China’s Transformation: A Southeast Asian PerspectiveBy Walden Bello
Over the last week, China has been undergoing a once-in-a-decade leadership transition. It is an event that will have major implications for China’s neighbors in Southeast Asia. Given this, it might be worthwhile to review the changing appreciation of the momentous developments in China on the part of people in our region, using my generation—the so-called “baby boomer generation”–as an example.
Many in my generation in Southeast Asia came of age during the tempestuous years of the Mao era, when China was seeking to assert itself as a revolutionary beacon in contrast to the Soviet Union and undergoing the Great Proletarian Cultural Revolution. Many were radicalized by the twin forces of the struggle of the Vietnamese for national liberation against the United States and China’s bid for revolutionary leadership in the third world.
Mao and Southeast Asian Youth
Throughout Southeast Asia in the 1960’s, young radicals gravitated away from the established pro-Soviet communist parties that had been dominant for four decades and went on to form new communist parties on the Chinese model. In the Philippines, the Communist Party was reestablished in December 1968 and the New People’s Army was founded in March 1969. The Chinese imprint was very visible: the basic strategy was to surround the city from the countryside in a “protracted people’s war,” relying on the peasantry as the main force of the revolution, not the urban working class.
Many in my generation were attracted by this vision of revolution that put the emphasis on the armed struggle, as opposed to the centrality of the parliamentary struggle that was then regarded as the trademark of the pro-Soviet communist parties. I would say, however, that what led some of us to join the organized left in the early 1970’s was not so much its revolutionary promise but its being the only force that seemed capable of resisting the Marcos dictatorship that was foisted on the country in 1972.
I think that in so far as being a developmental model during that period, China’s break with the rapid industrialization model espoused by the Soviet Union struck a resonant chord among intellectuals in countries where more than two thirds of the work force was in the countryside and the massive amount of capital needed for a large-scale rapid industrialization program was simply not available. However, when it came to the alternative of a countryside-led development based on the commune system, there was largely curiosity and not so much attraction on our part. I think that during this era, the sixties and seventies, it was the Chinese model of armed revolution that attracted us, not China as a model of development.
Deng and the Countryside
The twists and turns of Chinese domestic politics in the seventies and eighties, along with the crisis of socialism, led many of us to become cooler about China, even as the political limitations, economic illusions, and ethical flaws of Maoist and Leninist approaches became apparent to us in our efforts at social transformation. Many activists left the traditional organized left in the late eighties but I would say that a primordial concern about development with equity and sovereignty remained embedded in them, even as they saw classical Marxism-Leninism as anachronistic. It is from this perspective that I developed my stance towards Deng Hsiao Ping’s policies in the eighties and nineties. This process was probably less a theoretical than a subliminal one, as is usually the case.
While it challenged my views about the relative roles of the market and the state, I would say that my reaction was cautiously positive towards the introduction of more market forces in the countryside that allowed farmers to significantly raise their income. Under the Household Responsibility Contract System, each household was given a piece of land to farm. Of what it produced, the household was allowed to retain what was left over after selling to the state a fix proportion at a state-determined price, or simply by paying tax. The rest it could consume or sell on the market.
I distinctly remember reading an article about Deng’s rural reforms in the Washington Post in 1982, and while it challenged my cautious views on market reform, I also felt very excited and instinctively felt this was the way for China to go if the conditions of life of the country’s vast masses of peasants were to improve after the chaos of the Cultural Revolution. Indeed, looking back later at the results of this phase of the reform program, my instinctive reactions were justified. Between 1978 and 1984, rural poverty, according to official estimates, declined from 33 per cent to 11 per cent of the population, or the number of poor people declined from 260 million to 89 million in a matter of six years.
However, I was less enamored with the policy shift towards export-oriented industrialization that occurred in 1984, which portended that China’s rapid modernization would be carried out on the backs of peasants and workers. I must say, however, that I was judging China’s ongoing shift from the experience of export-oriented industrialization of the so-called “Newly Industrializing Countries” (NICs) that were China’s neighbors. There, rural income growth declined, agriculture deteriorated, while workers were subjected to repressive working conditions. My book Dragons in Distress: Asia’s Miracle Economies in Crisis, which came out in 1990, documented this underside of rapid development in South Korea, Taiwan, and Singapore.
Again, looking back, my worry about the policy turn in the mid-eighties was justified, at least with respect to the countryside. Peasant income, which had grown by 15.2 per cent a year from 1978 to 1984, dropped by 2.8 per cent a year from 1986 to 1991. Some recovery occurred in the early part of the 1990’s, but stagnation of rural income marked the latter part of the decade. In contrast, urban income, already higher than that of the peasants in the mid-eighties, was, on average, six times the income of peasants by 2000.
Nevertheless, one could not but be impressed by the boldness of Deng’s reforms: the building of massive export-processing zones, the invitation to foreign capital, the loosening of restrictions on domestic entrepreneurs, the tying of China’s future to the export markets of Europe and the United States. There was nothing new about these thrusts. Taiwan and South Korea had adopted them in the mid-sixties, some twenty years earlier. It was the scale and speed with which the reorientation was done that was impressive in the case of China. There was also the sense that China could tie its future to the western markets and western capital while still preserving its autonomy because it had carried out something that few other developing countries had been able to do: successfully carry out a national revolution that created a strong state that could bargain on strong terms with global capital and a hegemon like the United States.
Assessing China at 50
Let me cite a couple of paragraphs from an article I wrote for the now defunct Far Eastern Economic Review in Oct 1999, on the 50th anniversary of the founding of the People’s Republic of China:
- China is one of the world’s most dynamic economies, growing between 7-10% a year over the past decade. Its ability to push a majority of the population living in abject poverty during the civil-war period in the late forties into decent living conditions in five decades is no mean achievement.
-That economic dynamism can’t be separated from an event that most of us in the South missed out on: a social revolution in the late forties and early fifties that eliminated the worst inequalities in the distribution of land and income, and prepared the country for economic take-off when market reforms were introduced to the agricultural sector in the late 1970s.
-China likewise underlines the critical contribution to future economic development of a liberation movement that decisively wrests control of the national economy from foreign interests. China is a strong state, born in revolution and steeled in several decades of wars hot and cold. Its history of state formation accounts for the difference between China and other emerging markets such as Thailand, the Philippines, Brazil, and even South Korea.
-The difference is underlined by China’s relationship with foreign capital compared with most countries in the South. Beijing is tough on foreign investors and has the upper hand in its relationship with the international business community. Yet foreign investors are scrambling to get into China, restrictions and all.
-Foreign investors will always scream about investment controls chasing away foreign capital. But the case of China, which now accounts for about a quarter to a third of total investment going to emerging economies, shows that where there is money to be made, investors will live with the restrictions.
-In contrast, foreign investors can blackmail other governments to dilute their investment rules. Investors know that they can ratchet up their demands because weaker governments inevitably will give in, like the Estrada government in the Philippines, which has gone so far as to propose amending its constitution to make it 100 per cent investor-friendly.
- Respect is what the Chinese government gets from investors. Respect is what our governments don’t have. When it comes to pursuing national economic interests, what separates China from many of our countries is a successful revolutionary nationalist struggle that got institutionalized into a no-nonsense state.”
Some of my colleagues and companions in the search for equitable and sustainable development were upset at what they felt was my too positive views of the Chinese state, which in their opinion, had become an adjunct of global capital. Unfortunately, they ignored the rest of the article, which articulated my concerns about where China was headed. These concerns have become even more urgent in the 13 years since that article was written. Let me quote that section of the article in full:
- But China does have pressing problems, though state intervention in the economy is not at the top of the list.
- It goes without saying that China must pay urgent attention to environmental degradation and not be put off by the ethnocentric environmentalism of people like Lester Brown. Here, the Chinese must start reexamining, indeed discarding, the foreign capital-intensive model of development that they uncritically adopted from the World Bank.
- Another top priority for the state must be containing the social inequalities that have been generated by this model over the last two decades of rapid growth. Large numbers of people have been left behind, particularly in the great Chinese hinterland. According to the United Nations Development Program, about 29.4% of the population lives under the poverty line. And the World Bank estimates the gini coefficient (a measure of income inequality) to be 41.5–a figure that is far higher than that for India, Indonesia, Egypt, and Pakistan, and now approximates that for the Philippines and Thailand.
- But certainly, at the very top of the list is the urgent need for greater democratization, and here, many of us in the South should be speaking more loudly in favor of human rights in China, in the same way we scream about it in Indonesia and Burma. At the same time, democratization, we must remind our friends in the West, will come to China with its own rhythm and timetable, and in forms that might not be exact reproductions of western liberal institutions.
- The People’s Republic at 50 underlines for us in the South the critical importance of a careful balancing of the state and the market, of a strategy of selective, measured, and discriminate integration into the global economy. But the greatest challenge is still to come, and that is how the Chinese government can accommodate its citizens playing an active role in both political and economic decision-making. Only by genuinely bringing the masses into the process of determining their destiny-the leitmotiv of China’s revolutionary heritage-will this great country escape the pitfalls of the road ahead.”
China at 63
These concerns are, if anything, more urgent now than 13 years ago. China’s environmental problems, for one, are now global in relevance. China is now the world’s biggest emitter of greenhouse gases, accounting for some 29 per cent of total emissions in 2011, up by 9 per cent from 2010.
Inequality has worsened. With its gini-coefficient—a measure if inequality—rising to 0.47 in 2010, China is now a more unequal society than the United States, a development that is a far cry from the egalitarian society that the revolution was supposed to bring to China. A recent New York Times article on the economic activities of relatives Prime Minister Wen Jiao Bao revealed how the families of the high officials of the Communist Party of China have been able to corner much of the wealth created by the policies of the last few years.
Moreover, the concern about the model of foreign capital dependent export-oriented industrialization is now something that has become the center of debate in the party and government.
In 2008, in response to the deepening economic crisis in its main markets, the US and Europe, China launched a $585 billion stimulus program to enable the domestic market to make up for the loss of export demand. This has had fleeting success, however. Its growth rate in the first half of 2012 declined to 7.8 per cent, its slowest pace in three years. The main reason appeared to be its continuing great dependence on Northern markets and its inability to institutionalize domestic demand as the key engine of the economy.
China’s failure to break with export-led growth, rather than merely a case of structural dependency, reflected a set of interests from the reform period that, as Yu put it, “have morphed into vested interests, which are fighting hard to protect what they have.” The export lobby, which brings together private entrepreneurs, state enterprise managers, foreign investors, and government technocrats, remains the strongest lobby in Beijing.
Indeed, according to Yu, only crisis beckoned in the future since China’s “growth pattern has now almost exhausted its potential.” The economy that most successfully rode the globalization wave, China “has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could suddenly be lost. China’s rapid growth has been achieved at an extremely high cost. Only future generations will know the true price.”
From Low-Profile Developing Country to High-Profile Hegemon?
There is one other item of concern coming from the Southeast Asia. When I was in Vietnam last year, some people in the government there asked me if I thought that China had entered a new phase in its development, whether it had transitioned from the Deng’s preferred posture of keeping a low profile internationally while focusing on economic development to one where it was now striving for regional hegemony. Was China, the Vietnamese asked me, turning from an inward-looking country focused on modernization to being an outward-oriented power seeking regional hegemony?
The question was, of course, related to the inexplicable claim China was making to the whole South China Sea, or what Vietnamese call the East Sea and Filipinos now call the West Philippine Sea. The Chinese “nine-dash-line” claim has become extremely destabilizing not only because it so brazenly violates the United Nations Convention on the Law of the Seas that recognizes that countries have a 200-mile Exclusive Economic Zone (EEZ) from their shores but also because it would subject to Chinese domestic jurisdiction one of the world’s most active international waterways. Moreover, it has provided the United States an opportunity to reinsert itself aggressively into the region, converting a territorial dispute that could be resolved through multilateral diplomacy–if China would only allow that–into a superpower confrontation.
Challenges to the New Leadership
For all these reasons, the leadership transition that is currently taking place in Beijing is something that is of massive interest not only to Chinese but the whole world. The questions that are now uppermost in the minds of many include the following:
Will the new Chinese government headed by incoming President Xi Jin Ping definitively move to a new economic paradigm that would put the emphasis on income redistribution and be more ecologically friendly?
Will the new leadership institutionalize new ways to address the grievances of peasants and migrant workers and make them genuine stakeholders in the Chinese miracle?
Will China’s new leaders move towards promoting more citizen participation in governance and make a major effort to root out the now pervasive corruption that is a serious threat to their legitimacy?
Will the new leadership become more flexible in global negotiations on climate change, so that in the coming United Nations Climate Conference in Doha, Qatar, it will declare itself, as the world’s leading emitter of greenhouse gases, open to accepting mandatory cuts in its emissions?
Will the new leadership move away from confrontation and declare itself open to multilateral negotiations to resolve the territorial disputes with Southeast Asian countries in the South China Sea?
A Second Chance?
Let me conclude by saying that there was a time during the early 1990’s, before the Asian financial crisis, when the Association of Southeast Asian Nations (ASEAN) was still influential and China still placed a great deal of emphasis on good relations with its neighbors, that many of us felt that a new era was dawning in the region, a time when countries could finally develop the mature relations that had been stunted by decades of Cold War. Finally, I felt, developments were eroding the rationale that the United States presented for its military presence in the region: that it was the guarantor of peace and stability in the region.
That maturation of Asian relations did not come about. The Asian financial crisis, unfortunately, eroded the prestige of ASEAN and the effectiveness of the once promising ASEAN Regional Forum as an institution for the discussion and resolution of regional security issues, while China and the United States went on to develop their own special relationship that has oscillated from being complementary to being adversarial. The latter condition now dominates, if we are to take President Barack Obama’s comment during the final presidential debate a few weeks ago: “China is both an adversary, but also a potential partner if it is playing by the rules.”
There is still time to move away from the course of confrontation that threatens the region with America’s reckless “Pivot to Asia,” but it will take a really bold effort on the part of ASEAN leaders and the new Chinese leadership to reach out to each other. Given the propensity of History to spring surprises on us, I would not preclude such a development.
*INQ.net columnist Walden Bello is a member of the House of Representatives of the Philippines representing the political party Akbayan (Citizens’ Action Party). This article is adapted from a speech he gave at the China Institute at the University of Alberta on Oct. 24, 2012.
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