SHANGHAI - Like two sides of a coin, China
may have gained a lot from its accession to the
World Trade Organization (WTO) over the past five
years, but at the same time it has lost a great
deal. The rich have become richer and the poor
poorer, with Chinese farmers and laborers bearing
great hardships caused by globalization.
China's economy is arguably benefiting
from globalization and its five years of WTO
membership. It is expected that the country's
exports by value this year will triple those five
years ago. Over the
past
five years, China's gross domestic product (GDP)
has grown at an average annual rate higher than
9%, with its economy jumping from world's
sixth-largest to the fourth-largest by GDP in
terms of the US dollar at the current exchange
rate.
Since its accession to the WTO in
December 2001, China's has been the biggest
recipient of foreign direct investment (FDI), with
a record US$72.4 billion pouring into the country
in 2005. Strong exports, largely propelled by
multinational companies reallocating their
manufacturing operations to the Middle Kingdom,
have enabled China to become the biggest official
creditor in the world, claiming more than $1
trillion in foreign reserves at the end of 2006.
Its economic influence, mainly manifested
by the "China price" dominating the market, now
reaches every corner of the world. "Made in China"
has flattened the world, and "Bought by China" has
driven up the prices of commodities such as oil
and copper.
China and the United States
have been responsible for half of the world's
economic growth in recent years, with China alone
responsible for 12% of global trade growth in
2005. The US is China's biggest export market, and
Beijing has been recycling the dollars back to the
US, helping to finance Washington's war in Iraq.
Henry Paulson, the US
treasury secretary and President George W Bush's
China policy czar, called China "the leader of the
world economy", a title received a bit nervously
by the country's leaders.
So one-third of Bush's cabinet
ministers were sitting at a round table with their
Chinese counterparts last week in Beijing for the
first round of bilateral economic strategic
dialogue. Both focus on such hot issues as greater
flexibility of the yuan's exchange-rate regime,
China's trade surplus, and the protection of
intellectual property.
The timing of the
meeting could not have been better: China-US
strategic economic dialogue coincided with the
fifth anniversary of China's accession to the WTO.
For many ordinary Chinese, WTO membership
is like "dancing with wolves (foreign investors)"
- a popular phrase that was coined on the eve of
WTO entry to express deep concerns about possible
"shocks" after the country swung open its doors.
Indeed, the changes are radical: China has changed
or eliminated more than 3,000 regulations to
comply with WTO requirements. Gone are many
protections for domestic businesses and workers.
So far, farmers and laborers have been the
biggest losers. China's WTO accession has ushered
in FDI and spurred regional governments to expand
the industrial parks competing for FDI with more
favorable terms, including offering cheap or even
free land and no labor standards.
According to Chen Xiwen, vice director of
the general office of the Central Leading Group of
Financial and Economic Affairs, the all-powerful
organ overseeing China's economic affairs, every
year regional governments at all levels take away
200,000 hectares of land from farmers, with 2
million farmers becoming landless. By now more
than 40 million Chinese peasants have no land to
farm and another 40 million will join them before
2020.
Chinese experts say that the
urbanization and industrialization stimulated by
economic development will inevitably cause the
separation of farmers from their farmland -
globalization has greatly accelerated the process.
Professor Wen Tiejun, a well-known scholar on
rural issues in China, pointed out: "Rural
problems stem from industrialization but become
much more serious with globalization."
While China keeps reducing the number of
people living in poverty, the poverty dynamic has
changed. In the two years after 2001, according to
a World Bank study, the real income of the poorest
10% of Chinese actually fell by about 2.5%,
despite the country's rapid economic growth. More
than half of these newly poor do not live in
villages and about 70% of them had suffered an
"income shock" such as failing crops, health
problems and injuries.
Alongside the
multinationals, governments have been the biggest
investor in the past five years. As a result,
public services such as health care and education
are seriously under-financed, making China
notorious for its poor public services while the
economy soars.
The delicate
social-security system has also been exposed to
globalization. The system does not provide a
safety net for the poorest, weakest and most
marginalized people in China. Tian Chengping, the
minister of labor and social security, said:
"Globalization, alongside urbanization and aging,
is posing challenges to China's social-security
net." In particular, the exclusion of an army of
140 million rural migrant workers simply makes the
social-security system irrelevant to China's
fast-changing society.
While the
government can now boast a $1 trillion foreign
reserve, it also has a thick stack of unpaid
bills. In addition to foreign and domestic debts,
the government owes between 800 billion 1 trillion
yuan ($102 billion to $127.5 billion) to more than
100 million individual pension-system accounts.
In 2004 alone, the degradation of the
environment cost China 500 billion yuan. It has
been long overdue for the government to increase
the outlay for education up to 4% of GDP, the goal
set in the mid-1990s. It also needs to increase
its expenditure dramatically to fix the poor
health-care system.
The five years of WTO
membership has obviously created winners and
losers. Winners are international and domestic
capitalists, state monopolists, urban residents in
coastal areas and, of course, government
officials. The losers are farmers, unsettled rural
migrant workers, laid-off employees of state-owned
enterprises, and workers in non-monopolized state
sectors. In short, over the past five years, the
rich in China have become richer and the poor
poorer.
Indeed, China's leadership has
been enthusiastically embracing the WTO while
failing to formulate social policies needed to
cushion the shock resulting from opening the
country to the outside world. The leadership
apparently now wants to make up for this, with
President Hu Jintao proposing the development of a
"harmonious society", which could be on top of the
agenda and even be included in the Communist Party
constitution in the 17th Session of the National
Party Congress next autumn. It may not be too late
for China to solve its problems.
Zhou Jiangong is a
Shanghai-based analyst on China's economic,
political, and foreign affairs.
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