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8/20/1995 - Back to the Past: Part II - Can Capitalism Solve China’s Problems? by Cheng Li

Back Past Part II Can Capitalism Solve China Problems BYCHENG LI SHANGHAI China August The Resurgence Official Corruptionand Capitalist Exploitation Few issues People Republic China years generated public resentment social guandao Chinese official speculation publicmoneyandbureaucratic profiteering Chinese authorities penetration official corrup today China Corruption grown propor tions Jiang Zemin Secretary General Party warned would Communist Party itself Li Peng Premier cently depicted corruption death issue China The Chinese Communist Party power corruption appeal nowthisimage iscompletelygone In officials China Supreme People Procurator western political scientists agency alone received citizen eports official corruption years From Discipline Inspection Committee ofthe NationalPeople sCongressinvestigatedmorethan870 ficial violations various levels officials disciplined expelled Communist Party Corruption scandals found Chinese Since 1980s People Liberation Army PLA allowed start doing business Over companies officially registered andmany thousands areknown operate without approval logistics chiefs In ample total billion million worth unreported fundswereuncoveredinmorethan75 ofallPLAunits atorabove regimental level But interestingly those punished usually medium level government officials junior military officers There handful ranking leaders ministe provincial level during There local saying Shanghai reflecting hypocrisy problem governmental corruption campaigns A bezzler gives lecture governmental corruption campaigns ChengLi isanICWAFellowstudyingthepoliticaleconomyofthecoastofChina medium sized embezzler listens lecture smallembezzler If ranking officials punished punished because their crimes Mr Yang oldengineerwhomImetinShenyang summer because powerstrugglewithinthe Party Mr Yang viewwas widely sharedbymany people inBeijingwithwhom Italkedlastsummer Twolarge scandals official corruptionwere exposed earlier Beijing In first Zhou Guanwu Chair Shougang known Capital Iron Steel Corp largest State owned enterprises country under investigation Zhou Beifang Chairman ofShougan sHongKong basedin vestment subsidiary ShougangConcordHoldings arrested The Chinese authorities spelled alleged crimes ofthe father sonteam butsome press reports suggested investigation centered Shougang purchase Peru The company million least twice ofcompetingbids TheYoungerZhouwas accused ofreceivingahugekickback Thesecondscandalwasexposedbecause ofthe death ofWangBaosen whowas ViceMayor treasurer Beijing Hewasfounddeadwitha gunbesidehimand scores cigarettes butts Wang Chen Xitong Politburomemberandhead theCommunistParty Beijing forced resign under house Chen whoran Beijing sNewCentury Hotel arrested According official sources Chen Xitong associates municipal government CL Astreet advertisement Beijing states Seventh International Anti Corruption Conference beheldin Beijingin efallo f1995 No place could appropriate meeting Beijing afriendofminesaidtome passed advertisement No driver interrupted It would appropri ateforBeijingtohost interna tional corruption conference large fortune themselves through fundrais OlympicGames leasing downtown areas foreign investors ChenXitongand associates Beijingmunic governmentwere caughtbecause JiangZeminand Shanghai based leaders wanted expel their political enemies Mr Yang commented Otherwise Chen would remain Politburo Member andWangwouldnot Howmanybribes Chen Xitong andWangBao senreceive Iasked You asked wrong question Mr Yang replied These governmentleaderswere corrupted bother receive bribes They convenientwaysto Notbotherwithbribes Isaid Some ranking government officials revolutionary veterans turned State includingChina slarge internationalcorporations their private firms Mr Yang explained They spend State money their money A years Mr Yang continued corruption China petty bribery hundred dollars Nowofficials steal millions billions I Mr Yang exaggerating In first months example cases official corruption reported government The totalamount ofbribes exceeded million The phenomenon Mr Yang described means unusual today China I heard stories about State officials great tunes forthemselvesby selling stateproperty The tinction between public firms private companies oftenbecomeblurred China International Trust Investment Corp CITIC China first transnational corporation which assets billion billion US shares companies 8Manypeople inboth China abroad question whether State private Some level executives CITIC their children become extremely wealthy recent years A Rong Yiren former Chair CITIC currently Vice President China personally several dozen mansion suburb London where housekeeper gardeners three chefs several maids Thepersonwho isinchargeoftheCITICatpresent Wang Jun Wang Zhen Vice Presi China The Wang family notorious China abuse power corruption family members Earlierthisyear HongKongnewspapers ported Wang younger brother WangBing military helicopter kidnap rival grandson Ulanhu former Vice President China Resurgence ofBureaucratic Capitalists Before Communist Revolution middle Anew Lincoln Town militaThatandanalarm light thebackwindowsparks infrontof afashionable Suzhou Onecan often these luxuri alarm lights driving through traffic China major cities especially early evening Thesepoliticaland military elites usually business restaurantswith theirfamiliesor tonightclubswith theirfriends This isthescenethatweused movies about corrupt Nationalist officials relatzve ofminesaid butnowwe scene daily school teacher I chatted Guangzhou there FourBig Families sidajiazu wealthiest bureaucratic capitalist ilies country Now China Four New Big Families New families wealthy Nationalist government TheFourNewBigFamilies theschoolteachertold refertothefamiliesofDengXiaoping WangZhen Rong Yiren Chen Yun Chil Chen Yun revolutionary veteran impor business posts country Chen Yun ChenYuan isFirstViceGovernorofthePeople sBank third daughter Chen Weili Vice President China Venturetech state backed investment known speculation Shanghai property market Although there rumors China members FourNewBig Families under vestigation thesefournewfamiliesare stillverypower economically politically The Four New Big Families reflects widely spreadresentment officialcorruption inChinese etytoday A teenage relative Shanghai asked What English abbreviation PRC stand The People Republic China I replied No young relative PRC stands People sRepublic ofCorruption Official corruption undoubtedly become Institute ofCurrentWorld Affairs destructive effects China reform Ac cording comparative study corruption which recently released The New York Times countries surveyed China ranked No In donesia terms ofthe rampancy corruption Some people China believe rampant corrup inevitable Chinese government decreases macro micro economic control country movesto market economy China stage which identify primitive accumulation capital Chinese scholar East Asian Studies I Shanghai Things official corruption capitalist exploita disparity between unavoidable Do existence these things justified I asked Yes China wants socialism scholar answered Many other countries East West explained experienced similar stage capitalist development Japan Taiwan Sout Korea Southeast Asian countries example serious problems official corruption 1960s 1970s ashadtheWestern capitalist democratic triesinthe earlieryears oftheir capitalistdevelopment More importantly scholar continued social which emphasizes public ownership central greater economic equality failed China failedeverywhereintheworld Wedon thavean ternative Look around world today privatization shiyouhua global trend The scholar certainly valid points Since 1980s private sector swept world andgovernmentsacrosstheglobehavebeenbusy their companies In alone governments nearly countries billion US dollars worth state owned enterprises private companies That running total since startling328billionUS dollars This global trend toward privatization started advanced Western industrial where privatiza tionwasseenasthe goldenpathtoagloriousfuture early 1980s In years however vatization hasgrownmost quickly developing tries Latin America Regional privatization Latin America increased value worldwide total Events Eastern Europe former Soviet Union beginning CL stantiated global trend The United NationsDevel opment Program UNDP created special interregional network privatization which worksto assist private sector these regions The immediate causes private sector country country However governments usually faced common pressures force develop private sector These pressures include slowdown economic growth uncontrollable state budgets inefficient state enterprises public services decline military dustries problems welfare rnment Ex communist states example struggling inefficiency their economies build capital scratch As Western scholars observe after ofcommand paternalistic management ciety communist states painfully aware their economic political system could satisfy needs wishes citizens The communist system which deprived human beings right private property right initiate engage economic activity doomed every other human right example right equal oppor tunities participation government decisions jeopardy As state becomes ployer controller means produc given country formidable disparity poweris createdbetween rulers andthe ruled These communist countries capitalism towards individual liberty The process market reform gener accompa Chinese sociologist emanci pation people minds release people vitality With emergence private sector people decide where Before I China every Chinese citizenhadadanwei aunit whetheritbeafactory school neighborhood committee Danwei served institutional means Communist elites determine political economic individual One receive approval Danwei wanted married child But danwei losing importance because freely choose danwei start their private danwei The emergence private property rights economic decentralization market helped solve politico economic problems isted prior reform contributed economic miracle Deng It evident Chinese economy verge bankruptcy Mao A central question askis capitalism really solve China problems It seems solutions Mao authorities found problems become problems country I strongly about historical irony during recent visit Wenzhou medium sized which cated Zhejiang Province southeast coast China TriptoWenzhou theBreedingGroundof Chinese Capitalism Wenzhouhaslongbeenknown forthedynamicrole private economy People China callWenzhou breedingground China italist development The Wenzhou region population includes urban districts counties towns While private enterprises strictlybanned country during Cultural Rev olution petty entrepreneurs actually survived Wenzhou developed small underground private businesses Wang Hongwen former Vice Chairman Chinese Communist Party member Gang Four during Cultural Revolution wants lingering presence talism under socialist China toWenzhou When economic reform began Wenzhou immediately emerged pilot region China italist development In Office Central Committee Chinese Communist Party circulated notice thatWenzhou would serve experimental development private sector By State owned enterprises percentage total industrial output value while collectives private firms accounted respectively Table The average growth ofthe total industrial output values private firms faster those State owned enterprisesand collectives Several geopolitical factors contributed rapid development private economy Wen First W enzhouhaslongbeenrecognizedasare people little arable The arable person Wenzhou region about square meters Accord current condition agricultural mechaniza electrification China rural laborer cultivate about average This means region overwhelmingly largenumber rural laborers These surplus rural laborers either migrate other regions change their economic activities agricultural sector industrial commercial sectors Thus geographical disadvantage actually contributed economic boomin region Table ChangesofTotalIndustrialOutputValuesandtheEconomicStructureinWenzhou Imillionyuan Year Total Industrial State Firms Collectives Firms Private Firms Output Value Total Total Total Average Annual Growth Rate Sources YuanEnzhen Zhongguosiyingjingdixianzhuangfazhanyupinggu China sprivateeconomy conditions development andevaluation Shanghai RenminPress andHiroshiSato MarketConversioninWenzhou ZhejiangProvince ETROChina Newsletter No Institute Current World Affairs Secondly Wenzhou islocatedonthesouth coast China whichis opposite Tai across Taiwan Strait Because tegic disadvantage Chinese government unwilling invest region For first three decades government invested million State owned enter prises region As result industrial Wenzhou The government support pressure employment however provided portunity development private sector Thirdly geopolitical disadvantages Wenzhou nurtured strong distinctive sense entrepreneurship Wenzhou people A large number Wen people migrated during decades other areas other countries where formedWenzhou communi example Beijing Hanzhou Paris Rome They engaged kinds businesses places while maintained close Wen The money elsewhere vided capital their relatives establish private firms Wenzhou In example overseas remittances Wenzhou totaled which counted total overseas remit tance Zhejiang Province Currently Wenzhou private enter prises about private stores The annual output value private enterprises 10millionyuan ItiswidelybelievedthatWenzhouis richest areas China thousands millionaires I Wenzhou friend Joseph Kahn The Wall Street Journal Bureau Chief Shang May This first visit Wenzhou forboth Wehad anticipated thatwe would burgeoning other coastal cities country What I Wenzhou however shabby There buildings under struction I skyscrapers emerging commercial center southeast China Joe assistant The Wall Street Journal booked rooms Huaqiao Hotel hotel My father later hotel where stayed Wenzhou years Some hotels distinguished architectural styles other unique characteristics there nothing special about Huaqiao Hotel I surprised CL JIANGSU Shangl ZHEJIANG FUJIAN Fuzhou Wenzhou built hotels other modern urban lities during decade while other coastal cities built elegant Wenzhou seems atten urban reconstruction I disappointed inconvenience local transportation quality roadsinthecity Ihaveneverseenacitywithasmany bumpy streets Wenzhou The actually license small sized automobiles because survive conditions Ihaveheard storiesofhowrichentrepreneurshave contributed public welfare JoeKahn certainlynotwhatI seehere inWenzhou I absolutely agreed Joe The municipal govern mentofWenzhouoftenboastedthatthe cityusedlocal capitalincludingmoneyraisedfromtheprivate sector forurbandevelopment projectsinthe Butwedid major projects except construction newWenzhouAirport You could expect China become welfare capitalist country overnight Mr Zhu Astrong anddistinctivesenseofentrepreneurship theWenzhoupeople isevidentialongthestreets ofthecity Although thisbuilding stillunderconstruction thespaceon thegroundfloor ready being shopsfor small businesses oldentrepreneurwithwhomJoeandIhada calrestaurant But already twenty years since mergence private enterprises Wenzhou Joe commented Yes Mr Zhureplied butwe stillneedtoaccumu capital Mr Zhu peasant family small Wenzhou City In early 1970s Zhu parents started small business selling fruit seafood black market The family movedtoWenzhouintheearly 1980s Withinitialcap 000yuan providedby Zhu parents Zhu brothers three sisters established garment factories first Wenzhou Qingdao Tian The registered capital their family business creased Zhu tually brothers tershave several millionyuan capital Butwewill stillhavealongwaytogotobecomea entrepreneurial family Wenzhou Mr Zhu explained Atthis point privateentrepreneursinWenzhou Mr Zhu interested making fortunes themselves their families No really cerned about socio economic being community The disparity between serious problem region A survey private enterprises Wenzhou showed average income reportedby owners times their employees The income believed greater Another study private enterprises foundthat46 ofworkerswerenotsatisfiedwiththeir incomes benefits During Joe I visited number factories downtown Wenzhou The making dustry become industries along garment electronic industries reform A manager factory thatthecityhadabout6 000shoe factories Wewere strucknot onlyby large number factories terrible working conditions these factories Shuixin small industrial complex which islocatedafewminutesawayfromtheHuaqiao Hotel hashundreds ofshoe factoriesand stores Atyp factory complex actually shabby house where several hundred borers crowded along assembly These factory houses story houses Institute Current World Affairs Mr Zhuandhis asuccessfulyoungentrepreneurialcoupleinWenzhou owners managers factories added second story Tall workers would difficulty walking through factory house These factory houses enough light because fewwindows because owners wanted reduce electricity costs What struck however awful smell factory caused chemical glues other materials Not surprisingly there ventilation installed factories visited Every visitor would nauseated these workers hours heavily polluted environment Howmanyhoursdoyouworkeveryday Iasked teenage factory It depends whether I complete quota replied But usually I themorningto2a atnight Do contract owner factory I asked Doyou social welfare benefits Joe asked Social welfare benefits seemed CL zledbytheterm Yes Igetpayeveryday Do medical insurance Joe asked specific question I understand replied She never heard medical insurance I shared Joe concerns China safety increasingly inadequate reform Like other countries through trans formation economic structure Chinese govern given priority welfare issues unabletoallocatemoreresourcesto socialprogramsin employment income equalization pricing control security occupational benefits health services housing others In years witnessed large scale retreat state service provision problems employment inflation polarization become acute Meanwhile private sector unable socialprograms Don foreigners A middle woman looked manager appeared interrupted conversation Please toJoeand mebluntly We whether workers concerns problems working conditions I Amaid service market special Oflabor market Huashan Road theJingan Hilton Hotel EveTyday hundredyoung womerl andmen gather hiTed local families household servants The local government recently banned market If problems their woman replied My workers should grateful Go jobless people labor markets laodongli shichang andyouwillunderstandwhat Imean I certainly remind markets These memora indeed miserable scenes observed myjourney China In virtually every large medium sized I visited during years there places which hundreds young adults women their twenties waited hours hoping picked anyone could offer cludingtemporary hourlyjobs Each I market would filledwithwordssuchas exploitation oppression dehumanization On downtown Wenzhou Airport I labor market which about three hundred jobless migrants gathered It ready afternoon waiting since early morning One could easily sense their frustration their facial expressions As passed these people I suddenly realized middle manager meant about justification capitalist exploi tation butironically whytheChinesepeopleenthu siastically embraced socialism century GI Agroup ofpeoplefrom Anhuihave arrived Shanghai Train Station These labor markets usually locatedon streets plazas ofports busandrailway stations construc sitesandinfrontof factories thatmayhire temporary workers Institute Current World Affairs NOTES Far Eastern Economic Review March2 MichaelJohnsonandYufan Hao China Surge ofCorrup Journal ofDemocracy Vol N October Ibid The corruption campaigntriggered about major investigations first quarter alone prosecutions Far Eastern Economic Review June Far Eastern Economic Review August Far Eastern Economic Review March TheEconomist May6 Gongdangwenti yanjiu Stud ofproblems Chinese Communist Party Vol No Cankao Xiaoxi Oct Far Eastern Economic Review April TheNew York Times August E3 The Economist August LindaWong Privatization SocialWelfare Post Mao China Asian Survey April China Daily July Liu Weihua Wenzhoujixin Ajourney toWenzhou Nanjing shehui kexue Social sciences Nanjing No Gongdangwentiyanjiu Stud problems Chinese Communist Party Vol No July Ibid Ibid Kristen Parris Local Initia National Reform Wen ModelofDevelopment The China Quarterly No June Current Fellows Their Activities Hisham Ahmed Born blind Palestinian Dheisheh Refugee Camp Bethlehem Hisham finished A levels fifth highest score students throughout Israel He received B A political science scholar Illinois State University M A Ph D University California Santa Barbara Back East Jerusalem still blind Hisham plans gather histories broad selection Palestinians produce Portrait Palestine crucial point Middle Eastern history MIDEAST N AFRICA Adam Albion A former research associate Institute EastWest Studies Prague Czech Republic Adam spending studying about Turkey regional growing importance actor Bal Middle East former Soviet A Harvard graduate His Adam completed first M Litt degree Russian East European history languages Oxford University EUROPE RUSSIA Cynthia Caron With Masters degree Forest Science Yale School Forestry Environmental Studies Cynthia spending years South AsiaasICWA sfirstJohn MillerMusserMemorialForest SocietyFellow She studying writing about impact forest preservation projects lives tenure indigenous peoples local farmers their fringes Her fellowship includes stays Bhutan India Sri Lanka SOUTH ASIA Forest Society William F Foote Formerly financial analyst Lehman Brothers Emerging Markets Group Willy Foote examining economic substructure Mexico impact market reform Mexico people society politics Willy holds Bachelor degree Yale University history Master London School Economics Development Economics Latin America studied Basque history San Sebastian Spain He carried intensive Span language studies Guatemala worked editor ReporterfortheBuenosAires Heraldfrom 1990to THEAMERICAS Cheng Li An Assistant Professor Government Hamilton College Clinton N Cheng Li studying growth technocracy impact southeastern coast China He began academic earning Medical Degree Jing An Medical School Shanghai graduate Asian Studies Political Science United States M A Berkeley Ph D Princeton EAST ASIA Sharon Griffin A feature writer contributing columnist African affairs San Diego Union Tribune Sharon spending years southern Africa studying Zulu KwaZulu kingdom writing about nongov ernmental organizations fulfillment centers national needs developing countries where governments still feeling their toward effective adminis tration She plans travel Namibia Zimbabwe South Africa SAHARA PramilaJayapal Born India Pramila leftwhenshewasfourandwentthrough primary secondary education Indonesia She graduated George University M B A Kellogg School Manage Evanston Illinois She worked corporate analyst PaineWebber accounts manager world leading producer defibrillators recently managed million developing country revolving Program Appropriate Technology Health PATH Seattle Pramila spending years India tracing roots studying social issues involving religion status women population AIDS SOUTH ASIA Teresa C Yates A former member American Civil Liberties Union tional force workplace Teresa spending years South Africa observing reporting efforts Mandela government reform national tenure system AVassargraduate ajurisdoctorfrom Uni versity Cincinnati College Law Teresa internship Centre Applied Legal Studies Johannesburg studying feasibil including social economic rights South African constitution While ACLU conducted Seminar Women Law Fordham Law School New York SAHARA CL CL CL CL CL CL CL CL CL CL CL CL CL CL CL CL CL CL TITLESOFICWALETTERSFROMCHINABYTHEAUTHOR LEAVINGHOMETOGOHOME THECOLOROFMONEY SHANGHAIIMPRESSIONS CHINA S FALSITIES CHINA SF UTURE Part CallingThingsbyTheirRealNames Part II Daxing AMostFrequentlyUsedIdiominShanghai Part III Political Forecast ALittleKnowledge IsADangerous Thing CHINA S YUPPIECORPS Part ConversationwithAChineseTechnocrat Part IICollegeNetworksofthe BestandtheBrightest THEYINANDYANGOFEASTASIA Part East Asian Threat TIDALWAVEOFMIGRANTWORKERSINCHINA Part 94ers Eastward Ho Part 200MillionMouthsTooMany THEYINANDYANGOFEASTASIA Part IITheMeetingofEastandWest PartIIITechno Nationalismvs Techno Globalism EastAsiainSearchofaNewVisionforthe21st Century HUMANLIFE HUMANRESPONSIBILITY ATHREEGORGESADVENTURE Part TheFirstImpression sALastingImpression Part II Gorgeous Gorges Part III DamnDam UNDERNEONLIGHTS STREETPEOPLEINSHANGHAI SUNAN WHERETHERURALINDUSTRIALREVOLUTIONCHANGESCHINA SLANDSCAPE Part Sunan Miracle Seeing Believing Part II ANewForceSuddenlyCorningtotheFore Part IIIZhangjiagang ANewbornCity AModelofChina sUrbanization PartIVHuaxiVillage A Mini Singapore inChina SHANGHAISURPRISES UNLESSWEBEHOLDWECANNOTUNDERSTAND ONTHEROADTOSUBEI TRANSPORTATIONBOTTLENECKINCHINA S DEVELOPMENTVISITINGANSOEANDCLAIMINGANIOU WHOCREATED CHINA sECONOMICMIRACLE MEETINGWITHCHENJINHAI A PEASANT TURNED INDUSTRIALIST TO LIVE ISNOTTOBREATHE IT ISTO ACT DAIQINGANDHERNOTIONOFACHINESEINTELLECTUAL SHANGHAI CITYFORSALE Part LandLeasingand Foreign Investment China Largest City Part II ConstructionFever Relocationphobia ofUrbanResidents BACKTOTHEPAST Part ChinaontheEveofaCapitalistTakeover Part II CanCaopitalismSolveChina sProblems Institute Current World Affairs Author Institute Current World Affairs Title ICWA Letters East Asia ISSN Imprint Hanover NH Material Type Serial Language English Frequency Monthly Other Regions South Asia Mideast North Africa Europe Russia SubSaharan Africa The Americas Chosen basis character previous perience promise Institute Fellows young professional funded spend years carrying designed programs study writing outside United States The Fellows required their findings experiences field month They write subject formally informally The result unique report analysis periodical assessment ternational events issues The Institute ofCurrentWorld Affairs 4WESTWHEELOCKSTREET HANOVER NEW HAMPSHIRE 03755 ADDRESS CORRECTION REQUESTED Nonprofit Org U S Postage PAID Lebanon NH 03766 Permit