Chinas Transition to Capitalism - Essay Example

?Transitions in China into Capitalism Introduction China is today considered one of the more robust countries as it has continued experiencing economic growth for decades now even as many economies have fallen on downward spiral. This was due to reforms that began in 1978. The transition was from communist system towards capitalist system. Under the new system, gradual reforms to property rights were introduced and market changes permitted open-door policy to foreign investors. Capitalist countries especially the Western countries supported the reform and were encouraged to invest as soon as the new economic system was implemented. The country has shown a growing number of private-owned and family-controlled businesses which create real wealth, employment opportunities and better living conditions. Discussion China’s Transition to Capitalism The Chinese Communist Party (Bromley, Brown, Christiansen, Macintosh, Mehta, Sun and Wuyts, 2002, p.9) was slowly ended in 1965 (p.15), a system of government that controlled even the prices of the commodities, services and products in order to generate funds invested in industry (p.32).The private-owned sector of small and big businesses were suppressed by the government, properties were owned by dominant positions in the state and quasi-state (p.13). The dogma of the system was that all the people in the society were treated equal. The political system was centralized. All the businesses were owned by the state and the people. Therefore, everyone was entitled equal sharing, and received wealth according to their needs. Private capitalists and their countries were against the communist economic system because the primary aim of the capitalist is to gain bigger profits held in a free-trade market. The profits will be revolved as capital for their business expansion. The only disadvantage of this economic system is that the wealth is revolved around the limited capitalist investors. Capitalism in China boomed when the reform era began in 1978 as initiated by Deng Xiaoping. Gradual transitions were observed in the country as evidenced by the 10% growth of the economy and the per capita income that doubled every ten years from 1978-1999 (Bromley, et al., 2002, p.7). Under the new economic system, the state became friendlier to private property and markets. As Janos Kornai suggested, “the dominant position of private property, including a political system that is friendly to private property, is a defining feature of capitalism.” In capitalism, the state was more supportive and reduced its manipulatiion in the economic activities. They reduced systematic confiscation of property or suppression of markets as properties are now held in private hands and market relations dominate the coordination of economic activity (Bromley et al., 2002, p.13). Three scenarios about the future direction of China’s industrialisation As a result on the growing numbers of capitalist investors, the country underwent economic transition which caused gradual industrialization. Bromley et al., (2002, p.9) stated that economic transition in China is “the shift from a rural, agricultural society and economy to one where industry dominates, with all the accompanying structural changes in employment, production and growth.” The expansion of the economy resulted to the migration of more numbers of people from rural to urban areas, and from agricultural to industrial activities within the rural areas (p.52) to seek for greater and better opportunities. The economic reforms significantly increased the pace of industrialization in the urban area of the country of which industrialization was defined “as both growth in output and simultaneous far-reaching transformations of the economy and society,” (Bromley, et al., 2002, p.54) In the industrialization and intensive economic growth process, the structural changes in the urban areas occur such as the rise of industrial wage labor in place of traditional agricultural labor, development of new forms of property as a basis for investment in industrial production, and transformation of relations between the state and citizens and the legitimating of political rule (pp.11-12). During China’s reform era, the pattern of industrialization saw economic and political changes that shift ideology of the communist party towards legitimation based on economic growth, efficiency over communist moral purity and sacrifice, and a move to encourage economic growth even if it meant changes in the kinds of property prevalent in the economy and the role of the state in planning. There is also the relaxation of the rigid urban–rural division of labor force and the rise and move of industry in the rural areas. The ‘iron-rice-bowl’ employment relation was eroded with the rise of more market-driven employment instead of state-guaranteed employment. There is more insecurity of employment and welfare provision even in the state sector. In the realm of property and production, the almost complete dominance of state-owned and collective forms of property was reduced and a new private sector emerged alongside the older, state sector (Bromley, et al., 2002, p.157). Negative effects include migration of people from rural to urban that increased slum areas due to inadequate affordable housing facilities; society was divided as middle class rose and labor unions fight inequality of rights; forced children labor due to poverty; and greater need for raw materials to meet urban demands. News reports in Updating China’s Transition by the Open University (2006) include: “Middle Kingdom’s class revolution” by James Kynge published by The Financial Times on December 12, 2002; Minxin Pei “China’s ruling party cannot have it all,” published by The Financial Times, on 14 January 2004; “On the capitalist road: Private businesses are China’s great hope for the future,” last March 20, 2004 in The Economist; James Kynge, “A combination of appetite and energy has made China one of the world’s fastest-growing economies,” The Financial Times, 24 March 2004; “Mao’s promised land ends in sweated labour”, by Jonathan Watts, The Observer, 9 May 2004; “Inside the new China,” by Clay Chandler, Joan Levinstein and Zhang Dahong, among others. These news reports mirror Deng Xiaoping’s vision of China to inject the economy with limited doses of capitalism. Several millions of private-owned and family-controlled businesses in the provinces of China such as Zhejiang, Wenzhou, Guangdong and Jiangsu flourished. Small firms of cigarette lighters, pens, low-voltage electrical equipment, kitchen equipment, socks, and toys created 17.5 million jobs in 2001. However, these private firms were facing issues regarding property rights and lack of access to capital which makes these companies remain small (The Open University, 2006. pp8-9). Property Rights According to President Jiang Zemin, private property would receive protection of the law and income will be safeguarded. Meanwhile, the State assets are gradually sold off, reducing the party’s influence over the economy. The growing market was also appropriated the right to use rural land for expansion to allow 400m peasant farmers to become wealthy landholders. The middle class will also be given importance through banking system and supply of goods support (The Open University, 2006. pp4-5). It was suggested that the economic reform must be for all the people and property rights and contracts of the investors must be sustained. The authors called for Constitutional revision of Article 5 insisting that citizens’ legal private property should not to be violated and that the state must protects citizens’ private property rights and inheritance rights according based on law. The rights to property by individual citizens meant a bundle of assurance that allow its owners use of the property without interference that will also signal more interest to invest due to the assured incentive. These rights are four-fold: the right to use, transform, appropriate and alienate (The Open University, 2006, p 99). Another development that has been noted was the respect and protection of human rights considered as a “monumental improvement” (p.6). China has been carefully monitored by many other countries especially with its human rights policies due to the ever-growing population of expatriates, investors, tourists, foreign workers, and others that have stake on China. This has been closely tied with its economy as the better its human rights protection become, the more attractive China becomes as recipient for foreign direct investment as well as trading with other nations. Conclusion (300) It was not so long ago that China has undergone transformation of its economic structure from communism to capitalism as supported by the government. This transformation is evidenced by the increasing number of private-owned companies as well as foreign direct investment poured over the years. The industrial sector now serves as the backbone of China’s progressive economic status. Many of these private sectors are engaged to small manufacturing entities that supply the world with cheap home wares, electronics, plastic, glass, metal, and fabric products, to more ambitious and costly ones such as furniture, motor vehicles, assembled homes, and other items. Sophisticated and complex companies have also slowly emerged that embraced research, design, information, and communications technologies. These changes solely attributed to the transformation of China from a communist, social, to capital economy are carefully planned by its policy-makers. The government is careful in avoiding major loopholes of a capitalist society that kept the poor poorer and the rich richer, resulting to a widening gap between those who have and those who have not. This is also hoped for widely not only by its own citizens but also a wider world that already saw endless exploitations in the free market economies. References: Bromley, S. W. Brown, F. Christiansen, M. Macintosh, J. Mehta, L. Sun and M. Wuyts. (2002). Transitions. [e-book] United Kingdom: The Open University. Kornai, J. (2000) ‘What the change of system from socialism to capitalism does and does not mean’, Journal of Economic Perspectives, vol.14, no.1, pp.27–42. The Open University (2006) Updating China’s transition. Supplementary Material Technology: Level 2 International Development: Challenges for a World in Transition Transitions Theme update. United Kingdom: The Open University. Read More