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Charlie Hore

Breaking China

(March 1995)

From Socialist Review, No. 184, March 1995, pp. 8–9.
Copyright © Socialist Review.
Copied with thanks from the Socialist Review Archive.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The spectacular boom in China’s economy has created huge inequalities which threaten the stablility of the regime. Charlie Hore assesses the likelihood of upheaval and rebellion in the months ahead

Few stock markets pay much attention to the health of individuals. Yet when Deng Xiaoping reportedly went into a coma two months ago, the Taiwanese stock market plunged 4 percent, while Hong Kong’s stock exchange dropped over 7 percent in January on similar reports. The speculators’ unease mirrors wider concerns among the world’s rulers about the future direction of the Chinese economy.

Although free market ideologues are still touting China’s experience as showing the future for capitalism, Deng’s impending death raises a host of fears about what might happen when he goes. Few people expect a peaceful transition; some of the most pessimistic analysts even predict the break up of the Chinese state. No one has forgotten that the 1989 uprising was triggered by the death of one of China’s senior leaders.

It is undeniably true that the Chinese economy has grown enormously since, and as a result of, the economic reforms that Deng began in 1978. Throughout the 1980s the economy grew at an average rate of 10 percent every year, and after a short downturn following the events of 1989, growth rates in the 1990s have been even higher.

That very success has created the economic problems that have led to mass discontent. High inflation has meant an ever widening gap between rich and poor. There is spectacular corruption among government officials and private capitalists (often the same people wearing different suits), and a hyperactive boom-bust cycle which has produced immense waste and shortages as different parts of the economy grow at very different speeds.

By early 1989 inflation had risen to levels never seen since 1949, and resentment at falling living standards was one of the key factors that brought millions of workers onto the streets across China to support the students in Tiananmen Square. Since 1989 inflation has been worse – food prices in Chinese cities rose by over 50 percent during 1994.

That inflation is a direct result of the reforms in agriculture that have transformed the Chinese countryside. Peasants are now allowed to grow whatever crops they want and sell them on the open market. Since 1985 the amount of grain produced per head in China has declined every year, as peasants turn their land over to more lucrative industrial crops, or abandon it altogether to industrial development.

But it is the unevenness of this growth that makes for the greatest tensions within Chinese society. The biggest single gap is between the towns and the countryside. Across the country as a whole, peasant incomes have risen far slower than urban incomes (this average hides even greater variations between particular regions). The insecurity and growing relative poverty of rural life have produced a transient population of up to 100 million people as peasants move to the cities in search of work.

The growth of that transient population is one of the most significant social changes in China over the last 20 years. A small minority are traders who have prospered by taking their villages’ agricultural produce to urban markets, but most are young dispossessed peasants who live in shanty towns or on the streets. Under Mao, China was one of the most tightly controlled societies in the world – the growth of the transient population has destroyed that control. Above all, it has broken down the near absolute barrier between the villages and the cities that existed under Mao.

The vast majority of the economic growth has taken place in an arc across the fertile and densely populated southern coastal provinces from Shanghai to Guangzhou (Canton), while in many far inland areas life has improved very little for most people. That arc absorbs 80 per cent of foreign investment in China and produces the majority of its exports. Yet it is that arc which contains the most enormous gap between rich and poor.

Guangdong province has seen the highest growth rates of all, because of its closeness to Hong Kong. Yet the northern and western areas of the province still contain some of the poorest areas in all China. And in the boom city of Shenzen opposite Hong Kong, which has grown from 5,000 to 200,000 people over the last ten years, workers in the garment and micro-electronics factories work 12 to 15 hour shifts, live in damp dormitories 20 or 30 to a room, and have one of the highest rates of industrial accidents anywhere in the world. The Wall Street Journal likened working conditions to ‘those once described in 19th century Britain, where Marx proclaimed the inevitability of social revolution’.

When free market ideologues point to China as showing the future for world capitalism, it is the example of Guangdong above all that they quote. Yet while few of them are willing to admit the human costs of this development, fewer still acknowledge that the unique relationship between Guangdong and Hong Kong makes it an example very difficult to generalise.

For the last 15 years most foreign investment in China has come from Hong Kong, and the vast majority of that goes to Guangdong. Hong Kong is a unique economy, growing very fast because of its trading position with China, yet lacking both the land and labour to expand internally. Over the last ten years Hong Kong has been effectively absorbing the parts of Guangdong closest to it. Hong Kong businesses now employ three or four times as many workers in Guangdong as they do in Hong Kong, and something like a quarter of Hong Kong bank notes are in circulation in Guangdong.

The primary draw is not cheap labour, but cheap land and tax concessions. Wage rates in Guangdong are 10 percent of those in Hong Kong, but land prices are only 2 percent – and that is before the tax concessions and other givebacks. Indeed, these concessions mean that much of the investment is not foreign at all, but rather capital accumulated by families or enterprises in China, circulated through Hong Kong to qualify for tax concessions.

These transplanted businesses are able to draw on a constantly growing pool of fresh labour coming in from the countryside, for whom the abysmal wages and working conditions represent an improvement on life in the villages. Yet even here there have been sporadic strikes, walkouts and attempts at union organisation.

It is in the large factories under state control, however, that workers’ resistance is growing fastest. Detailed facts and figures are hard to come by but Business Week reported that ‘in March [1994] there were 270 strikes in Liaoning, Shaanxi and Sichuan provinces, several lasting as long as 40 days and involving 10,000 workers.’ Even the state run trade unions are reporting enormous increases in the number of industrial ‘incidents’ (strikes, walkouts, petitions and sabotage).

In the countryside the ferment is even greater. In 1992–93 the official press reported over 200 major peasant riots and demonstrations, while individual or group attacks on tax collectors and corrupt local officials have become endemic, and open banditry and even warlord gangs have reappeared. A survey by the Far Eastern Economic Review in mid-1993 concluded that, ‘To call the rural crisis the most severe challenge to the [Communist] party’s rule since the 1989 Tiananmen massacres understates the extent of the crisis.’

The fears about what will happen after Deng Xiaoping goes are rooted above all in that growing social unrest. From the mid-1980s onwards living standards have declined while political repression has been stepped up once again. Popular anger was fuelled by a mixture of anger at broken promises, a greater knowledge of the gap in living standards between China and other countries, and the blatant corruption of most officials and managers.

The Tiananmen Square massacre drove open mass opposition off the streets, but at the price of destroying any moral authority left to the Communist Party. Since then Deng has been the cement holding together a tiny band of aging leaders who hold all effective power in the government and Communist Party, irrespective of their nominal positions. Whether any other figure can hold that coalition together is a very good question.

The central government’s problems are made even worse by their loss of effective control over the pace and direction of economic development. The economic reforms gave local officials and managers powers to spend and invest as they wished, rather than on orders from Beijing. In Guangdong, for instance, just 3 percent of new investment is directed from Beijing – the rest comes from local or foreign sources. The result has been that local and provincial officials make decisions on the basis of what most benefits their immediate empire, rather than on the priorities of the ruling class as a whole. This has led to both enormous fragmentation and a growing defiance of orders from Beijing.

That economic independence lies behind the possibility of China’s breakup foreseen by some commentators. While it is not impossible, it is highly unlikely. The national tensions that caused the breakup of the USSR and Yugoslavia are largely absent from central and eastern China, where the vast majority of the population live.

There is also no tradition of regional separatism for regional leaders to draw on; indeed, the opposite is the case. Even during 1920, when effective power lay in the hands of competing local warlords, the vast majority of them formally acknowledged the authority of a central government. And when the Communist Party came to power in 1949, Chinese nationalism and the importance of strong central government was at the heart of its ideology.

But although physical breakup is unlikely, it is highly probable that the trend of provincial authorities becoming effectively independent of day to day control from Beijing will increase. That can only add to the economic and political instability of China after Deng.

All the elements that produced the explosion of 1989 are still in place and the massacres and mass arrests have left a legacy of hatred of the ruling class. China’s rulers could ride out 1989 because the villages, where 75 percent of the population still live, stayed quiet and did not follow the students. If mass protests do break out when Deng dies, the ruling class cannot count on the peasants’ passivity. And the working class, the key force who will decide China’s future, will go into the protests with a level of militancy and union organisation that did not exist in 1989.

It is by no means certain that such protests will break out, but they are widely expected. As the authoritative China Briefing summarised a recent survey of the Chinese economy:

’Popular resentment of official corruption could easily spill out into the streets again, especially if provoked by the sense that standards of living are jeopardised by another round of inflation. Add an uncertain political climate in the wake of Deng Xiaoping’s death and a restive rural population to the mix, and the situation could become unmanageable.’

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