Dr. Dr. Cheng Xiaonong, a former advisor to China's past premier Zhao Ziyang and Chief Editor of i>Contemporary China History Studies magazine, delivered the following address:
There is a principle that has long been overlooked when evaluating the social reforms in China: Is the social policy adopted by the communist regime fair and just? The regime keeps avoiding this question, because herein lies the key to the problem of escalating social unrest. In the 1980s, the regime usually took social justice into consideration when making decisions, since this was part of the ideology of socialism. Back then, the authority would try its best to redistribute financial resources to balance the interests of different social groups such as workers, farmers, intellectuals, and government officials. There wasn't the apparent social injustice seen today. Even then, there was still considerable criticism from the public about social justice. People had many complaints about the reforms. This was mostly because it wasn't that fair: some social groups became richer, while others didn't.
Even the intellectuals complained that "Surgeons earn less than the egg-sellers; teachers earn less than the barbers." Those sayings demonstrated that back then people cared about social justice. Their opinions weren't always right, but at least it showed that people thought about it, no matter how successful the reform was in achieving its objectives. Yet, the reforms still needed to maintain social justice and take care of the interests of different groups. The government at the time considered people's opinions and tried to explain the situation and take financial measures to compensate the various groups that were affected.
The Turning Point
However, this environment totally changed after the Tiananmen Square Massacre on June 4, 1989. After the massacre, the China Youth Daily published an article by Chen Yuan (the son of communist regime senior member Chen Yun) and a group of intellectuals who followed Chen. This article gave a clear analysis of where the regime stood and what choices it had after the massacre. According to the article, after the massacre, the regime should have realized that no matter what reform it initiated, it would never gain support from the majority of the population. The people would want another reform after each reformpolitical reform would follow economic reform and eventually the people would want democracy and the Communist Party would lose power.
If the regime wanted to stay in power, it couldn't rely on getting support from the people. It needed to get support from the cadres and their next generations—these people are the hardcore supporters of the Communist Party. Chen Yuan's article suggested that the regime adjust its policy and let the reforms be beneficial to the cadres and their children; only this type of reform would consolidate the party's power.
What this article really suggested was that it was acceptable if a reform took advantage of billions of people because these people would not have supported the party anyway.
This article touched the regime leaders' hearts, and from then on new policies gradually manifested this suggestion. The new policies included the "forced unemployment policy for state owned enterprises," pushed by former premier Zhu Rongji; the sale of residential housing to the owner, which had already been assigned to them as part of their benefits; and the so-called "national healthcare reform" that cancelled free healthcare for state-enterprise employees, but preserved it for the cadres.
A New Social Order
Since the early 1990s, the connotation of the Chinese communist regime's reform policies began to change quietly. Those policies touched the majority of Chinese people's interests without any concern, and were established with the sacrifice of these people's interests as its premise. This created new opportunities for communist cadres and their relatives to accumulate wealth. It is just these kinds of unfair policies that caused such extremes in Chinese social structure.
Every time the regime talks about a particular reform policy or measure, it uses the usual rhetoric that "it is in the interest of the whole society." Is that true? Do all Chinese social classes pay the same price for the reform? Do all social classes bear the same burden from the outcome? No! For example, housing reform, breaking the iron bowl of socialism (abolishing the permanent employment in state owned enterprises) and health care reform affect every urban family in China and the majority of these families directly feel its impact and pressure. They have to save every single dollar to pay for skyrocketing medical expenses, home loans, cope with their possible unemployment, and pay for their living expenses.
But these three reforms had no impact on the party or the government cadres who still enjoy the benefits as in the "old tradition" under the past socialistic system. The higher their ranks, the more luxurious their free medical treatments are; their housing is free, or they may even have several luxury houses. Although the party and government have a severe problem with redundant head count, a real layoff will never happen so no one needs to worry that his "iron bowl" will be broken. However, a hospital can refuse to give necessary treatment to a common Chinese citizen even if they are only short five or ten yuan (US$0.60 to US$1.20) for payment. This actually happens in many places in China today.
Does the reform in China have a social fairness connotation? The answer is apparent from the above viewpoints. After many years of reforms, China is still a hierarchical and privileged society. Reforms only take away benefits from the powerless. One can easily determine who belongs to the lower and middle classes of societyjust ask one question: "Does the knife of social reform cut into your paycheck?" If so, you pay the cost of the reform, and you belong to the middle or lower classes. If, no matter how many reforms come and go, you are faring progressively better, then you belong to the upper class in this privileged society.
Unemployed Graduates
Currently, it is exactly for this reason that the best career for undergraduate students from the People's University is still to be a party cadre. You can enjoy both the benefits of socialism and the opportunities in the market economy. The benefit is a privilege type benefit preserved under the socialist society because the regime insists on a socialist system. At the same time, the advantage of the market economy allows Chinese officials to directly interfere with economic activities and market transactions, through which they can accept bribes so that their bank accounts grow larger and larger. This is the main source of income for the top five percent of China's wealthy.
This causes us to reconsider how we should view the current reform in China. From the social justice point of view, this reform changed from being relatively fair in the first half of the 1980s to almost unfair now. The reform has gone astray, and created an upside down "T" shaped bi-polar social and economic structure, with a series of social problems [Editor's note: The upside down "T" refers to the minority of very wealthy people at the top, with the majority in poverty at the bottom.]
Feudalism Returns to China
The polarization is progressively worsening; the structure has been formed and is difficult to change. The elite group has monopolized power as well as the opportunity to obtain wealth.
Four years ago, Professor Sun Liping from Beijing University published an article. He presented one important point; the Chinese elite group is a closed circle. If you are one of them you have an opportunity to share the benefits and opportunities during the current economic development; if you are not, the door is almost totally closed to you. Many people believe that a good education and university graduation can provide a chance to gradually move up to the upper class in this society as is common in many other countries.
But this process is not possible in China now. If you are not one of the elite group or their children, no matter how hard you work or how good your education is, it is almost impossible for you to get into their circle. You cannot share in the resources and power that are monopolized by this circle. There is no access to their way of obtaining instant wealth, which means plundering society or another's wealth.
Today, the career path for Chinese university undergraduates, or even those with a master's degree, is becoming narrower. In 2002, about 70 percent of university graduates could find a job within six to eight months; the remaining 30 percent could not find a job. If graduates do not find a job in the year they graduate, their prospect for a job the following year is hopeless because of the large graduating classes that follow. Since 2002, the non-placement rate for university graduates has progressively grown. The rate doubled to 60 percent in 2005.
At that time, the regime's propaganda department banned the media from reporting on this situation, making it another "state secret." Now, in many places, even if there are available jobs, the starting salary is becoming ever lower. [Editor's note: In 2002 the starting salary in central China was between 1,500-2,000 yuan (US$188-250) a month.] China's central provinces have seen reductions to about 1,000 yuan (approximately US$125) a month; in China's western provinces such as Shaanxi, it has fallen to about 800 yuan a month (approximately US$100), close to farm workers' salary in the eastern provinces.
"Zero salary employment" has also become a strategy adopted by university graduates. They are very worried about being unemployed and will work for no income. This possibly only happens in China.
Why, with such a high rate of economic growth, can't China absorb its university graduates? Those who graduate from prestigious universities, having received excellent engineering credentials, are supposed to be the most desirable workers for this developing country, but they cannot find a job.
One of the most important reasons is China's twisted economy to maintain a high economic growth and maintain a good image. The regime created a series of opportunities to maintain the high growth, but high growth neither improves people's living standard, nor increases employment opportunities, but it does cause severe environmental pollution. How one should evaluate this kind of economic growth is a profound question.
In the past decade, ordinary consumers' purchasing power has declined under a series of reform policies. Many families cannot afford consumer products to improve their quality of life. This has caused China's domestic consumer market to shrink; many enterprises have not been able to expand their volume of consumer products in China. Although the Chinese economy is growing rapidly, the Chinese domestic consumer market is in a depression.
In the United States, if the consumer market is in a depression, the entire economy is in a depression, because 70-80 percent of the US economy relies on consumer products. This is not the case in China, where the Chinese government can use public funds to create a high growth economy, no matter how depressed the consumer market is.
There are three methods to achieve high growth in a depressed consumer market. The first is to attract foreign investment by all means, reduce taxation, allow pollution, allow foreign companies to hire workers to work extended hours, reduce salaries, and lower labor safety standards. Through foreign investment, China can sell its consumer products to the world's marketplace, even though Chinese consumers cannot afford these products. This is the first method to maintain high economic growth.
The second method is to construct public infrastructure such as bridges, highways, government office buildings, city squares and sports facilities. China has used public funding in construction to improve the appearance of city and public infrastructure.
This has not only brought short term economic growth, but also increased the demand for construction materials, such as cement and steel, and improved employment. The improved infrastructure is used to show officials' achievements. However, since the overall demand for consumer products is low, the public infrastructure will not be fully utilized, and this infrastructure will therefore soon be in disuse.
The third method is to encourage real estate development which will increase the demand for construction materials, and the sales of high priced housing.
The advantage of these three methods is that they have created a positive impression on tourists and foreign investors. Tourists and investors come to China and find that China is changing rapidly. Any other country's government could achieve the same result with the same amount of investment. However, in a democratic society, voters and taxpayers would not allow their government to waste public funds like this.
Yet in China, the waste is viewed as achievement, success and development. Foreign investors do not understand the difference between the two cases. Investors think China is very wealthy and full of hope, so they invest more money in China.
However, these three methods are not beneficial for China's long term economic growth. China is now facing the reality that these three methods of developing the economy are creating problems.
First of all, foreign investment has reached a peak.
Secondly, investments for public infrastructure has also passed its peak, all the necessary facilities have been built, no city needs a new government office building every year, and the highways are all built.
Thirdly, real estate is becoming a new bubble. Many high priced houses cannot be sold, which becomes a time-bomb for China's economic stability. This is because the real estate developers borrowed from banks to fund the developments, Shanghai tycoon Zhou Zhengyi, is an example. If the houses cannot be sold, the bank's loans will turn into bad debt.
The Chinese government recently recognized this threat and is making every effort to stop the bursting of the real estate bubble. Once real estate developers default, China's banking system's bad debt will increase dramatically. The Central Bank may potentially face a new financial crisis.
Therefore, behind the high growth of the Chinese economy, there is an unfair social policy and a looming series of severe economic problems. These problems make it more difficult for China to maintain its high rate of growth. Starting in 2004, Chinese Premier Wen Jiabao changed the slogan for the government. Many people did not pay attention to what this new slogan implies for China.
The slogan is, "we need to develop in a scientific way." In other words, the development in the past was not scientific. The methods of ensuring high growth during former Premier Zhu Rongji's era, such as building public infrastructure, encouraging real estate development and attracting foreign investment, were not scientific and were not good for China.
As a matter of fact, the CCP was overruling its own policies in Zhu's time, though the slogan was packaged in a politically correct way. This made it hard for western China experts and reporters to understand the true meaning of the slogan. Another implication of a scientific development policy means China will no longer make efforts to maintain a high economic growth rate. We can see that the Chinese government itself has already recognized that high growth is not good for China.
Article contents are taken from a recording of Dr. Cheng Xiaonong's speech at a forum in Houston, Texas. Dr. Cheng is a Ph.D in sociology at Princeton University.
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