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ORIGINAL FRENCH ARTICLE: L’Année du Dragon A la recherche d’un nouveau souffle

by Dominique Bari

The Year of the Dragon or China In Search of a New Impetus

Translated Thursday 12 January 2012, by Isabelle Métral and reviewed by Bill Scoble

In a context where many voices urge it to stimulate the global economic machinery, China responds with great caution, weighing its assets and its weaknesses. The question is whether the slowing down of growth, a side-effect of the crisis in the US, foreshadows a belly landing or whether it will have a leverage effect and usher in a new mode of development for the country.

As tradition will have it, fireworks and crackers will no doubt signal China’s entrance into the year of the dragon on January 23. Chinese people generally like to enlarge their families in that festive period, and indeed now that the end of the year is near, one comes across many young women with round bellies. The single child law has once more, and rather more signally, been softened, as a remedy to the persistent greying of the country. But the near prospect of longer births columns is not enough to defuse the anxiety concerning the economic prospects of the second biggest economy in the world. China Daily, the English daily, finds it impossible to make forecasts at a time when China is in search of a new impetus through the invention of its growth model. As many voices urge it to stimulate the world’s economic machinery, China responds with great caution, weighing its assets and its weaknesses. The Chinese Communist Party’s conference on economic and monetary affairs organized in Beijing in mid-December confirmed the pessimistic finding that “the international environment is extremely dull and complex.” The first ominous indication of this is a slack in the economy. The rate growth for 2011 – of approximately 9% - is susceptible to flag or stay put in the next months as a consequence of the decrease in exports to the US and to Europe.

Does this foreshadow a belly landing? “China has a potent and flexible arsenal of macro-economic regulations that enable it to take efficient measures. We reacted very quickly in 2008 and more effectively than European countries by releasing a stimulus plan of 450 billion euro to bring down the unemployment rate thanks to great infrastructure projects: 20 million migrant workers had been fired by the coastal area plants,” Wen Tiejun argues. He is the dean of the department for agriculture and rural development at People’s University of China in Beijing, which leads the fight for the modernization of rural areas. “We have steered clear of the worst and have taken advantage of the crisis to accelerate the mutation of our mode of development. We are making good progress, but there are difficulties due to the international environment and to our own internal blocks.”

The slower rise in the GDP is not considered as alarming on condition that it is soon stimulated by domestic demand, which has been the backbone of the government’s new adjustment program in the last few years. But the turn in China’s economic epic history implies new social priorities, an unflagging struggle against social and regional inequality, strict measures against corruption and local powers’ abusive practices, the development of the hinterland provinces, and the building of a green economy.

All this requires immediate and difficult regional and structural adjustments. China’s home market has not yet taken over from exports as a locomotive of growth despite major wage rises in the large companies, from 15 to 20% yearly. It still weighs only 39% of the GDP, hardly more than in 2009. “The investment rate is higher than the consumption rate, contrary to what we find in Europe,” Gong Sen observes, a member of the Research centre for the development of the State Affairs Council. “Today we are still the biggest exporters, in a few years maybe we shall be the biggest importers.” And so China is seeking consumers. Rather than a limited fillip to growth, Beijing has chosen to invest in a gigantic urbanization plan, for it is in the towns that domestic demand is strongest. The enterprise raises controversies “as to the environmental effects and the modernization of rural areas”, Wen Tiejun oberves. He believes that one necessary condition for the improvement of the quality of life in the country is the extension of cooperatives and a mutualization of services.

Managing an important mutation like this necessarily takes one, or even, two decades: it cannot be done in three months. Hardly thirty years ago only 18% of the Chinese population lived in towns. “Raising the proportion of town-dwellers from 49.7% in 2010 to 70% by 2030 means accommodating over 300 million new town-dwellers in the interval,” Gong Sen points out. “Over half of those people already live in the towns.” These are the famous mingongs, the peasants who in the eighties left their land to work in the workshops of the coastal plants or on the vast construction sites. These workers and their families have been discriminated against by the persistence of the residence permit (the hukoo) which has prevented them from being integrated into the cities. Often considered as troublemakers by city-dwellers rather than as a legitimate labour force, those home immigrants today represent a considerable social force due to the arrival on the labour market of the second generation which is more and more cut off from the families’ villages. What is really unprecedented is the new way they are looked at, namely the narrowing of the millennial gap between the urban élite and country dwellers. “They are still only half-citizens,” observes Gong Sen. They cannot get their rightful due, they cannot be completely integrated until enough social housing and schools have been built and they are guaranteed a minimum income and the transferrable benefits of a national social security.”

“The objective defined in the five-year plan is therefore also a political manifesto aimed at doing away with those social inequalities, for these are a burning question for China”, says Fan Gang, an economist at Beijing People’s University of China. All the more so as the mingongs’ strikes and social protest have sent shock waves through the country. Notably in the delta of the Pearl river in Guangdong, which produces a third of Chinese exports. The province is restructuring its industrial fabric in order to rise upmarket and encourage the relocation of intensive labour activities that generate a lower added value in the more remote areas. In mid-November some 7,000 workers of the Yue Cheng shoe factory, a sub-contractor for Adidas and Nike, went on strike to defend their jobs against the company’s project of removing the plant to the hinterland. There have been other similar examples. Chang Kai, a Labour law specialist at Beijing People’s University and a counsellor of the Honda strikers during the 2010 dispute, was again solicited last November during the strike in the Japanese Citizen watch factory. He regretted “the absence of union delegates and the slow pace at which collective agreements are set up (the planned rate by 2013 is 80%).” For his part Wang Kan, of the Chinese Industrial Relations Institute, notes that “all those movements are inscribed in a new context characterized by a stronger, a more conscious and collective mobilization on the part of the workers. Since the law on labour contracts voted in January 2008 (and despite the fact that it is still not fully implemented), there has been an increased awareness of the need for collective demands. “

“Those contradictions give rise to a new political debate,” one of our interlocutors observes – a writer who would rather not be named. “Let’s put it this way: we are now coming to the end of the after-Tien An Men period during which a growth pact based on the progression of the standard of living had been brokered against a general political abstention. But the people’s trust in the economic gain is eroding on account of excessive social disparities, of the corruption, of the censorship, of the impenetrability of what is taking place at the top when a Communist Party conference is in preparation and the top-posts are about to be redistributed.”

A confrontation like the mobilization against land seizures that pitted the inhabitants of Wukan, an important coastal village of the eastern part of Guangdong against the local authorities for several weeks, is symptomatic of what is no longer tolerable today in China for those at the bottom end of society. The government of the province eventually conceded the demands of the 20,000 peasants: their comrades were released from jail, the 27 hectares that had been confiscated were ceded back, and democratic elections to designate the next village head were promised.

Wukang’s anger, which was instantly made widely known through the social networks, amply validates the leader of the great Guangdong daily Nan Feng Chang last June: “As it develops at a tremendous speed economically, China is confronted with a political transition characterized by the fact that the people demand more civic and political rights.”

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