China: Upbeat In China

2002

Deborah Johnson

Developments at the 16th National Congress of the Communist Party of China (8-14 November 2002) have been seen by some as a giant leap towards modernisation and change. However, others have been a little more cautious in their assessments.

From an economic perspective, China has, of course, been making huge strides. After Deng Xiaoping's decision in the late 1970s to gradually shift from a planned to a 'socialist market' economy and specifically since Jiang Zemin took up the reigns in 1989, China's GDP had by 2001 almost tripled. This represents an average annual increase (1978-2000) of 9.3 per cent. Foreign exchange reserves rose from US$5.5 billion at the end of 1989 to US$258.6 billion by end September 2002, with China now ranking second in the world.

China's economy in 2002 is expected to grow 8 per cent; the GDP will exceed US$1,200 billion, up about 8 per cent from 2001; total imports and exports are likely to top US$600 billion. The proportion of exports in China's GDP had increased to 23 percent in 2001 from 11.8 percent in 1989; foreign direct investment (FDI) for the first 10 months of 2002 reached US$46.44 billion, up 19.7 per cent from the same period in 2001. By the end of June 2002, China had set up 6,758 enterprises overseas with a total investment of 13.2 billion dollars, of which 8.9 billion was Chinese capital. Thus, China is rapidly emerging as a major engine driving the world economy. It plans to quadruple its GDP of 2000 by the year 2020.

This has come about through some major restructuring and opening of the economy accompanied by a policy of stimulating domestic demand whilst also maintaining a proactive fiscal and monetary policy. By the end of 2001, the number of private enterprises reached 2.02 million, involving 270 million employees. State-owned Enterprise (SOE) reform has been continuing with the number of SOEs dropping from 102,300 in 1989 to 46,800 in 2001. At the same time SOE profits jumped to US$28.7 billion in 2001 from a meagre US$8.9 billion (in current exchange rate terms) in 1989. As a result of China's formal admission into the World Trade Organisation (WTO) on 11 December 2002, China has sharply lowered its tariff levels and removed various non-tariff barriers, whilst abolishing or revising some 2,300 laws and regulations related to foreign trade and economic cooperation in order to meet WTO standards.

Such economic (and accompanying social) changes have led President Jiang Zemin to oversee the two significant changes during the 16th Party Congress. His 'Three Represents Theory' was incorporated into the Party's constitution. It allows non-state business elites and professionals the once 'hated capitalists' - to join China's more than 66 million member 'party of the workers'. Since last year, according to an official China News Service report, more than 100,000 Party cells have been set up in China's two million plus private enterprises; some 9,065 businessmen had been elected members of People's Congresses in cities and districts higher than the county level and 32,025 entrepreneurs have become members of regional-level Chinese People's Political Consultative Conferences exemplifying a new dimension to China's 'people's democracy'. Breaking new ground at the 16th Congress, one high-profile entrepreneur, Zhang Ruimin - head of the Haier Corporation - was elected to the Central Committee as an alternate, or non-voting, member. The official recognition given Jiang's 'Three Represents Theory' elevates his doctrine into the select company of Marxism/Leninism, Mao Zedong Thought and Deng Xiaoping Theory. Significantly, the Party will continue to pursue 'socialism with Chinese characteristics', which means that the Party will remain the political superstructure firmly atop this increasingly corporatist state.

The second change was, of course, that Jiang Zemin stood down from his position as Party chairman and in March 2003 is expected to also stand down as China's President handing both posts to 59-year-old former engineer and Party Vice President, Hu Jintao. Significantly, Jiang is to remain as chairman of the Central Military Commission, effectively making him commander-in-chief of China's 2.5-million-strong military. Somewhat after the mould of Deng Xiaoping, he seems set to remain the 'power behind the curtain', as Hu's largely university-educated 'fourth generation' leaders settle in to their new roles. Importantly, the new 24-man Politburo's expanded nine-man Standing Committee is packed with six of Jiang proteges including Jiang's closest associate, Zeng Qinghong who heads Central Committee (CC) secretariat, which sets the Standing Committee's agenda and implements its decisions; former Beijing Party Secretary, Jia Qinglin, and former Shanghai Party Secretary, Huang Ju.

Thus, whilst a socialist market economy is being constructed in keeping with the times, China may remain for some time yet under the guiding thought and hand of Jiang Zemin.

WATCHPOINT: Will the new executive be able to address the problems of unemployment (4% by end 2002); social inequity (Gini Coefficient - a key gauge of income disparity now at 0.45, up from 0.33 in 1980); corruption; incomplete legal infrastructure; and, a banking sector bedevilled by bad loans to the SOE sector? Also will Hu Jintao be able to consolidate his grasp on power by placing his people around him to counter the influence of the Jiang faithful?

 

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