The Guardian 14 February, 2007

A visit to the People’s Republic of China (Part 2)

Sitaram Yechury*

This is the second part of a two part report on behalf of a delegation from the Communist Party of India (Marxist) to the People’s Republic of China at the invitation of the CPC made in October of this year.

Public sector the mainstay

In response to the question, whether the growth of private enterprise in the course of building socialism with Chinese characteristics is leading or would, in the future, to a class differentiation in the society, they answered in the negative. Yes, they admit, new social strata have emerged. Yes, income inequalities have risen but no new classes have emerged. The effort to build a harmonious socialist society is to prevent this from happening.

They asserted that the public ownership will always remain the mainstay of the economy. While private economy is being encouraged, such development is taking place within the socialist system and within the controls imposed by the system. The main question under socialism is how wealth is generated and how this wealth is used. The pre-condition for private enterprise in China today is that they are part of the socialist system and they are judged by their contribution, whether it is beneficial to strengthen the socialist economy.

In the primary stage of socialism, by its very nature as a period of transition, private ownership will exist. Converting [the economy] entirely into public ownership in this transition stage may endanger socialism itself. The character of the vast bulk of the private sector in China is mainly small or, at best, medium. However, there are a few large private enterprises with an asset value of 10 billion yuan (A$1.7 billion) or more. These have to function within the strict enforcement of law under the socialist State.

Advanced democracy

When asked about what they mean by advanced democracy, they said that it means:

(a) people are masters, (b) rule of law, and (c) the leadership of the CPC.

The institutionalised forms of such democracy will consist of the system of people’s congresses and multi-party political consultations. There are eight political parties that are part of this multi-party consultations in China. Self-governing rural communities would be established while trade unions will be strengthened to ensure the protection of all labour law under socialism.

A definite plan

Following the initial discussions the CPI(M) delegation proceeded to visit Tianjin. Tianjin historically has been the entry point of British and other European colonialists. The British landed at the Tianjin port and proceeded to colonise China along with other European powers.

The visit to Tianjin only confirmed that the CPC has embarked on the process of modernising social China on the basis of a definite plan. It is erroneous and unscientific to pose the issue as Plan vs Market. In all commodity-producing societies, markets need to exist for an exchange of commodities. Market by definition needs to exist under socialism. However, unlike under capitalism where market forces alone determine economic decisions, under socialism, market indicators must strengthen/correct the plan process. Under socialism, a planned economy, the market needs to be subsumed by the plan process.

I remember in 1987 when we met Deng Xiao Ping, he unfolded his vision of the transformation of socialist China from its primary or primitive stage to an advanced socialist society. He told us that they began this process by dedicating the decade of the 1980s for the development of the south.

In the 1990s, the focus would be the development of the east with Shanghai and Pudong as its core. The first decade of the 21st century would be dedicated to develop the north, with Tianjin as its core. The next decade would be devoted for developing the west and in the decade after that the concentration would be on the development of central China. After this, Deng informed us that for two decades, China as a whole will develop to reach a modern socialist society with an economy surpassing the levels of developed capitalism. In visiting Tianjin we could see this process in action.

Stupendous advances

In the Tianjin Area the GDP grew from a modest 11.2 billion yuan in 1993 to 160.8 billion yuan in 2005, i.e., an average of 20.6 per cent annual growth rate.

The per capita GDP is an astonishing A$18,500.

The Foreign Direct Investment (FDI) reached A$20.5 billion, foreign trade volume jumped from $650 million to $24 billion — a 36-fold increase. This development has already taken place and the target is to double the GDP of 2005 to reach 320 billion yuan(A$53 billion) by 2010, averaging an annual growth rate of 17 per cent. Such is the scale of the economic advances that the modern China is targeting and achieving.

During the course of our visit, we had the opportunity to see the port, the fourth largest in China and the seventh largest in the world. The production units that we visited also gave some insights about how the Chinese are dealing with FDI and also the many myths and disinformation that are spread concerning China.

At the outset, it should be noted that there are no Special Economic Zones (SEZs) in China today where restrictions on the movement of people or where labour laws and other laws of the land still exist. Today, in the whole of China, there exist a total of 54 Economic Development Areas (EDAs). None of these are a "state within a state". Every single law operates in all the EDAs.

Except for a very few, all FDI in China is through joint ventures. We visited a Toyota motor factory that produces 220,000 cars per annum employing 12,000 people. Except for a few technical and managerial staff, all the workers are Chinese. This is a 50/50 joint venture between Toyota and two Chinese companies. The Secretary of the CPC branch and Chief of the trade union of this unit gave us a guided tour of the factory. All workers are members of the trade union and in every enterprise, unions and party branches exist. Our experience was similar at a very high-tech chemical factory that we visited which is again a 50/50 joint venture.

The question of land

The bulk of the land on which this remarkable development is taking place was once a marshy swamp. All land in China is government property. Even the peasants are given land on a contract for a specified period. So the question of acquiring land from the peasants simply does not arise. China is extremely strict and cautious about transfer of agricultural land lest it leads to a decline in food production.

In those rare cases where because of such industrial development, some peasants who were cultivating are now being denied, there is a complex scheme of providing them with alternative economic activity. In the first instance, such peasants are provided with a state built and furnished alternate home which has to be made ready before the land is acquired.

Further, every person who was once dependent on farming is now provided with alternative employment. They are given the necessary training and the relevant skills by the state authorities at no cost. The Chinese, in fact, state that some of the former farmers are today in a better economic condition than other constituents of the society. Many have refused to work even though offered jobs, being more content to lease a part of the housing accommodation and live off this income. We, in fact, had to ask the party chief whether they were not promoting laziness and inactivity as a result!

Employment, work conditions and taxation

This, however, is not to say that there are no problems with conditions of employment. The migrant workers that came into such areas often have a wage structure that is much below that of the local inhabitants. However, every single worker has to be provided with accommodation even if it means a dormitory accommodation to begin with. These necessarily have to be equipped to serve wholesome meals at affordable prices and after a period of time upon the ending of the contract they have to be provided with proper housing if they are employed. Those who are not re-employed will be trained by the local government at its expense and looked after, by paying a subsistence allowance, till they find alternate employment.

At all places we visited, all employment was under the contract system. The contract carries obligations on part of the employer as well as the employee. The employer has to abide by the law of the land, i.e., existing labour laws. The social security provisions are made by both the employer and the local government. In the Tianjin area we found a situation where, far from crowding unemployment, there is a growing demand for workers and people are being encouraged to come and settle there. Skills are being provided, through training centres, by the local government.

Another area which is often compared wrongly is in the field of tax exemptions or concessions given to the FDI in China. During the initial years of reform, China, we were told, used to give a tax holiday for the first two years to any enterprise followed by a three-year period where 50 per cent of the tax was to be paid. This has now been reduced to a one year of tax holiday and a 50 percent tax in the following year. From the third year onwards, all enterprises in China have to pay the full tax.

Even in free trade areas, where there are no duties on imports or exports, a value added tax of 12 per cent has to be paid. In Tianjin the financial revenue rose from 2.36 billion yuan (A$400 million) in 1993 to 31.7 billion(A$5.3 billion) in 2005. Thus, the disinformation that China’s economic development is because there are no taxes on FDI is obviously yet another malicious campaign.

* Sitaram Yechury is a member of the Polit Bureau
of the Communist Party of India (Marxist)

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