Modern China. A Very Short Introduction (16 page)

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A modern society?

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Overall, there are plenty of aspects of contemporary Chinese society that are directly connected to the world of a hundred or
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fi ve hundred years ago: popular religious practice, the preference
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for male children in the countryside, and the stress on hierarchy among them. Yet other aspects of society could only have been formed in the modern world: the presence in a globalized economy where labour as well as capital have become more mobile, the stress on the language of equality and rights that comes from a century of nationalist and communist politics, and the notion that the state and the people are, and should be, closely entwined with one another, the latter tendency strengthened by the experience of total warfare, whether against Japan or against

‘class enemies’. Modern Chinese society is both Chinese
and
modern.

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Is China’s economy modern?

In the last week of July 2007, a remarkable combination of stories about China hit the headlines. In the southern province of Guangdong, unemployed workers expressed alarm at the rapid prices rises in basic goods: cooking oil was up 33% that year, noodles, 40%, and pork, a staggering 70%. At the same time, it was announced that China’s commercial banks would need to raise their reserve requirement ratios (the amount of money they need to have on hand, rather than lent out) by half a percentage point, to try and reduce the amount of excess credit in the economy. Meanwhile, US Treasury Secretary Hank Paulsen was given a tour around the impoverished Qinghai province in western China. ‘China has 23 million people living in poverty’, declared vice-premier Wu Yi. ‘Who could we threaten? We don’t have the ability.’ Over in Beijing, a group of Americans were in town to discuss another sort of threat: contamination of food and drugs produced in China, which had caused a series of health scares and consumer reaction against Chinese goods in the West.

Contamination was also on the mind of those who heard another important story released that week: China was abandoning its much-trumpeted measure of ‘green GDP’, a scheme to measure the cost of pollution in China, because it threatened to reduce economic growth.

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Economic superpower that moves the world’s markets, impoverished developing country – or both? China’s economy was still growing at around 10% per year in the fi rst decade of the 21st century, one of the highest sustained rates of wealth creation in world history. The rate of growth seems all the more astounding because it is contrasted with the relatively inward-looking Mao period and the era of war that preceded it. Yet it may not be unprecedented: the growth in the Chinese economy marks something of a return to the early modern era, when the Chinese economy was comparable with those of Europe.

However, the 20th century was undoubtedly a troubled time for the Chinese economy, particularly for its huge agricultural sector, which was devastated by war, depression, and the impact, within a short number of years, of not enough government (under the Nationalists) and too much (under the Communists).

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The characteristics of a modern economy include an active
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enthusiasm for growth, capital investment and industrialization, and ever-increasing productivity through the development of
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technology. In those terms, China’s economy, particularly since 1978, measures up spectacularly. Among the key factors have been Foreign Direct Investment (FDI), cheap labour, and the immense importance of Overseas Chinese fi nancial and human investment, as well as continuing investment in education and scientifi c and technical research and development. However, there have been real drawbacks to this growth. In particular, the rise in Chinese consumption and the impact of unrestricted production on China’s environment have stored up immense, and expensive, problems for the next generation of Chinese leaders.

The origins of the modern Chinese economy

To trace the origins of China’s engagement with the modern, globalized economy, we need to go back over a thousand years.

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The Song dynasty (960–1276) saw one of the major changes in the Chinese economy. Up to that point, the majority of farmers were subsistence cultivators, but by the end of the dynasty, they had become specialists, producing cash crops or making goods for the market. At the same time, a countrywide internal market developed in China, which would go on to expand under the Ming and Qing. A paper and metal money economy also thrived during this period, leading to fi nancial crises and increasing contrasts between the very rich and very poor. Yet overall, it was clear that this was a time of immense growth for the Chinese economy, and it was certainly comparable with the increasingly commercial nature of the European economy of the time.

However, half a millennium later, events in the economies of Europe and China would differ greatly. China’s economy essentially produced more of the same. The 18th century in particular was a golden time for China. Its territory expanded
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as the Qing conquered lands to the west and the north.

The introduction of New World grains in previous decades
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had expanded the number of crops that could be grown on land that had previously been considered barren, allowing the population to spread and grow. By the end of the 18th century, China’s population had doubled from 150 to 300 million people.

The same period, of course, saw a revolution in Europe, starting in England: the agrarian and industrial revolutions of the modern era. The historian Kenneth Pomeranz has been particularly associated with a specifi c question: Why was there a ‘great divergence’ between Europe and China in the 18th century? He argued that Europe’s most advanced area (England) and China’s (the Yangtze valley) were at a comparable level of development in around 1800. Why, then, was it England that saw unprecedented, dynamic growth? His argument was based on a number of factors, but principal among them was that England had benefi ted from conveniently sited coal mines and colonies, neither of which was 104

available in the Yangtze delta at the same time. While there has been lively debate about specifi c details, there is now considerable consensus that it is meaningful to compare the economies of early modern England and China, in terms of their relative stage of economic dynamism and growth.

Nonetheless, the ‘great divergence’ did take place. China developed an ever-more commercial economy in the late imperial era, but until the 19th century, it was not an industrial one. This changed, inevitably, with the advent of Western imperialism in the mid-19th century, which brought about profound changes both to China’s industrial and agricultural economy.

The collision with imperialism and

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industrialization

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The problems of rural China were not just of Western making. By
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the late 18th century, signs of an agricultural crisis in the Chinese countryside were evident. Over a century later, in the 1930s,
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the British economist R. H. Tawney was moved by the plight of China’s peasants to declare: ‘There are districts in which the position of the rural population is that of a man standing up to the neck in water, so that even a ripple is suffi cient to drown him.’

For years, it seemed self-evident that the rural economy in China was a disaster in the period before 1949. Yet over the past 20 years or so, serious reassessments have been made. These have led to strongly opposing views as to causation, but the old view that China’s agricultural crisis was bad and getting worse all the way into the mid-1930s is highly misleading.

One of the major reasons that China’s peasant economy in the century from the 1840s to the 1940s has come in for such criticism is the turbulent nature of the times. However, economic historians no longer make the assumption (common enough from the mid-20th century until around the 1980s) that tumultuous politics necessarily led to disastrous consequences for the 105

Chinese economy. In fact, there is signifi cant evidence that, after the late Qing crisis, the overall agricultural economy of China became more productive and profi table. The historian Loren Brandt argued that ‘between the 1890s and 1930s, agricultural output in Central and East China increased more than two times the estimated population growth of 0.6 percent per annum’. He attributes this to various factors. One was increasing specialization, including the growing of cash crops such as cotton.

Commercial and technological factors also changed things: by the 1930s, more than 40% of all farm households in that region were using commercial fertilizers, and rural credit was becoming easier to obtain. Seed development, including higher-yielding varieties of rice, were also coming into usage. Yet the economy remained a very poor one. In the mid-1930s, per capita GNP was only 60 yuan (around US$ 200).

China had been signifi cantly involved in trade within Asia for
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centuries, and had played a signifi cant part of the luxury goods market in Europe in the 18th century (providing tea, porcelain,
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and silks in return for silver). But China only entered the international market fully in the modern era. This was a dubious blessing, because that international market was in large part a function of imperialist attempts to open China up. Nonetheless, China’s semi-colonial status did give it a level of economic autonomy that a true colony, such as India, did not have, particularly after the Nationalists managed to regain autonomy to set tariffs (taxes on imports) by the early 1930s.

The Sino-Japanese War would cripple China’s economy, just as it destroyed China’s state-building experiment of the same era. Not enough research has yet been done on agricultural production in wartime China, but there can be no doubt that the war dealt a heavy blow to the progress made in the decades before 1937.

China’s transport networks were destroyed, and large parts of its agricultural land were laid waste by war. Not everything was lost: good harvests in the fi rst year of the war meant that the 106

breadbasket province of Sichuan was able to supply the areas of China under Nationalist control, and the government continued experimentation with fertilizers and new seed varieties. But wartime did not provide anything like normal conditions to assess economic progress. The fi nal years of the war saw the economy collapse. Scarcity of consumer goods led to black marketeering and hyperinfl ation. The loss of important agricultural areas to the Japanese during the offensives of 1943–4 led to widespread starvation in the countryside and increased the population’s alienation from the Nationalist government. Even after the war was over, the fi nancial crisis continued throughout the 1946–9

civil war, and Chiang’s government fl ed to Taiwan leaving behind a crippled economy.

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Mao’s China

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It has become conventional to condemn Mao’s China as an
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economic failure, which ultimately forced the reform era of the 1980s on the government. While there is real substance to this
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argument, it is worth noting that there were developments during the Maoist period that provide favourable conditions for the eventual economic takeoff after 1978.

Despite an initial accommodation with capitalists, the new economy of Mao’s China was established by 1952. Mao’s China was always going to have a socialist command economy. Emerging as it did at the start of the Cold War as an ally of the USSR, there was little ideological possibility of China following a different economic model. In addition, the new PRC became part of a postwar Soviet-driven system of economic cooperation, signing trade agreements with most of the newly communist Eastern European countries, and benefi ting from Soviet technical assistance. The terms of such assistance were often favourable to China, with Moscow providing steel and factory fi ttings in return for pork and tobacco. Sometimes the PRC also made gestures of solidarity, as in 1953, when it urgently despatched food to East 107

Germany after East Berlin had been shaken by protests against the government.

Nonetheless, the pressure that shaped China’s economy during this period did not come only from one side. The United States made a decision not to recognize the establishment of the PRC

in 1949, and along with non-recognition came a trade embargo by the US and its allies. Although other nations, such as Japan, did begin to carry on informal international trade with China, the country still appeared isolated from the non-communist world. In addition, relations with the USSR began to sour from the mid-1950s, and were actively hostile by the mid-1960s. In that context, China’s leaders began to think in terms of a siege economy that could be defended in the context of a catastrophe, such as an American-sponsored attempt by Chiang Kaishek to retake the mainland, or a Soviet attack across the northern border.

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Many economists condemned this decision in retrospect, arguing that it moved much of China’s industry away from the
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coastal areas from where goods could be more easily exported after production. However, others have noted that the infl ux of investment into western China actually improved living standards and provided the basis for later development, such as higher literacy rates, industrial plant, transport infrastructure, and water conservancy projects. In fact, some of these factors have become even more relevant since the 1990s, when the government chose to develop the policy of ‘Opening up the West’, encouraging migration away from China’s overpopulated east to the less-developed western regions. The establishment of the Three Gorges Dam project has also helped to cement the importance of the southwestern city of Chongqing, now a regional powerhouse and, at least on paper, China’s biggest city in terms of population.