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In feeling for the stones, China’s
already realized economic transformations have vastly improved the lives of
hundreds of millions of people (The Economist 26)- Chinese people. Economic
measures instituted by Deng Xiaoping have been grouped together, under the
general term of gradualism, but many observers now say that in order for China
to continue its double-sized growth over the long term and to rectify the
problem of the state industries that are losing billions of dollars, economic
shock therapy needs to be administered, and quickly. But the current plan of
China’s President Jiang Zemin and his advisors includes no such shock therapy.
It does include, however, divesting the government of all but one thousand of
the more than three hundred thousand state-owned businesses that have cost the
Chinese government $85 billion in looses over the past ten years. The following
chart shows the distinctions of several of China’s economic indicators, and
their changes since 1987. Table 1. Selected Economic Indicators (Billions of
dollars) Factor 1987 1997 Change Gross Domestic Product 300 610 610 Merchandise
Exports 30 180 150 Foreign Investment 2 48 46 Hard Currency Reserves 25 128 103
Losses of State-Owned Industries 3 88 85 (Business Week, Sept. 1997) From the
preceding chart, the growth in China’s GDP over the past ten years in nearly
indefinable.
Other indicators are highly favorable, with the economy’s only
apparent problem being that of the losses of the state-owned industries. The
losses incurred over the past ten years could have served extremely well in
furthering the quality of life of the Chinese people, rather than simply
supporting the workers in those industries. Those workers represent no small
percentage of the Chinese population- there are 100 million workers in those
state supported industries that have lost so much money (Clifford et al.). The
plan of action proposed by Jiang Zemin in rebuilding the Chinese economy
includes: · Restructuring state enterprises. Already responsible for a third of
the country’s industrial output, these could be converted to public
corporations. When these companies become shareholder-owned companies, it opens
the door to foreign competition. Government holdings can be at the level of
minority shareholder. ·
Strengthening financial markets. Set up the equivalent
of our SEC and allow annual capital-generating stock listings in Shanghai and
Shenzhen. (China already has a start on regulating securities exchanges
(Reuter’s).) · Selling state assets. Currently, there are 305.000 state-owned
businesses. The government would retain 1,000; the remaining would be sold.
Those that cannot be sold will be allowed to go bankrupt. · Building social
services. Literally millions of Chinese citizens stand to lose their jobs
through the sale and conversion of state-owned businesses. This action is
intended to both replace some of those state-owned enterprises and provide
assistance to those affected in the form of training, housing, and pensions
design. · Cutting trade tariffs. Though China is not a member of ASEAN, the
country does aspire to join the World Trade Organizations (WTO) by the year
2000. Tariffs must be reduced to 15 percent by that time in order for China to
be eligible for WTO membership (Business Week).
Even while concentrating on
internal adjustments, the government apparently intends to work toward that end.
Jiang’s objective is to build a complete market system which will give China a
chance to grow at an average of 6.5 percent annually for about 25 years and come
forth as a $5 trillion modern industrial superpower (Clifford et al.). If the
President is able to succeed with his plan of action, the impact will be
tremendous for the global economy of the 21st century. Hong Kong, the center of
the Chinese capitalism, could have the opportunity to be side-by-side with
London, Tokyo, and New York as financial centers.
As long as Chinese individuals
move in on global bonds and stock markets to help finance everything, like
superhighways to steel mills, China could take part in even more parts of the
world’s capital. The main goal for China’s modern foreign policies is the
development of the Chinese infrastructure. The significance of improved
communication and transportation cannot be over-stressed. Economically, enhanced
means of communication and transportation allows more expedient supply of demand
scheduling. Two of the latest Chinese reform measures to aid in the development
of the country are the Provisional Regulations on Direction Guide to Foreign
Investment and the Catalogue Guiding Foreign investment in China. Both these
policies place specific industries including telecommunications, machinery, and
electronics on top priority.
Funding for these projects come from foreign
investments and appropriations from the Chinese government in the form of grant
financing, and legislative or administrative support. Yet another example of the
Chinese emphasis on industrial based growth is far reaching goal of having just
under 100 million telecommunication lines by the year 2000. China’s Central
Ministry of Posts and Communication said that in order to complete this major
task China will enlist the aid of major overseas suppliers and create
manufacturing plants within the nation. AT&T, Motorola, Northern Telecom,
Alcatel, Ericsson, NEC, and Siemens are just a handful of the multinational
companies which hold a considerable share of the Chinese telecom market, once
again proving that China is becoming a party to interdependence. The Chinese
pharmaceutical market, much like Chinese industrial markets, is experiencing
rapid growth due to reforms in China’s economic strategy. The nation’s
government has decided to lower import tariffs and remove the necessity of an
import license to bring pharmaceuticals into the country. Also, patented foreign
drugs, such as Tylenol, are now being protected from counterfeiting by
administrative action. The result of these provisions are overseas contractual
investments totaling $1.5 billion in the past five years, and income from the
medical industry’s exports reaching 2.6 times the amount five years ago,
according to Zheng Xiaoyu, director of the State Pharmaceutical Administration (moftec.gov).
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