Agenda for a reform initiated sustainable growth

CHINA: 100 YEARS OF CPC

Udayan Hazarika

(The writer can be reached at udayanhazarika@hotmail.com)

On the day of the 100th Anniversary (01-07- 21) of the Communist Party of China (CPC), the Chinese President XI Jinping while addressing the nation emphatically declared that the first centenary goal of building China a moderately prosperous society has been realized with great effort defeating the absolute poverty in the country. Without elaborating any further details as to how this was made possible, he disclosed that the country is now marching towards the second centenary goal of building China into a great modern socialist country in all respect. For this achievement, he congratulated the Chinese nation, the people of China and the Communist party. Despite the declaration claiming his party's role in the achievement, many scholars who are following China's development agenda throughout history feel that the role of CPC is quite insignificant in the progress that China has achieved – much of the credit goes to the extreme effort and devotion contributed by the people of China despite all odds against them.

The CPC was established in the year 1921 in Shanghai secretly with a dream to establish a society similar to that of the Russian society after the Bolshevik revolution. It was a time when poverty was everywhere in China and the Chinese society was divided with the impact of civil war. The situation was such that nothing flourished there except poverty. It took the Communist party long 23 years (excluding the five years' engagement in World War II when both nationalists and the Communist party agreed to go ahead together) to come to power. The party assumed power in 1949 and on October 1 of the same year, Mao Zedong declared China as the People's Republic of China. There were high expectations of people especially the rural masses who make the backbone of the CPC from the newly established Communist Government which however could not be realised immediately.

Even during Mao's rule, the experience of people was pathetic - some of his policies resulted in disastrous failure. His Great Leap Forward campaign was responsible for the death of more than 30 million people which are mostly farmers. It was the result of his wishes to achieve industrialization in the shortest possible time. Edward Friedman, a scholar on Chinese affairs writes "Mao is no longer a hero to anyone who knows of the vigilante violence wrought by his Cultural Revolution or of the 20 plus millions of innocents who died as a result of Mao's Great leap forward. Although the Government of China continues to censor and ban revelations of the horrors of the Mao era to keep outsiders or Chinese from perceiving the reality whole, the evidence that has leaked out persuasively establishes that the communist fundamentalist that Mao propagated was taking China down a bloody road…"

Mao died in the year 1976 leaving the place to Hua Guofeng. Mao although was the longest-serving President in the history of China yet, his reforms agenda did not take off. It was during Hua's tenure that the Chinese economy had shown a tendency to gradually open up. Hua was followed by Hu Yabong (1981-1987), and thereafter Zhao Ziang (1987- 89) who took over as Chinese President, compared to others for a shorter period of two years. Nothing much had happened on the macroeconomic front during Zhao Jiang.

But he had done some farm sector reform giving limited autonomy in running the firms to the State-run firms in the Sichuan province which resulted in growth in production. But he advocated further autonomy and wanted to minimise the government control over the industries and also wanted to create special free enterprise zones in the Coastal regions of China. However, he was dismissed from the post after the students' demonstration in 1989 – the Tiananmen Square incident of which he was a sympathiser. He was followed by Ziang Jemin, another reformist. Jemin was one of the advocates of the market economy and advocated economic reforms in the country. It was during his rule that the plan was formulated to privatise about 3,00,000 Chinese industries and make them free from Government control. Jiang Zemin was followed by Hu Jintao (2003-2013) and thereafter Xi has assumed office (2013 till date). The present leader Xi Jinping is one of the most powerful leaders of the PRC. He has been in the office since 2013 and is responsible for many crucial decisions. He started his tenure with a nationwide anti-corruption campaign and emphasised the adherence to rule of law and the Constitution. His anti-corruption campaign led to the punishment of millions of corrupt officials.

China had started its much-awaited reforms in 1978 without any real agenda. Considering the nature of reforms that took place, the period between 1978 and 1993 - about 15 years is now marked as the first phase of reforms while the second stage began thereafter. During these 15 years, the Chinese economy grew at an average of 9.0 per cent (10 per cent as per official statistics). It is believed that there has been a significant rise in the living standard of Chinese people. As per statistics, absolute poverty was reduced during this period from 250 million to 100 million. (Qian and Wu: 1999) "These changes take the form of "incremental reform" (zengliang gaige), that is, introducing dramatic changes outside, rather than inside the existing core of central planning. The most significant is the rapid rise of a sector outside the state sector, known as the "non-state sector" (Qian and Xu, 1993; Wu, 1999). The Non State enterprises (NSE) were functioning outside the core areas of State-run Planning. The NSE's contribution was remarkable during this period. This could be visible from the statistics which reveal that in 1978 the share of State Sector in industrial output was accounted for 78 per cent in the total national Income which falls to a significant low of 43 per cent in 1993. Not only this, the contribution of the State sector commerce was 55 per cent in 1978 which fell to 40 per cent in 1993. The second phase of the reforms began from the later part of 1993, continuing with the inclusion of more and more areas of the economy within its agenda. The phase is marked by gradual political participation in the reforms process. In 1993 China finally decided to replace its centrally planned system with a modern market system which happened to be the milestone in China's path towards a market economy. The government took a major decision to transform the SOEs into modern enterprises with "clarified property rights, clearly defined responsibility and authority, separation of enterprises from the government, and scientific internal management." Along with it came a decision to build market supporting institutions and a modern tax system, enterprise reforms and a financial system that separated policy banks from commercial banking. China's Entry into the WTO in 2001 was the turning point in achieving speedy economic reform. Before this reform was gradual and slow.

During the period of reforms covering long 40 years from 1978 to 2018, there have been significant developments in various economic parameters in the country. Real GDP per capita (at 2011 USD) has risen from USD 650 to USD 15,309. China's contribution to the world GDP rate has improved from a mere 2 per cent to a robust 22 per cent; the population below the poverty line ($190/day) has been reduced from 88.3 per cent in 1978 to a mere 14 per cent in 2018. Life expectancy at birth has risen from 66 to 76, the infant mortality rate (per 1000/birth) is reduced from 53 to 8 literacy rate has improved from 70 per cent to 96 per cent.

Despite so much success, the economic growth in China has recorded a slow-down since 2010. GDP has been falling gradually from double-digit rates to single-digit continuously for about six years till 2016. In 2017, again the GDP growth rate has picked up. The recent statistics show that despite the pandemic, the Chinese economy grew by 18.3 per cent in the first quarter of FY 21 which appears to be the biggest jump ever since reforms programmes were initiated. No doubt that the growth during the last few years has been showing a mixed trend due to various constraints like declining labour force, and slowing down of productivity, etc. At this juncture China needs to ensure a sustainable growth path to maintain its image which XI has rightly defined in his 100th year's celebration speech: "A century ago, China was in decline and withering away in the eyes of the world. Today, the image it presents to the world is one of a thriving nation that is advancing with unstoppable momentum toward rejuvenation."