Feature China: renewed progress and some new problems The political bureau of the Communist Party of China emerged from meetings in the first week of February devoted to the country’s economy and declared the eco- nomic situation in China to be “remarkably good.” The leading economic statistics for 1987 more than bear out the assertion. With the growth of the Gross National Product (GNP) recorded at nine percent in real terms, China’s economy ranks among the hottest in the world. Sector by sector, China’s economic fig- ures for last year are pace-setting for the socialist world, which is engaged in a major economic reform to break out of the stagna- tion of the past decade. China’s retail sector continued to boom last year with a 10 per cent increase in sales after inflation. But the boom included sig- nals of potentially serious economic prob- lems inherent in the hot economy. Price Fred Wilson inflation was 8.6 percent and for a few months last summer inflation edged into the double digits. It is the third consecutive year of significant inflation in China, and in 1987, it reduced growth in real purchasing power or urban workers to 1.3 per cent, a sharp drop from the healthy 8.2 per cent jump in purchasing power enjoyed in 1986. Incomes for rural workers grew in real terms in 1987 by 3.3 per cent. The price inflation is closely related to supply shortages for the increasingly demanding Chinese consumer. But it is also a product of a new phenomena that all socialist economies engaged in the current reform may face: price fixing. The decen- tralization of the Chinese economy has imposed cost accounting on state enter- prises and simultaneously given them the right to control their own prices within the socialist market. Last year, a number of wholesale manu- facturers in various industries met and jointly raised prices. In December, 1986, representatives of 27 ball bearing factories held a meeting called “the 1987 price nego- tiation meeting of the national steel ball industry.” They decided to raise the prices of steel balls by 50 to 60 per cent effective Jan. 1, 1987. Similar practices in textiles, pharmaceuticals and energy resulted in a State Council decree in January of this year to outlaw “monopoly pricing.” Inflation and price fixing are just some of the new problems that the economic reform has produced. China’s economic reform was launched in 1982, after four years of intensive debate and searching for a realistic path of development following the fall of the “gang of four” in 1978 and the abrupt end of 20 years of leftism in social and economic life. China’s leaders today readily admit that those twenty years were a total disaster for the development of socialism in China. Five years into the reform, the ideological debate is as lively as ever in China. CPC General Secretary Zhao Ziyang’s report to the party congress in October of last year echoed a slogan heard increasingly in China: “against dogmatism and ossified thinking.” The new thinking advanced by Zhao and the Chinese leadership is prag- matic but also very theoretical and based on 8 e Pacific Tribune, March 23, 1988 a re-definition of the stages of socialist development. In theoretical terms, the concepts advanced by the Chinese leadership closely mirror those of Gorbachev and the Soviet leadership regarding the need for the social- ist economy to adjust the relations of pro- duction with the level of the productive forces in the country. Zhao and Chinese theoreticians assert that China is in the “primary stage of build- ing socialism” and they insist that the coun- try’s stage of development be measured not by subjective or cultural considerations, but by the actual level of the productive forces. China’s status as a world power can obs- cure, as it did for twenty years, the fact that in per capita terms it remains the world’s ninth poorest country. The relations of production in the prim- ary stage of socialism must provide for tran- sitional forms of social ownership, indiv- idual initiative and socialist market relations, say the Chinese, and these have been the basis of the economic reform. The end result is what the Chinese call a “planned commodity economy.” A lot of nonsense has been written about the restoration of capitalism in China. The public sector remains overwhelmingly dom- inant in the Chinese economy, constituting about 97 per cent of production, although the economic reform consciously separates ownership from management. Self-man- agement and cost accounting in the Chinese economy has to a degree served as a model for the current reforms in the Soviet Union. The cultural revolution almost totally eliminated the individual and family sector of the economy. In 1957, at the completion of the socialist transformation of China, there were more than one million persons in individual private labour. By the end of the cultural revolution, the number had been reduced to 180,000, with the resulting deci- mation of the service sector. There are now some 20 million people engaged in the indi- vidual sector, mostly in agriculture. There is also a small private sector in China’s economy which is regarded as an essential requirement for developing the productive forces. As of June, 1987, it con- sisted of joint ventures with foreign capital as well as some 70,000 businesses employing about 1.2 million wage labourers. - The growth of the individual and private sectors, taken together with the new eco- nomic management mechanisms in the cit- ies and the dismantling of the people’s communes and the re-establishment of agriculture on the basis of family plots, have transformed China in five short years. The resulting income disparities, infla- tion and shortages that now present them- ZHAO ZIYANG (top): Challenging “ossi- fied thinking.’’ Bringing home a new — washing machine (centre) and a Chinese silk. factory: demand for consumer goods and enterprise price-fixing push- ing Chinese inflation higher. selves as problems are as yet largely in the domain of economists and theoreticians. — The vast majority of China’s 1.2 billion people are still focused on waking up-after — an enforced, lengthy sleep. In the twenty years of the cultural revolu- — tion, per capita income in China’s cities — failed to grow a single yuan. In the country- _ side, per capita income actually declined. Over the next eight years, until 1986, rural — incomes soared 150 percent after inflation, — and urban incomes climbed by 80 per cent after inflation. China’s socialist economy continued its — dynamic growth in 1987, prompting an — article by Zhao Ziyang that appeared in Beijing newspapers Feb. 7. Zhao credited the economic success to the break with left- ism in 1978 which “re-established a Marxist ideological line for the emancipation of our — minds. “Whatever is good for the development of the productive forces and the improve- | ment of the people’s life should be recog- — nized, experimented with and explored,” said Zhao, “The more developed the pro- ductive forces, the more attractive the socialist system.”