China’s Neglected Half Stirs to Life

By Garth le Pere and Garth Shelton –
(Business Day) — The modernisation and emergence of China as a global player is inextricably interwoven with the narrative on globalisation. Trade, investment, technology, capital market liberalisation, export-driven growth and flows of information all help to explain — and indeed, have been vital to — China’s dramatic integration into the sinews of the global economy, in a manner that could not have been anticipated when Deng Xiaoping crafted a more pragmatic economic policy in 1978.

However, China’s spectacular economic success masks what Mao Zedong described as the “three great differences”: those between workers and farmers, country and city, and mental and physical labour. These differences persist and continue to define the domestic political economy. Moreover, they are the antithesis of Maoist egalitarianism whose essential premise was the mobilisation of all social strata.
A primary challenge for China’s development is how it manages the institutionalised difference between city and country in pursuit of a more balanced approach to industrialisation and modernisation.
In the context of contemporary China, the city-country dichotomy has played itself out in the rapid development of the coastal (eastern) regions that have become the industrial vectors and commercial nerve centres of China’s economic marvel, on the one hand; and its western hinterland, which forms the geographic axis of China’s underdevelopment, poverty and inequality, on the other. There is an invisible line that separates the coastal and western provinces of China along various demographic and topographic dimensions: ethnic Chinese and ethnic minorities; high and low population densities; relative affluence and backwardness; major downstream water users and upper-reaches suppliers; the locus of development plans and (until recently) benign neglect, and so on.
This virtual glass wall is grounded in economic and political factors, raw material endowments, and regional disparities in development and ethnicity. If anything, it is emblematic of Mao’s “three differences”. And Deng’s “open door” policy increased these differences — coastal regions were favoured in budgetary allocations for education, economic development, infrastructure, and social expenditure.
The magnitude of the challenge of developing the western region comes into sharper relief when considering its size. It includes 11 provinces, autonomous regions and municipalities under the direct administration of Beijing and covers 5,4-million square kilometres, 57% of the country’s land mass, and has a population of 285-million (23% of the total population). Despite its vast size, much of the region is not fertile. It nevertheless boasts substantial mineral reserves such as 36% of China’s coal, 12% of its petroleum and 53% of its natural gas.
But it is the region’s poverty that is most troubling. In 1999, the region accounted for only 14% of national gross domestic product (GDP). More than half of China’s poverty-stricken counties and 90% of the poorest population are concentrated in the western region.
It is not surprising, therefore, that in 1999 China unveiled an official plan to focus on the western region and to pursue a vigorous programme of economic development, particularly as this affected a rise in the standard and quality of living. The goal is to establish a “new western China” by the middle of the 21st century that will enjoy economic prosperity, social stability, ethnic harmony and ecological health.
Thus water conservation, energy development, telecommunications, and improved social infrastructure have been placed at the top of the government’s Western Region Development Strategy. As a measure of its seriousness, in 2002 the government launched an investment plan: 500-billion yuan ($60,5bn) in planting trees and restoring grasslands; 200-billion yuan in upgrading infrastructure; 260-billion yuan in economic development; and 50-billion yuan for improved social welfare. One-third, or 160-billion yuan, of the long-term state treasury bonds were used for western development. Also, the central government made direct budget transfers to the western region totalling 300-billion yuan.
Reminiscent of Mao’s “great leap forward” and its man-over-nature imperative, the calculus of social and economic development includes major capital projects: a south-north water diversion; a west-east natural gas transfer; a west-east power transmission; and the building of the Qinghai-Tibet railway. There are 10 other major projects, five in preparation, and 78 medium-sized projects that invite foreign investment.
Since 2001, the government has offered preferential investment incentives in the western region. For instance, for three years after the termination period of the preferential tax policy, tax will be collected at a reduced rate of 15%. Depending on the product, those that are targeted for export will be either tax-exempt or taxed at a reduced rate of 10%. In addition, western provinces, autonomous regions and municipalities have the authority to approve investments of less than $30m themselves.
The results of the western development strategy have been impressive: GDP growth in 2000 was 8,5%, 8,7% in 2001, and 9,6% in 2002. President Hu Jintao’s recent commitment to divert additional funding to western development programmes suggests a continued period of growth for the region as a whole.
However, from the perspective of development, impressive growth figures and China’s successful reorientation towards the global market are no panaceas for the multiple problems it faces in the western region. Renovated political and social institutions — which are sensitive to cultural identity and ethnic diversity and enjoy devolved authority and powers — will be necessary to resolve China’s internal crisis of modernity as this is manifested in the dual worlds of east and west. For it is precisely at this geographic interface where the contradictions of capitalism come face to face with the practice of socialism.
Le Pere is executive director of the Institute for Global Dialogue, and Shelton is associate professor of international relations at Wits. The authors recently visited western China.
Source: Resource Investor

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