Analysis of the costs and benefits of China`s economic reforms in last decades - Essay Example

Political, Social and Economic Reforms in China Introduction Partial market reforms from the 1980s onward allowed Chinese leaders to experiment pragmatically with various different approaches to raising economic productivity, efficiency, and competitiveness. By the same token, however, partial, piecemeal reforms also created substantial wealth gaps, inequities, and opportunities for the “rent-seeking” behavior of opportunistic government officials, resulting in a significant rise in social unrest. This paper analyzes the pros and cons of China’s economic reforms in the last three and a half decades. China’s fiscal policies are mostly complex and have yield varying resulting in different phases of reform. The early reforms were more definite since they were responses to definite problems and crisis of that period. In the second phase, the reforms were adapted to new set of challenges and opportunities (Naughton, p.107). China has shown a remarkable economic progress after centuries of oppression by the Westerners. Recently the China Daily newspaper has conferred that the nation is an example to all nations who are struggling to stand on their own feet (Callick, 13). In 1991, General Secretary Jiang Zemin that temporary difficulties cannot prevent the Chinese from continuing to develop (Saich, 75). Economic & Political issues in China (1985-1991) By 1985, China was besieged with various Economic and Political problems, which were out in the open. (Saich, 64). Goldstone (1995) & Chang (2001) believe that in the outcome of Tiananmen 1989 and the breakdown of socialism in the previous Soviet Union and Eastern Europe, the Chinese Communist Party has opposed expectations of its fall (Yang, 159), endured along the way of budgetary change, and directed a quarter century of maintained monetary development. (Yang, 159) Existing clarifications for the Chinese development have given pride of spot to institutional motivators for venture, and a few scientists have fought that China may have developed into a market-saving federalism regardless of the Communist Partys transcendence.(Yang, 159) Yang’s survey of the advancement of focal commonplace relations since the recent 50% of the 1990s, particularly the focal governments one-sided progressions to focal commonplace monetary relations in the connection of the Centers privilege to choose top common pioneers, recommends the constrained appropriateness of the MPF model. (Yang, 159). Corruption It has been rightly assumed that the conversion of China from state socialism to market economy has generated pervasive corruption. With constant changing of reforms, public official took the opportunity to fulfill their personal ambitions. The factors encouraging corruption became more apparent from the pre-reform era with officials submerged in informal relationships. It is because of such golden opportunities that the Communists eagerly embraced political and economic reforms (Lu, 191). With market economy becoming the dominant economic structure in China, corruption has gone through a transformational phase. Today, corruption or any other kinds of non-obeisance are combination of certain old patterns and emerging new patterns. The previous two decades have witnessed the pattern of corruption transforming from “whom one knows” to “what one controls” and “how much one pays (p.192). Corruption has also shifted hands in the post reform era. Previously, corruption was more common in state owned enterprises. After that, corruption became rampant in administrative units that were responsible for maintaining resources resulting in apparent shortages or becoming monopolies. In recent years, corruption has become prominent in law enforcement agencies with official like police, judges, lawyers, tax agents and market regulators becoming more greedy as “rent-seekers”. The involved parties in corruption has also changed over the years. Previously, managers and accountants of state owned enterprises were inclined to commit graft. Later on, officials who supervised resources became involved in corruption. Although corruption in China has many common features like those in other countries, it nevertheless has some unique features like “housing irregularities, public offices for sale, and various forms of administrative rent-seeking, all of which involve abuse of power by public officials” (Lu, 192). Before the 1998 housing reforms, it was the state that provided housing and the result was acute scarcity.(Lu, 192) Therefore, adopting unfair means to obtain houses by working couples became a common phenomenon. However, housing irregularities first emerged among power holding officials who obtained the better apartments sooner than others and also using government funds. Such practice was attempted to be eradicated due to growing dissatisfaction among common people; however it sustained with more people holding administrative power. In the early stage of reforms, rent-seeking was practiced mostly by officials and agents who had monopoly power over resources. Later, when state’s control over resources diminished and economic regulatory power increased, other illegitimate forms of payments like fines and donations became common. It has been estimated that “every year more than 10 billion yuan worth of rents of various kinds is collected by officials and agencies endowed with regulatory power or monopoly” (Lu, 195). Social problems Market reforms in China have paved the way for growing disparity among different sectors of the society. Since policies now are mostly market based, the former strong relationship between the Communist Party and the Labor has deteriorated. According to State Statistical Bureau, state-sector employment has declined from 110.4 million in 1997 to 76.4 million in 2001 (Yang, 150). Although many such employees have secured other jobs, the level of unemployment is high in urban areas. A society suffering from inequalities no doubt has varied interests resulting in inevitable public riots and mass protests. The Chinese leaders have deduced that per capita GDP being around US$1000-3000 is at risky position and subjected to increasing popular demands. Daily petitions have become extremely common making the local authorities immune to them. The elite Chinese who are technologically educated propose that solution can come from reforms and developments without disturbing the realm of the Communist Party. The Party has taken several measures to refrain from depicting the real state of inequalities and poverty to the common people like controlling the mass media. Even public intellectuals are at risk of losing their jobs if they promote political reforms (Yang, 153-154). Research has shown that 41 percent of urban Chinese consider themselves as lower middle class (Yang, 156). This is in comparison to a survey which found that, compared with developed economies and Asian societies ranging from Japan and South Korea to India and the Philippines, fewer Chinese people identified themselves as Middle Class,(Yang, 156) and as mentioned earlier, 41 percent considered themselves lower middle class.(Yang, 156). Rural Politics Chinese economy today focuses mainly on urban regions. In 2011, it was recorded that 50 percent of the total Chinese population of 1.34 billion dwelled in cities, thus marking the era as “great urban transformation” (O’Brien et al., 915). In spite of this, rural politics has remain the central focus of the PRC. With more people settling in cities, active labor working age concentrated in cities, thus cities becoming “the primary site of political, cultural and economic worth” (O’Brien et al., 917). During the 1990s, many local governments were burdened with expenses resulting in increasing taxes and fees in poorer agricultural villages resulting in growing mass protests. In the beginning of this century, the state took steps to deal with major rural problems. In 2002, tax reforms eliminated most local fees following which agricultural taxes were eradicated in 2006. Also in 2006, the New Socialist Countryside program was launched to develop rural areas, and reduce income inequalities by reallocating resources (O’Brien et al., 917). Part of the China Model’s strategy has been to give their working class a proprietorship stake in the recently developing economy by privatizing the majority of the administration housing stock for well underneath the market cost. Corporatizing it to the extent that the state sector can, and then rundown minority stakes on the stock market to give another outlet to reserve funds. In any case dont let the national bank off the rope; use it to keep up a hold over the cash conversion standard and other key approach levers. Keep extreme control over the vital sectors of the economy; for Chinas situation, these incorporate utilities, transportation, telecommunications, finance, and the media. (Callick, 2) Conclusion In the early 1990s, China’s approach towards economy resembled any other transitional economies with emphasis on sustaining balanced and efficient financial policies. The principles objectives were to eradicate corruption, promote a developed market economy and maintain fair competition in the domestic market. The transformation phase of China can be educative but only from the perspective of the overall transition than from any specific policies. This is because China’s fiscal policies are mostly complex and have yield varying resulting in different phases of reform. References Callick, Rowan (2007) “The China Model: How long can economic freedom and political repression coexist?” Lu, Xiabo. Cadres & Corruption, California: Stanford Univ. Press, 2000 Naughton, Barry. The Chinese Economy: Transitions and Growth, MIT Press, 2007 O’Brien, Kevin J., Yeh, Emily T. & Ye, Jingzhong. “Rural Politics in Contemporary China”, Journal of Peasant Studies, 40.6 (2013) 915-928 Saich, Tony. China Under Reform Yang, Dali L. “Economic Transformation and its Political Discontents in China: Authoritarianism, Unequal Growth, and the Dilemmas of Political Development”, Annual Review of Political Science, 9.1 (2006) 143-64 Read More