The final major hurdles to China's attempts to be fully reintegrated into the global capitalist trading system have been removed. In late May, the US House of Representatives granted China permanent "normal trade relations" status and a bilateral trade agreement with the European Union was reached.
China's readmission into the World Trade Organisation (WTO), the main institution through which capitalism's global trade order in maintained, is expected within months. China left the WTO's predecessor, the General Agreement on Tariffs and Trade, shortly after the 1949 Chinese Revolution.
Technically, US Congress (the US Senate is likely to vote on the issue in a few weeks) cannot stop China's accession. However, a US refusal to grant permanent normal trade relations, which would have put at risk the access, with minimal tariffs, of Chinese goods to the world's biggest economy, would have made China's WTO membership much less meaningful.
To protect its fragile economy in the wake of long semi-colonial devastation, China's post-1949 government controlled foreign trade through a state monopoly. Today, that measure would be necessary to defend China's economy against the advanced capitalist countries, whose productivity and technological levels are far higher.
However, by 1998-99, only 35 commodities remained subject to import licensing and 59 to export licensing. In October, limited rights to import and export directly were extended beyond the designated foreign trading corporations to other mainland firms, including private ones. Never before had that right been granted to foreign firms.
That is going to change under the normal trade relations deal; US firms will have that right. Given the WTO's rules against discrimination between members, it is only a question of time before the remaining 134 WTO member countries will also have that right.
Armed with its new ability to export to China at much lower tariffs and distribute products in China through its own networks, foreign capital (from imperialist countries, in particular) will be able to push many Chinese industries into insignificance. The resulting loss of jobs will be massive.
China's agriculture, which provides a living for 75% of the Chinese population, will also be endangered. Given its reliance on small-scale cultivation and primitive technology, it is unlikely that Chinese agriculture will withstand the onslaught of price and quality competition from advanced capitalist countries' mass production and superior technology.
In the city and country, the ruling bureaucracy's pro-capitalist measures have caused significant job losses, a decline in the majority's living standard and major social dislocation. These problems are poised to get much worse after the WTO accession.
Crossroads
The ruling Communist Party has not dropped its claim that it is promoting a market economy which preserves its "socialist" nature. It points to the continuing existence of the state sector as proof of this claim, on the premise that state ownership of key industries and strategic firms defines whether or not an economy is "socialist". It does not spells out which industries and firms fall into this strategic category and the number of "key state firms" varies from a few hundred to a few thousand in various pronouncements.
In fact, Beijing has been partially privatising key firms — maintaining a majority state ownership — and turning them into profit-oriented enterprises.
It has been very keen to strip firms of various social welfare functions — such as housing, education, medical care, child-care and old-age pensions — that they had long delivered. The state sector's ability to serve social needs is further undermined by Beijing's 1998 plan to "turn around" key loss-making state firms by the end of 2000.
These attempts to rid the state of responsibility for the meeting of basic social needs exposes as false Beijing's claim to be a "socialist" government.
Privatisation
Privatisation intensified with the 1999 formation of four "asset management corporations" (AMCs), each designated to salvage the sour loans of the four major state banks — the Construction Bank, the Agricultural Bank, the Industrial and Commercial Bank and the Bank of China. For decades, each bank was in charge of key lending to different economic sectors, encapsulated in their names (the Bank of China specialised in foreign exchange transactions).
The banks' key clients are prime state firms, many of which were the main source of the state banks' bad loans. Under an extensive "debt-equity swap" arrangement, the AMCs became partial owners of many state firms that could not service their debts. The AMCs are empowered to sell shareholdings in the state firms to other investors, including private and foreign ones.
Because the AMCs have no obligation to disclose their dealings, it is difficult to know how far these equity swaps have gone. However, judging from snippets in the official press, it involves much more than loose change. Sheng Huaren, minister of the State Economic and Trade Commission, said in January that 78 state firms had engaged in such swaps, worth 112.2 billion yuan (US$13.5 billion). Another 601 firms had been approved to follow suit with equity swaps worth 460 billion yuan ($55 billion).
Major state firms that have lost part of their public ownership include China First Automobile Group (China's biggest automobile manufacturer) which swapped 7.9 billion yuan, Shanghai Electric Apparatus, a "heavy weight" in China's electricity industry (4.55 billion yuan), Qinghai Aluminium Industry Co. (1.08 billion yuan), Liaoning Panjin Ethylene Industrial Co. (1.07 billion yuan), Guizhou Metallurgical Holdings (831.5 million yuan) and Anhui Military Industry Group Holdings (207 million yuan).
Not surprisingly, foreign capital is keen to "help out". In Liaoning alone, a key industrial province, foreign capital has "assisted" in the restructuring of 40 billion yuan worth of state assets, according to the September 19-25 China Daily Business Weekly (CDBW). In December, Britain signed a £19 million (US$31.3 million) program to "help restructure" 48 state firms in Sichuan and Liaoning.
How much China's state sector has shrunk is unclear because official figures shy away from specifying whether the "state sector" includes the privatised portions of state firms. However, with that important qualification in mind, the extent of the shrinkage can be gauged by the statement in the March 1 China Daily editorial: "The state economy ... generated less than 40% of the GDP".
More welfare attacks
The Chinese people's right to a job is also no longer guaranteed. Officially, there will be 11-12 million workers laid off from the state firms by the end of 2000 (6.5 million from last year and 5 million to be dismissed this year), but it is no secret that the number of hidden unemployed and underemployed (including those already outside the state sector and not covered by regular state statistics) is many times higher.
If laid-off workers register with the re-employment centres of their old firms, (about 95% have), they are entitled to a basic allowance of 273 yuan (US$33) a month. Although this is barely enough for subsistence (the 1999 minimum wage was 310 yuan a month), it is often not paid in full or on time. Nor are old-age pensions. According to the Ministry of Labour and Social Security, the overdue pension payments owed to April totalled 38 billion yuan.
Public housing is also under attack. In Beijing, for example, the tripling of rent (to 3.05 yuan per square metre per month) in April is only the latest move to pressure tenants to buy their homes. Housing is selling at 360,000 yuan for an average 60 square-metre unit, or 15 times the 24,000 yuan annual income of a double-income family.
The lifting of the ban on the trade of housing units will force housing costs up. More than 30 Chinese cities have allowed such transactions.
The provision of housing, however truncated and inadequate, is, in the main, a privilege reserved for state employees in the cities. Farmers are expected to manage with their tiny plots of allocated land. However, the degeneration of irrigation and other infrastructure, unfavourable prices and backbreaking taxes and charges, have forced a massive number of farmers off their land and into the city to eke out a living. They have no rights to basic entitlements and are confined mainly to the lowest paying jobs.
A report by the Communist Youth League last year put the number of rural migrants at 50 million, of whom more than 70% are under 35 years old. Even officials of the Ministry of Agriculture expressed concern that such a high loss of productive labour and talent could further stall the much needed modernisation of agriculture.
Worsening situation
With China's re-entry into the WTO, the plight of both workers and farmers is going to get much worse. Even the official press, quoting "economists", has estimated that within seven years of entry into the WTO, 9.66 million jobs will be shed from the agriculture sector (3.6%), 498,000 from the automobile industry (14.5%) and 582,000 from machinery and equipment industries (2.5%) (CDBW, December 12-18).
But the "economists" insisted that there will be an overall gain of 12 million jobs. From where?: small and medium-sized firms in labour-intensive industries in which China has "comparative advantages", such as textiles, toys and shoes. They also suggested that farmers could shift to producing more cash crops, another of China's "comparative advantages".
The history of the Third World is littered with sad stories of how a reliance on labour-intensive industries and cash crops has reduced countries to little more than junior partners at the mercy of imperialism.
BY EVA CHENG