Talking About the Real China

Talking About the Real China
By George H. Wittman on 2.11.11 @ 6:07AM

In a recent column Yang Yao, the esteemed director of the China Center for Economic Research at Peking University, explained China's economic reasoning as "moving in a statist direction." It was as if the past sixty years had not existed. Were we to believe that the PRC has not been a nation of political, economic and social totalitarianism all this while?

It was a beautiful argument built on statistical discovery and contemporary academic obfuscation. The need for not allowing the renminbi to float freely in the international market is all justified as necessary government actions based on Beijing's commitment to "ensure strong employment and social stability." Ah, yes, and the non-convertibility of the ruble during Stalin's time in the USSR was to protect against Western exploitation. That explanation was as specious then as the contemporary Beijing version is now.

The truth is that the PRC is fighting tooth and nail to maintain its currency advantage in international trading operations. The growth of Chinese overseas investment in basic commodity production to fuel its own industrial growth is possible in great part by the West's inability to crack the financial stranglehold China has on the valuation of its national currency.

It is worth noting that "off-the-record" conversations with Chinese officials explain away any state economic and financial controls as the result of pressure by state lobbying groups protecting their industrial status within the country. Let's see, that means that the massive state political economic structure is simply reacting protectively to "pressure" from component parts of the nation's special interests. Exactly whom is this theory supposed to convince?

Building a lock on natural resource availability is said to be required in order to ensure an uninterrupted supply of such important items as oil and other minerals essential to China's booming economy. This is the justification for purchase (with the aid of the controlled renminbi and accumulation of vast amounts of hard currency, especially U.S. dollars) of ownership of mineral and commodity production in foreign nations. The economics of such basic investment abroad just does not work out competitively with simple purchase of needed supplies in the open market. And yet Beijing gets away with this commercial charade.

In typical Marxist-Leninist sophistry the official Chinese intellectual collective has come up with a new concept: As a result of the success of the "new Chinese state," there must be a reformation of the market-oriented Western approach that proved so vulnerable during the recent financial crisis. This purportedly calls for a "new economic and social model" -- something peculiarly and distinctively Chinese.

The fact that China now suffers from a self-created economic problem arising out of its calculated wage controls, which suppress labor income and completely over-balance the country's capital-intensive development programs on the backs of China's workers. Lip service is repeatedly paid to increasing family income -- and yet the market reforms necessary to accomplish this aren't forthcoming.

The vaunted great managerial ability of China's political and economic leadership falls far short of the accomplishment for which it is given credit. Perhaps the most obvious manifestation of the gigantic social price being paid by the inequitable economic basis of China's modern development is the fact that the extolled factory system of the nation is based to a great degree on the brutal totalitarian system of separating workers from their rural families.

Official estimates indicate nearly 60 million children have been left behind in foster homes due to the economically forced migration of their parents to work in the cities. This is approximately one half of all the children of rural China. It is said that their poorly educated parents have chosen to live separate lives from their families; that it is a conscious sacrifice for their good and the good of modern Chinese society.

The reality is that this system is the basis for what President Hu Jintao characterized as creating a "moderately well-off society." The entire principle is an outgrowth of the Mao Tse-tung willingness to break down the Chinese family in order to replace it with a state-controlled system. Mao succeeded in the separation but not the destruction of the family. Today's statist China hides a similar device, but in the end is doing the same thing. China's economic life is dictated by such exploitive justification camouflaged by political economic rhetoric.

In explaining that China's leaders are less driven by political philosophy than economic pragmatism, one falls into the trap of excusing excesses as simply logical defensiveness regarding the nation's growth. This is a convenient device that allows for a very useful Chinese advantage. The Chinese have been very good at this. They have been practicing this methodology for hundreds of years.