Bridging China’s past with humanity’s future – Part 2

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June 29, 2020

Bridging China’s past with humanity’s future – Part 2

by Straight-Bat for the Saker Blog

This will be presented in 3 parts and in 3 different blog posts

PART – 1 can be found here


PART – 2

5. POST-DENG CHINA

Post-Deng China witnessed three variants of socio-economic trajectories associated with three different Leaders. Even though the economic programme of reform initiated by Deng went on unhindered, there were significantly different style of implementation of the same. A brief recapitulation is noted below:

A.  Jiang Zemin (till 2003)

In 1997, after Deng’s departure Jiang Zemin became the paramount leader of China. Both – the economic reforms and the deep-rooted problems of economy – accentuated during Jiang’s stewardship. There was marked increase in political corruption, inter-regional imbalance and inter-class imbalance in growth, rural migration into urban areas, unemployment, inequality and wealth gap, and crime rates across China. During 1998 and 1999, many SOE were privatized with massive lay-offs and asset transfer to private businessmen, many others were restructured to make them profitable. The employee welfare and social welfare system which were embedded in SOE (since the Mao era) were completely dissolved – this also created a low-income urban working class. The government followed a policy of retaining the crucial sectors within state-owned enterprises while small and medium SOW were either privatised or closed down. Crucial sectors or ‘commanding heights’ were:

  • Nation-wide service networks like railways, aviation, telecommunication, electricity etc.
  • Mining and exploration coal, oil, and natural gas
  • Basic metal processing like steel, and aluminium
  • Basic hydrocarbon processing like refinery and petrochemicals
  • Heavy industrial machinery such as machine tools, power generation equipment, rolling stock
  • Infrastructure engineering and construction – roads, railways, ports, dams
  • Significant consumer durables like automobiles
  • Military machinery

Apart from reducing the number of SOE (from 262,000 units employing 113 million in 1995-1997 period to 110,000 units employing 64 million in 2007-2008) and restructuring bigger SOEs, the government reduced tariffs, trade barriers, regulations; reformed banking system. The average return on assets in SOEs soared from 0.2% in 1998 to 5% in 2007. In the same period, the SOEs’ profits rose from 0.3% to 6.6% of GDP. Funds continued to be poured into SEZ and export-oriented manufacturing industry. As per Chinese National Bureau of Statistics, Hong Kong-Taiwan-Japan-South Korea-Singapore contributed about 71% of the FDI that flowed into China between 1990 and 2004. To sum it up cogently, it can be said that government of China pursued neoliberal economic agenda along with consulting advice from USA bankers and capitalists. China joined World Trade Organization in December’2001. During the period 1990–2004, China’s economy grew at an average rate of 10% per year.

A very interesting observation can be made related to the foreign relations during Jiang era – all foreign trips by the leadership and communication with foreign media were consciously made to revolve around China’s (the then) economic growth model and the imperatives. Incidents like USA bombing of China embassy in Belgrade, and collision with USA aircraft near Hainan Island were played down after some exchange of documents. Apparently, the top leadership aimed only at maintaining the stability of the government and the economy.

Very significant transformation took place in the CPC itself – from being a party of predominantly peasants and workers, CPC converted itself to a party with large number of middle-class petty bourgeois. This class evolved during the industrial restructuring of 1990s, who came out as the main beneficiary due to their entrepreneurship and connection with the then local and central leadership of CPC, and more importantly this class acted as a robust base of CPC in the urban regions of China.

B. Hu Jintao (2003 to 2012)

Hu Jintao had to continuously swim against the tide of domino effect from the (capitalist) economic reform and opening which was primarily initiated by Deng in 1979. During October’2003 Third Plenum, amendments to the constitution were discussed – an overarching government economic policy would be introduced to reduce unemployment rate, to re-balance income distribution, and to protect the environment. Also private property rights would be protected. Due to widespread poverty, inequality, and discontent the Chinese Government was forced to seek a balanced society above all. Using the concept of “socialist harmonious society”, balanced wealth distribution, improved education, and improved healthcare were assigned high priority.

During 1995, exports from East Asian countries to China were not very significant percentage of their total exports (Japan exported 4.95%, South Korea exported 7.0%, Taiwan exported 0.3%, Singapore exported 2.3%). In 1995, Chinese total exports were worth about 149 billion USD. However, by 2013 there was an explosive growth in exports from East Asian countries to China as a percentage of their total exports – (Japan exported 18.1%, South Korea exported 26.1%, Taiwan exported 26.8%, Singapore exported 11.8%). And, in 2013, Chinese exports to the world were worth about 2210 billion USD (a little over 30% of the value were exported by wholly foreign-owned enterprises, and 12% of the value were exported by joint ventures between foreign-owned and China-owned enterprises). Apparently, during this period China evolved as ‘core’ and East Asia as ‘periphery’ in a new sub-system within the overall world-system (with USA and west Europe as ‘core’ and rest of the world as ‘periphery’).

China’s GDP grew 10.1%, in 2004, and 10.4% in 2005 in spite of attempts by the government to cool the economy. And, in 2006 trade crossed USD 1760 billion, making China third-largest trading nation in the world. Again, in 2007 China registered 13% growth in GDP (USD 3552 billion) becoming world’s third largest economy by GDP. According to UN estimates in 2007, around 130 million people in rural areas of the backward inland provinces still lived in poverty, on consumption of less than $1 a day, while about 35% of the Chinese population lived under $2 a day. Chinese government’s official Gini index peaked at 0.49 in 2008– 2009 and thereafter declined only marginally, to 0.47 in 2014. The Global Financial Crisis in 2008 revealed the innate weakness of Chinese economy – export-oriented economy depends upon economic conditions in foreign countries much more than internal consumption. Government of China took highly effective policy decisions about economic stimulus and implemented those effectively (however, it also increased the already high debt burden). The stimulus (about US$600 billion at the then-current exchange rate) involved state investments into physical infrastructure like railway network, roads, bridges and ports, urban housing complex, easing credit restrictions and lowering tax on real estate. As per National Bureau of Statistics of China, in 2010, GDP of China was Yuan 40850 billion, which can be broken down into following expenditure categories:

  1. Household Consumption Expenditure – Yuan 14146.55 billion (34.63% of GDP)
  2. Government Consumption Expenditure – Yuan 6011.59 billion (14.71% of GDP)
  3. Gross (Fixed) capital formation – Yuan 19186.69 billion (46.96% of GDP)
  4. Net Exports of Goods and Services – Yuan 1505.71 billion (3.68% of GDP)

Household consumption has not increased substantially with economic growth – may be one of the reasons were wages and salaries of working class didn’t move upwards with same pace. Even though the reforms helped to improve the socio-economic indicators, taking into consideration the difference between coastal region and inland regions as well as between urban and rural regions, China could hardly overcome the poverty and inequality predominantly in the inland and rural regions.

By 2011, there were less than 10 out of 40 major industrial sectors in which SOE accounted for more than 20 percent of output. Another significant statistics of 2012 on industrial enterprises (as per National Bureau of Statistics, China) shows:

State-owned EnterprisesPrivate-owned EnterprisesPrivate-owned FDI Enterprises
Total Asset (billion Yuan)31,20915,25517,232
Profit (billion Yuan)1,5182,0191,397

The above statistics might suggest at the first glance that, state-owned enterprises are laggard in profitability. However, such conclusion will be clearly wrong if it is noted that there exist wide difference of asset ownership across various sectors – in mining and extraction of coal, petroleum, natural gas etc. SOE commands 93% of sector-specific assets, while in textiles sector Private enterprises commands 90% of sector-specific assets. Different sectors of industry have different profit-capital asset employed ratio.

C. Xi Jinping (2013 onwards)

Since around 2010, Chinese government and CPC has been busy implementing economic policies that will pursue ‘economic growth based on domestic consumption’ while maintaining the decades old export-oriented economy. With Xi Jinping at the top chair, a long pending but top priority task was undertaken – war against corruption and nepotism. CPC took strong measures so that corrupt among ruling party cadres and government officials were identified and punished, Marxist principles were enforced as guideline for CPC so that the society and economy can be steered towards equality and justice. CPC has also became proactive in taking actions to enhance its geopolitical and geo-economic base throughout the world. Simultaneously, Chinese government has taken concrete measures to modernize all wings of military through research and development of 5th generation stealth military aircrafts, naval ships, nuclear submarines, hypersonic missiles, anti-satellite missiles, as well as procuring most lethal S400 air defence system and electronic warfare systems from Russia.

However, China has performed extremely well in reduction of poverty. In 2015, World Bank Group estimated that only 0.7% of Chinese citizens live below extreme poverty line of $1.9 (2011 PPP) per day, while 7.0% of Chinese population live below lower-middle poverty line of $3.2 (2011 PPP) per day. Such rapid poverty-reduction is an unparalleled achievement in the history of mankind.

As per National Bureau of Statistics of China, in 2019, GDP of China was Yuan 99492.74 billion (by expenditure approach), which can be broken down into following categories:

  1. Household Consumption Expenditure – Yuan 38589.56 billion (38.78% of GDP)
  2. Government Consumption Expenditure – Yuan 16559.90 billion (16.64% of GDP)
  3. Gross (Fixed) capital formation – Yuan 42862.78 billion (43.08% of GDP)
  4. Net Exports of Goods and Services – Yuan 1480.50 billion (1.49% of GDP)

Compared to 2010 statistics, in 2019 the household consumption has moved upwards at almost 39% of GDP. However, the 2019 figures of household consumption below 50% of GDP can’t be considered as healthy neither gross capital formation more than 30% of GDP can be termed as balanced growth. This is not to say that, the period of 1970-1975 was better because household consumption component was around 60 – 65% of GDP (GDP itself was very low).

The inequality between urban and rural remained too glaring even in 2019 – as we can note in the following data as per National Bureau of Statistics of China (2019 data),

  1. Per Capita Disposable Income Nationwide – Yuan 30,733
  2. Per Capita Disposable Income of Urban Households – Yuan 42,359
  3. Per Capita Disposable Income of Rural Households – Yuan 16,021
  4. Per Capita Expenditure Nationwide – Yuan 21,559
  5. Per Capita Expenditure of Urban Households – Yuan 28,063
  6. Per Capita Expenditure of Rural Households – Yuan 13,328

The growth model chosen by Deng and reinforced by Jiang has already run out of steam. It had its own utility to provide mass employment and to build the fixed capital for the national economy. Chinese government need to pivot economic growth on domestic consumption as soon as possible without damaging the export sector much. To boost consumption, ‘demand’ for goods and services will have to be enhanced – in China, ‘purchasing power’ is the key for boosting demand and hence, domestic consumption. Income of ordinary citizens should be increased through forced regulations whereby the surplus from industrial operation (that is pocketed by the capitalists for accumulation of capital) will be distributed to the working class. Similarly for the agricultural sector, government should provide much higher procurement prices for agricultural produces. Another key area that needs government intervention is social security and welfare system, whereby housing-education-healthcare for all rural and urban people living with daily expenditure below USD 10 will be arranged by the government (against a token amount of annual insurance premium). Most of such people will be confident enough to spend instead of saving money for rainy day. The well-entrenched capitalist elites will resist because such steps would restrict their continuous capital accumulation process – however, China being a socialist peoples’ democracy, it has to give priority to the common people.

BRI – Challenge to Current World-system?

Belt and Road Initiative (formerly One Belt One Road – OBOR programme) of China actually is a framework wherein investments amounting to anything between one to two trillion USD in different countries of Asia, Europe, Africa, South America will be done in primarily government-to-government projects. When successfully implemented, may be around 2035, BRI will completely transform the economy and comfort of peoples in more than 100 countries. Investments are mainly channelled into physical infrastructure, mining and exploration, power generation, industrial production hub, agricultural production hub, and communication network. BRI, instead of moving away from existing liberal capitalist economy, predicates on existing capitalist system with more inclusive agenda compared to Zionist Capitalist dominated financial system – thus BRI projects attempt to alleviate poverty and unemployment in participating states without bothering about the government ideology.

BRI benefits China in primarily four ways:

  1. Corridors like CPEC (through Pakistan) and CMEC (through Myanmar), when fully established, will provide alternate trade routes for China-based companies to import energy and raw materials as well as export finished goods through Arabian Sea and Bay of Bengal respectively; the corridors will circumvent the ‘choke point’ of Malacca Strait
  2. China-Mongolia-Russia and China-Central Asia-West Asia corridors will be channel for further Chinese investments across Asia; in the long run exports and imports among these Eurasian states will experience quantum jump
  3. ‘State capitalism’ will get a boost with most of the BRI projects being G-to-G kind; most of the participant governments will control the new projects thereby reproducing the production relations of capitalist society with the ‘state’ playing the role of capitalist who will make ‘profit’ and accumulate ‘capital’
  4. Enhance Chinese ‘image’ through socio-cultural exchange
  5. Enhance Chinese ‘influence’ through government-to-government contacts

There are more BRI corridors as well as ‘Maritime Silk Road’ planned as part of BRI. I would not get into the details of such a mammoth programme (consisting of hundreds of gigantic projects) which itself is a separate subject. However, it will be very interesting to analyse if and how BRI will pose a challenge to the existing world-system coordinated by the Deep State.

BRI follows the traditional capitalist economic model of ‘profit’, but unlike the Zionist Capitalist propelled system, BRI system aim for nominal profit margins that will create a tremendous ‘pull factor’ among the developing countries to seek BRI projects. Another key difference is: BRI system is radically different from existing capitalist system by shunning hegemony and force BRI promotes harmonious global integration. In all probability, BRI will create a ‘benign core’ and ‘exultant periphery’ in a global scale which uncannily resembles the Confucian concepts of family and state governance. The existing hegemonic world order and the Deep State will find it very hard to digest such decline of their stature and the formation of a new core-periphery. However, by no means will this new development threaten to upend the existing Zionist Capitalist world order – the new core-periphery will form a significant non-imperial sub-system within the existing world-system. USA, 5-Eyes, and Israel will have to share the hegemony with China being the BRI core and Russia as the semi-periphery (with low population count and hence limited domestic market, Russia can’t play much bigger role).

In practice, post-WW II world order has seen the working of core-periphery system with USA (and NATO) enforcing their will on the weak countries on the ‘periphery’ whenever a threat to the primacy of ‘accumulation capital’ was perceived by the Deep State cabal. The Deep State capital, through control of the media and academia, ensure that such threat to capital gets portrayed as a threat to ‘democracy and human rights’ which in turn provides a moral high ground to the Hegemonic superpower to invade any country at will. In the BRI system such supremacy of capital is not expected simply because Chinese outlook on ‘world-system’ was built typically on Confucian praxis.

Significant observations on post-Deng China:

1. CPC central committee in a conference in 2015 formulated eight principles of ‘socialist political economy with Chinese characteristics’:

  1. Sustainability Led by Science and Technology
  2. Orienting Production to Improve the Livelihood of the People
  3. Public Ownership Precedence in National Property Rights
  4. The Primacy of Labour in the Distribution of Wealth
  5. The Market Principle Steered by the State
  6. Speedy Development with High Performance
  7. Balanced Development with Structural Coordination
  8. Economic Sovereignty and Openness

Undoubtedly the above eight principles (like Buddha’s ‘asta-marga’ teaching) are very sound principles – but these are not focussed to Marxist ideology in a sense that, any other liberal democratic capitalist political party can also follow such principles for an effective management of economy and society. CPC leadership should take into account the core ideology of Marx-Engels-Lenin-Mao to explore that, the owners of capital can never reconcile with the proletariat and petty-bourgeois (as petty-bourgeois, I’m meaning only the middle-income group of rural land-holding peasants and urban professionals and self-employed people who own very little capital to earn their livelihood) – the theory of historical materialism clearly and correctly predict that, in the long-run, the capitalists will continue to accumulate capital with endless exploitation of 90% of the population, eventually they will overrun the CPC setup (as insider like CPSU in Soviet Union, or as outsider like Solidarity Movement in Poland) and create a state which will be ‘liberal capitalist’ in letter and spirit. Mao and Deng differed only on strategy to achieve Marxist economy and classless society, they never differed in the end objective – successive CPC leaders shouldn’t forget to take note of that.

Questions will be raised, ‘why then Mao didn’t create a classless society since 1950 or why Mao also tried for accumulation of capital to begin with’ or for that matter, even before Mao, ‘why in 1921 Lenin was staking on new economic policy (NEP) to introduce free market and capitalism under state control’?

To seek the answer, let’s visit the greatest leader of transformation – Lenin. Lenin considered the NEP as a strategic retreat from principles of socialism – Bolshevik party leaders had to create the “material basis” of economic development in Soviet Union before they could initiate the first stage of socialism to be followed by the second stage. This was exactly the situation for Mao and Deng in China who wanted to first create the basic building block for Chinese economy for which the forces of production were either outdated or non-existent. Interestingly, both CPSU and CPC tried to create ‘communes’ as an ideal communist construct for the rural regions and agricultural sector – primarily due to mismanagement among the party members and lack of indoctrination among the rural population, both the experiments failed. More valid question however remains, ‘why both CPSU and CPC got lost in the quagmire of ‘initial capitalistic development’ and never returned to their end objectives’ even after there was basic level of ‘fixed capital formation’ in Soviet Union by 1960 and in China by 2010! May be because geopolitical events were unsurmountable. To best of my knowledge, this question remains unanswered till date.

2. Another issue related to very high exports and some trade surplus obscures two significant points:

(a) China (with a GDP of Yuan 99,492.74 billion i.e. USD 14,140 billion) in 2019 not only exported goods and services worth USD 2,486.69 billion, but the import was also huge at USD 2,135.74 billion (as per National Bureau of Statistics of China). Even if the overall export surplus is not substantial, when the values are grouped continent-wise, large imbalance due to export surplus can be noted for Oceanic and Pacific Islands (about USD 64 billion), Europe (about USD 95 billion), North America (about USD 330 billion), while marginal imbalance of USD 5 – 10 billion export/import surplus exists in case of Asia, Africa, Latin America. Moving deeper at a country-level, one would find more imbalances. The main reason is that, the sourcing requirements of China (energy, raw materials, manufacturing components, foodstuff, etc.) and sourcing countries are, most of the time different from the nature of exported item (manufactured finished goods), quantity and destination where export opportunity exist.

(b) More often than not, the economists forget to mention that the imports of China has multiple categories including import by foreign-owned export-oriented enterprises for value addition before exporting goods, import by Chinese-owned enterprises for value addition before dispatching for export as well as for domestic selling, import of plant and machinery etc. for capital formation, and import for direct household consumption. Contrary to that, export has almost single dimension – manufactured finished goods, primarily consumer goods with some industrial goods as well. There is overwhelming dependence on exports which jeopardise Chinese economy to the extent that, without continuous growth in demand from foreign countries, Chinese economy will encounter slow growth. In future, there can be scenarios where trade partner countries (other than USA) may reduce good imports from China in order to produce within their country (to reduce unemployment).

3. Trade surplus resulting from the exports and high internal savings empowered the east Asian countries like Japan and China to accumulate largest forex reserves (together they account for more than USD 6 trillion) which were used to purchase USA Treasury bonds. USA Treasury bonds are issued by USA government to cover fiscal deficit – thus China and Japan are largest creditors of USA. With this arrangement of deficit financing successive USA government has been reckless to cut taxes (of oligarchy) and increase direct government expenditure to keep voters happy. The prices of east Asian exports into USA were kept low to keep it attractive in the USA market. Finally, more demand of east Asian goods increased trade surplus and more trade surplus meant more purchase of Treasury bonds. A two-way mutual relation between USA and China-Japan thus helped USA engage in end-less wars as well as keep inflation within USA low, hence, even if USA leaders take anti-import posture that will be only to please the constituency of nationalist voters. However, China will not only be at the receiving end if and when exports get restricted suddenly, China should be prepared for the worst scenario when, in future, USA will simply refuse to pay for their debt.

China will have to take a serious initiative on how US Dollar can be removed from world’s reserve currency status. Along with Russia, China should look into the possibility of introducing a new international currency which will be backed by gold – this action will not lead to a socialist economy, but this action will certainly work towards curbing the USA government’s undue advantage of printing as much fiat Dollar as possible using the global reserve currency without gold-backing status.

4. Indisputably China achieved incredible feats in economic growth and socio-economic indicators during past few decades. But such achievements to a large extent depended also on credit policy (apart from FDI and export). As a result, China’s total debt burden including households, government (central, regional, local), non-financial industry sector (including real estate), and financial sector has been rising over the decades albeit slowly. Apparently, in 2019 beginning, Household debt rose to more than 50% of GDP, Government debt crossed 50% of GDP, Financial sector debt rose to more than 40%, non-financial Industry sector breached 150% of GDP. As a whole, Chinese government is in a precarious position to control such huge debt (total crossing 40 trillion USD) – with strict control economic growth will be at stake. Even though the government of China have been periodically trying to deleverage the economy with control measures, economic growth trounced all such attempts till date.

The problem of bad debt first hit the Jiang government in late 1990s. The non-performing loans (NPL) caught the leadership’s eyes back then. And to address the burning issue, in 1999 asset management company was created, which absorbed Yuan 2 trillion bad loans from state-owned banks leaving the banks normal and healthy. For Chinese government NPL issue will continue to be a thorn in the flesh.

5. Maritime border disputes in South China Sea and East China Sea have historical roots when Japan displaced European powers from these two sea regions. It is also true that, after WW II most of the littoral countries (except Vietnam and North Korea) were/are backed by the Deep State and were/are armed to the teeth. However, it will be a monumental milestone for Chinese diplomacy and indeed, image, if China can resolve the maritime border issues without conflict, and if required, sharing the under-sea resources with the littoral states.

On the land border disputes, China resolved all but the dispute with India. The land border was drawn by the British colonial power who ruled most of south Asia till 1947, but Chinese government never accepted the border. Chinese government should keep no stone unturned to bring India-Pakistan-China on the same discussion table with UNO as observer. It will be beneficial for all three countries if they settle the dispute once for all through mutual concessions using give-and-take policy. A border war for a land with little economic value (but high geopolitical strategic value) makes no sense.

6. During 1700 to 1840 China was world’s biggest economy and second largest land empire. However that position didn’t deter the European powers from rampaging at their will inside Chinese territory. Chinese empire lost the edge because of inability to keep track with global technological changes. For the European powers, advancements in few industrial and military technology proved decisive. Keeping such watershed moments in view, government of China should make extraordinary arrangements (like special task force etc.) to bridge manufacturing technology gaps which have been pointed out by McKinsey Global Institute in “China and the world” report published in July 2019, some of which are:

  1. Electronic Components
    1. Display
    2. Integrated circuits
  2. Pharmaceuticals
    1. Small-molecule drugs
    2. Biomolecule drugs
  3. Genomics
    1. Gene sequencing
    2. Gene editing

The above mentioned elements are not necessarily of military in nature – the backwardness in military technology are well-known which are being addressed by Chinese government since past two decades, jet engines with thrust-vectoring control technology among the most significant ones.

6. GEOPOLITICS 1930 ONWARDS

With the setting up of Bank for International Settlements (BIS) in Switzerland in 1930, the disputes and tussle among the most prominent Jewish and Anglo banker families (like Rothschild, Rockefeller, Morgan, Warburg, Lazard, et al.) over type of business, geographical region of influence, and share of banking sector operations got resolved. The Zionist Capitalist elites were fully united in words and deeds notwithstanding the occasional rivalry and difference of opinion between followers of two camps: Rothschild and Rockefeller. The long-term objective of the Zionist Capitalist Deep State clique (representing primarily the Jewish, Anglo, Dutch, French, German oligarch and aristocrat families who had accumulated wealth and have been engaged in business in banking-land-industry-trading) after WW I has been to establish a hegemonic world order which would:

  1. own ‘political process and power’ in every society/country on the earth
  2. own ‘economic process and wealth’ in every landmass/country/ocean on the earth
  3. control ‘socio-cultural process and population’ in every region/country on the earth

I find it difficult to consider that, ‘winning’ political power anywhere in the world, has ever been an objective of the Deep State – they want to ‘own’ the process through which any political party may be made to ‘win’ or ‘loose’ power depending on short-term and long-term interest of the Deep State.

The Zionist Capitalist Deep State crystallized in its existing form when WW II started in 1936 (with signing of anti-communist pact between Germany, Italy, and Japan). Expectations of the Zionist Capitalist Deep State were destruction of powerful societies (non- Anglo/Jewish/Dutch/French) who had potential to develop advanced economy, and expansion of Zionist Capitalist empire:

  1. combatants Fascist Germany and Communist Soviet Union decimating each other’s (i) military forces, (ii) physical infrastructure, and (iii) population across entire Eurasia;
  2. combatants Fascist Japan and Nationalist China decimating each other’s (i) military forces, (ii) physical infrastructure, and (iii) population across entire East Asia;
  3. stages (a) and (b) would be followed by occupation of whole Europe and Asia by the ‘benevolent’ Anglo-American military who would claim that they have ‘liberated’ these ancient civilizations from the ‘authoritarian dictatorships’ of fascism and communism;
  4. stage (c) would be followed by establishment of ‘liberal democratic capitalism’ version of empire (as against ‘colonial extractive capitalism’ version) in whole Europe and Asia to continue plunder of wealth in maximum possible way;

Unfortunately half of the objectives remained unfulfilled in the WW II that was over by 1945 – because of two political parties: Communist Party of Soviet Union (CPSU) and Communist Party of China (CPC) whose top leadership mobilised their countrymen in collective patriotic spirit, Soviet Union and China didn’t capitulate but their direct adversaries (Germany and Japan) were trounced. Phase II became a necessity for the Deep State.

WW II – Phase II:

Phase II of WW II was initiated as soon as phase I was over. ‘Operation Unthinkable’ was planned by most ardent imperialist Churchill in order to launch a surprise attack on Soviet Union to achieve the original objectives that Hitler failed to achieve, but dropped. Realising that a military block consisting of all societies that join together as Zionist Capitalist Deep State would be more effective to demolish: (a) morally and militarily supreme power like Soviet Union which recuperated economically,

(b) new power like Communist China (where by January’1949, Peoples Liberation Army already won three major campaigns in last strongholds of Kuo Mintang party in east and south regions of China), NATO was formed in April’1949.

To achieve the long-term objective of hegemonic world order as well as the four WW II objectives, the Deep State displayed creativity in designing and deploying diplomatic, political, economic, cultural tools and methods that proved to be highly durable and extremely effective:

  1. UNO and its key sister organizations were established to control the international political incidents in all regions across the globe
  2. Through WBG, IMF, ADB global banking and financial companies spread its tentacles to every region of the world to control natural resources and economy
  3. US Dollar as the foreign currency exchange basis across the globe – not only the gold backing was withdrawn from Dollar in 1971 by USA government, but the hegemon also manipulated the Arab rulers to use Dollar as currency for most crucial commodity trading (of petroleum)
  4. Trade pacts like GATT, WTO, and similar other pacts driven by USA-West Europe-Japan were implemented so that the hegemonic power maintains their hold over global trade
  5. Promotion of ‘periodic election’ plus ‘market economy’ plus ‘private ownership’ masquerading as ‘Democracy’ across the globe
  6. Promotion of literature-cinema-fine arts that revolves around sex-drug-commercial duplicity in all major languages across the globe
  7. Promotion of mainstream media for broadcasting and publishing round-the-clock propaganda on the above mentioned tools (i) to (vi) in all major languages across the globe
  8. Promotion of academic institutions and intellectual for propagating curriculum on the above mentioned tools (i) to (vi) in all major languages across the globe
  9. Promotion of religious fundamentalist groups (male chauvinists with belief in illusory past glory from society which profess religious faiths like Sunni Islam, in Catholic Christianity, in Puritan Christianity, Brahminical Hinduism etc.) as well as ethnic fundamentalist groups (believing superiority of his/her ethnicity) in all regions across the globe
  10. Development of highly complex computerised system and other industrial technology to replace human labour in every sphere of productive work as much as possible

During the ensuing four and a half decades- from 1945 to 1990- major tasks accomplished by Deep State were:

  1. The Zionist Capitalist elites located primarily on either side of the Atlantic (who were driving force for aristocratic groups like Bilderberg Club, Club of Rome, Trilateral Commission as well as think-tanks like Council for Foreign Relations) were immensely successful in mobilising most of the academic institutions and media entities across world to spread propaganda among the people world-wide about ‘failure’ of socialism/ communism/ Marxist principles in Soviet Union and east European countries as well as China. While it was true that these countries which were devastated during WW II couldn’t provide the standard of living as west European imperialist/colonialist countries could offer to their citizens, these socialist countries provided all basic amenities of life to all its citizens.
  2. In most unfortunate turn of history, in the second half of 1950s CPSU led by Khrushchev (a closet Zionist) denounced Stalin’s leadership in Soviet Union that not only defeated the most cruel war machinery ever built on earth but became the second superpower of the world by 1945 (in 22 years after Stalin got the top leader’s position). This created an unbridgeable ideological gap between CPSU and CPC that divided the entire socialist/communist movement across the globe. After removal of Khrushchev from the position of top leader in Soviet Union political situation was salvaged internally, however, China became completely blind about the changing landscape of Soviet Union. The lack of trust of Chinese leadership in Soviet leadership was utilised by the Deep State elites in the 1980s to bleed Soviet Union in Afghanistan and Angola.
  3. By 1960 most of the Asian, and African countries got freedom from the west European imperialist/ colonialist powers like UK, France, and Belgium etc. Most of these countries were ruled by nationalist party who heavily mixed socialist ideological tenets with their nationalist creed. Most of these countries, backed by Soviet Union, had highly corrupt ruling party. Such leaders easily became prey for the global capitalist-imperialist elites, and simultaneously those semi-literate societies came under the spell of ‘Hollywood’-promoted illusion and ‘drug-sex-violence’ kind of culture. The significant block led by Soviet Union and relatively small islands of Chinese sphere came to a crossroads – they were falling behind in harnessing technological progress in economic growth, which resulted in relatively low standard of living of majority population while government officials and ruling party leaders led much better life.
  4. Deep State tried hard to manipulate the policy of government and bureaucracy as well as to co-opt the key political parties across all countries so that they can create pro-USA, pro-5 Eyes, pro-Israel policies as well as anti-Soviet Union anti-China policies. Simultaneously, oligarch-aristocrat families and elite individuals with servility towards Zionist Capitalist ideology (i.e. capitalist enterprises, private ownership, European ‘liberal imperialism’) were promoted in political leadership-bureaucracy-judiciary in those countries so that they can convert the policies into actions to advance interests of global oligarchy.
  5. In many large countries across the world, the Zionist Capitalist Deep State manipulated domestic politics to overthrow patriotic and incorruptible leaders who couldn’t be co-opted by them – Congo, Iran, Indonesia, Chile, Guatemala, Afghanistan, Bangladesh, etc. The Deep State mainly mobilised the country’s military forces to grab state power by killing the top leader(s) and by creating a repressive environment. Sometimes that would include mass murder of leaders and members of socialist party/communist party – in Indonesia, in the 2nd half of 1960s, between one to two million members of communist party were killed by military junta. In all the above mentioned cases, soon after coming to power the military junta would create economic policies that would favour the MNC from USA, 5 Eyes, west European countries, and simultaneously reduce contacts with Soviet Union and China.
  6. Developing conventional, nuclear, biological, chemical, and other special weapons and building a military force based on land, marine, air, and space that will be able to dominate every other country in every region, and if necessary, the military force can take punitive actions against any country including carrying out ‘first strike’ against other nuclear powers like Soviet Union and China without any possibility of retaliatory strike. USA built over 700 military bases all over the world.

The Deep State operatives were very successful in their original plan of wrecking Soviet Union from within. In the beginning of 1980s two leaders got into powerful political positions in the Soviet block – Yuri Andropov became top leader of CPSU and Lech Walesa became top trade union leader in Poland, Such high-ranking anti-socialist leaders quickly made inroads into state structure and policies in Soviet Union and Poland. After Andropov handpicked Gorbachev to lead CPSU, it was only a matter of time for the Deep State to wrap-up the socialist experiment what was known as USSR. Gorbachev and his so-called reformist clique systematically incapacitated Soviet economy, and also actively promoted downfall of governments in every east European country which were led by socialist party aligned with CPSU. This clique was helped by professionals from USA and west Europe. They also pinned hope that CPC leader Zhao Ziyang will become the ‘Gorbachev of China’ to bring down the government ruled by CPC – however this was a complete failure as Zhao himself confided with Gorbachev that ‘Deng was the top leader’ in a meeting when Tiananmen Square protest was raging in Beijing in 1989. Without a single gun-shot being fired by the military wings of Zionist Capitalist cabal, the Soviet Union dissolved itself between 1990 to 1991 CE – the phase II of WW II came to an end. Instead of serious introspection and course correction among ruling party officials and government departments to design policies keeping pace with socio-economic changes and technological changes, all these ‘reformist’ leaders decided that the best way to (personal?) growth was to join hands with Zionist-Capitalist world order after bringing down the governments ruled by their own party communist/socialist party.

By 2020 whole Europe and half of Asia had been occupied by the ‘benevolent’ Anglo-American NATO military who claimed that they guarantee ‘independence’ of those ‘liberated countries’ from the clutch of ‘authoritarian’ communism, and they also ensure that ‘liberal democratic capitalism’ version of empire will suck the land and citizens dry. No wonder, Soviet WW II war memorials and monuments have been systematically destroyed in east Europe – how long the Deep State would tolerate anti-zionist anti-capitalist flag hoisted by Soviet Red Army in Europe with immense sacrifices and sufferings by Soviet leaders, soldiers and people?

Concomitant with the complete control of all political parties (across the wide spectrum of their professed ideology) on both sides of the Atlantic: North America, South America, Europe, the discerning Zionist Capitalist cabal maintains a complex cobweb connecting all key members and rotating them from one role to another. Thus a retired Director of intelligence department of USA will occupy the chair of Chairman of a big financial investment firm as well as the role of a university Professor! The cabal maintains a carefully constructed façade where professionals from different spheres of society jointly appear as a highly educated, experienced and intelligent wing – industrialists, bankers, politicians, bureaucrats, military officials, business managers, legal and media professionals, academicians, NGO managers, cinema directors and artists all walks of life are present.

[ Link: https://www.zerohedge.com/news/2016-06-10/does-bilderberg-really-run-world-one-chart-help-you-decide ]

Interlude?

After Soviet Union was pulled down, the corrupt and treacherous Soviet leaders and their lackeys backed by the Zionist Capitalist oligarchy and elites ripped apart the socio-economic fabric of Russian society. The state exchequer was looted blatantly, the natural resources were divided among the Soviet elites-turned-businessmen, the industrial capital largely destroyed or privatised without any meaningful payment to state, workers were retrenched or pauperised without regular wages, and peasants were left without proper means of cultivation. Not only peoples tried to earn livelihood offering sex-drug-smuggling etc., but steep drop in birth rates across all splinter provinces of USSR made it to appear like entire Eurasian landmass will get depopulated within two generations. The Deep State also tried to split Russia (which, after the USSR dissolution, became largest state in Eurasia) into 4 – 5 regions through creating and aiding regional separatist movements with help of the 5th column elites and oligarchy within Russia. Without funding, military capabilities of Russia went into oblivion. Technological research and development as well as manufacturing of defence machinery came to a dead end. Demoralised troops and open corruption became symbolic of Russian military.

So, were the different factions of Zionist Capitalist cabal content with the successful closure of the WW II by 1991? What were they thinking about the glaring failure of destroying the CPC rule in China? Apparently, the Deep State was not only happy with their performance in destroying the CPSU and Soviet Union, they were also very confident about China becoming a ‘normal country’ with full-scale liberal democratic capitalist system of economy and periodic elections to elect governments that will be run by the Zionist Capitalist world order staying behind the curtain (as it happened for all countries in the world in 1992 except China-Vietnam-North Korea-Iran-Zimbabwe-Angola-Cuba). We need to ask ourselves, how the Deep State was so confident that China will be on board with them.

1978 onwards the drive towards industrial capitalism in China using the global finance owned by the Zionist Capitalist bankers and industrialists was initiated by Deng and followed up by Jiang Zemin in such earnestness that, the Deep State representatives like Kissinger and Financial Institutions like JP Morgan had to conclude that Chinese acumen for business and trade will transform the society into a capitalist society. Japan was anyway part of the world order triad i.e. USA-West Europe-Japan, and with China’s entry, the triad would have become USA-West Europe-East Asia. Chinese government went all-out to create a ‘happy hunting ground’ for global Zionist Capitalist interests which wanted more and more profits towards endless accumulation of capital, and hence were busy shifting their manufacturing base to China to harness low-cost labour and slack regulations. By 2008, i.e. after 30 years of reform, China became third largest economy in terms of GDP nominal (as per IMF estimates USD 4604 billion) and largest export base in the world (In 2007-2008, its Export-to-GDP ratio reached 32%, and its Exim-to-GDP ratio was 59%), but it also became a society where inequality was one of the highest in the world – China’s Gini coefficient (a measure of inequality – ‘0’ represents perfect equality, ‘1’ represents perfect inequality) rose from about 0.3 in early 1980s to 0.49 in 2008. The media, academia, multilateral institutions funded by the Deep State went all-out to woo the CPC leaders towards ushering a new era of ‘political reforms’ after such a brilliant success of ‘economic reforms’ – by ‘political reforms’ they meant introduction of multi-party election system and privatisation of the state-owned enterprises. After one and a half decades of persuasion, by middle of 2000s the Deep State cabal understood that, CPC never ever had any such plan of changing their ideology of political economy.

And about the same time in 2007 Munich Security Conference, Putin as the leader of Russia, delivered his famous Munich speech. In no uncertain terms, Putin criticized USA’s hegemonic dominance and its “almost uncontained hyper use of force in international relations“. That speech came as a shocker to the Zionist Capitalist clique – it was like waking up from a slumber. All these years they thought WW II was over with Soviet Union completely decimated – after 16 years they had the ignominy of attending a conference on European soil, where a Russian leader was chastising them about use of force in settling disputes!

Actually 2000 onwards, there had been relentless sole-searching among top leadership of Russia. It was about the overall decay of Russia within a span of just 10 years – between 1985 and 1995. As a result, the Russian government and a section of ruling party led by Putin has been pushing economic policies that created new consumer goods industry and improved agricultural production, enhanced the oil-gas extraction operation. Within few years’ time Russia got on its feet and created an economy based on ‘domestic consumption’ and pushed export of oil-gas to earn foreign exchange. However, the Zionist Capitalist oligarchy led by powerful faction of the ruling party was deeply entrenched in the bureaucracy, academia and media who supported (and benefited from) their illegal amassing of wealth. Corruption, nepotism, extortion among ruling party cadres and government officials, mostly went unpunished. Outward flow of capital and tax breaks for rich businessmen were also happening albeit at a slow pace. But noticing the overall upswing in Russian society the Deep State got alarmed – ‘filthy’ Russian bear is again cooking up some curry that may prove difficult to digest in long run!

Part 1

Part 3 – pending


By profession I’m an Engineer and Consultant, but my first love was and is History and Political Science. In retired life, I’m pursuing higher study in Economics.

I’m one of the few decade-old members of The Saker blog-site. Hope that this website will continue to focus on truth and justice in public life and will support the struggle of common people across the world.

An Indian by nationality, I believe in humanity.

Bridging China’s past with humanity’s future – Part 1

June 27, 2020

Bridging China’s past with humanity’s future – Part 1

by Straight-Bat for the Saker Blog

This will be presented in 3 parts and in 3 different blog posts

PART – 1

1. INTRODUCTION

The world is tottering under the omnipresent virus covid19. Since January’2020, economic and sociological parameters went into a tailspin in one after another country across the globe. By end of year 2020, when the corona pandemic would be under control in all the top 25 countries (with GDP PPP more than 1 trillion $ in 2018, as per World Bank estimates), global economic fabric would have been torn apart with unheard of impact on society, few of which are:

  • millions of sick people will need medical care,
  • millions of unemployed people (and continuously growing) will need food and shelter,
  • at least one-third of the medium and large industrial and utility producing units will be financially sick, while close to half of the small scale units permanently closed down,
  • due to decline of overall purchasing power among the citizens, demand of manufactured products will decline dramatically with simultaneous upsurge of demand for medicines,
  • banking system will be under tremendous stress to renegotiate with their clients to reschedule loan repay and/or write-off loans,
  • Governments will be embarrassed with dwindling tax collection, large scale impoverishments which would accompany increasing unrest among common people

Under the above circumstances, what would be the action plan of the global oligarchy who collectively own banking and industrial sectors and who maintain the current unipolar world order through chosen members of the so-called (USA/5Eyes/Israel) Deep State? We need to remember that there exist nothing like ‘national capitalism’ – by virtue of its expansionary characteristic, ‘capitalism’ has always been global in outlook which resulted in ‘world system’ with industrially advanced society forming the ‘core’ and rest of the world forming the ‘periphery’. The global oligarchy has its interest in EVERY nook and corner of the globe. Deep State elites maintain strong economic and political alliances with almost all countries where, ALL significant political parties and large business houses of every hue and colours are joined through invisible covenant to continuously extend their support, and, in return get benefitted from the global oligarchy. (Cuba and North Korea are the exceptions owing to their overtly and fiercely ‘independent’ policy of governance; for past two decades, Russia-China-Iran-Venezuela governments are resisting the global oligarchy and their local partners with gusto.)

The answer to above question is – state policy and implementation of the same would be geared towards accumulation of capital in every country except the above mentioned six countries. Other than getting humongous sums as bailout packages from governments and share buy-back programmes through zero interest loan, the oligarchy (1% of the population) and flunky elites (5% to 15% of the population) has little interest in governance and support to common people in distress.

[ Link: https://www.cnbc.com/2020/05/21/american-billionaires-got-434-billion-richer-during-the-pandemic.html ]

A closer look reveals that, among those six ‘resistance camp’ countries, only China has both: landmass and population, that can be termed as ‘resources’ necessary to resist unipolar world order, roll back onward march of global capitalism, and simultaneously build a multipolar world order and more equitable society in close coordination with Russia. So it is natural to expect that China leads socio-economic rejuvenation of the world with full support from Russia. China is also well positioned to harness the strengths of Iran-North Korea-Cube-Venezuela. On behalf of peace-loving people who believe in truth-justice-equality, let me dig deeper into the proposition.

The journey will begin with review of Qing Chinese society as well as economy and industry of Qing era, then discuss the current Communist epoch, and end with future possibilities. Looking back is necessary, because a society which have a significant past would have a remarkable future as well.

2. CHINA IN QING ERA

While mentioning three successive empires: Yuan-Ming-Qing in late medieval and early modern China, it is often forgotten that, Yuan empire was divided into two parts: Ming and Northern Yuan empires, and most of the regions falling under these two empires were brought under control by Qing empire. Even though during the ‘century of humiliation’ starting from 1839 CE Qing empire gradually lost large territories in north-east, north, north-west as well as smaller tracts of land in the south and South China Sea, Qing empire should be given due credit for the following:

  1. Notwithstanding the preferential treatments meted out to the Manchu aristocrats, the Qing emperors transformed the Chinese empire as a multi-ethnic multi-language empire in official policy and procedures (in contrast to Ming era that was truly Han chinese in outlook), thereby creating a fundamental basis of a modern Chinese society. Starting in 1618 through renunciation of Ming overlordship and creating Manchu kingdom by Jurchen/Manchu tribal chief, by 1648 Qing dynasty formed by the Jurchen/Manchu tribal chief extended their control over most part of the erstwhile Ming empire through a military force in which Manchu Bannermen represented below 20% of the manpower while Han Bannermen made up more than 70%. This data amply represented the multi-ethnic character of Qing policies.
  2. The successive Qing emperors maintained warm relationship with all tributary states and protectorates until the onset of the ‘century of humiliation’ in 1839. Commentators and academicians who bring up Westphalian concept while discussing relationship between empires/kingdoms in pre-colonial Asia generally forget that Westphalian sovereignty was a concept that was necessary for and was derived under ‘feudal’ environment of medieval and early modern Europe. Except Japan, statecraft in Asian empires/kingdoms never introduced ‘feudalism’ in medieval and early modern Asia. Hence, the relationship between Qing empire and different categories of vassals had multiple vectors that can’t be seen through the Westphalian lens. Even though Qing empire didn’t lack manpower or military resources that would be necessary to directly rule over the vassals, they were comfortable with the tributary system (based on Confucian ideals) whereby different kingdoms surrounding the Chinese empire would accept Chinese emperor as the predominant authority of that part of the world, and the benevolent Chinese empire would guarantee the opportunity of peaceful trading and commerce across central, east and south-east Asia – this ensured continuation of the two millennium long exchange of goods-services-knowledge-culture between Asia and Europe.
  3. Continuation of the merit-based entry through examination system to the bureaucratic institutions and pre-eminence of Confucian family value system (both were adopted from earlier dynasties) ensured that Qing China stepped into the modern era keeping the fundamental socio-political basis of Chinese society intact. Both of these ancient Chinese practices are valued in all modern societies across world.

By the end of the 18th century, Qing empire commanded an area of around 14 million sq.km with estimated population of around 300 million. Qing society was divided into mainly five categories:

  • Bureaucratic Officials
  • Gentry elite aristocracy
  • Literati, scholar
  • Respectable “Commoner”
    • occupational group of farmers
    • occupational group of artisans
    • occupational group of merchants
  • Debased “Mean” people (slaves, bond-servants, entertainers like prostitutes, tattooed criminals, very low-level employees of government officials)

About 80% of total population were peasants. Landholding peasants were largest labour force with presence of insignificant number of hired (landless) labour. The state also recruited army personnel from rural population.

Agriculture and Land-use:

Agriculture sector was the largest source of employment in Chinese society. With private property rights over land, the farmers had natural incentive to produce more quantity and produce variety of crops. This resulted in increased factor productivity. Land owning peasantry also got benefitted from the state policy that supported hiring of labourers. On the other hand, tax from agriculture made up the largest share of state revenue. So, the landholding peasantry and fiscal-military state both had incentive for territorial expansion. And, the state often resettled farmers in new regions with material (seed and farming tools) and finance (free passage and tax holidays). By the 18th century the Han ‘refugees’ from northern China who were suffering from drought and flood were resettled in Manchuria and Inner Mongolia regions. The Han farmers farmed about 0.5 million hectares of privately owned land by Manchu elites in Manchuria and about 200,000 hectares of lands that were part of noble estates and Banner lands.

There were other innovative actions as well – introduction of maize and sweet potatoes, double cropping, fertilizer such as bean-cakes, re-introduction of early-ripening rice – that helped to increase productivity and conversion of marginal land into regular farm land. A system of monitoring grain prices helped the rulers to eliminate severe shortages, as well as to eliminate hoarding and price shock to the consumers.

The farmers on the basis of a high-yield agriculture produced a constant and sizeable ‘surplus’ that ensured development of market economy in (medieval and) early modern China. Historians estimate that up to one-third of China’s post-tax agricultural output was subject to market exchange. This surplus also became the basis of growth and development of other sectors in the economy.

Trade and Commerce:

For the first time, a large percentage of farming households began producing crops for sale in the local and national markets rather than for their own consumption or barter in the traditional economy. Surplus crops were placed onto the national market for sale, integrating farmers into the commercial economy from the ground up. This naturally led to regions specializing in certain cash-crops for export as China’s economy became increasingly reliant on inter-regional trade of bulk staple goods such as cotton, grain, beans, vegetable oils, forest products, animal products, and fertilizer.

Merchant class functioned within the state-imposed boundary. At the apex of the market structure, the state controlled key commodities like salt, wine, iron and steel etc. Qing state refused new mining rights to private merchants. Foreign trade was controlled by the state, participated by both state and private merchants. So the Chinese merchant class was left with unrestricted platform to engage in commercial transactions at village level (surplus-based market exchange with farmers) and at region level (estimated around 1,000–1,500 such regions in Qing empire). Trade between markets at the village level, region level, and province levels developed into a network covering much of Qing empire. Hence, the merchant class became very wealthy but lacked the strength (as a class) to influence the economy and state politics.

Merchant guilds proliferated in all growing cities in China who sourced manufactured items (by artisans and commoners) like textile, handicraft, ceramics, silk, paper, stationary, cooking utensils. More efficient administration of the Grand Canal created new opportunities for private merchants who could transport goods easily within Qing empire. It has been estimated that in the early nineteenth century, as much as one-third of the world’s total manufactures were produced by China. Though In 1685 the state opened maritime trade for the merchants along the coast by establishing customs offices in port cities like Guangzhou, Xiamen, Ningbo, due to internal political moves such trade arrangement was abandoned. By the time when maritime trade was again made legal, trade with west Europe grew to such an extent that, Canton alone housed more than forty mercantile houses. China primarily imported war horses (for the army), and metals (for currency). China exported silk, ceramics, textiles, metal products (made of iron, copper, bronze etc.), non-metal handicrafts, tea. Trade between China and Europe grew at an average annual rate of 4% between 1719 and 1806. Qing state established the Canton System in 1756 CE that restricted maritime trade to Canton/Guangzhou and gave monopoly trading rights to private Chinese merchants. European merchant ‘companies’ British East India Company and Dutch East India Company had been granted similar monopoly rights by their governments long ago. In the early modern era, demand in Europe for Chinese goods were met through import for which payments were made by silver (sourced by European colonial powers from western hemisphere colonies). Resulting inflow of silver expanded the money supply, facilitating the growth of competitive and stable markets. Thus China had gradually shifted to silver as the standard currency for large scale transactions and by the beginning of 18th century collection of the land tax was done in silver. Since China was self-sufficient in all types of consumer goods, very low import caused imbalance of trade vis-à-vis Europe, which in turn resulted in drain of silver from European powers. British East India Company started importing opium into China. Import of opium into China were paid for by silver – It is estimated that between 1821 and 1840, as much as one-fifth of the silver circulating in China was used to purchase opium. Alarmed with both over the outflow of silver and damage that opium smoking was causing to Chinese people, emperor ordered to end the opium trade, which started the conflicts with European powers in 1839 CE.

Apart from short-term credit systems, offering house and farm land as collateral to raise long-term money was also present. But, community and state interference with such contracts by blocking land transfers from debtors to creditors was one of the significant factors that displacement and dispossession (basis of ‘capitalistic’ primitive accumulation) never took root in China.

Due to ‘equal opportunity’ meritocracy and social mobility, the talented youth were generally drawn towards literati and officialdom (‘Pan’ family of Anhui transformed from one of wealthiest merchant family to powerful family of bureaucrats within two centuries). Merchant class was not considered as sufficiently suave which can attract talented people. They could not rival the influence of large landholding aristocracy notwithstanding localised influence of very rich merchants. Instead, the existence of factor markets for land allowed merchants to join the landholding class.

Some merchants with entrepreneurship zeal migrated to the European colonial outposts like Manila, Macau, Jakarta to avoid empire’s policies which were Confucian (assigning merchants and other commoners same level who deserved equal treatment from the state as a patriarch).

Early Banking:

Copper coins were used for everyday transactions, while silver was used for larger transactions as well as for payment of tax to the government. Apart from monetary conversion the money-changers also provided credit, and rudimentary banking services. Remittance banks evolved during this period that would take cash deposits from merchant in one place and issue remittance certificates, which the merchant could then take elsewhere to pay his supplier. That person would in turn go to bank in his vicinity and exchange the certificate for coins. By the 18th century there was a vast network of such banks which played a stellar role for development of commercial activity in China.

Development of Trade Towns:

Due to the commercialization of the surplus agricultural products as well as booming ‘cottage industry’ (if I may say so), merchants were involved in inter-region and inter-province trades with help of long-distance transportation network. Towns popped up as commercial centres to direct the flow of domestic trade. As more and more people travelled, ‘guild halls’ came up in market-towns for lodging and boarding of those people which included merchants, buyers, and sellers. It has been that about 45,000 market towns developed, some of which became home to some of the merchants.

During mid-17th century guild halls were introduced for more specific purpose – to facilitate craftsmen and artisans of specific sectors like textiles weaving, carpentry, medicine, iron and steel work. Thus those guild halls acted as nucleus of industrial-towns, which further developed into large cities with real estate, water supply, sewerage system etc.

Similarities & Dissimilarities with Western Europe:

In 18th century Qing era, the standards of living in south and east regions of China reached a high level which was comparable with wealthy regions of 19th century Western Europe. As per renowned Historians-cum-Sinologists key factors were ‘(1) the rationality of private property rights-led growth, (2) total factor productivity growth associated with China’s green revolutions from Han to Ming-Qing and the economic revolution under Song dynasty, and (3) China’s export capacity (hence China’s surplus output) and China’s silver imports (hence purchasing power of China’s surplus)’.

Ken Pomeranz showed that the core productive regions in China and West Europe both faced major bottlenecks in the form of land and energy constraints in the 19th century. A combination of domestic and international factors as well as much luck enabled England to overcome these challenges and embark on a capital-intensive path of industrialization. As per Pomeranz, two major factors here were ‘(1) the conveniently located coal reserves, which, being near the core areas helped Britain escape its energy constraints more easily, and (2) Britain’s coercive colonization of the western hemisphere, which served as a source of land-intensive goods such as cotton, sugar and grain, while at the same time providing a market for its manufactured goods. In China, where coal reserves were not as readily available, and a policy of coercive colonization, which could provide it with free land, was absent, ecological constraints led to a turn to labour-intensive agriculture.’

Yet another line of thought considers (1) families of ‘strong, urban, entrepreneurial class capable of concentrating the agrarian surplus to foster a capitalist-industrial’ were absent in China unlike in UK, (2) In both agriculture and cottage industry sectors the Qing emperors’ policy of conflict-containment (between landlord and tenant, between owner and labour) contained appeasing and accommodating attitude towards the tenants and labours (very much unlike the UK where merchants, landlords and entrepreneurs received unconditional support from state) which ultimately were detrimental to accumulation of capital.

Socio-economic indicators:

As per Maddison, percentage share of global GDP and GDP per Capita of China, West Europe, and USA:

YearChinaGDPChinaGDP per CapitaWest EuropeGDPWest Europe GDP per CapitaUSAGDPUSAGDP per Capita
150024.91.115.51.4
182033.00.920.41.91.81.8
19406.40.327.52.520.63.6

As per Allen, and Pomeranz, select socio-economic indicators in early-modern China and England:

CountryAverage Life Expectancy at Birth in mid-18th centuryAverage Calorie Intake/male/dayin 19th centuryLand Productivity 1806 to 1820 CE (Pound/Acre)Labour Productivity 1806 to 1820 CE (Pence/Day)
China35 to 39About 260026.151.3
England31 to 342000 to 35003.360.9

Significant observations on Qing China:

1. Even though Chinese society maintained a robust lead over rest of the world in science and technology (as conclusively shown by Joseph Needham) including metallurgy, porcelain, gunpowder, compass, silk, paper, block printing, water turbine, herbal medicines and many other areas, China was slow to catch up with the technology behind (a) industrial machinery, (b) transportation systems, (c) military arms developed in West Europe since mid-18th century

2. By end-18th century when territorial expansion stopped, population continued a healthy growth. Due to prevailing equal-inheritance practice, farm-owners started facing the problem of a shrinking farm that resulted in decreasing prosperity among farmer class, which finally reflected in less than expected tax realisation by the Chinese state. Combination of key factors like (a) the organised hooliganism and colonialism of European trading companies, (b) internal discontent and rebellion among the common people, and (c) territorial competition with Russian and Japanese empire, proved fatal after 1840 CE

3. With a thriving agriculture and a splendid cottage industry that catered domestic demands China mostly needed war horses and metals to be imported. This was in direct contrast to West European states who needed consumer goods to be imported from China but couldn’t offer goods to be exported to maintain somewhat balance in trade, so they brought in opium. Qing administration should have analysed this problematic trading relation beforehand to take necessary actions to forestall such developments

4. The debate among a large number of Historians and Sinologists about ‘why China couldn’t develop capitalism before West Europe’ continues till date. The fact of the matter is that, the social-economic-political checks and balances that existed in China since 1st millennium BCE (largely due to pervasive Confucian thought in Mandarin Chinese mainland as well as Buddhist thought in Mongolian-Tibetan dominated regions) were diametrically opposite to concept of the so-called ‘animal spirit’ of zionist capitalism. The wealthy landlord and merchant class in China could never pursue profit and endless accumulation of capital by controlling state super-structure. However, the hard-working and merit-based dynamic society of China allowed commercialization, trading, proto-industrialization, and urbanization in a big way since medieval Song era.

3. CHINA IN MAO ERA

Since mid-19th century, one-after-another onslaught by the west European colonialist powers, and Russian-Japanese empires devastated China: first the Qing empire up to 1911, then the Nationalist China up to 1945. Overcoming the ‘century of humiliation’, through armed struggle and huge loss of life, the Chinese Communist Party seized state power in mainland China in 1949. Mao Zedong lost his wife, a son, two brothers, and sister, Zhou Enlai lost all his children, while Zhu De found decapitated head of his pregnant wife nailed to the city gate. At the time, China was a backward agrarian economy with widespread poverty, lawlessness and illiteracy; of its five hundred million people, eight in every ten people were illiterate, one in every eight people was drug addict. It was a time when peasants had to give away two-thirds of their produce in rent/tax, and people sold themselves to avoid starvation.

One can only look back at 1949 China with bewildering awe about how the Peoples’ Liberation Army completed their task of liberation under Mao and his comrades, which culminated with CPC’s emphatic take-over of state power. No other revolutionary leader, anywhere in the world till date, could mobilise such vast number of his countrymen through such enormous hardships for decades. Initial acts were swift and effective. The banking system was nationalized and People’s Bank of China became the central bank for the country. The government tightened credit, established value of the currency, implemented centrally controlled government budgets – all of these ensured that inflation was under strict control. CPC undertook a land reform programme through which 45% of the arable land were redistributed to the 65% of peasant families who owned little or no land. These peasants were encouraged to form sort of mutual aid teams among 7-8 households. CPC also nationalised most of the industrial units as soon as they came to power. By 1952, 17% of the industrial units were outside state-owned enterprises compared to about 65% during Kuo Mindang government.

The First Five-Year Plan (1953–57) followed the Soviet Union model which assigned primacy to development of heavy industry. Government of China controlled about 67% as directly state-owned enterprise and 33% as joint state-private enterprise. There was no more privately owned company. Key sectors like Coal and Iron ore mining, Electricity generation, Heavy Machinery manufacturing, Iron and Steel manufacturing, Cement manufacturing etc. were modernised by construction of hundreds of new factories with help from engineers sent by Soviet Union. Growth of industrial production increased at average rate of 19% per year during this period. During this period, more than 90% of cottage/handicraft industries were organized into cooperatives.

The agricultural sector however didn’t perform as per expectation and only clocked average growth rate of 4% per year. From loosely constructed ‘mutual aid teams’, peasants were encouraged to form ‘cooperatives’, in which individual families still received some income on the basis of their contribution of land. In the next stage, ‘collectives’ were formed on which income was based only on the amount of labour contributed by each family. In addition, each family was allowed to retain a small plot to grow vegetables and fruit for their personal consumption. By 1957 the collectivization process covered 93% of all farm households.

Second Five-Year Plan (1958–62) was abandoned. The leadership introduced new set of policies, and decided to engage entire population to produce a “great leap” in production for all sectors of the economy at once. 3-tier Communes were built to spearhead quantum jump in agricultural produce – at the top level commune central administration, at the next level 20 or more production brigades represented by the old ‘collectives’, and the last tier production team that consisted of about 30 families of village. They attempted to build vast irrigation network by employing unemployed and underemployed farmers – final objective was to increase the agricultural output and employment. Similarly, surplus rural labour was also employed in thousands of small-scale, low-technology, industrial projects in rural areas – final objective was enhancement in industrial and agricultural output and employment. Such small scale industry (including steel making furnaces) were also run by communes. The communes proved to be too bulky to carry out administrative functions efficiently. As a result of economic mismanagement, and unfavourable weather for two years, food production in 1960 and 1961 plunged. As a result, China faced a famine – in 1960 the death rate was 2.54% compared to average death rate of 1.14% registered during 1957 and 1958.

In 1958 industrial growth was 55%, in 1961 it was 38%. By 1962 overall economic collapse propelled the leadership to devise a new set of economic policies. Agricultural taxes were reduced, supplies of chemical fertilizer increased, agricultural machinery were made available, procurement prices for agricultural products were raised, the role of the commune central administration was significantly reduced, and private farming plots were restored. In industry, planning was again emphasized, import of technologically advanced foreign machinery started, hydro-electric power plants were setup, old plants were refurbished, chemical fertilizer plants and agro-machinery plants were setup in large numbers. Between 1961 and 1966, average annual growth of industrial output surpassed 10% while agricultural output grew at an average rate more than 9% a year.

The Cultural Revolution, a political upheaval whereby Mao re-established control over the party by pushing aside the right-of-centre and left-of-centre factions of CPC. It didn’t produce major changes in official economic policies or the basic economic model. Nonetheless, the disturbances affected urban society which impacted about 14% decline in industrial production in 1967. By 1969 industrial sector returned to a normal growth rate. Fourth Five-Year Plan (1971-1975) saw resumption of systematic economic growth especially in industrial sector (with new plants setup for Petroleum Exploration and Refinery, Fertilizer, Steel, building materials, Chemicals etc.). Petroleum and Coal were exported since the beginning of 1970s. With industrial sector average rate of 8% and agricultural sector average rate of 3.8% it was clear that, contrary to popular image Mao era targeted industrial growth as the top priority.

CPC leadership re-evaluated the economic state of affairs and Zhou Enlai presented a report to the Fourth National People’s Congress in Jan’1975. He formulated the famous ‘Four Modernizations’ policy targeting agriculture, industry, defence, science and technology. By 1976, when both Mao and Zhou departed, foundation for a strong self-reliant country had been built, and mainland China had (1) a very large, and healthy labour force having basic education, (2) a huge battery of state-owned industrial enterprises across sectors, (3) infrastructure, power, communication required for further economic growth, (4) an economy burdened by extremely low external debt (2.99% of gross national income as of 1981).

Socio-economic indicators:

Except three interludes – Great Leap Forward (1958–60), Proletarian Cultural Revolution (1966–69), and post-Mao political struggle (1976–78) – different sectors of the Chinese economy (agriculture, mining, manufacturing) experienced healthy growth, albeit with quite difficulty aroused out of frequent policy changes. Economists estimate that during the period 1952–1978, China’s real GDP per capita grew at a robust 4% average annual rate, the industrial share of GDP rose from 20.9% in 1952 to 47.9% in 1978 (as per Chinese National Bureau of Statistics), industrial labour productivity grew by 236.7% and agricultural labour productivity growth was only 25.5% over the same period, the fraction of the labour force in agriculture declined from 83% to 75% with the value added produced in agriculture declined from 78% in 1953 to 30% in 1977, household consumption grew by only 2.3% annually, retail prices for consumer goods grew at an average rate of 0.6% a year. Life expectancy at birth improved from 43.5 years in 1960 to 66.5 years in 1978, according to World Bank data.

YearGDP Nominal(Billion USD)GDP per Capita(USD)Population(Billion)
195230.55540.569
196059.72890.667
197092.601130.818
1977174.941850.943

Significant observations on Mao China:

1. Treading on the same path taken by Soviet Union, 1949 onwards China went on to implement a mode of production which was essentially ‘state capitalism’. Soviet Union as a state was the owner of the means of production and ‘commodity’ (which by definition is integrated with exchange-value i.e. ‘price’ in the ‘market’) that were produced. Following similar model, China created a new economy that also revolved around commodity production by state-owned enterprises, agricultural output production by state-owned communes and accumulation of capital by the state (through extraction of surplus from the rural agriculture and light industry). In Soviet Union and China, the ideologues termed it ‘socialist commodity’, however, socialism’ can’t theoretically accommodate production of ‘commodity’ that inherently refers to ‘market’.

In fact as Marxism suggests, the concepts of ‘commodity’, ‘market’, ‘capital’ and ‘surplus capital’ are intricately joined with ‘ownership’ of means of production. Marx and Engels were clear that these concepts don’t have place in socialist/communist society. It is not true that ownership pertains to only ‘private’ citizens, even ‘state’ can own assets to be used as ‘capital’ and the profits out of business gets appropriated by the state authority and close followers.  Undoubtedly, Stalin and Mao being the most committed followers of philosophy and ideology of Marx-Engels-Lenin, were well aware of the final destination of the Marxist journey. Why then both of them set out to accumulate capital in the state treasuries? We will come back to this question again in the last part of this hypothesis in section 5.

2. The central planning system initially adopted from Soviet Union, was the punching bag for CPC leaders whenever they reviewed the planned-vs.-achieved results and found variance (actual results were less than planned). The centralised economic planning as a concept was correct – there were shortcomings in the execution process. Firstly, sector-wise prioritization should have been done that reflects the reality in the society – Chinese society being overwhelmingly agrarian, the 1st Five Year Plan should have assigned primary importance to agriculture and next level of importance to light industry, heavy machinery being at the last layer of importance. Secondly, centralised economic planning needs accurate and complete set of data – China being a vast country with wide regional differences in weather, natural resources, social norms, demography, occupation, infrastructure etc., compilation of complete and correct and data for planning process 70 years back was much more complex than we can imagine today. Thirdly, in reality the central planning was a top-down process albeit with participation of all concerned ministries and departments. In a large country like China, bottom-up would have been a better approach.

3. Government introduced hukou system (originated in medieval China) in 1958 through which all rural households got registered through which the family members will get entitlement for housing, education, medical care in the place of their registered birthplace. In a way government controlled migration of rural population towards urban and semi-urban regions. Intellectuals who value human rights as inalienable natural right, termed this system as draconian. However, such arrangements were highly effective in controlling large-scale migration of unemployed rural people to urban areas causing socio-economic problem in both rural and urban areas.

4. The revolutionary spirit of Mao knew no bounds. Undoubtedly, he was right in emphasizing that, (a) not only economic sphere needs transformation from capitalism to socialism, but cultural sphere of society equally calls for such transformation, (b) the proletarian revolution has a long way to go. Time and again he became impatient with policies that were developed by him and his team earlier. Possibly Mao was oblivious of the fact that, frequent changes in political and economic policy would leave a trail of inefficiency, maybe he was not. During the second half of 1950s, the decisive rejection of Stalin’s achievements by CPSU, dampening of Leninist ideals, and withdrawal of all kinds of Soviet support from China made Mao deeply perceptive of the overall challenges on the way to build socialism in a country– this alone can explain Mao’s vacillation in policy issues and in-depth deliberations on socio-cultural aspects of socialist revolution (a territory, which was much less travelled by Lenin and Stalin). Thus Mao delved into too many intangible factors (apart from political economy) that would influence the final outcome of a complete communist transformation of any society.

4. CHINA IN DENG ERA

After a brief struggle for leadership, Deng Xiaoping took control of CPC in 1978. At the Third Plenary Session of the 11th Central Committee of the CPC held in December’1978 in Beijing, the majority party leaders decided to undertake reform and opening up of economy. They repudiated the Cultural Revolution of Mao era. The reform, as Deng proposed, would develop productive forces through increasing role of market mechanisms and reducing role of government planning.

Agricultural production was stimulated by an increase of over 22% in the procurement prices paid to the peasants for farm produces. The commune system was decollectivized but the state still owned the land and household responsibility system was introduced in agriculture starting in 1979 – individual farming families would get ‘right to use’ on plots of land (divided from old ‘communes’) from government, earn profit by selling their products on the market in lieu of delivering a small contractual amount of produce to the state as taxes. This arrangement increased productivity through the profit incentives for the farmers, and about 98% of farm households were brought under this system by 1984. In 1985, by employing 63% of the country’s labour force the agricultural sector achieved 33% of the GNP, agricultural production got increased by about 25%. Among agricultural produces grains like rice, wheat, corn, barley, millet, cash crops like oil seeds, sugarcane, cotton, jute, fruits, vegetables, poultry and pigs were primarily produced by peasant families. Though efficiency of agriculture sector improved a lot with all arable plots producing at least one crop per year, and under favourable conditions two or three crops a year, fundamental problems remained as before – small farm size, and inadequate agriculture equipment.

Apart from a significant category of small handicraft/cottage industry, light industries formed second category while large industry category included Power plants, Petroleum Refineries, Petrochemicals, Chemicals, Fertilizers, Textile, Steel, Cement, and Automobile. Reforms targeted in urban industrial regions. In industrial sectors, state-owned industries received permission to sell production above the ‘plan quota’ at market at prevailing market prices, as well as received affirmation to experiment with the bonuses to reward higher productivity among employees. Industrial Responsibility System introduced in mid-1980s allowed individuals or groups to manage the state-owned enterprise by entering into contract with government. Private businesses (which almost disappeared after the Cultural Revolution) were allowed to operate and price flexibility was introduced, and gradually private ownership enterprises began to make up a greater percentage of industrial output. Bringing in modern business enterprise management process, government allowed managers to gain control over their business operation including recruitment and layoff (with approval from bureaucrats and CPC). Industrial sector generated around 46% of GNP in 1985 by employing only about 17% of the total labour force in China. Enterprises further got incentive when in 1985 the policy of retaining the net profit (after payment of tax-on-profit to government) within the enterprise was made across China. On banking and financing also there were policy changes – bank loans were made available to the enterprises at a very low interest which would have to be paid back to banks. Budgetary support by government was reduced. For industries, foreign trade procedures were made much easier; (soon special economic zones would be launched to be in the forefront of the boom in foreign trade). The effect of profit-driven competitive environment on working class people was that, many enterprises slowly replaced permanent employment with short-term contractual job as well as eliminated welfare packages for workers – this impacted industrial workers’ living standard and social security negatively.

Perhaps the most sweeping policy decision taken by Deng related to the open door policy for foreign investment. Starting in January’1979, Chinese government created initial 5 special economic zones (SEZ) in Shantou, Shenzhen, Zhuhai (all in Guangdong province), Xiamen (in Fujian province), and Hainan province where many additional infrastructure, fiscal incentives, and freedom from too many bureaucratic regulations were provided to foreign investors for setting up industry. Primarily geared to exporting goods, the five SEZs housed foreign joint ventures with Chinese companies as well as fully owned foreign companies. In 1984, China opened 14 coastal cities to MNC investment: Dalian (Liaoning province), Qinhuangdao (Hebei province), Tianjin, Yantai, Qingdao (both in Shandong province), Lianyungang, Nantong (both in Jiangsu province), Shanghai, Ningbo, Wenzhou (both in Zhejiang province), Fuzhou (Fujian province), Guangzhou, Zhanjiang (both in Guangdong province), and Beihai (in Guangxi province). Beginning in 1985, new economic zones were established in Liaodong peninsula, Hebei province, Shandong peninsula, Yangtze river delta, Pearl river delta, Xiamen-Zhangzhou-Quanzhou in southern Fujian province, and Guangxi Zhuang Autonomous region. In the post-Deng era, these regions became high-power engines of economic growth and technological breakthroughs for the Chinese economy.

The open door policy changed the landscape of foreign trade in China. Before the reforms, combined exports-imports in 1969 was 15% of GDP; with reforms in 1984 it became about 20% and in 1986 it reached 35% of GNP. Textiles, Petroleum, and foodstuff were main export goods while machinery, transport equipment, and chemicals were key import items. By 1986, Japan became the dominant trading partner accounting for 28.9% of imports and 15.2% of exports. During the same time, USA appeared on the horizon as the third largest overall trade partner, next only to Hong Kong which accounted for 13% of imports and 31.6% of exports. Under Deng, the SEZ and foreign trade became significant tools for both foreign direct investment (FDI) and modern technology. Most interesting part of China’s industrial drive was ‘technology transfer’. While historically China was always on the forefront of applied science and technology, as the 18th century was drawing to a close China was slowing down in the technology race compared to west Europe – hence Deng made it a point that following the ‘four modernisation’ programme China should rapidly close the technology gap by upgrading old mining and manufacturing plants as well as installing plants with sophistication.

Apart from huge coal reserves, China had substantial reserves of natural gas. With many rivers running across the country, hydroelectric potential was among the largest in the world. Large number of coal-fired thermal power plants and large hydroelectric projects were undertaken by the government to generate electric energy necessary for a thriving industrial economy.

Undoubtedly Deng’s overall reform programme accomplished very impressive success, but it also gave rise to several serious socio-economic problems – rise of factions attached to neoliberal free-market political economy within CPC, managerial autonomy in state owned and private owned enterprises, rampant corruption, economic crime, widening income disparities, uncontrolled inflation, and large scale moral deterioration. These concerns created huge storm within CPC and party general secretary Hu Yaobang was forced to resign in 1987. The left-of-centre faction of CPC stalled some of the reform programmes. Student leaders mainly based in Beijing and Shanghai who were fascinated by the neoliberal free-market ideology, pointed out to such socio-economic issues in the then Chinese society and built a movement (supported by the Zionist Capitalist Deep State) that aimed at toppling the CPC rule. The People’s Liberation Army was mobilised to break seize by protesting students at Tiananmen Square in Beijing in June’1989.

In November and December of 1990 Deng reopened the Shanghai Stock Exchange and established the Shenzhen Stock Exchange respectively. Party Congress in 1992 echoed Deng’s views while stating that China’s key task ahead would be to create a ‘socialist market economy’. And, in 1992 Deng undertook ‘southern tour’ during which he underscored the need to continue reforms to open up the economy. Through these actions Deng re-established control over the party (which was weakened in the aftermath of Tiananmen Square protests) by pushing aside the far-left and left-of-centre factions of CPC. Deng made Jiang Zemin the CCP’s new top leader. A new round of market reforms was initiated. Private enterprises and enterprises owned by the local governments took advantage of easy loans from state-owned banks to expand their business. This again caused inflation and fiscal deficit during 1993. New policy of floating exchange rate and convertibility for renminbi caused about 33% devaluation of renminbi. Foreign Direct Investment was further encouraged and capital inflows to China poured. Economy cooled down after enterprises owned by local governments transferred a larger portion of revenue to the central government, and bank credits were tightened. Exports surged due to devaluation. In 1996, the economy grew at around 9.5% accompanied by low inflation.

Working on the free trade and economic zone policy after 1990, the government opened the Pudong New Area in Shanghai and cities in Yangtze river delta to overseas investment. Since 1992 the government opened more border cities and capital cities of provinces and autonomous regions.

The total number of industrial enterprises rose from 377,300 in 1980 to nearly 8 million in 1990. During the Deng era, higher levels of inflation appeared with reduced government controls – in 1980 consumer prices rose by 7.5% while in 1985 the increase was 11.9% going down to 7.6% in 1986. In 1995 China exported 24.7 billion USD to USA and 149 billion USD to rest of the world. In 1997, the year when Deng departed, share of private consumption in GDP was only around 43% while share of exports in GDP was around 22%.

Changing socio-economic indicators:

Economists John Whalley and Xiliang Zhao estimated the impressive performance of Chinese economy (using Barro-Lee approach) between 1978 and 1999:

  • Output growth rate – 9.72%
  • Growth rate in Input
    • physical capital – 7.30%
    • labour – 2.03%
    • human capital (represented by average years of schooling) – 2.81%
  • Growth rate in Total Factor Productivity (TFP) – 3.64%
  • Contribution to GDP growth
    • physical capital – 36.35%
    • labour – 10.78%
    • human capital – 14.95%
    • TFP – 37.93%
YearGDP Nominal(Billion USD)GDP per Capita(USD)Population(Billion)
1980306.173120.98
1990394.573481.135
1997961.607821.23

Significant observations on Deng China:

1. The 14th National Communist Party Congress held in the year 1992 not only backed Deng’s continuous push for market reforms but they thought that China was on the way to create a ‘socialist market economy’. This was the official expression of CPC to document their push for reform using market forces. I doubt, if such terminology existed in pre-Deng China or in pre-Gorbachev Soviet Union.

Again, as the Marxist theory proposed, socialism would be antithesis to market-driven economy which had been propelled by capitalistic mode of production. In capitalist society the ‘factor of production’ would be sourced from ‘market’ and commodity would be sold in the ‘market’. In socialist parlance, concept of market shouldn’t exist irrespective of whether the concept is proposed by any faction within the communist party: ‘left’, ‘right’, or ‘centre’. It was, primarily, the inability of the then CPC leadership to reorganise and galvanize the rural and urban economy to unleash the productive forces; instead they got into the ‘market economy’ which was the engine of ‘mercantile’-‘agrarian’-‘industrial’ versions of capitalism that took root in west European societies since 16th century.

2. Deng was the great architect of what can be termed as the ‘Chinese juggernaut for export’. China’s market reform was undertaken much later compared to Japan and other Asian Tigers. Beginning in the 1980s the late-coming exporter did a splendid job of absorbing huge amount of investment and latest manufacturing technology. Relatively stagnant urban living standards and falling rural living standards resulted in massive transfer of rural labour into the growing export sector. Additionally, the state-owned enterprises already had disciplined, educated, and skilled labour force that made the entry of big Multi-National Corporations (MNC) easy into Chinese market – giants like Boeing, Toyota started their businesses in China through collaboration with Chinese state-owned enterprises who were in same sector of aircraft or automobile. This environment was another legacy of the Mao era. China’s attractiveness to global capital was further enhanced by persistently low level of workers’ wage compared to other Asian countries like Japan, Singapore, as well as the competitive pressure among local provinces who raced with one another to achieve high GDP growth by offering favourable terms possible to foreign investors (ranging from tax breaks to free industrial land).

While China went on to build world’s largest export-dependent economy in 2000s, unlike Japan and other Asian Tigers who built on the basis of private-owned enterprises, Chinese government depended on both: state-owned and private-owned enterprises to manufacture and to export an amazing range of consumer goods to every nook and corner of the world. Deng foresaw this economic boom that provided much needed upliftment of living standard of millions of educated Chinese. However, Chinese economy couldn’t avoid the short-term economic hardships unleashed by such rapid reforms to push export-oriented economy.

3. Far from being a follower of liberal capitalist political thought, Deng was a committed socialist unlike many top leaders of Soviet Union at that point of time. Researchers should remember that for Deng, ‘market economy’ was ‘a method of using black cat to catch mice instead of using a red cat’, and capability development in China would follow the policy ‘hide your strength, bide your time’. In my opinion, Deng didn’t have ever any doubt on the final outcome of the Marxist view that, the final history will be written by the classless communist society. Hence, his advice to build strength.

While authorising the deployment of PLA forces to remove the protesting student by force from Tiananmen Square in 1989, Deng was clear that the leadership of protesting students were liberal capitalist ideologues who was trying to bring down the CPC rule in China using the discontent among the people about corruption-inflation-nepotism. Had Deng and most other senior leadership believed an iota of liberal capitalist philosophy, by 1991, words like ‘socialism’, ‘communism’, ‘Marxism’ would have been completely erased from even the written history of civilization.

Part 2 – pending

Part 3 – pending


By profession I’m an Engineer and Consultant, but my first love was and is History and Political Science. In retired life, I’m pursuing higher study in Economics.

I’m one of the few decade-old members of The Saker blog-site. Hope that this website will continue to focus on truth and justice in public life and will support the struggle of common people across the world.

An Indian by nationality, I believe in humanity.

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