The South African Civil Society Information Service

China's Curious Blend of Communism and Capitalism

6 Jun 2013

China will soon surpass America to become the world’s largest economy. What surprises people most is the fact that China has managed its rapid economic growth despite being a single-party state ruled by a Communist party.

How does a politically repressive state produce such an enormous middle class of consumers that have now become the engines of the Chinese economy?

SACSIS' Fazila Farouk speaks to Saliem Fakir of the World Wildlife Fund (and regular SACSIS columnist) about his impressions of China, following a recent trip he made to Beijing. She questions him about China's curious blend of Communism and capitalism, the views of ordinary Chinese on the suppression of human rights in their country as well as China's growing global footprint.

Editor's Note: This interview was conducted via broadband and the visuals as well as quality of the audio are poor -- but we've produced a transcript so you don't have to miss a word.

TRANSCRIPT OF INTERVIEW

FAZILA FAROUK: Welcome to the South African Civil Society Information Service, I'm Fazila Farouk in Johannesburg.

From being a relatively poor nation, to everyone’s surprise, China has emerged as the world’s second largest economy in the past decade or so. China's impact on the global economy and its political influence is not to be overlooked.

Analysts argue that China will soon surpass America to become the world’s largest economy in the next few decades.

What surprises people most though is the fact that China has managed this rapid economic growth despite the fact that it is a single-party state ruled by a Communist party that’s been in power for more than half a century.

How does a politically repressive state produce such an enormous middle class of consumers that have now become the engines of the Chinese economy?

Helping us to make sense of this issue today is Saliem Fakir.

Saliem the head of the Living Planet Unit at the World Wildlife Fund and he also has a regular column here at SACSIS and when not writing for SACSIS. Saliem is a member of the “China for Africa Shift” group, which is monitoring China’s resource demands, investment and trade flows in Africa.

He's in Cape Town and we're talking to him via broadband.

Saliem you mentioned to me that you saw lots of conspicuous consumption in China when you were there. Lots of luxury brands of cars being driven on the streets of Beijjing, for example. Tell us, what are your impressions of life in China, at least in terms of what you saw when you visited Beijing?

SALIEM FAKIR: What I found was very fascinating - is that clearly over the last 30 years, China has invested heavily in modernising and industrialising its economy. And Beijing is a clear display of that phenomenon of growth and  development that China has made since it opened up its economy to the market and foreign investment and so on.

Deep within the bosom of the economy, is clearly an economy that's based on a form of state capitalism. The economic energy of the economy has been unleashed over the last 30 years. And you see the material progress that ordinary Chinese have made as a result of the growth.

Just statistically if I give you some figures, 20 years ago, the Chinese per capita income was around US$800. That has now grown to about US$6,000 per capita. That's a significant shift in income ordinary Chinese have received.

You must remember China's removed 400 million out of poverty over the last decade or more with sustained growth rates of 10% on average…and has brought...this increase in income has also (driven) consumption.

What is more important is to understand how China's wealth has also led to material consumption and that's quite visible in the streets of Beijing.

All the major brands that you and I can think of or dream of, like Gucci and other types of brands are there openly in your face.

And you see this also in the night mall culture, for instance, where Chinese stay up late shopping, visiting malls - and in Beijing there's - one mall follows another mall. And I think that was a little bit surprising to me, to be frank.

FAZILA FAROUK: How does a politically repressive state operating within a communist system produce such a vibrant class of economically active people? It's quite a curious blend between (the) communist and the free market system – what are your views on it?

SALIEM FAKIR: The relationship between communism and what we see in the economy are two distinct polar opposites of each other. I think in the minds of many people, communism means a form of socialism, marxist dominated state and so on, where the state is the dominant, you know, controller of the levers of the economy.

That is largely true. The state still controls…you know, large segments of the land in China are still owned by the state. There are over 200 major state owned enterprises, which have many subsidiaries and that can run into thousands.

And there's opening up of, sort of, the market economy since the 80's when Deng Xiaoping came in. What I think has happened in China since Deng Xiaoping, particularly, is that the Chinese are more concerned...the Chinese Communist Party is not so much more concerned about what it means to be Communist, but rather what it means to be in power.

And I think that it recognised that with the failure of the cultural revolution and the Great Leap Forward, they were disastrous periods after Mao for 50 years. There's been a refocus and reform programme in China since the 80's that has recognised that if you do not open up the economy and sort of unleash the potential of ordinary Chinese, which really happened, particularly in the rural economy with, sort of, the village enterprise system and ability of peasants to grow surplus and be able to sell that in the market.

And then also the Chinese state intervening directly in the economy where it took a structured approach to industrialisation, particularly with heavy industries and so on. And then encouraging more foreign direct investment by allowing rural labour to move into areas along the east coast, particularly in Shanghai and so on, where export zones were established. It allowed the cheap labour to become a competitive advantage, particularly where China over time became, sort of, the manufacturing centre of the world for cheap goods.

So I think that this was…and you have to understand this that you can't understand this economic reform without understanding the history that China came from.

And that particular history was the 30 years (where) political reforms did lead to disastrous policies and I think there's an admission of that.

And I think with the opening up, and in a sense, some liberalisation of the Chinese economy with great state intervention, they've allowed rather economic liberalisation to take precedent over political liberalisation.

FAZILA FAROUK: What does the average Chinese citizen think of her country’s economic success? Does it concern Chinese people that human rights are suppressed in China?

SALIEM FAKIR: The people that I did have conversations with, I sensed that there is a sense of pride in the development and modernisation of China, that China's stature in the world is growing.

And I think when economies progress, there's a general…my sense is there's a general feeling that that prosperity is also bringing…in the populace is giving a sense of new pride and I think that is also filtering through with demonstration of very overt nationalism against Japan in the current crisis that China has with Japan over the, you know, the Senkaku Islands, and so on.

So, my sense is that the Chinese, you know, view the current situation as positive. I think its very difficult to discuss human rights issues. I mean, its been difficult for me to get a view on the rural Chinese because I never went to rural areas, but certainly with urban Chinese and more educated Chinese, there's an acceptance of the Communist Party, there's an acceptance of progress economically and there's a new pride in the fact that China is becoming a new global power.

I think that this points to the success of the Communist Party in China. The reason is that because it was able to adapt to changing conditions. And I think that adaption talks a lot about the nature of the Communist Party. Even though outsiders view it as authoritarian, undemocratic and so on…that it is able to concern itself with the needs of the populace and I think this is topmost in people's - Chinese leadership minds or political leadership minds - is internal stability of China.

That drives the way China thinks about itself and the world. And also (the fact that China) has removed many people, millions of people, out of poverty, has given the Chinese Communist Party confidence and has also given citizens confidence in the rule of the Communist Party in a kind of mutual symbiosis that has evolved over this time.

And I think that's going to be very hard to untether unless economic progress doesn't happen.

FAZILA FAROUK: Should we be concerned about China's expanding global footprint? What does it mean for Africa, and what does it mean for us particularly here in South Africa?

SALIEM FAKIR: In certain countries, China's foreign investment is significant in terms of its impact. But if you look in the constellation of countries, there are 50 or more countries in Africa. China's involvement is probably 20% of that or even less.

So I think that one has to be very careful in terms of the fear mongering that goes around.

I think what we have to worry more about is overall foreign direct investment in Africa and how it's being managed by African governments themselves. And I think the relationship of African governments to their populace is (a) far more important concern that we should have.

I think that obviously China's need for resources are going to grow as its economy grows, except that now its economy is slowing down -- this year the figures are around 7,5%. So it's slowing down and obviously its resource demands will also slow down.

I just want to give you a figure - for instance, there's been much made about China's extraction of timber resources from a few African states; I think Gabon or Congo. But actually from our studies we show that the most significant timber imports actually comes from Russia. Most of it is also illegal.

You also have to distinguish Chinese state involvement in Africa through explicit state-directed investments through its state enterprises and its development banks versus private firms. Many of these private firms are small enterprises, family run businesses and so on.

For instance there are around 800 corporations are involved in Africa -- 80% of them actually have no link with the Chinese state. So one has to be very careful how one interprets Chinese involvement.

Of course there's also movement of Chinese, in terms of migration. There's an increasing number of Chinese coming into Africa and South Africa, for instance, has an estimated number of about half a million Chinese. It is estimated in Africa, possibly we're looking at about a million Chinese that are dispersed over the African continent.

I think China's investment can also be a positive thing if it is well managed by African governments. It's like any other foreign investment. It's not unique to China.

FAZILA FAROUK: Thank you very much for joining us Saliem.

SALIEM FAKIR: No, thank you very much.

FAZILA FAROUK: And thank you very much for joining us at the South African Civil Society Information Service. And to all our listeners and viewers, if you're looking for more social justice analysis, please do visit our website at www.sacsis.org.za.

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