, not only are the employment effects of growth declining, but the jobs being produced are increasingly ones that offer the least protection and stability and the lowest earnings.35

Table 6. Employment elasticities
1980s 1990s
Bangladesh 0.550 0.495
People’s Republic of China 0.330 0.129
Indonesia 0.435 0.379
India 0.384 0.312
Republic of Korea 0.223 0.225
Malaysia 0.683 0.406
Pakistan 0.406 0.553
Philippines 0.535 0.731
Singapore 0.375 0.711
Thailand 0.315 0.193
Taiwan 0.242 0.139
Note: The elasticities show the percentage increase in employment resulting from a percentage increase in GDP
Source: Felipe and Hasan, “The Challenge of Job Creation in Asia,” 1.

For example, in Indonesia, the employment share of the informal sector in total non-agricultural employment grew from 65.4 percent to 70.8 percent over the period 1998–2003. Similar but less dramatic increases took place in Thailand, the Philippines, and Vietnam. In India (the newest poster country), the employment share of the informal sector grew from 80.5 percent to 83.2 percent between 1993–94 and 1999–2000. Over that same period, Indian GDP per capita grew by approximately 4.7 percent a year. As the Economist observed: “Despite [Indian] manufacturing’s remarkable success, the number of jobs in its ‘organized sector,’ i.e., firms employing more than ten people, has hardly changed since 1991, at just above 6 million, out of a total of about 48 million in manufacturing as a whole.” Even in OECD-initiate South Korea, the self-employed and their unpaid family members now account for more than one-third of the total workforce.36

Beyond the high and rising share of informal work, there are also changes in the nature of formal sector employment which are undermining its status. Generally, formal labor status involves regular or long-term employment with an enterprise that is registered and thus regulated by government mandated labor laws. However, this is changing as registered enterprises are increasingly making use of temporary or contract workers while shedding permanent workers via explicit layoffs and forced or semi-forced “retirements.” As a result, a growing share of formal sector employment no longer includes employment security or other benefits previously associated with regular employment. In South Korea, for example, the percentage of wage workers with irregular labor status rose from 42 percent before the 1997–98 crisis to 55 percent in 2003, and these irregular workers receive on average only 53 percent of the hourly real wages paid to regular workers. Similarly, the share of contract labor in India’s formal sector manufacturing rose from approximately 7 percent of total person-days worked in 1984 to 21 percent in 1998. The share of non-regular workers in Filipino establishments with ten or more workers increased from 20.51 percent in 1991 to 28.20 percent in 1997. In short, as the Asian Development Bank explains, “the distinction between formal and informal sectors in terms of desirable job characteristics (from a worker’s perspective)…has become somewhat blurred.”37

As in China, a growing number of workers in the other East Asian countries suffer from open unemployment or involuntarily part-time employment. Official unemployment rates in Singapore, Taiwan, and South Korea have recently exceeded 5 percent, meaning that hundreds of thousands of workers in these countries have been unable to find any work at all. And, as the Economist admits, “those figures do not include the legions of underemployed.” Younger workers are disproportionately afflicted by this unemployment and underemployment. Workers between ages 15 and 24 account for only a fifth of the workforce but half the unemployed in Asia as a whole, according to the ILO. In South Korea, about 5 million workers aged 20–34 are either wholly or partially unemployed and dependent on their parents for support. The overall official unemployment rate of about 9 percent for South Korean workers aged 15–29 thus represents only the proverbial tip of the iceberg.38

The Dynamics of Capitalist Accumulation

How do we explain these labor market outcomes? According to the Asian Development Bank, they are a result of “the interplay of three factors, namely, globalization, technical change, and competition.” Specifically, this interplay leads to the adoption of “inappropriate technology.” As East Asian companies compete to produce exports for sale in developed capitalist countries, they are increasingly relying on technologies imported from those countries. Thus, “the modern sector in developing countries is not much different from those in industrial countries in terms of capital intensity. The problem is that given the supply of labor available, and given the rate of investment, the more capital intensive the techniques, the less employment will be required.”39

However, this framing, which pins the blame for employment stagnation simply on the rising capital intensity of production, leads to a false understanding of, and misdirected response to, the problems facing working people. For example, the common response by mainstream economists is to target government policies (and/or trade unions) for keeping wages at “artificially” high levels compared to the “price of capital.” Yet, this obviously makes no sense in the case of China or other East Asian countries like Indonesia where wages are abysmally low. Capitalists do certainly mechanize production in order to reduce labor costs. But the fact is that given the nature of the products produced, it is often—even usually—the case that mechanization lowers unit costs even at very low wage levels. In fact, given the nature of the output, more labor intensive production processes may not be physically feasible at all.

Industrial capital accumulation is not a process that, if unrestrained by regulations and/or worker-organizations, tends toward an equilibrium with labor force growth so as to ensure productive and regular employment for all. Far from it. As Karl Marx explained, the “industrial war of capitalists among themselves…has the peculiarity that the battles in it are won less by recruiting than by discharging the army of workers. The generals (the capitalists) vie with one another as to who can discharge the greatest number of industrial workers.” This war is especially intense in East Asia, where more and more production is being structured under the control of and according to the logic of competing transnational corporations (and their local subcontractors) operating through cross-border production networks. It is the real force underlying the recent statement by Singapore’s labor minister, responding to the seventeen-year high 6.3 percent official unemployment rate, “that the boom years of near-full employment would not return as Singapore faced competition from low-cost rivals in the region.” Similarly, explaining why India’s economy needs to grow at least 8 percent per year just to keep unemployment from rising, the Far Eastern Economic Review noted that the basic problem is that “companies are shedding workers and increasing productivity in the face of new competition.”40

More generally, much of the underemployment and unemployment in China and the rest of East Asia can best be understood as the result of the ongoing separation of workers from access to the conditions necessary for their production and reproduction, what Marx called “primitive accumulation.” David Harvey has recently coined the phrase “accumulation by dispossession” to describe this process—the change in terminology rightly emphasizing that this kind of separation and disemployment (creation of a pool of exploitable labor power) is not limited to the early history of capitalism on a global scale, but is rather integral to the system’s ongoing historical development especially in its latest, neoliberal phase.41

Even the “flexibilization” of employment that is promoted by governments in response to neoliberal market pressures can be viewed as a variant of accumulation by dispossession insofar as it involves erosions of workers’ job rights. This is obvious, for example, in the case of state-enterprise industrial workers in China, but it is also true for workers in other East Asian countries where capitalists—domestic and foreign—have responded to unionized worker struggles by locking out and then replacing them with contract workers and other temporary laborers. In Indonesia, for example, upsurging unionization, strikes, and wage-gains in the immediate post-Suharto period were followed by dismissals of workers (and replacements with contingent workers) exceeding 100,000 per year in 2002 and 2003. As Rustam Aksam, president of the Indonesian Trades Union Congress, observed, “Every country is now competing to reduce worker rights….We’re racing to the bottom.”42

In sum, the employment problems of China and East Asia need to be seen as part of “the growing failure of capitalism…to solve the elementary and, in the long run, the very survival requirements of the vast majority of those living under its sway.” Of course, this failure is multi-dimensional. Alongside these employment problems, there is also “the unprecedented scale and speed of the deterioration of the natural environment.”43 That working people in the most dynamic centers of accumulation are also suffering from this crisis is an indication of its deep, intensive, and above all system-wide character. Under capitalism, universal access to productive employment—including jobs in education, health care, and other areas oriented toward improving the conditions of human development—is always seen as an inefficient diversion from the business of competitive money-making. Better to maintain a massive reserve army of unemployed and underemployed as a check on workers’ bargaining power and as a source of cheap labor to service the consumption needs (servile, sexual, and entertainment-wise) of the capitalist class and its various professional functionaries. Seen from this perspective, it is clear that the answer to worker problems in Africa, Latin America, and elsewhere for that matter, is not to be found in supporting policies designed to replicate capitalism’s so-called Asian success stories. Rather it lies in building national and international movements with an accurate understanding of, and a commitment to overcoming, the dynamics of contemporary capitalism.

1. We discuss these points in detail in Martin Hart-Landsberg and Paul Burkett, China and Socialism (New York: Monthly Review Press, 2005); “China and the Dynamics of Transnational Accumulation, Causes and Consequences of Global Restructuring,” Historical Materialism 14, no. 3 (2006).
2. Indeed, many believe that China’s emergence as a world economic power is creating a progressive alternative to the U.S.-dominated regime of neoliberal economics and military unilateralism.
3. Ajit K. Ghose, “Employment in China,” Employment Analysis Unit, Employment Strategy Department, Employment Strategy Papers, 2005/14, ILO, 1,
4. Hart-Landsberg and Burkett, China and Socialism, 48; OECD, Economic Surveys: China (Paris: OECD, 2005), 133.
5. John Whalley and Xian Xin, “China’s FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth,” National Bureau of Economic Research, Working Paper Series, Number 12249, May 2006, 5. Hart-Landsberg and Burkett, China and Socialism, 121; Steven S. Roach “What if China Slows,” Global Economic Forum, Morgan Stanley, May 23, 2005. There is a similar trend with imports; in 2004, foreign invested enterprises accounted for approximately 60 percent of China’s total imports. Whalley and Xin, “China’s FDI,” 5.
6. Whalley and Xin, “China’s FDI,” 9. However, some analysts regard these figures as upper bound estimates. See, for example, Lee Branstetter and Nicholas Lardy, “China’s Embrace of Globalization,” National Bureau of Economic Research, Working Paper Series, Number 12373, July 2006, 19.
7. Stephen S. Roach, “China’s Control Problem,” Global Economic Forum, Morgan Stanley, July 21, 2006.
8. Jephraim P. Gundzik, “What a US Recession Means for China,” Asia Times Online, September 27, 2006,
9. Gundzik, “US Recession.”
10. David Lague, “China Overtakes U.S. as Tech Supplier,” International Herald Tribune, December 12, 2005; , “China’s high-tech export grows 43.5% in past five years,” January 29, 2006. Approximately 42 percent of China’s electronics and information technology exports are sold in the United States; beginning in 2002, China became the largest exporter of these products to the United States (Branstetter and Lardy, “China’s Embrace of Globalization,” 36).
11. Branstetter and Lardy, “China’s Embrace of Globalization,” 37–38.
12. Branstetter and Lardy, “China’s Embrace,” 38. The computer industry is a noteworthy example. Approximately 80 percent of the world’s notebook and desktop computers are assembled in China, but most of the production is controlled by Taiwanese firms operating as original design manufacturers (ODMs). As a consequence, eight of China’s top ten exporters are Taiwanese companies that supply “branded PC sellers such as Dell with unbranded computers and components.” These Taiwanese firms may produce on the mainland but most of their components are supplied by other smaller firms that operate in other countries. As one analyst explains, “Almost all mainland China brings to the industry is cheap land and even cheaper labor. China is the manufacturing center of the global computer industry, yet it adds little value and therefore makes little profit.” According to another, “There are no Chinese ODMs and there are no significant Chinese suppliers to the Taiwanese ODMs or to their suppliers.” Tom Miller, “Manufacturing That Doesn’t Compute,” Asia Times Online, November 22, 2006,
13. Branstetter and Lardy, “China’s Embrace,” 39–40; George G. Gilboy, “The Myth Behind China’s Miracle,” Foreign Affairs (July–August, 2004).
14. People’s Daily Online, “Nearly 90 pct of China’s Electronics Exports are from Foreign Ventures,” April 15, 2006.
15. Economist, “The Struggle of Champions,” January 6, 2005, 59–61; Gilboy, “The Myth Behind China’s Miracle.” For example, as a result of its 2005 acquisition of IBM’s PC unit, Lenovo became the world’s third largest PC brand by volume. However, its profits have been on the decline. More importantly, “Like its rivals, Lenovo employs Taiwanese ODMs in the mainland to manufacture its branded computers….The company’s headquarters have moved to the United States, and US engineers are largely responsible for developing new products (in conjunction with their ODM suppliers).” Tom Miller, “Manufacturing That Doesn’t Compute.”
16. Barry Naughton, “China’s Emergence and Prospects as a Trading Nation,” Brookings Papers on Economic Activity, no. 2 (1996); Economist, “The Struggle of Champions,” 61.
17. Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries 2006,; Asian Development Bank, Asian Development Outlook 2006, 3,
18. Prema-chandra Athukorala and Nobuaki Yamashita, “Production Fragmentation and Trade Integration,” North American Journal of Economics and Finance, 17 (2006): 241.
19. Francis Ng and Alexander Yeats, “Major Trade Trends in East Asia, What are their Implications for Regional Cooperation and Growth?” Policy Research Working Paper 3084, World Bank Development Research Group, June 2003, 60. The rest of East Asia includes Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand.
20. Athukorala and Yamashita, “Production Fragmentation,” 246–47.
21. UNCTAD, Trade and Development Report 2002 (New York: United Nations, 2002), 75.
22. Anoop Singh, et al., Stabilization and Reform in Latin America, occasional paper no. 238, International Monetary Fund, February 2005, chapter 2, 7,
23. Neil Gough “Trouble on the Line,” Time Asia, January 31, 2005.
24. John S. McClenahen, “Outsourcing,”, July 1, 2006.
25. Anita Chan, “A ‘Race to the Bottom,'” China Perspectives, no. 46, (March–April 2003): 43.
26. Ching Kwan Lee, “‘Made in China,'” presentation at the 2004 Mansfield Conference, The University of Montana, Missoula, April 18–20, 2004,, 2; Hong Kong Confederation of Trade Unions, Chinese Labor and the WTO, 2004, , 22.
27. For a more complete examination of the social costs inherent in China’s growth as well as a refutation of arguments that present these costs as temporary, see Martin Hart-Landsberg and Paul Burkett, “China and Socialism: Engaging the Issues,” Critical Asian Studies 37, no. 4 (December 2005).
28. Studies done by the ILO, Asian Development Bank, and IMF all present very similar employment trends. See Asian Development Bank, Labor Markets in Asia (Manila: Asian Development Bank, 2005), and Ray Books and Ran Tao, China’s Labor Market Performance and Challenges, IMF Working Paper, WP/03/210, 2003.
29. Ghose, “Employment in China,” 6.
30. Howard W. French, “Letter from China,” International Herald Tribune, December 14, 2006,
31. Ghose, “Employment in China,” 8, 12, 13.
32. Edward Cody, “Students Grow Desperate Over China’s Tight Job Market,” Washington Post, November 24, 2006; Guan Xiaofeng and Wang ShanShan, “Job Shortage to Affect Graduates,” China Daily, November 29, 2006, .
33. Asian Development Bank, Labor Markets in Asia, 22.
34. Jesus Felipe and Rana Hasan, “The Challenge of Job Creation in Asia,” Asian Development Bank, ERD Policy Brief, Economics and Research Department Series No. 44, April 2006, 2.
35. Some countries limit the definition of informal employment to only self-employed and unpaid family workers, while other countries also include wage workers at small and/or unregistered enterprises. Indonesia is an example of the former, India of the latter. Asian Development Bank, Labor Markets in Asia, 18. Gianni Rosas and Giovanna Rossignnotti, “Starting the New Millennium Right,” International Labor Review 144, no. 2 (2005): 144. Southeast Asia is defined to include Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
36. Asian Development Bank, Labor Markets in Asia, 18, 20: Simon Long, “Now for the Hard Part: A Survey of Business in India,” Economist, June 3, 2006, 10; “The Self-Employed in Plight,” Korea Herald , February 12, 2005,
37. Sang-hwan Jang, “Continuing Suicides Among Laborers in Korea,” Labor History 45, no. 3, 2004, 280–81; “Labor Group Seeks Equality for All Workers,” Korea Herald, January 16, 2003, For details on forced retirements as a method of lowering labor costs, see Samuel Len, “Job Cuts Follow Recovery in South Korea,” New York Times, December 9, 2003; Joonmo Cho and Sunweong Kim, “On Using Mandatory Retirement to Reduce Workforce in Korea,” International Economic Journal 19, no. 2 (June 2005): 283–303; Data on India and the Philippines comes from Asian Development Bank, Labor Markets, 19, 56.
38. Kim Jung Min, “Victims of Efficiency,” Far Eastern Economic Review, January 29, 2004; Keith Bradsher, “After an Exodus of Jobs, A Recovery in Taiwan,” New York Times , March 19, 2004; Trish Saywell, “A Question of Jobs,” Far Eastern Economic Review, January 15, 2004; “The Jobless Boom,” Economist, January 14, 2006, 47.
39. Felipe and Hasan, “The Challenge of Job Creation in Asia,” 5; Asian Development Bank, Labor Markets in Asia, 30;
40. Karl Marx, Wage-Labor and Capital (New York: International Publishers, 1976), 45; Saywell, “A Question of Jobs”; Joanna Slater, “The Dangers of Jobless Growth,” Far Eastern Economic Review (May 6, 2004).
41. See David Harvey, The New Imperialism (New York: Oxford University Press, 2003) and A Brief History of Neoliberalism (New York: Oxford University Press, 2005).
42. Wayne Arnold, “In Indonesia, Unions Hit a Roadblock,” New York Times, May 21, 2004.
43.Harry Magdoff and Paul M. Sweezy, Stagnation and the Financial Explosion (New York: Monthly Review Press, 1987), 203, 205.

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Posted by Indian Vanguard on August 27, 2007

Some members of WPRM-Britain recently travelled to China and were able to observe various aspects of the lives of the Chinese people. This is their report of their experiences although limited in time. WPRM-Britain hopes that comrades and friends can also write reports on their travels abroad in order to deepen our understanding of the lives of the people in different countries around the world.
We would be very happy to attend meetings and do presentations and slideshows of our experiences in China. Contact us at and check out our website at
Arriving in Beijing
Driving from Beijing capital airport the first thing we noticed were the huge 16 lane roads clogged with traffic. Air pollution was also evident straight away, making it more difficult to breath. Tall, modern apartment buildings were in various stages of construction all over the place, but we were staying in an ex-state built residential area. Everywhere was dusty but tall trees lined the pavements. Elderly Chinese wearing clothes reminiscent of the Mao era sat in groups playing chess or mahjong, or exercising in an enclosed area of fitness machines, a sight that would be unbelievable on a British estate! One woman sold quarter pineapples on a stick, peeled with an angular knife, selling at 1 yuan each (about 6.5 pence). We were renting a room in a bed-sit with no kitchen and poor sanitation, though with central heating. The daily rent was 80 yuan a day. Very old bicycles and tricycles lined the streets, interspersed by the sight of a dark coloured car with black tinted windows.
The Great Wall and Tian’anmen Square
On the second day we visited the Great Wall, symbol of China and a top destination for foreigners and Chinese alike.
Apart from the stunning spectacle of the wall snaking up and down the mountains, we were struck by the number of people selling all kind of merchandise to tourists. One 65 year old woman described herself to us as a farmer, unable to make a living except for lugging goods up the slopes in the already warm sun, marking the coming of summer.
The next day we visited Tiananmen Square . Travelling there on the bus cost us 1 yuan and on the underground 5 yuan, and we saw the real state-led effort of construction before next year’s Olympic Games. While now there are only 3 lines on the underground, by next summer there will be 13. We heard from the people that a fortnight before, one of the tunnels of a new line had collapsed, killing half a dozen workers, evidence of the importance of speed over people’s lives. Walking out of the underground we caught our first glimpse of Tian’anmen, the Gate of Heavenly Peace, with the portrait of Mao sitting in the centre. On either side of the portrait are two giant size slogans: “Long live the People’s Republic of China ” and “Long live the unity of the peoples of the world”. Lining up in front were dozens of Chinese waiting to be photographed in front of the portrait of New China’s first Chairman. South of this was the square itself, the largest in the world, flanked by the Great Hall of the People, Mao’s mausoleum standing in the centre, though closed at present for renovation.
Everywhere we were approached by hawkers, mostly quite old, selling Mao watches, badges, postcards and even bilingual editions of the Little Red Book. Hawkers sell their goods starting at least 10 times higher than the final price we agree on. We guess this is a combination of the disparity between the economies of the West and China , as well as because of financial desperation. Unlike most places, the toilets here were obviously catering for foreigners, with clean Western style toilets. In the Summer Palace in Beijing , which was plundered and destroyed by the colonialist powers of Britain and France on more than one occasion, we also came across clean and hi-tech sanitation, in stark contrast to the sanitation in most of the parts of the country we saw.
Interview with Lao Zhang
One of the biggest problems in Beijing at the moment is the destruction of the local housing and the reolocation of its residents, providing a great opportunity for corruption. We met up with one man who was living in an area which was to be demolished, and in fact every house except for his had already been demolished by a private construction company. The compensation given does not match the local housing prices, but the man we met, Lao Zhang, who had lived here for 23 years, was refused compensation because he is not from Beijing . The local government has not only failed to issue a residence permit for Lao Zhang before but is also now turning a blind eye to the company carrying out the demolition. Lao Zhang is living in a rundown house in a former residential area and all other houses have been reduced to rubble. They are offering him no compensation and trying to use scare tactics to make him either move out or accept inadequate compensation.
“Inside I feel completely chaotic. At the moment I feel like I am having a battle with the company, but they have a machine gun and I only have a pistol.”
After interviewing Lao Zhang we went for dinner. Lao Zhang would hardly eat anything until making sure everyone was full, very different from the customs in Europe . We found out that the greeting here, instead of “hello” is “have you eaten?” Below is the transcript of the interview:

Interview with Lao Zhang
26th April 2007, in Jishuitan, Deshengmennei, Beijing .
Q: Where are you from and why did you come to Beijing ?
A: I am from Jiangjiazhuang Village in Dingxing County , Hebei Province. I came to Beijing following my marriage to a Beijing resident.
Q: When did you come to Beijing ?
A: In the spring of 1985.
Q: What job did you have before you came here?
A: I was a farmer (nongmin). The reason my problem is still unresolved is mainly because I don’t have a Beijing residence permit ( hukou).
Q: What was life like in your village?
A: The life of a farmer in China is very difficult. Every day I was working in the fields and there was nobody to help me, I didn’t have any family except for a brother but we never worked together.
Q: Are you employed now and what sort of work have you been doing in Beijing ?
A: I am not working at the moment. I have never had a job with a contract and have never worked for more than 4 months at a time. I have always been working for other people, usually doing business like selling fruit and vegetables on the roadside.
Q: How much could you earn over the course of a year?
A: My wages would average out at about 600-700 yuan per month (about £40-£48). Now I have to live on savings, but they are nothing to talk about.
Q: How did you get this house?
A: It was given to me by my wife’s family when we married. Now we are no longer together, but as part of our separation we agreed I would keep the house.
Q: When did you hear about the company offering compensation for everyone to leave?
A: In April or May of 2006.
Q: What was the reaction of the neighbours?
A: They were mostly happy and signed contracts quite quickly.

Q: How much compensation did they get?
A: It was different for different people. Large houses and small houses did not get the same, and it depended on how many family members there were. If you argue with the company then you can get more. A house like mine could get around 300,000 yuan (about £20,000), but others got 800,000 or even one million yuan.
Q: What did the company say to you?
A: They claimed the house belonged to my ex-wife and not to me, and that I didn’t have a residence permit. I think that according to law the house belongs to me. The company told me they had compensated my ex-wife but my son, who lives with my ex-wife, told me she had received nothing.
Q: As you were married to a resident of Beijing , shouldn’t you have been eligible for a residence permit?
A: I am not sure, I think so. I know of others in the same situation as me who were give one, but I never followed it up.
Q: What have the company offered you?
A: They haven’t offered anything, they just asked me to tell them how much I think I should get.
Q: What have you asked for?
A: First I asked for a house in the same area and of a similar size. When they refused I asked for the money equivalent, about 25,000 yuan, but they rejected that as well and have not said anything else to me.
Q: What do you plan to do about this?
A: The only choice I have is to stay here. The government has a policy that no-one can be evicted without compensation, so I have the law on my side.
Q: Have you talked with government officials about this?
A: No. They are useless because I don’t have any money to offer them or any connections ( guanxi), so they won’t even bother talking to me.
Q: Are you worried about being evicted without compensation?
A: Extremely.
Q: Have there been any threats?
None yet, the company would need to go through all sorts of legal processes before anything could happen, such as bulldozering my house.
Q: Have you heard of any other people in this kind of situation?
A: Not many, but I have heard of others, and I know one person in the same situation as me, without a residence permit, who has the same problem.
Q: If they evict you without compensation how would you survive?
A: I would have no way to make a living, I could rent somewhere but my savings are not enough.
Q: How do you feel about the situation?
A: Inside I feel completely chaotic. At the moment I feel like I am having a battle with the company, but they have a machine gun and I only have a pistol.
Still in Beijing
Behind the façade of new, modern tower blocks lie warrens of houses along alleyways. The areas were run down and dirty and lacking in natural light, but solar water heaters adorned some roofs. People made their living selling street food or repairing bicycles. We were able to find that the average wage for a worker in Beijing in McDonald’s is 6.5 yuan per hour (about 40pence), while a security guard can earn around 1200 yuan per month, (about £80).
One interesting conversation occurred over dinner, when the owner of a small restaurant we ate in started talking to us about his love of philosophy, especially dialectical materialism, which he saw as a tool to help analyse society and solve people’s problems. He praised Mao’s thinking and lamented that this is not taught in universities anymore. We also found that traditionally China has had no bars or pubs and eating out is a luxury for most Chinese. Next to the restaurant was a hairdresser’s, which at night became a brothel. People told us that prostitution and AIDs are widespread and growing fast and that the government largely ignores both issues.
Heading to the North West
For Mayday many Chinese are given one week of holiday, and that week we planned to travel to Yan’an and to try to see what life is like in the countryside. Later we found out that during this week 46 million train tickets had been sold in that week, and more than 400 million bus tickets were sold! Most of the people travelling were students returning home for the week. At the time though we were not really aware of this, and queued for an hour to buy tickets for the 12 hour journey to Xi’an, eventually unable to get sleeper tickets and having to make do with a hard seat. Tickets can only be reserved 5 days in advance, producing more of a rush to get them, and you can only buy tickets leaving the same city you are in, with no way of getting a return ticket. What’s more touts line the queues in the stations, buying and selling tickets. This backward ticket selling system contrasted completely with China ‘s technological advancements, such as their recent capability of shooting down one of their satellites in space.
On the way to the train station to catch our train to Xi’an we had an interesting conversation with a taxi driver, most of whom always seem very eager to talk and very open. He works 10-12 hours per day, 7 days a week for a monthly salary of 3000 Yuan (part of which he has to use to pay for the petrol he uses as a taxi-driver). This is compared to the owner of the company who the driver claimed owns 2000 taxis in Beijing and has a monthly salary of about one million yuan! The driver compared his own financial gains since the start of the 1980s with the social losses. In 1980 he only earned 35 yuan per month, while working for the government. But at that time he didn’t have to worry about health care or the education of his children. He also enjoyed cultural activities along with his wife, organised by the state, such as film showings and operas. Now he hasn’t seen one film in the last three years, health care and education are expensive, and all their money goes into saving in order to afford this when it is needed. As we were pulling up to the station, he said that Mao was a great leader who cared about the masses, unlike the corrupt leaders today.
On the train, travelling through Beijing municipality, Hebei , and Shanxi provinces we observed run down areas as well as numerous high-rise blocks and numerous construction sites. Out of towns and in the countryside, from our modern, electric, double-decker but over-staffed train, we could clearly see that agriculture was not mechanised, farmers were mostly working by hand, often with hoes. The problem of overstaffing seems to be endemic; in shops, banks, restaurants, train stations and on trains there were usually at least twice the number of staff necessary.
Xi’an is the capital of Shaanxi province, a big city but not as developed as Beijing . Whilst we were waiting for a space in the youth hostel we went to rest in Revolution Park . There were many people singing and playing music there for leisure, but also a relic of the not-so-long-ago collective past. Amusingly we fell asleep on the grass and before long were woken up. I expected to be told off by a park worker for sleeping on the grass, but in fact we were woken by three elderly women warning us that sleeping that way we could develop joint aches in later life!
The youth hostel adjoined a museum, the former command centre of the Eighth Route Army. The hostel was decorated with photos of Zhou Enlai as well as Edgar and Helen Snow and Norman Bethune, the revolutionary Canadian doctor who gave his life working with the Communist Party during the anti-Japanese war.
In the bar there were ornaments depicting Mao and a Cultural Revolution era poster with the slogan in Chinese of “Grasp Revolution, Promote Production!” The hostel mainly catered for foreigners but many middle class Chinese were also using the hostel. The workers were wearing Eighth Route Army uniforms while serving Western food, playing Western music and showing Hollywood films every night to please foreigners, mainly Westerners. In the evening we sat round playing guitar and many people joined us in the music. One person who joined us was a middle-aged man from the US who had put all his belongings in storage in Colorado to travel around the world. Interestingly for us, on the issue of the occupation of Iraq, which he seemed to have some sympathy for, he believed that it had gone wrong because the US government mainly relied on British intelligence! A long debate ensued…
The museum of the Eighth Route Army was free and we just had to write our names and country in a guest book. The rooms where the leaders of the revolution in China stayed were decorated with their pictures and a conference room was decorated with large pictures of Marx, Engels, Lenin, Stalin and Mao. There was an exhibition room on Helen Snow, celebrating her life and exhibition on foreigners from Canada , India , Germany and the US who had helped the revolution in China .
The centre of Xi’an is very modern and westernised including McDonald’s and Starbucks. In the Drum Tower there was a furniture museum showing many original designs of much of furniture still used around the world, showing just how creative the Chinese people are. Away from the centre is the Muslim quarter where people are densely packed along alleyways with very dim or no light. There are many small restaurants and many more street sellers. Unlike other areas people are not allowed to play cards or drink alcohol in restaurants. One woman told us that under Mao there was more morality but now girls walk around wearing virtually nothing. We asked the young workers in the restaurant how they felt as Muslims about the War on Iraq and the attacks on Muslims in the West. They answered that they are too “small”, meaning that they are the lowest level of society and don’t think about these things.
Lopsided Development
Huge modern buildings dominated the main roads heading north out of the city, but only a short distance behind was the contrast of smaller, old blocks and maze-like streets hiding badly-lit courtyards. In one area the workers were working in very unsafe conditions, balancing on bamboo scaffolding without hard hats. They wore no masks even though the air was thick with dust and some workers welded on the roadside with no goggles. Some workers working up high had no safety harnesses at all. We often saw elderly people going through rubbish bins looking for bottles, and around the rubbish dumps we saw children working through the rubbish as well.

In each area there are public bathhouses, which include hot and cold baths and saunas. This is mainly due to the lack of facilities at home which left most people having to rely on going to public baths, especially during the winter when the water was too cold. The more upmarket of these public baths also serve as places for prostitutes to congregate. Prostitution is mixed in with daily life. Shops act as hairdressers during the daytime and brothels at night, switching the red lights on as dusk falls. One street of shops in Xi’an were displaying cold drinks outside, but the women sitting on the steps made it obvious what the real purpose was. One woman ran up to tug the sleeve of one of our group, showing just how open prostitution is. We had read a few months back about a government effort to prevent prostitution in Shenzhen, a city in south China . Their method was to break into many different brothels at the same time and seize prostitutes and customers alike, dressing them in prison tunics and marching them round the city in an effort to shame them, an unbelievable response to a problem which has spiralled out of control since Mao’s time, and which ends up as the last resort of the migrant workers who find it a better opportunity than the almost slave-labour conditions in factories in south China.
Banpo Neolithic Village
One sight in Xi’an which we visited was the site of Banpo Neolithic village, said to be 6000 years old. The museum stressed the fact that at that time society was matriarchal, surely a fading reference to Engels’ Origin of the Family, State and Private Property. The museum was badly preserved, and the local area was heavily polluted, the air being thick with dust which made us all short of breath by the time we had walked from the bus stop to the museum.
Journey to Yan’an
On the bus trip from Xi’an to Yan’an we had hardly left Xi’an bus station before we were held up in a traffic jam for an hour or so. The cause soon became clear, a van had hit into the rear end of a car. The only damage caused was to the cover of the rear indicator, so very minimal. However, the policy in this situation is to leave the two cars in the position they stopped and to wait for the police to arrive, even though this blocked up the traffic completely. The police arrived after 10 minutes but spent another 40 speaking with both parties of the incident. Eventually they moved the two vehicles to the side of the road. This incident really showed the power of the police, they are able to decide on whose fault the accident was at the scene where it took place, giving tremendous opportunity for bribes and corruption where the person least able to bribe will be found guilty.
The road to Yan’an soon left the flat plains around Xi’an and entered a very hilly area, making us all imagine the soldiers arriving at the end of the Long March, and settling in a place suitable to continue People’s War. The most remarkable thing about the journey was just how modern the infrastructure was. Yan’an is not a large city, but the roads from Xi’an were large and well constructed, frequently passing through tunnels and going over elevated roads, with electronic signs on the roadside. We passed industrial towns, where workers’ houses were situated right next to the factories and the air again thick with dust.
Yan’an itself is situated in a valley in between steep mountains, but high-rise buildings now hide the natural environment. On one side a factory and power station were visible, and at the centre of the city was a huge bridge over a river that only produced a trickle of water. A huge department store four floors high stood in the city centre, selling designer clothes at western prices, and standing in contrast to the small local market which stood opposite, selling goods affordable to most Chinese.
“Yan’an today is not the same as the Yan’an before”
Mayday Parades
On May the First there was no celebration, we asked around but there was no special event being held on that day. By mid-morning we heard drums in the street and looked out expectantly, hoping to see some sort of demonstration. Instead, we saw a parade with a large banner at the front proclaiming the name of a mobile phone company, urging people to choose China Unicom and showing the discounted prices available during the Mayday holiday. We saw further parades like this through the week, but this first one was the strongest, holding up the traffic on the main road. One Chinese friend had said to us before we set off, “Yan’an today is not the same as the Yan’an before”, but we had expected nothing quite as blatant as this.
Farmer’s Houses
We had heard before arriving in Yan’an from Chinese friends that is was possible to stay in the houses of farmers in the countryside just outside the city. While investigating this possibility however we discovered that the so-called farmer’s houses were really nothing but semi-smart hotels in the countryside inhabited by Chinese tourists and visiting cadres. After some more investigation we were able to find a family further up the valley side that were happy to put us up. The family consisted of a man who was a road-sweeper, his wife, his mother-in-law and his small baby. We were given a kang to sleep on, a huge stone bed that can be heated in the winter. The family had two rooms, one of which served as a bedroom and a kitchen. They had electricity, a television, a landline telephone and also mobile phones. A poster on a wall outside advertised a “farmer’s mobile phone” and displayed a picture of a smiling farmer. However, the village lacked running water, and they had to walk down the steep mountain slope to fill up two buckets of water, carrying them back on a pole over the shoulders. There were two public toilets on our slope, each of which was a small hut with a hole in the ground dropping half a metre into a maggot-infested pit. The smell was unbearable, but we heard that this human waste would be used as fertiliser in the fields. The village was in stark contrast to how most people live in the West, as well as to the middle class areas in the large cities, showing the real lopsidedness of China ‘s development, with some modern appliances available but still no access to running water.
Today’s Communist Party in Yan’an
The family cooked for us, usually consisting of noodles or steamed bread with some pickled vegetables or cucumber and potato. While we were eating, we noticed they generally ate plain noodles sometimes with a bit of cucumber. This contrasted sharply with our experience in one of the official “farmer’s houses” where we had lunch one day. On asking for a meal which the farmers normally eat, we were recommended buying the most expensive dish of mutton on the menu. This really demonstrated that the façade of “farmer’s houses” is used by the Communist Party cadres to show that they are intent on understanding the farmers. In reality however, they end up missing the target completely. The car park outside was full of black cars with tinted windows, the sign of the party cadre, but 50 metres up the steep slope seemed too much for them. That the Communist Party in China today lacks a revolutionary character was already obvious to us, but the reasons they need to maintain a pro-Mao and pro-masses line soon became more clear to us.
Mao amongst the Chinese masses
We spent one day looking around the revolutionary sites of Yan’an, including various former offices and residences of Mao, Zhu De and Zhou Enlai, as well as the site of the 7 th Party Congress, the rooms where Mao wrote On Contradiction, On Practice and On Protracted People’s War, and the place where Mao delivered his famous talk at the Yan’an Forum of Literature and Art. One of the most striking things was the number of Chinese tourists visiting the area.
While we saw not one westerner, we spoke to Chinese who had come from different parts of the country, including as families but also youth. There was a real respect for the revolutionary heritage of the CCP and especially of Mao himself. Youth dressed in old Eighth Route Army uniforms and lined up for photos in front of statues of the old leaders and portraits of Mao, shops were filled with Mao badges, busts and posters. Some visitors left un-smoked cigarettes on Mao’s old bed as a token gesture to the Chairman, but in general the museums were not kept well, with objects not encased and rubbish left in the rooms by some people.

However, the atmosphere was exciting, and it felt a real privilege to be in such a place. To see so many Chinese tourists in such an atmosphere really helped us understand the pride with which the Chinese people think about Mao, as well as their closeness to their former chairman. One of our members was wearing a Mao t-shirt and was frequently given thumbs up signs by passers by. Ultimately, we realised that this deep respect and love for Mao and the revolution is the main reason why the Communist Party needs to maintain a veneer of ‘serving the people’ and visiting “farmer’s houses”.
Deeper into the Countryside
One day we hiked from the village where we were staying along a dirt track into the countryside. Again we crossed a river that was hardly flowing, but there was a good water system up in the terraced fields as well as some agricultural machinery. In general, however, there was a lack of mechanisation that showed the necessity of human labour. Arriving in villages we would find them empty but for the very elderly and the very young. In the fields the farmers were planting watermelons, digging holes and filling them with water, placing the melon in and then rolling polythene sheets over the top, which would act like a mini greenhouse. Some of the farmers worked on collective land that belonged to the village, while others told us they owned the land they were working on. While most of China’s farmland was de-collectivised from the early 1980s, we were left wondering how agriculture could be mechanised with farmers working on such small patches of land. Again, the villages were all electrified, with large pylons crossing the hilltops. There were no safety measures around them, and sometimes the lines were very close to the ground beneath, with no precautions taken by farmers working on the land below. The villages were also without running water, although the road system was quite good. On a hilltop there was a field where ten farmers, men and women were working in a blazing sun. They greeted us with respect, gave us water and told us that they grow watermelons and sweet corn. The field was a collective field 6 “mu” (1 mu=approximately one-sixth of an acre) in size where everyone including farmer’s children worked. They told us that they had to “work very hard everyday, like all farmers in China”.
In a nearby village we met a couple, who told us about conditions in the village. They said that people in general in their village work 11 hours a day, every day without break but the couple we were speaking to worked less (7 hours )because they are older.
Also the male in the couple said that people in the village near Yanan had no meat to eat and ate mainly sweet potatoes and eggs. They told us that they got electricity in the village in 1978, and a 6 metre wide road was built in 1984. They grow melons but mostly eat potatoes and never eat meat or rice. He said the only hospital is in Yan’an, which is very expensive. His children are working or studying in Yan’an. The woman farmer had a pair of pliers in her hand and she explained that she was repairing the pipe work in their house. They told us that they have a mobile phone and television, but that the programs were rubbish and stupid. He described Chinese people as having “bad thinking” now, that they have become individualists and they cheat each other to get money. However, we said that we believe Chinese people are clever and he agreed that a Chinaman, Chairman Mao, was a great thinker.

“You can speak against them, here we are just scared of them.”

After this conversation, as we were winding our way up a small track, a young boy aged 15 invited us to his house. He told us that he is a Junior Middle School student in Yan’an and wants to be a teacher. But at home he works in the field and has no activities outside work except watching the black and white TV. He said he would remain in his village once he finishes his studies. When we asked him what he did for leisure, outside of the time he was studying or working and he made clear that actually he gets very little leisure time at all as when he is not studying the only thing he does is help his family in the fields. His father came in and started talking to us as he was having his lunch of noodles. He offered us lunch and when we declined he gave us delicious fresh apples. He said that working and living in a village is very hard, and that we from the West wouldn’t be able to cope with the hardship. He said that production was good and thought that this period is better than in Mao’s time because they can keep their own chickens. However, he said there is now rampant corruption everywhere, especially among local officials, which has grown in recent years and which is significantly harming the incomes of people in his local area due to demands for corrupt payments. He said the national government is also corrupt and rich people can buy their way into official posts. When we said officials in Britain are also corrupt he said yes, “but in your country you can speak against them, here we are just scared of them.”
Back in the hotel in Yan’an we were again struck by the lopsidedness of the development, in a high-rise building with modern facilities, call-girl agencies phoned the room at night. The KFC was packed with middle class chicken lovers, who could pay 23 Yuan for 2 pieces of chicken and chips, while most others who ate outside the home ate in street restaurants for less than 5 yuan.
“You can speak against them, here we are just scared of them.”
Returning to Beijing
The train journey back to Beijing lasted 16 hours but seemed to pass quickly. One man was keen to speak with us. He sat down next to us and the university students we were sitting with and started to tell them that they don’t understand anything about the Cultural Revolution, which had its good points as well as its bad points. He talked to us mainly about the equality for the people during that time, as well as the development of rural China such as the countryside around Yan’an which benefited from educated youth being sent down there. Later he told us that if China had a system like US or Britain the whole country would be reduced to chaos.
On returning to Beijing we took a taxi back to our hostel. The driver asked us where we had been travelling and when we told him Yan’an he squeezed the leg of the man in the front seat and loudly and enthusiastically exclaimed “ah, Yan’an!” He described Mao as the greatest leader China has had, committed to equality and improving the living standards for all unlike the current government which only serves the rich, “a tiny proportion of the population” he said, pinching his fingers together to demonstrate just how small. We asked him about the traffic in Beijing , notoriously congested, and he complained about the government policy of encouraging private cars and individualistic consumption, only benefiting the rich while the poor had to cope with worse public transport. He complained about the lack of education and health care, which he claimed was too expensive for the ordinary people. He worked one day on and one day off, 14-hour shifts, and could earn around 2500 Yuan per month.
Speaking to a Former Red Guard
One day we were eating in a small restaurant in central Beijing and started speaking with a man and his wife who were working there. The restaurant was run collectively by three families because the rent and other expenses are so high, and this couple were one of the three partners involved. The man was also a Red Guard during the Cultural Revolution and later proudly recounted to us being part of the one million strong crowd in Tian’anmen Square which was greeted by Chairman Mao. After the meal they invited us back to their house to continue our discussions and we had to pass through a very narrow alleyway full of junk. The house was very basic, and like most of the houses in this area, and like most working class areas in the city, there was no toilet, forcing the family to use the public toilet outside on the road, which, according to a news report on China Central Television, are extremely unhygienic with an unbearable smell, and are going to be replaced by new ones before the Olympics, renovation for foreigners and not for the local people who are forced to use them all the time. The house was very small, with one bedroom, a storeroom, and a living room of about 5m by 2.5m. It was situated in an old alleyway right in the centre of the city. Some of the workers also sleep in the restaurant after it is closed. Below is a transcript of our discussion with the couple:
Q: How has the position of women changed in China after the revolution?
A(Woman): Under feudalism many women were not even allowed out of the house, there was a definite division of labour and women’s place was in the house. This was signified by the practice of binding their feet. Women had no chance for education, but all of this changed after the liberation and women gained equality.
Q: What about after 1976? Although there was equality for women after 1949, from watching television here and seeing advertising it seems like women are still treated as commodities. What do you think?
A(W): No, by looking at my family you can see there is an equal division of labour and men and women are equal. My husband has to do as much work as I do.
Q: You said that you were a Red Guard and you once saw Mao on Tian’anmen, can you tell us what happened in the Cultural Revolution? (The answer was a long but very patiently explained talk about the chronological progression of the Cultural Revolution but below are the main points)
A(Man): If we look at why the Cultural Revolution happened we need to look far back in Lao Mao’s thinking as well as the history of New China. Firstly in Mao’s writings we could see a development leading up to the Cultural Revolution, such as from his essay On Contradiction. He said that everything divides into two. Then we can look at the rectification campaigns, the 3-anti and 5-anti campaigns against corruption and bureaucracy, and eventually, in the mid-1960s there was the discovery of the corruption of some top leaders in Tianjin city. This was alongside the realisation that capitalist restoration had taken place in the USSR . This is why the idea of the Great Proletarian Cultural Revolution was developed. The movement started from the students who were encouraged to write big character posters and to travel around the country, we had free journeys on the train system at that time. We went to see the situation in the country for ourselves and to learn firsthand from the people there. In every factory and place of work people split into two camps, those supporting their leaders and those opposing their leaders. This led to some fighting, sometimes using guns. As a Red Guard I went first to the city of Lanzhou in Gansu Province in the northwest. When we got there workers factions were fighting and even though we were unarmed we set straight in to prevent the fighting. However, at this time workers stopped working, students didn’t attend classes, and peasants also stopped working. In Shanghai some workers kept on going, and Mao used them as an example. He advocated non-violent struggle above all else, saying that we should rely on our mouths, our brains and our pens. But in some cases the army was called in to stop the fighting. Eventually the top capitalist-roaders from the party were kicked out, like Liu Shaoqi, Deng Xiaoping and Tao Zhu, some other leaders had notices hung from their necks and had to attend sessions where they would be criticised by the masses. Deng Xiaoping’s son jumped from a window and broke his leg, now however he is an important government official. At that time, government officials earned the same or even less than the masses, now corruption is so common that they earn countless times more than most of us.
Q: How did the Lin Biao affair affect people’s thinking during the Cultural Revolution?
A(M): At that time Lin Biao was criticising Mao from the left, saying that he was not paying enough attention the point of view of the masses. But his words made no sense to us, everything he said was not played out in practice, and so we couldn’t understand it. His coup failed, and we found out that although he was left in form, he was really a rightist in essence, not relying on the masses. One interesting thing was that the government always claimed that his plane crashed in Mongolia because of a lack of fuel, but most masses in China think that it was shot down by the secret services.
Q: During the Cultural Revolution, Mao called for many more cultural revolutions in the future, that one would not be enough to deal with the problem of capitalist restoration. How do you think about that?
A(M): Yes, if Mao was alive today he would certainly say that capitalism has been restored in China . Although at that time we were quite poor, we didn’t have any worries, everyone was equal and we all had enough. At that time we could earn about 40 yuan a month between us, now we can earn 4000 yuan. However, we didn’t have as many dishes on our table like we had tonight, but our values were different. We lived collectively, now everything is so individualistic, we have to fight against each other.
A(W) At that time we felt very safe, up until the end of the 1970s we still left our doors unlocked at night. Now we can earn more but we have so many worries, mainly paying rent and also health care, and education for our children. Now we have to really pay a lot of attention to our health care because it is so expensive. Before it was free and provided for us, but now it is different. The government provide a scheme for people who have retired, because there are no pension schemes for people like us. They ask for 1300 yuan every year in exchange for paying 85% of all of our medical fees. If we catch a cold or a fever then we will avoid going to the hospital, but imagine if we have a serious problem and need an operation that costs 30,000 or 40,000 yuan. There is no way we would be able to pay for it. But even the 1300 yuan a year is difficult for us, so what most Chinese people do is that they register one person for the scheme, and then many people will use that card when they get ill, that way we can save money. But our biggest problem is still rent. For example the rent of this restaurant, which we need to run to provide for our living, is so expensive that three families have had to work together to pay for it. Before we didn’t have to worry about questions like this, but now the rent is going up all the time, not to mention the fees for electricity and water.
Q: Do you keep up with international issues, like the wars on Afghanistan and Iraq ?
A(W): Now we talk mostly about local issues. Individual families don’t really talk about these things. You know we are so busy with other things that we never have the time to find out this kind of information.
Muslim Hui minority
With our trip to Beijing coming to a close we had an interesting discussion with workers in a small Muslim restaurant in a rundown area. Opposite the restaurant, on the other side of the road, was a thirty storey high skyscraper with marble facia. Outside was an extravagant water feature, surprising considering the water shortage in the country. The man was young and told us he was a Muslim from Lanzhou city in Gansu Province , ethnically a ‘hui’ Chinese, who are Muslims but are more integrated into Chinese society than the minorities who live in the border regions. They had moved to Beijing to start this restaurant. When we asked him if they drank beer he replied adamantly “of course not, but we have to sell it, there is no other way.” He explained to us that as Muslims in China they don’t really suffer any problems. Their religion and culture is respected and even encouraged, and the One Child Policy does not apply to them, they are allowed to have as many children as they like.
“We would all like to help the people of Iraq , but we just don’t know how.”
We asked him about the war on Iraq and the increasing persecution of Muslims in western countries, and what he thought about this. He replied that they keep up with news from around the world, and feel very bad about this: “We would all like to help the people of Iraq , but we just don’t know how.” We asked him about the Danish cartoons depicting the Prophet Muhammad as a terrorist and he was surprised, he hadn’t heard of this but said that of course it would provoke all Muslims. However, he talked of the inhumanity of Saddam Hussein’s execution, and that he had seen it on the internet.
The area of Beijing we were staying in was the student quarter of the city, packed with universities and colleges such as People’s University, National Minorities University , Tsinghua University and Peking University . We spoke with one of the students from Peking University , one of the most prestigious universities in China . So prestigious it seems that it has decided to retain its imperial name of Peking University rather than modernising in line with the simplification of the Chinese language organised by the Communist Party in the 1950s. We spoke with a postgraduate student who was studying the history of the relationship between China and the USA in the 1970s after Nixon’s visit. A very well spoken man, the student told us he had access to all sorts of academic literature from the West. When we asked him if there was much discussion about government policies, and specifically whether anyone questions whether China is really a “socialist society with Chinese characteristics” he chuckled and replied that almost nobody believes that, almost everyone knows China ‘s economy is now capitalist. For students and academics in China this is a no go area, and if anybody tried to publish an article demonstrating that China was capitalist then they would be in big trouble. However, he told us that in academic circles questions such as these are regularly discussed and that there is great interest. Declaring himself against China ‘s capitalist development he told us about the stark and disgusting inequality in the country, especially in the countryside, and the corruption of the government. On hearing us give not dissimilar sentiments about the British government he lamented “it seems nobody will ever be satisfied with their government!”

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The real face of the “Chinese miracle”

Posted by Indian Vanguard on August 24, 2007

July 31st, 2007

30 July 2007. A World to Win News Service. On 17 July the manager of a kiln in north China and one of his subordinates were sentenced to life imprisonment and death respectively. This followed the shocking news in June about the slave labour scandal, which revealed how people have been forced to work in brick kilns in Shanxi province.

These men were accused of holding workers in virtual slavery and forcing them to work in furnace-like brick kilns. The kiln owners ran the factory like a prison according to state media reports, using guard dogs and beatings to deter escapes.
During the trial of the accused it was also revealed that at this particular kiln they had enslaved 34 labourers, including nine who were mentally disabled. In the year before their arrest, 19 workers were injured. The state media reported that at least 13 died from overwork and abuse, including a labourer who was allegedly battered to death with a shovel. Their daily toil started at 5 in the morning and lasted for 16 to 20 hours. The slave workers were locked in a bare room with no bed or cooker, allowed out only to work in the red-hot kilns, from where they would carry heavy loads of newly fired bricks on their bare backs. Many were badly burned. They were fed once a day, given steamed bread and cold water during the only break of the day, lasting 15 minutes. Witnesses testified in court that the hard work was accompanied by lashes and beatings.

Worried that such scandalous news would tarnish the image of the so-called “Chinese economic miracle”, the authorities at first tried to give the impression that such incidents are rare and happen only due to the cruelty of some individuals and greedy kiln owners. However, it came out in various reports that working in brutal and sometimes slave conditions appears to be common, if not in all of China, at least in some inland provinces such as Henan and Shanxi. The authorities, at least on the provincial level, were aware of this situation but deliberately ignored it because of a commitment to boosting economic growth at any cost.
Hundreds of parents had been looking for their missing children and had reason to believe that they had been forced to work at the brick kilns. The government took action only when these parents posted an open letter on the Internet accusing the Henan and Shanxi authorities of ignoring them and even protecting the kiln owners and human traffickers. “A Henan reporter who had helped expose the business accused officials of keeping parents from finding missing children. ‘In our reporting, the biggest obstacle has been lack of cooperation from some authorities in Shanxi’, Fu Zhenzhong, a television reporter, told The China Youth Daily. ‘Some are still coming up with any number of ways to keep parents from rescuing their children.'” (Reuters, 17 June) Finally, close to 1,000 workers were released in a series of police raids and inspections of 7,500 kilns in the central China provinces of Henan and Shanxi.

The traffickers connected with the kilns hunted children on the streets. They used false promises and even kidnapping to obtain children under ten years old and then sold them to kiln owners for less than €50 each.
As a result of this scandal, Shanxi courts convicted a total of 29 people for their role in this slavery. A dozen more are awaiting trial.
The Chinese government could not limit the scandal to one isolated case in one kiln, but did its best to limit the impact by punishing a score of low-level officials. Higher-ranking officials were cleared of wrongdoing. Disciplinary measures were taken against nearly a hundred so-called Communist Party members.

Contrary to what the Chinese authorities and their promoters in the West might want people to believe, there are reasons to think that working conditions in various places in China are not totally different from the situation that came to light in these kilns. For example, the UK Guardian reported 18 June 2007: “From the densely packed factory zones of Guangdong Province to the street markets, kitchens and brothels of major cities, to the primitive factories of China’s relatively poor western provinces, child labour is a daily fact of life, and one that the government typically turns a blind eye to…. as Hu Jindou a professor of economics at Beijing University of Technology says, ‘Forced labour or child labour is far from an isolated phenomenon. It is rooted deeply in today’s reality, a combination of capitalism, socialism, feudalism and slavery.'”

(Actually, while capitalism, feudalism and slavery do mingle in contemporary China’s economy, socialism was abruptly overthrown there through a coup d’état in 1976 after Mao’s death, when those whom Mao called the capitalist roaders within the Communist Party took power by force. The continued existence of state-owned industries today is not a sign of socialism, but of a state capitalist sector of the economy in which the working people are just as exploited as in the private sector.)

The same report refers to a different case in Guangdong province. Middle school students from faraway Sichuan Province complained that they were being abused through a work-study programme that supplied young workers from western China to an electronics assembly plant in the south-eastern industrial boomtown of Dongguan, where labour shortages are common. They were forced to work, supposedly to pay back their school fees. Students complained that they worked 14-hour days, including mandatory overtime. They also said that their pay was withheld from them. In some instances, those who wished to quit the programme had no way of telephoning their families or paying for transportation home.

A similar report of this sort appeared in the German magazine Der Spiegel 6 February 2005. Ullrich Fichtner wrote that the two-decade long economic miracle of Shenzhen province, whose annual economic growth rate has hit 15 percent, rests on the shoulders of young women factory workers such as the malnourished Tang Shotsen, who works from early morning until late night seven days a week making coffee machines for 500 yuan (45 euros) a month, and the young women who assemble plastic dolls, put together watch bands from unfinished leather, make trainers and glass parts for copy machines and do numerous other jobs. In these factories the risk of injury is high. Labourers are often badly injured, losing a finger or burning part of their body, but there is no sign of insurance and medical care, only a few plasters and bandages.

The journalist Fichtner reports that women constitute 70 percent of the 5.5 million seasonal workers from all over China in Shenzhen and the factories in the surrounding area. In some parts of the province such as Nanshan, a high tech centre, this figure is even higher. The migration of young women started in 1980 when Deng Xiaoping called Shenzhen, a city in Guangdong province, a laboratory for the watchword he adopted for China: “To get rich is glorious.” The march of young women searching for a better life coming from all over China to Shenzhen hit a peak in the mid 80’s and early 90’s, when the news of this place of “dreams” spread all over China. Soon these dreams turned out to be illusions and Shenzen a place where life pours out of the workers and into the products they make.

One result was that a vast number of women ended up working as prostitutes in the city and surrounding area. The German report describes the lives of women such as Chou Venil, who works in massage parlour seven days a week from 8 am to 8 pm for 54 cents per hour. The report continues, “Older women with bad teeth stand on the sidewalks holding photo albums. These albums are in fact catalogues of prostitutes, with page after page of passport photos of deformed and swollen faces indicating the vanished dream of the poor girls. The older women whisper, ‘Girls, mister, they are young, they don’t have AIDS, mister…'”
Prostitution seems to be an integral part of this economic boom. These women face huge problems. Their dreams have vanished, and now they have to fight for a job they never dreamed of: “In the southern boom city of Shenzhen, thousands of armed police were deployed earlier this week to quash a protest by more than 3,000 prostitutes and karaoke hostesses who were left without jobs after a crackdown on massage parlours and discos.” ( Guardian, 21 January 2006) The city is notorious not only for the street prostitutes but the huge number of concubines kept as “second wives” by foreign businessmen, especially from Hong Kong.

Behind this reality is another bitter truth: many of those young women who came to Shenzhen are from families where female children were not welcomed. They come from places where giving birth to a girl once again is considered as a disaster and infanticide of baby girls is common. This evil disappeared or vastly diminished after the new democratic revolution in 1949 and China’s advance toward socialism. It has once again erupted in the last couple of decades in China, along with many other aspects of capitalism and other oppressive economic and social relations.

These examples from Guangdong are particularly important because unlike Shanxi, where the slave labour brick kilns are located, Guangdong is not an isolated, backward area but a coastal province emblematic of China’s rapid growth and the success of its export industries. It is the country’s richest province. Guangdon’s success depends on the super-exploitation of workers from other, far poorer areas, especially the hinterlands, and, to a large extent, women. Without the kind of backward conditions in the countryside symbolized by slavery in the brick kilns, China’s modern industry would not be so profitable.

We often hear about the “Chinese economic miracle” after the socialist road was abandoned following the death of Mao in 1976. Since then China’s economy has achieved a growth rate of about ten percent a year. But this growth has been achieved at the cost of enormous and galloping disparities, among them the economic gaps between the cities and the countryside, agriculture and industry, and the better-off coastal provinces and the poor interior, as well as the reversal of the emancipation of women. These inequalities are the source of enormous profits and enormous suffering. They are also a sign of a radically different social system since Mao’s time.

Mao said that the real difference between capitalism and socialism is not what a society is called but what road it is on. Socialism could not just immediately abolish what it had inherited from the whole history of exploitation, including these and other major oppressive social differences, above all the division of society into classes, and all the ideas, customs and practices that came from those property relations. But when the proletariat held state power, the revolutionaries under his leadership fought to reduce the very same gaps that have become yawning chasms in China today. They did this by policies based not on what produced the most wealth in the short run, but what would bring about the balanced, equitable and liberating growth of society as a whole.

Socialist China did achieve economic miracles. Its sustained growth rate was enormous compared to comparable countries like India. In only a few decades the people’s average lifespan doubled. But the question was not how to produce the most, but the purpose of production and consequently how to produce. Should the wealth produced by labour increase social disparities and inequalities and further enslave the working people? Or should it increasingly allow the working people to become masters of production and all of society? Should the working people be beasts of burden, or should they lead the vast majority of people in the revolutionary transformation of China and turn it into a base area for world revolution to liberate humanity and bring about communism, a globe freed of the chains of the social inequalities and relations that bring such misery and hold back human potential?

The policies of the leadership of the communist party regarding these issues, Mao said, determine whether or not a country is really socialist, and whether or not that party is really communist. The truth of this idea is dramatically demonstrated in the contrast between China of today and of Mao’s day – the contrast between his China on the road to an enormously different future for the whole of mankind, and the hell-bound country of the 21st century that has brought back so much of the evil of the past.
Since the capitalist roaders enshrined private property, made profitability the highest goal and dissolved the collective forms of ownership and way of life in the countryside, much of the two-thirds of the population that is still rural has been abandoned. In the cities, the vast majority have become wage slaves – able to earn a living only as long as their labour enriches capital. Even the country’s most profitable and highest-tech industries are dependent on super-exploitable rural migrants, and most of those businesses are in the hands of foreign capitalists. Poverty and oppression is a condition for the wealth the country produces. China has replaced socialism with globalized capitalism.

While it is certainly true that the vast majority of people are not kept in the kind of literal slavery found in the brickyards, what has been happening in the poorest and most backward areas of China sheds light on the kind of society it has become. Most importantly, it shows what kind of social relations have come to characterize Chinese society. Where working people were once masters and liberators, now once again they are slaves

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In China, they are ready to throw out anybody for commercial space

Posted by Indian Vanguard on April 4, 2007

NEW DELHI: Here is yet another Chinese model of “displacement” that could appeal to communists here. A report from Beijing on Tuesday said the state has asserted its right to displace a citizen for providing space to a commercial establishment, but only after providing a compensation package.

The report said that a couple and a man lost out to the might of the state when their “nail houses” were demolished to make way for a shopping mall and a landmark building for the state broadcaster.

The couple, Wu Ping and Yang Wu in southwest China’s Chongqing Municipality will be compensated an additional 900,000 yuan for the loss of their business. The developer, Chongqing Zhirun Real Estate Co Ltd, will compensate them for 30 months of losses at a rate of 30,000 yuan a month.

Leftists in West Bengal, just like their favourites in China, have been maintaining that the state should have a role in corporates acquiring land for business purposes. It is not in agreement with the Congress and the BJP when they say that the government should have no role in the corporates’ acquisition efforts.

And like in Nandigram, it also took a protracted fight for the Chinese couple to get justice from the Communist bosses. The Chinese couple’s fight came to a head after a photo of their home, showing their house perched a top a spike of land in the middle of 17-metre-deep excavation site where a new shopping mall will be built, was published in the domestic as well as international media.

Agency reports from Beijing said water and electricity to the couple’s two-storey brick house in Jiulongpo District was cut in 2004 but they refused to move. Developers had earlier persuaded 280 other families to make way for a new shopping mall. The couple’s residence became known as the “nail house” because it stood up like a nail in the middle of the excavation site. Economics Times

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