China: The Years Ahead

Article excerpt

THE AGE WHEN PROFESSIONAL CHINA WATCHERS could only peer over the border from Hong Kong is long over. Western analysts now have access to much more and much better information about the People's Republic of China. But does this necessarily translate into better informed or more rational analysis or analysis that is taken more seriously? In Canada, much of the discourse on China continues to be shaped by a curious admixture of grandiose expectation, exclusionist alarmism, and racial stereotyping. In this brief, short-term forecast of developments in China, I focus on what I consider some common misperceptions in current understandings of China. Specifically, I explore the changing domestic economic and political situation in China; the likelihood of aggressive Chinese military activity, especially against Taiwan; and the ongoing problem of illegal emigration to Canada.

China has now been under reform for almost as long as it was under Mao. But the legacy of the Maoist era lingers, and the course of reform has been far from smooth. In the 1980s and early 1990s, just about everyone gained from the decollectivization and decentralization reforms, and household incomes across China rose. The situation has changed dramatically since the mid-1990s. The productivity of Chinese agriculture skyrocketed after individual farm households started to make their own decisions and reap the benefits of their own hard work. But without mechanization and economies of scale, further gains will be difficult. Rural incomes have begun to stagnate, even to decline. On the industrial side, the collectively owned Township- Village Enterprises (TVEs), which drove much of the growth of the earlier period by expanding low-end manufacturing, are now finding that they too have reached the limits of what can be accomplished without larger scale and more advanced technology. As a result, the Chinese economy is becoming more and more capital intensive. Growth in output is increasingly elastic with respect to employment; growth no longer equals job creation. This means that further reform can no longer absorb the surplus of China's ever-growing labour force, and unemployment is rising rapidly.(1)

At about three per cent, official unemployment in China is remarkably low. But this figure is misleading because rural unemployment or underemployment is notoriously difficult to measure, and large numbers of urban workers have been laid-off (xiagang) but remain on the administrative rolls of their employer. Some analysts estimate that the number of real urban unemployed is as high as twenty million. To this estimate must be added the tens of millions of rural migrants - China's so-called floating population - who have come to the cities looking for work, but are captured by statisticians only if they find work. As further reform means losses to some as well as gains to others, Chinese society is becoming increasingly unequal across the urban/rural divide and across regions. The disparities are already striking. The World Bank reports that urban households earn on average 2.5 times what rural households earn. When benefits such as housing, pensions, and insurance are included, the ratio rises to four times. There are serious and growing regional disparities. Per capita gross domestic product in Shanghai and other coastal regions is ten times that of the poorest provinces in the interior. Real unemployment is also unevenly distributed across regions; the highest levels are in the northern provinces, where the economy continues to be dominated by loss-making State-Owned Enterprises (SOEs).(2)

Enterprise reform has given rise to the other serious problems confronting China's leadership: corruption, inefficiency, and the erosion of social welfare. In the 1980s, decentralization of management of collectively owned enterprises created all sorts of opportunities for the personal enrichment of managers and local officials. Then, in the mid-1990s, the state authorized the partial privatization of enterprises, both TVEs and SOEs. …