No Real Progress in Chinese Companies Despite 30 Years of Economic Development
There is another problem besides all the problems mentioned in Part I: the slow progress of technology and management systems in the last 30 years. It’s been 30 years since China engaged in economic reforms. Thirty years is a long time for a country, usually enough to transform and industrialize an under-developed country. For example, after World War II, it took Japan about 30 years to become one of the strongest industrialized countries in the world. By the 1970s, Japan was already one of the leaders in the world economy.
Other examples of rapid reforms include Korea and Taiwan. What about China? Unfortunately, the last 30 years of reform only brought a facelift and attracted foreign companies and capital. However, these companies have not truly brought substantial progress to the broader Chinese economy. The main reason is that the foreign companies are in China primarily for its cheap labor.
On the other hand, Chinese-run companies have not really changed their management systems or invented into many new products or technologies in the last 30 years. Without foreign technology, Chinese firms lack accomplishments in both consumer and industrial manufacturing. Although there are many cars made in China today, most of the core technologies, used in domestic car manufacturing, depend on foreign patents. Chinese auto companies have failed to create new technologies. The exception to this Chinese companies manufacturing quality products that can compete in the international market.
It took Japan only about 20 years to reach the stage of technological independence. Thirty years have passed for China, yet there is no sign of innovation. The same is happening in other manufacturing fields. Recently some are discussing passenger airplanes that are made in China. Research and development has gone on for the last 30 years, yet there has been little development. It has been said that China has begun to assemble its first domestic airliner, yet only the “skin” of this airplane is Chinese. Most of the parts inside are imported from various other countries.
In other words, without foreign technology and equipment, China’s airplane manufacturing industry is also just a joke. We can see that the real lag in the Chinese economy lies in its enterprises. Of course enterprises are directly related to the Chinese social system and government policies. The fact is, the Chinese government is only interested with the rate of economic growth, and is not concerned with the true growth of Chinese companies.
At the same time, many executives of Chinese companies only care about their own compensation. Their management method is primarily focused on hiring low-wage migrant workers to reduce expenses. They don’t truly trust researchers and developers of technology, let alone encourage them with monetary compensation. As a result, development staff in Chinese firms are only interpreting plans from foreign companies and acting as craftsman in the manufacturing process.
These companies rarely spend any time on independent technological development and innovation. If there is any training opportunity in a foreign country, the opportunity is often taken by cadres who are company executives. The front-line developers rarely have the opportunity to live in a foreign country for a substantial period of time to study technology. In addition, companies allocate very limited funds to research and development. The result is a fast rate of development, yet low level of technical maturity in Chinese firms.
This explains why China is so dependent on exports and joint ventures. Without these, Chinese products cannot compete in the international market. They fail both in terms of design and manufacturing processes. As soon as the conditions of the Chinese economy become less profitable for foreign companies, a large amount of foreign capital will leave China, leaving the Chinese economy reeling. This is what’s happening in China today.
Special Interest Groups Given Priority
We can see that the dire situation in China today is deeply rooted. One can say that the entire economic system or even government policies contributed to it. But, the Chinese government has not tried to solve the problems from a policy perspective. What it should admit is that it has made a series of mistakes in the last 30 years of economic reform.
The biggest mistake is giving special interest groups top priority. The development of the country came in second place, or even less important than that. For the benefit of special interest groups, the government often sacrificed the interests of the general public. The situation today is a direct result of this deliberate approach.
Of course, the root of the problem is political. As a party interested in monopolizing political power, the Chinese Communist Party is not keen on the normal, long-term development of the country. It’s most interested in the benefits of its members. The party members also know that this is not a sustainable situation. They try to accumulate as much money as possible in the short window of opportunity when they are in power.
That’s why they all take a short-term approach. They don’t care about the interests of the company, employees, or the nation, as long as they can gain personally from it. After they get the money, they have no plan to stay in China. Instead, they try their best to move to another country with their illegal wealth, leaving behind in China the mess they caused.
The last few decades of development brought improvements to city infrastructure and buildings, while causing rapid deterioration in the natural environment. Natural resources are being robbed and depleted. People’s morality is also quickly sliding. As a result, there are many toxic foods on the market. It’s a reflection of a host of problems in the domestic economy and society. This is not something that can be changed by a couple of slogans about economic development or policies.
Chinese Economy Could Enter an Ice Age
From this perspective, despite 30 years of economic development, China is in a crisis. The current situation is no better than right after Mao passed away. It’s just a different kind of crisis under new conditions. It’s possible that the current crisis is even more severe. Besides, the problems cannot be solved by attracting more capital from other countries. In other words, the government is out of tricks.
The Chinese economy is not only in a storm. It’s possibly in an ice age. For years to come, it’s possible that the economy will stay depressed.
The Chinese government has used the slogan “stability is paramount” to prosecute anyone who offers criticism. A lot of people thought that it was the right approach. In fact, the “stability is paramount” slogan also contributed to the economic crisis.
“Stability is paramount” has negative effects, which have become more and more clear. The situation cannot be changed simply by one or two strategies, as it is the result of the actions of tens of thousands of elite members of the ruling Chinese Communist Party. As long as they remain, it is nearly impossible to change the situation.
Although China has shown growth in the past 30 years, these years also had severe consequences. For most common people in China, their lives will become harder in the next few years. As the economic crisis worsens in China, more of the elite ruling class will flee China, taking with them more capital. By then, the Chinese economy will be even more devastated.
Here, I have attempted to give a preliminary, yet comprehensive analysis of the economic problems facing China today. My hope is to make more people, especially those who are not economic experts, aware of the past, present, and future of the Chinese economy.
Thank you everyone.
Please read: Why China’s Economy is in a Deep Freeze Part I
Read this article in the original Chinese: http://shenyun.epochtimes.com/gb/8/12/20/n2369258.htm
