In trying to comprehend the methodology and modus operandi of the logic behind the Chinese capitalism I recycled and came up with the above title. To understand how the Chinese business community was able to transform themselves and their country is not that simple. The trajectory rise of China to influential economic and political power on the world stage is the testament of human will. This can become a lesson to Africa that hard work and commitment are the answer to the enduring and existential problems confronting the continent.
Certainly the Chinese capitalistic revolution unlike their communist revolution did not happen in one day. The term capitalist revolution is being used in this context to denote and elucidate the emergence and the taking root of trade liberalization and fiscal decentralization in China. Essentially, the Chinese are not politically liberated nor are they democrats. However, they were able to differentiate succinctly between trade and politics. While China is not democratically capitalist but one can say for sure they are practicing capitalism
It was windy and difficult path to get to this level that spurred China to become a significant and a dominant player on the world stage especially in the economic sphere.
The Chinese old saying: "A journey of a thousand miles begins with a single step" is exactly what China put into practice. In the 1970s the Chinese began to decentralize their economy, gradually relinquishing their strangulation on means of production to the private sector. First and foremost, China liberalized the agricultural sector and eventually privatized most of the bloated state controlled industries.
The Chinese communist leadership and bureaucrats spurred innovation and free enterprise in China by encouraging the young Chinese to make money and travel to West to acquire a Western education. They encouraged the Western capitalistic paradigm but rejected democracy. The Chinese were no more afraid and shy of making money, a tendency that was chic in the old communist thinking. The old communist China was preaching that making money and profit was evil but the capitalistic revolution in China turn around and changed and reshaped the minds of the Chinese. The new communist guard emphasized that profit and free enterprise were needed to awaken the sleeping China. Of course they were quick to delink modernization from democracy thus denying their populace the fundamental rights to free expression and free association. Maybe China needs economic power before venturing into democracy. Only time will tell.
China has made a giant leap forward within a short period and less than a century she has become a force to reckon with in economics and scientific innovations. A nation that was known for producing low quality products has metamorphoses to dominate the global manufacturing sector. The China’s “Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment " with export based economy.
Consequently, China is the third largest economy with GDP over $7.9 trillion with over $1 trillion foreign reserve. China stashed away in her piggy bank over $800 billion US treasuries mostly short term bonds. China refers to herself as the largest developing economy while America as the largest economy of developed economy. One can say that reason China ascribed herself that way may be part psychological and part geo -political calculus. China probably chose to discourage the world as looking up to her as rich and powerful. Maybe they are not ready to shoulder the responsibility associated with being powerful and wealthy. The downside of this enormous industrial success is the continuous environmental degradation of China’s ecosystem through massive air and water pollution.
The Chinese are quick to dominate manufacturing by producing products with very low wage and without strict labor and environmental regulations. As a result of the abundance and cheap labor it becomes very difficult, if not impossible to compete with the Chinese. Most of the American manufacturing and industrial sector has literally vanished. With American high standard of living compounded with not-so-cheap labor and regulations, the products made in America become expensive and do not have a chance of competing with similar products from China on the global market. The Chinese business community works together with their government and can enjoy some privileges from the centralized government because of their communist affiliations.
With China’s wealth and large foreign reserve they are venturing into new territory -Africa. China is investing heavily in Africa without caring about human rights of the host country. Africa has the raw materials especially oil and precious metals that China needs to fuel and maintains her industrial and manufacturing domination. This paradigm shift of de-linking human rights from trade and investment is not healthy for Africa. The African dictators are quick to open up to the Chinese traders and investors including Zimbabwe’s Mugabe who signed chromium and energy deals with China. The mammoth China National Petroleum Company has acquired rights for oil exploration blocks in African oil producing countries including Nigeria and Sudan. The Sudan government that is notorious for its human rights abuses in Darfur did not detract the Chinese investments. The emerging manufacturing industries in Africa a supposedly panacea to poverty and unemployment cannot withstand the dumping of cheap Chinese products on their commercial turf and landscape.
The Chinese capitalist can target a particular industry in American or any other country for matter and flood the market with the products at a cheaper price and the small local manufacturer do not have the resources and connections to offset the Chinese made products. Therefore of recent the President Obama imposed tariff on Chinese tires which may be the wave of the future. "The tire tariff will amount to 35 percent the first year, 30 percent the second and 25 percent the third. Although a federal trade panel had recommended higher levies — of 55, 45 and 35 percent, respectively — the decision is considered a victory for the United Steelworkers union, which filed the trade complaint."
The downside is that it may trigger trade war and everybody will be a loser. Although the free marketers are not comfortable with the tire tariff but no one has a better alternative. For if nothing is done before you know it the Chinese tires will be the only tires in the market. But for the sake of free market a negotiated settlement may be more appropriate, if not cordial with relative tranquility. At same time trade quotas must be discourage for it is antithesis of capitalism and competition. For with competition comes trade specialization and choices for the ultimate consumer.
The export driven Chinese brand of capitalism may not be all that healthy for the world community. Chinese business community is becoming the only active participants of old fashion trading on the world stage. They have managed to dislodge the West especially American manufacturers from the global scene. The ramification is the total disappearance of manufacturing jobs in America and the declining working class and rising unemployment in the Rust belt and other manufacturing towns in America. The trade imbalance and deficit with China is becoming unsustainable with its tangible consequences on the regular working class people.
Emeka Chiakwelu is the Principal Policy Strategist at Afripol Organization. Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa. www.afripol.org