Center for People Empowerment in Governance

Fellows Speak

A CONVERSATION ON CHINA'S DEVELOPING ECONOMY AND SOCIETY: Notes on our Asian Neighbor
(Lecture during the Dean's Forum, college of arts and sciences, U.P. Manila, July 10, 2013)

by Professor Roland G. Simbulan
University of the Philippines &
Vice Chair, Board of Directors,
CenPeg

INTRODUCTION

On a personal note, I would like to begin by saying that I have always been fascinated by both ancient and modern China. Ancient China gives us an insight into one of the oldest civilizations of the world, which came from the our side of the world, the East , and not the West, which belies the Western myth that the origins of civilization came from the Western part of the world. Then, there is Modern China especially after its social revolution in 1949 which restructured China, abolishing foreign control of its economy, dismantling the classic comprador and the big bourgeoisie class and altogether, semi-feudalism which persisted in most of rural China. Modern China fascinates a social scientist like me for two reasons:

How it has managed to practically eradicate poverty in the most populous country in the world, and there are many anti-poverty programs that we can learn from this rich neighbor with a population of 1.34 billion today. There are important lessons we can learn from this country which used to be ranked as one of the poorest countries in the world to the 2nd largest economy of the world.
How it has managed to strategize to absorb the state of the art technology of the West, or what we call "transfer of technology" through its special economic zones where it has invited multinational corporations. So effective is this transfer of technology to China's advantage, that Westerners complain and call China "the pirate capital of the world."

From June 1-13, 2013, I was invited to be one of the ASEAN scholars and academics from various academic" think tank" NGOs from Southeast Asia to visit China. I was representing the Center for People's Empowerment in Governance as its Vice Chairman of the Board of Directors. This is actually my third visit to China, the last one in May 2006, when I was part of the official U.P. System delegation led by then U.P. President Emerlinda Roman, which forged formal academic exchanges with Universities in Xiamen and Fujian province.

In my recent visit last June, 2013, I was also so honored to have been elected to be the Head of the 25-member ASEAN NGO-Academic delegation to China which interacted extensively with scholars and academics from the leading think tanks and universities in 5 cities of China. It was dubbed the "China-ASEAN High Level People to People Dialogue." As Head of the delegation, I gave several speeches in many meetings and forums, seminars, press conferences and receptions/banquets.

The highlight of our visit to China was the two-day China-ASEAN High Level People to People Dialogue in Nanning City, Guangxi Province, China from June 3-4, 2013. In that Conference attended by at least 450 participants from China's leading universities, policy think tanks, women's organizations and other NGOs, I emphasized two points:

That ASEAN as a group, and as a collective regional organization, should deal with China on the issue of territorial disputes and maritime issues since several ASEAN members are claimants in the West Philippine Sea (or South China Sea).
That if China wants to win the respect of ASEAN and the world as it emerges as a global economic powerhouse, it should just use its soft power - trade, economic relations, investments, loans, cultural and people to people exchanges, etc..--in its relations with weaker countries. That it should not follow the bad example of Western colonial powers (and the current global superpower) in Asia that employed coercion and force through military power in dealing with smaller and weaker countries. That is, if it wants to gain the respect of its immediate ASEAN neighbors in its backyard.

In the Nanning Conference and as Head of the ASEAN NGO-Academic delegation, I articulated the sentiment of our delegation that our visit to their country and interactions with their leading intellectuals, CPC party and government officials, businessmen, teachers, students and farmers, will lead to a better understanding of mutual interests and towards Asian solidarity. That it will help build bridges to improve ASEAN relations with China. Let me quote myself from my remarks at the China-ASEAN High Level People to People Dialogue:

" For many decades after the founding of the People's Republic of China, many ASEAN peoples, NGOs and people's organizations have long looked up to China as a socialist model and alternative to the capitalist path of development, to uplift its people's well-being. We admire China's present modernization, prosperity, economic growth and development under a "socialist market economy" , just as we have always admired China's socialist values that guides its socialist path of development."

"Before European and Western came to Asia to colonize it, China had long been a major commercial partner to most of Asia. We hope that this People to People Dialogue between China and ASEAN may serve as a contribution to the development of a relationship that seeks to maximize the benefits of cooperation and friendship between China and ASEAN, minimize potential conflict, and promote our peoples' well-being in the family of Asia-Pacific nations."

"We conclude that it is best to emphasize a relationship between China and ASEAN that stresses that which unites us rather than that which divides us: a relationship that promotes unity and values - such as solidarity, humanism, respect for differences and diverse perspectives among neighbors, towards indeed, and together, making the 21st century an Asia-Pacific Century. After all, we are guided by the collective objective of building societies that makes possible not only economic growth but societies that make possible not only our liberation from poverty, but the full development of all human beings."

"We can only wish for China's continued prosperity and success in its socialist modernization with Chinese characteristics -- in mutual partnership and cooperation with its neighbors in the ASEAN - for this can only lead to our common goals of economic emancipation and prosperity for all."

My remarks in the China-ASEAN High Level People to People Dialogue in Nanning City were heavily quoted in the June 4, 2013 issue of the China Daily and by the June 7, 2013 issue of the Hsinhua News Agency.

Our ASEAN delegation interacted extensively with China's think tanks like the Beijing-based Chinese Academy of Social Sciences through its National Institute for International Studies, the China Institute of International Studies, Peking University's Center for Global Studies and the Guangdong Research Institute for International Strategies. The Guangdong Research Institute for International Strategies was created in 1963 by then Foreign Minister Chou En Lai to be the think tank of the Chinese government on foreign policy.

CHINA'S ROLE IN SOUTHEAST ASIA AND THE GLOBAL ECONOMY

China's fast-tracked modernization of its economy and rapid economic development has inevitably made it become a global player and power. What are the indicators of this rapid economic development?

First, China is now the 2nd largest economy next to the U.S., surpassing Japan, in terms of GDP in current dollars (IMF data).

Second, today China is unsurpassed in terms of consumption in iron ore, celfones, beer and copper, energy consumption and car sales. By 2014, if trends continue, China will surpass the U.S. as the biggest retail market in the world.

Third, China is now the largest global manufacturing country, the "factory of the world" .

Fourth, China is the largest trading country or the world's biggest shopping center.

Fifth, China is the highest Foreign Direct Investments (FDI) recipient and therefore has the largest concentration of foreign companies in the world.

Chinese perceptions about their country include a resurgent
The Philippine government's invitation to U.S. and Japanese military give support to Chinese hard-liners in the People's Liberation Army. Even
Many Chinese intellectuals speak of a "common dream"
Many Chinese officials and academics agree with the view that it would
We visited the Guangxi Autonomous Region, home of the 14 million shares borders with northern Vietnam. During our visit to Guangxi's the ports of Fangchenggang City played a key role in China's support for

CHINA'S ACHIEVEMENTS IN ITS ECONOMIC SYSTEM

Recently, Chinese leaders have spoken of "China's Dream". The dream
China's minimum wages vary from province to province. They average
The Chinese "dream" includes the creation of a predominantly Chinese this goal by repeating the mistake of the former Soviet Union which engaged
The Chinese Dream may also have something to do with being a global world that the U.S. currently controls and dominates without any check and
China has the largest foreign reserves in the world today
In 1981, the absolute poor in China was estimated to be 84% of the according to IMF and WB estimates.

For the past 20 years, China has had an average annual growth rate of
Government expenditure as share of GDP in China increased from 16.48%

GENERAL OBSERVATIONS ABOUT CHINESE SOCIETY

Political System

China's political system is dominated by the Communist Party members. Its national and provincial political, economic and even academic command, playing the policy-making role, while there is also an implementation of policies. Non-CPC political parties exist and at least 8 People's Political Consultative Council (CPP-CC) which was established in
Despite its image as a police state, we did not see any
The media is still controlled by the CPC-led State. There are Resistance during World War II. The latter is the only "values"-oriented socialist values. Frankly, I was looking around -very hard -for signs or international department admitted that China has a problem with
Social Welfare

We did not see any beggars or any homeless street people in
NGOs in China

The Chinese academicians as well as the China Network for political power in 1949 that led to the establishment of the People's power built in the grassroots. Because they are not seen as autonomous from
Problems and Issues in China

1. One of China's emergent problems related to its fast-paced economic Their energy-extracting industries and manufacturing centers are the drink the tap water but to drink bottled water. Better still, to boil the
2. In big cities like Beijing, 20 years ago they had 80 million bicycles. becoming a daily problem despite their subway (Metro) system.

3. There is still extreme inequality as reflected in the gap of its gini because China is producing so many millionaires and billionaires at a very
Red Capitalism, State Capitalism or Market Socialism?
The CPC-led and controlled Chinese state continues to nationalism in the light of the United States' "Asia pivot" or "rebalancing" in the Asia-Pacific region. They perceive the United States as trying to encircle them once again with U.S. military bases and the American fleets as during the height of the Cold War. South China Sea is a vital choke point for China's enlarging trade with Asia and the rest of the world. The Philippines' recent acts of conducting joint military exercises in the Western Philippine Seas are perceived by China to threaten or restrict their flow of trade which relies heavily on imported energy sources, raw materials, etc..for China's industries. There is a perception among their intellectuals and policy makers that the Philippine government is a puppet of the U.S. especially when it openly invites more U.S. military forces and even Japanese military forces on Philippine territory.
forces to use Philippine bases can only stir up Chinese nationalism and in ASEAN, a resurgent Japanese military in Southeast Asia is not entirely welcome because of the region's experience under the occupation of the Japanese Imperial Army. China suffered the most during World War II, and almost the entire city of Nanjing was razed to the ground and its people suffered one of the worst massacres in Asia by the invading Japanese Imperial Army.
and "common goals of development" for the people of China and the people of Southeast Asia in an environment of regional peace. Their desire to have close relations with their immediate ASEAN neighbors with its almost 580 million population in their own backyard is hindered by the Trans Pacific Partnership (TPP), and the U.S.-Japan Security Treaty whose jurisdiction the U.S. wants to widen to include the entire Asia-Pacific region. China, used to the Chinese way of quiet negotiations and much like when you bargain in a Chinese market, feels humiliated insulted and humiliated when territorial disputes such as in the West Philippine Sea are brought for resolution before third parties or in an International Dispute Tribunal on the UNCLOS (UN Law of the Sea). Very direct and strong belligerent words can only fan the fires towards a hardline position. Professor Pang Wei of Peking University told me that for them, the territorial disputes need not be solved or resolved at present. According to him, "Not all problems have solutions....some cannot really be solved, all we have to do is to survive them."
be devastating for China to go into another open and violent conflict with any of its ASEAN neighbors (like what happened in its brief skirmish with Vietnam), because it would damage the cornerstone of China-ASEAN economic cooperation which is very important for China as well as for ASEAN whose 580 million population is a big market for China's exports. ASEAN is the 3rd largest trading partner of China, but this ranking may go up further as incomes and purchasing power is also fast increasing among ASEAN countries. ASEAN is a source of energy and raw materials for China's industries. Overseas Chinese from ASEAN are also some of the biggest investors in China.
Zhuang, the largest ethnic minority in China. Guangxi autonomous regions thriving key port city of Fangchenggang, the Chinese were proud to say that the national liberation struggle of the Vietnamese people against French colonialism and later the U.S. military intervention in south Vietnam.
may have something to do with China's goal of totally eradicating poverty by 2020 ( it still admits that 128 million of its 1.3 billion population are still poor, mostly in its Western provinces near Tibet).
between 2,500 yuan to 5,000 yuan per month. The poorest provinces in the rural areas still have farmers earning 1,000 yuan a month. 6 Yuan equals 1 US $ dollar.
middle class for the majority of its people. China does not want to derail in a tit for tat arms race with the United States during the Cold War. The Soviet Union over-extended itself, leading to vast resources spent on unproductive defense spending instead of the peoples' needs, and leading to the collapse of its economy and fragmentation of the former Soviet Union into 14 independent states. China wants to focus on its domestic affairs, but in their view, "they have the right to protect their national interests " and their government "will respond to challenges from the outside."
player, which is a better situation, because this will end the unipolar balance. In a multi-polar world, important global players that will emerge will include India, the European Union, Japan, and even South Korea.
/> population. In 2008, the absolute poor was estimated to be only 8% 10%, the highest in the world.
in 1952 to 26.76% in 2004, and more and more budget is poured into basic social services.
of China (CPC) which claims to have a current membership of 82 million structures have a dual leadership, with the CPC Party Committees in administrative leader which takes care of the day-to-day operations and non-Communist political parties have representatives in the Chinese 1949 right after the victory of Mao's Red Army over the Koumintang forces of General Chiang Kai Shek.
single gun or firearm carried by policemen, or by the military (People's Liberation Army). Although, I had this eerie feeling that the entire country was wired, with CCTV cameras. Police presence is highly visible but none carry guns, not even sidearms. All their airports and banks do not have visibly armed guards or policemen. We went to at least 4 banks to exchange foreign currency.
about 15 channels of the government-controlled China Central TV, and two thirds of them are largely entertainment channels. A few are news channels and the rest are tele-novelas featuring China's anti-Japanese War of program that I saw in China but it highlights nationalist, rather than indicators of "socialism" in China. Later, one official in the CPC "values" today because "everyone is just trying to become rich and earn money." The CPC official said that , "Consumerism and materialism are consuming the young people for they are forgetting the ideals of Mao Zedong Thought, and even the traditional values of Confucianism!"
both urban and rural areas that we travelled (we travelled hundreds of miles on land between some cities). Most Universities in China are subsidized by the State, although students pay an affordable tuition, including fees for staying in dormitories. There are centers for senior citizens also subsidized by the State and with minimal fees, as well as pre-school centers with similar subsidies and/or support from the State. There is a medical insurance scheme even in the remote rural areas, as part of social insurance where Chinese citizens pay only 20% of their hospital bills.
International Exchanges claim that there are 271,000 NGOs or social organizations all over China. This claim is either exaggerated considering that most so-called NGOs in China are CPC-led like the State, or if true, they are government initiated and heavily regulated. But considering that the CPC organized and led mass organizations even before the seizure of
Republic of China, then the State is an extension of the CPC's political the government, this may be the reason why an official of the International Department of the CPC mentioned that their trade unions are not accepted as members of the two major international organizations of labor unions, though they have long applied for membership. There are also 3,029 private Foundations, and 225,000 private non-profit organizations such as day-care centers and community centers which are registered with the government.
and industrial development is environmental destruction and pollution. biggest polluters. These are part of the problems related to the urbanization of almost half of its population. Clean and drinkable is becoming a problem. Even in the 5-star hotels, everyone is advised not to bottled water and to drink it with tea!
Today, they have 5 million private cars in Beijing and heavy traffic is coeffient which their own economists show in their own charts. This is fast rate because of the high savings rate of many Chinese people. The poorest however are not THAT poor by our standards in the Philippines, but are mostly the farmers in western China where there are still few industries and poor infrastructure. Rural migrant workers in the cities are also classified as "poor" in China. But as state-funded education becomes even more accessible, there is a remarkable increase of a middle class sector even among rural migrants who have made it professionally or through their successful business enterprises in China's big cities. While admitting that the "Reform Period" after 1978 caused rapid economic development in China, officials there recognize that their immediate challenge now is "how economic growth can transform the lives of the remaining poor in China."
/> monopolize 11 state industries, which according to Li Guoping, are in the following industries:

1. Oil extraction and oil processing

2. Tobacco

3. Coal

4. Gas

5. Electricity

6. Heat production

7. Postal services

8. Airlines

9. Telecommunications

10. Banking

11. Insurance

The basis of this continued State or public control of vital industries is its socialist Constitution (1954): " The ownership of the means of production of the Peoples Republic of China now mainly falls into the following types: ownership by the state, or by the people as a whole; ownership by cooperatives or by the working people collectively; ownership by individual workers; and ownership by capitalists." Under its Constitution, no one can own land in China. It can only be leased long-term by the private sector from the State, which is its permanent steward.

Is this capitalism guided by the CPC? Or a form of State Capitalism? Several Chinese Marxist authors (like Pao Yu Ching and Au Loong Yu) say that it is 'bureaucratic capitalism". The Chinese government says that it is " a socialist market economy with Chinese characteristics."

For example, data from independent academic sources in Hong Kong reveal that as of last year, 130 State Owned Enterprises (SOEs) account for 60% of total market value, while private enterprises (local and foreign combined) account for only 30+%.

PRELIMINARY CONCLUSIONS AND RECOMMENDATIONS

China has achieved a lot when it comes to material progress, no doubt.

Thanks to the Revolution in 1949 under the leadership of Mao Ze Dung, they have successfully attained their National Liberation from foreign domination and social liberation from feudalism ( or semi-feudalism).

But they still have to attain the longer and more difficult struggle for Social Liberation which Mao attempted to accomplish fast-track and with haste. The premature establishment of agricultural communes, the Great Leap Forward towards Industrialization, etc. where institutions and ideas that the masses were not yet ready to embrace and the necessary conditions were not yet there at that time. Deng Xiao Ping who was later to become one of Mao's successors, tried to correct, but deviated from these and adopted economic reforms that took the character of the capitalist road. Deng who visited Europe and the U.S., is said to have asked, why do workers in these countries have better conditions than those in socialist China, making him adjust China's socialist path towards the market economy (which for him is not a monopoly of capitalism). I have tentatively referred to this Dengist path as RED CAPITALISM.

The result is the rapid and spectacular economic (and mainly material) development of China which got a boost from:

Western wasteful consumption of cheap Chinese products and also by the rest of the world.
Exploiting its own workers (cheap labor), especially migrant labor from the rural areas.
Sacrificing environmental concerns (air, soil, and water pollution)
"Red capitalists" beating the Western capitalists in their own game.

There are important questions that remain to be answered:

(1) In China, is it still Socialism with Chinese characteristics, or is it Capitalism with Chinese characteristics?

(2) Who controls the economy controls politics. Will the Chinese Communist Party succeed in converting the profit-oriented Chinese millionaires and billionaires, or will it not be the other way around, where the Communists are becoming Capitalists?

(3) Will China's struggle and competition with the United States and the rest of the capitalist countries for the world's resources (oil, mineral and other natural resources, etc..) in Asia, Africa and Latin America not lead to hegemonic conflicts and war?

(4) Can we still expect the oppressed and exploited countries peoples of the world to get help and solidarity from the Red Capitalists of China in their struggle for national and social liberation?

(5) Will not a Red Capitalist China become a Modern Chinese Empire ? In other words, can it become or can it avoid following the path of "Soviet Social Imperialism"?

In my meetings with our Chinese counterparts, my purpose was to engage, seeing to it that our point of view and national interests ( not of the elite, but of the Filipino people) is not compromised, that there is a fair and equal opportunity in the engagement (exchange of views, discussion, debate, etc..). I know that the Chinese are trying to win over us over their side in their strategic competition, struggle and quarrel with the United States for a dominant position in the world. We must assert our sovereign rights and our independence, not a witting or unwitting pawn of either one. We can study well and learn from the Vietnamese experience in dealing both with China and the Soviet Union who were at odds with each other, to gain and to uphold the country's independence and higher interests. It is in this context that I speak of engaging in the exchange of views, discussion or debate with the Chinese especially the Chinese people. There should be more economic cooperation between the two countries, and more people to people exchanges to gain insights and understand each other better. We should also do the same with the Americans, Japanese or Europeans -- always for the purpose of protecting and promoting the interests of our country and our people in mind.

With regards to our country's territorial dispute with China over the Spratlys, which are also claimed by four other countries, the middle ground is or the joint exploration and exploitation of the contested group of islets and rocks. These can be negotiated multilaterally with all the ASEAN claimants working together. But China's recent actions in asserting its "Nine dash line" over Scarborough Shoal and Ayungin Shoal which are undisputably part of the Philipplines, seem to be preempting even this middle ground. Like its famous Chinese liquor, Mo Tai (which is 52% alcohol) made of fermented sorghum which I tasted for the first time in Guangzhou, China will be a strong neighbor and like any powerful country, may have imperial if not hegemonic designs. Chinese officials however, want to reassure that " historically even during their Imperial centuries under the dynasties, unlike their European and U.S. counterparts,they are not aggressive and are not interventionist." That they want "dialogue, communication and mutual benefit" in relating with their neighbors, following the Chinese proverb that " a neighbor is more helpful than a far-away relative. "

China's immediate neighbor, the Socialist Republic of Vietnam, with whom China shares land borders taught China and all big power bullies a lesson. That smallness in size of economic and military strength is not necessarily an invitation to being pushed around. We must develop and have our own capability to defend what is ours. The Vietnamese showed the French, the Americans and even especially China that when their
independence and sovereignty is threatened, they are determined to fight to the end and win. China today highly respect the Vietnamese for this and relations have more than normalized with closer ties.

My visit to China made me realize how little we know about China. That we need more Filipino academics to specialize on China, as this neighboring country emerges globally and rapidly into an economic and military power. We need to raise the level of our understanding of China's impact on the Philippines and the Asia-Pacific region, and to increase our familiarity with the complexities of Chinese politics, economy and governance. To effectively defend and pursue Philippine national interests and sovereignty as the Asian dragon emerges and to engage it as a neighbor, we need to know how it thinks, what its strengths and weaknesses are. Remember what a Chinese ancient general and author Sun Tzu wrote in 500 B.C.? " Know your enemy and know yourself. You will win a thousand battles, a thousand victories." Even if China was not an enemy, but a powerful neighbor, we will still have to deal with it in trade negotiations and in other bilateral relations.

We need to understand this giant neighbor more deeply - with a critical eye, and from our own perspective.

China is still a developing economy, a fast-developing economy and society, a work in progress.

HIGHLY RECOMMENDED REFERENCES ON CHINA:

Au Loong Yu, China's Rise: Strength and Fragility. UK: Merlin Press, 2012.

Allen Carlson, editor. New Frontiers in China's Foreign Relations. New York: Lexington Books, 2011.

Justine Yifu Lin, De-Mystifying the Chinese Economy.

______________ " China's Economic Development and Cultural Renaissance in the Multipolar Growth World of the 21st Century." World Bank: 2011.

_______________The China Miracle: Development Strategy and Economic Reform.

_______________State-owned Enterprise Reform in China.

Liu Suinian and Wu Qungan, editors. China's Socialist Economy: An Outline History, 1949-1984). Beijing Review: Beijing, 1986.

Martin Jacques, When China Rules the World: The End of the Western World and the Birth of a New Global Order.New York: Penguin Press, 2009.

Ouyang Jin. The Important Economic Foundation for Socialism with Chinese Characteristics: China's Basic Economic System. Beijing: Research Office of the National Development and Reform Commission, 2012.

Vogel, Ezra. Deng Xiao Ping and the Transformation of China.

Pao Yu Ching, Revolution and Counterrevolution: China's Continuing Class Struggle Since Liberation. Institute of Political Economy: Quezon City, 2012.