Wed, Aug 16, 2006 page8

• Don't count on China's economy

  • By Chang Ching-hsi 張清溪
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  Some participants AT the recent Conference on Sustaining Taiwan's Economic Development made an all-out effort to promote investment in China. In their view, Taiwan has no future unless it develops a close-knit economic relationship with its neighbor. This is a grave mistake. If Taiwan wants its economy to develop sustainably, how can it pin its hopes on an unsustainable economic entity such as China?

  China's economic situation seems rosy, with growth rates at 9 percent to 10 percent, but there are many underlying problems that are both serious and unsolvable. When China's economy collapses one day, no one will ask why because the number of factors that could cause such a collapse is overwhelming.

  China's economic problems are systemic. Simply put, the Chinese Communist Party (CCP) has ruled for more than 50 years: half the time through a communist system, and half the time through reform and deregulation. This has not, however, changed the CCP, and China's economy is still a communist economic system.

  Communism's collapse in the Soviet Union and then Eastern Europe was the last nail in the coffin for the idea that a strong economy can develop in a communist country. Since China still has a communist economy, it will never be able to achieve sustainable economic development.

  Why would I say that China hasn't changed? First, we must ask what the CCP is. In simple terms, the fundamental nature of the party is "lies and violence." This has been true since the day it was founded.

  But why do I also say that China's economic system hasn't changed? Generally, economic systems are defined by private property rights and economic decision-making rights. Economic decision-making refers to the question of who makes decisions regarding production -- or work -- and consumption. In a capitalist system there are private property rights, and production and consumption is determined by the market. In a communist system, there are no private property rights, and the state decides about work and consumption for every individual.

  After its reforms and opening, China has developed what seems to be commercial housing, self-employed households have developed into private enterprises, and food and clothing ration coupons are no longer used. It would appear to be a capitalist market economy.

  But when China demanded that every nation recognize that it is a market economy under the WTO framework, the EU, the US and Japan were unwilling to do so. Why? Because Chinese farmers' land, urban housing, and the capital and operational rights of private enterprises are not guaranteed, and can be taken away by the CCP at any time. What kind of market economy is that?

  In fact, the sale of farmers' land, the demolition of old urban housing and forced relocation are no longer news. China has said that there were more than 87,000 collective protests last year, an average of 238 per day, most of which were sparked by complaints over land sales and renovation projects. Because these problems cannot be properly resolved at the local level, many people have gathered in Beijing to file complaints, to the point that there is now a "complaint village" there.

  The problem with the lack of guarantees for business investments may not be as well known because it doesn't attract as much media attention. One good example of this is an incident that occurred in the northern part of Shaanxi Province. The local government in this oil-producing region signed an agreement with residents to allow people to invest in oil-field development. Before long, however, the government appropriated the oil fields, paying very low compensation.

  This single incident cost investors 7 billion yuan (US$876.8 million) and assets worth more than 14 billion yuan. The number of investors directly affected exceeded 60,000, and more than 100,000 were indirectly affected.

  The seriousness of the frequent trampling on business rights can be clearly seen from the problems suffered by Taiwanese tycoons Wang Yung-ching (王永慶) -- who has tried to build a power plant in Zhangzhou, Fujian Province -- and Hsu Wen-lung, as well as former Singaporean prime minister Lee Kuan Yew's (李光耀) Suzhou Industrial Park. If China is not afraid of bullying people at this level, imagine how they treat the average person.

  China under the CCP's rule still has a communist economy led by a government with unlimited powers. This can never lead to sustainable development.

  If we want to see sustainable development in Taiwan, how can we depend on an economic entity that will one day collapse?

  Chang Ching-hsi is a professor in the department of economics at National Taiwan University.

  Translated by Lin Ya-ti
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