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5 Paulson, China and the turmoil
beneath By Henry C K Liu
such modes of growth. Paulson wants China
to open up Chinese capital markets for "healthy
competition" within the domestic financial system,
so China can have a currency that is "freely
tradable", despite a history of financial crises
that befell economies with freely tradable
currencies in recent decades.
Paulson
warns Chinese officials that they underestimate -
"at China's own peril" - the extent to which the
currency issue is
"viewed by their critics as a
symbol of unfair competition", even though his own
expert opinion differs from those held by such
uninformed critics. Yet if such critical
complaints are substantively groundless, any
appeasement on them will only lead to further
absurd demands to perpetuate their anti-China
agenda, amounting to "if it's not one thing, it
would be another". Free traders, of whom Paulson
is one, should not tolerate political bias
interfering with free trade.
Paulson calls
on China to press ahead with liberalization across
a broad front, including financial-sector reform,
fiscal and regulatory policies to reduce excess
savings, market-based macroeconomic management and
enforcement of intellectual-property rights. "We
are taking a comprehensive approach," he said. "We
are collectively pulling it together." Paulson
said China had become a lightning rod for fears
about globalization, but insisted it is
"manageable".
Paulson's neo-liberal
message is music to some in China, particularly
his fans in Tsinghua University, the bastion of
neo-liberal supply-side economics in that country.
These reformers would like to see US political
pressure push the Chinese economy more toward
capitalistic market economy, at a time when
Rubinomics, a set of policies named after Robert
Rubin, treasury secretary under Clinton, is forced
on to the defensive by rising economic populism in
the US and around the world. Chinese reformers are
similarly put on the defensive by glaring defects
of their export dominated economic policy, in the
form of worsening income disparity,
life-threatening environmental pollution, economic
and developmental imbalances, erosion of national
spirit and, worst of all, systemic corruption.
China is not about to drive its economy further
down any road that leads to an economic equivalent
of a dangerous cliff merely to appease US
ideological displeasure.
Chinese
socialism In an interview with US
television journalist Mike Wallace on September 2,
1986, Deng Xiaoping, the architect of China's
market reforms and opening-up policies, responded
to a question on corruption and other obstacles to
foreigners doing business in China:
Deng: I am aware of these
things. They do exist. As we are new to doing
business with the West, it is inevitable that we
shall make some mistakes. I do understand the
complaints of foreign investors. No one would come
here and invest unless he got a return on his
investment. We are taking effective measures to
change the present state of affairs. I believe
that these problems can be solved gradually. But
when they are solved, new problems will arise and
they, too, should be solved. As leaders, we have
to get a clear picture of the problems and work
out measures to solve them. There is also the
question of educating the cadres.
Wallace: To get rich is
glorious. That declaration by Chinese leaders to
their people surprises many in the capitalist
world. What does that have to do with
communism?
Deng: We went
through the Cultural Revolution. During the
Cultural Revolution there was a view that poor
communism was preferable to rich capitalism. After
I resumed office in the central leadership in 1974
and 1975, I criticized that view. Because I did
so, I was brought down again. Of course, there
were other reasons too. I said to them that there
was no such thing as poor communism. According to
Marxism, communist society is based on material
abundance. Only when there is material abundance
can the principle of a communist society - that
is, "from each according to his ability, to each
according to his needs" - be applied. Socialism is
the first stage of communism. Of course, it covers
a very long historical period. The main task in
the socialist stage is to develop the productive
forces, keep increasing the material wealth of
society, steadily improve the life of the people
and create material conditions for the advent of a
communist society ... There can be no communism
with pauperism, or socialism with pauperism. So to
get rich is no sin. However, what we mean by
getting rich is different from what you mean.
Wealth in a socialist society belongs to the
people. To get rich in a socialist society means
prosperity for the entire people. The principles
of socialism are: first, development of
production, and second, common prosperity. We
permit some people and some regions to become
prosperous first, for the purpose of achieving
common prosperity faster. That is why our policy
will not lead to polarization, to a situation
where the rich get richer while the poor get
poorer. To be frank, we shall not permit the
emergence of a new bourgeoisie.
Deng's
view of a socialist market economy during the
transition phase from socialism to communism is
still the national purpose of the People's
Republic, despite the fact that Chinese economic
policy has veered off course from Deng's original
vision for the decade after the Tiananmen incident
in 1989. The current leadership is moving to put
economic policy back on the socialist path and to
rein in the excesses of market economy and address
the imbalances of development approaches that
emphasize quantitative over qualitative
performance.
China's 11th Five-Year Plan,
the roadmap for the country's development in the
next five years, will bring revolutionary changes,
moving from the "get rich first" phase to the
"common
