Almost 30 years after the Chinese Communist Party (CCP) started its economic reforms, the average citizen's standard of living hasn't kept pace with the reported GDP increases. The majority of people can barely make ends meet.
As China's neighboring countries of Japan and Korea developed, their economies grew steadily in less than 20 years but didn't have the 10 percent GDP growth that China did.
However, their standards of living have greatly improved. The fundamental reason for the dramatic difference in the standards of living between China and the other two countries lies in economic exploitation by privileged CCP members. The CCP 2006 "work report" showed China's GDP was 20.94 trillion yuan (USD 2.6 trillion), an increase of 10.7 percent over 2005. The government's revenue was 3.93 trillion yuan (USD 0.5 trillion), which is one-fifth of the GDP.
The government spent 8.5 percent of this revenue on the maintenance of agriculture, rural improvements, and the poor, 3.92 percent on technology (USD 9.7 billion), education (USD 6.7 billion), public health (USD 1.7 billion), and cultural businesses (USD 1.7 billion).
The CCP invested less than 40 percent of its annual revenue on its people and managed to consume the rest.
During the 2007 National People's Congress and the Chinese People's Political Consultative Conference, the issue of high administrative costs was again discussed.
The CCP's administrative costs are much higher than those of developed western countries, and are 25 percent above the average of all countries. This administrative overhead is a burden on China's financial and economic development and consumes funds intended for education, technology, culture, public health, and social security.
Currently, the government's administrative costs consume 32 percent of the nation's financial revenue, and this doesn't include the CCP's internal expenses. The Party's enormous expenditures strains the nation's finances, leaving barely enough to pay the officials' salaries. Government institutes have too many people for the number of jobs available and many are under-qualified.
There are a lot of business vehicles and many are used for private purposes. All of the above, plus escalating corruption, have eroded financial revenues. The CCP has appropriated the nation's income as its own and people no longer benefit from the taxes they pay.
Besides consuming national financial revenues, the CCP takes advantage of its political power and the economic policies it introduces to amass money the cadres use to maintain their luxurious spending habits. We can analyze this phenomenon that is based on "rent-seeking" economics.
Gordon Tullock defines "rent-seeking" as controlling resources and labor through manipulating the political process to achieve an advantage, rather than to produce the goods and services required by consumers. The CCP uses its power and relentlessly creates "rent" in order to gain maximum profit.
Initially, the CCP fabricated market prices, interest rates, and dual exchange rates for the yuan to garner "rent." Later, this political power was used to create and maintain profits for certain interest groups. These interest groups then, with their illegal rewards (the rent) in hand, lured the government to ratify more beneficial regulations for them. Now, the government spontaneously uses administrative influences to help the local enterprises profit and then takes part of the profits for "rent."
With a political system that allows its government officials to serve for life and cumbersome bureaucratic institutions that are full of inefficient employees, China is home to the largest group of public servants in the world.
In addition, the enormous number of retired officials is also an economic liability. Thus, funds taken from the national budget are huge each year. So it comes as no surprise that China is spending a considerable amount of its national income providing for its officials.
Especially in some underdeveloped areas, the economic activities are used entirely to feed the bureaucrats. To raise the funds it needs, the government has to resort to "rent-seeking" as well as levying taxes.
According to the 11th issue of Beijing's China Review magazine, in the 1990s, economist Mr. Hu Heli, among others, figured that the funds generated through rent-seeking from differentials in prices, exchange rates, profits, and so on reached 456.9 billion yuan (approximately US$ 57 billion), or 40 percent of the year's GNP of 1.18 trillion yuan (approximately US$ 141.7 billion).
Recently, Mr. Gao Huiqing and others at China's State Information Center came up with a figure for the year 2004. The funds from rent-seeking for that year rose to 4.6 trillion yuan (approximately US$ 570 billion), which accounted for 29 percent of the year's GDP or 1.5 times the year's national revenues, or 2.3 times state salaries.
The funds collected through rent-seeking come from differentials in commodity prices, bank rates, trade licenses, land prices, farm workers' prices, social security debts, funds collected by state monopolized industries, funds flowing out of state assets, taxes that state enterprises are supposed to pay, education funds, and so forth. So it is clear that the Chinese communist regime is raking in profits that belong to the market, and which almost exceed the tax revenues.
Today the economy is critically dependent on the behavior of the Chinese communist regime, which has never stopped its meddling in the market and creating conditions for itself to plunder the nation's wealth. In the 20-plus years since Beijing started its economic reform and opening up, nearly one third of its GNP was taken by the central government in the name of collecting funds through "rent-seeking," and another one third was collected as tax revenues. So, how much was there really left for enterprises and ordinary citizens?
Consequently, life has not changed much for the majority of people in the "robber baron state" after all this time. It also explains why so many people are still living on the poverty line to this day. The Chinese communist regime is taking away the lion's share of the nation's rapid economic growth, and the people have truly become second-class citizens of the communist "robber barons" under the regime's rule!
Over the past three years, China's foreign trade has been growing at an annual rate of more than 30 percent. In 2004, China became the third largest trading nation in the world, with its total import and export volume reaching USD 1.150 trillion.
In 2005, that figure grew to USD 1.4221 trillion, of which exports accounted for 6.5 percent of the world's total. By 2006 the nation's trading amounts jumped to USD 1.760 trillion, up 23.8 percent over the previous year.
As of the end of December 2006, the balance of China's foreign reserves stood at USD 1.0663 trillion.
Looking at the export goods from the "Robber State" under the Chinese communist rule reveals that they are mostly resources and energy-consuming products that are sold at extremely low prices.
For instance, in 2004 China exported 450 million electrical fans at an average price of USD 3.8 each, 5.2 billion lighters averaging USD 0.063 each, 960 million watches averaging one dollar each (among them, six million watches from Zhejiang Province averaged only USD 0.3 each), 5.9 billion pairs of shoes averaging USD 2.5 a pair, which is less than one third of Italy's price, and shoes from some provinces were only one dollar a pair, 130 million DVD players averaging USD 45.6 each, less than one third of Japan's price, and 56 million film-style cameras averaging USD 5.9 each, which is less than one-twentieth of Japan's price.
Such export patterns, where large quantities of goods are flowing into other countries, consume large amounts of natural resources and energy, and thus inflict devastating damage on the nation's ecological environment.
Within two years China's foreign reserves added USD 500 billion for a total of USD 1.066 trillion. The large increases in foreign trade and foreign reserves show that large quantities of goods are flowing out while huge amounts of foreign currencies are pouring in.
What does that mean to the ordinary citizen in China? It means that enormous material benefits and welfare meant for the people are being turned into large foreign reserves for the Chinese communist regime.
Furthermore, China's material and financial resources are both exiting exponentially, and in this process China is in effect subsidizing the world.
More important, if the U.S. dollar and other foreign currencies depreciate, the paper money wealth that China has accumulated over the years will be instantly watered down. It is quite likely that after China has achieved a trade surplus by depleting its natural resources, the wealth represented by paper money will be reduced to naught in the midst of the changes in the exchange rates.
To sum up, in essence, China's foreign trade policy uses a poor nation's meager natural resources to subsidize rich nations in the world consume the Chinese people's benefits and welfare.
Meanwhile, the number of bad debts in the four major state banks in China is staggering. Illegal practices are rampant in the poorly regulated stock markets. Corrupt officials are fleeing the country, carrying with them enormous amounts of cash—a virtual exodus of state capital.
An estimate, based on an indirect calculation, shows that between 1998 and 2002 the amount of capital leaving China totaled USD 78.384 billion, an annual average of USD 15.677 billion. This figure places China fourth in the world in terms of capital flight, and explains why peoples' incomes have not kept pace with the rapid growth of the nation's GDP.
The root cause of the hard life Chinese people are experiencing lies in the economic policies that the privileged class of the Chinese communist regime have made for themselves. They used their power to restrict dissidents, rake in profits under various names, and to push the general populace to the brink of human tolerance. There is no doubt that the people have become second-class citizens of the "Robber State" under the CCP.
In conclusion, hard work alone will not improve life for the majority of citizens; for the economic policies of the CCP takes the fruits of people's labor. Thus, we need to step forward and bid farewell to the Chinese communist regime. The second-class citizens of the "Robber State" have no reason to perish along with the regime!
Feeds