People in regions deserve fair share
Zhang Xiaogang
2004-04-22 06:44

Traditionally, the Chinese have always sought balance in all aspects of life as can be seen with the Confucian Golden Mean. But the notion may be more idealistic than realistic, particularly when considering economic concepts.

The economies of China and the United States are not on an equal footing. But it is precisely because of vast discrepancies in wage levels and lower costs that China, with a per capita gross domestic product (GDP) level comparable to less than one-20th of the United States, can compete with the North American country in the world market and be considered an equal trading partner.

If all Chinese workers were to earn as much as their North American counterparts, international enterprises would not be so keen on buying products from China and the nation would be forced to drop out of the world trade game.

China, however, has tried to steer clear of its reputation for low-cost products what some economists might call its advantage on the world stage through its economic reforms.

Out with the old...

Just as overseas observers have noted, and quite correctly, China moved away from the production of lower-end products when it began building a modern domestic transportation system, paving the way for the domestic market system to evolve slowly.

Chinese economists in the 1980s were bickering about how to build a unified national market, or how to better integrate the fragmentary, and sometimes mutually conflicting regional economies.

It was a time when the national economy was hinged on another kind of balance where every region was trying to be self-sustaining. Every city had its own brand of cigarettes and every province had its own tractors and trucks. But those products were not hot items on the world market.

About 25 years ago, the nation embarked on reforms to interface with the world market and import capital along with international standards.

It did this by lowering its exchange rate to a level where it could conduct business internationally, and by doing so, help its immense workforce until then locked into low value-added and even subsistence-level farming switch over to manufacturing activities led by export orders.

This signalled an important change in the economy's landscape.

As thousands of newspaper commentaries complained about how ruthlessly foreign commodities especially brand names like Coca Cola, Toshiba and Volkswagen were pushing local brands into the ditch, a new industrial army was formed in China's coastal cities, able to compete with even the most formidable international corporate giants.

It happened first in Shenzhen, Dongguan and the Pearl River Delta in South China, then in Shanghai, Suzhou and the Yangtze River Delta, and now in the Bohai Bay rim (in the vicinity of Beijing and Tianjin), the Shandong Peninsula, and many small towns in Zhejiang and Fujian provinces. Chinese companies not only learned international standards, they realized they could also lead in the world market.

China is providing the world with products in volumes unheard of 20 years ago, including a large amount of garments, half of its shoe supply, and 40 per cent of its timepieces.

Regional imbalance

Dongguan, once a sleepy agricultural town 80 kilometres east of Guangzhou is a prime example of this economic transformation. It is now the manufacturing base for thousands of overseas institutional buyers, employing not only all of the local labour force, but also 1.5 million migrant workers from other parts of China.

In 2003,the city's electricity demand even exceeded Guangzhou, China's oldest port city and business hub on the Pearl River Delta. And in 2004, the entire Pearl River Delta has been spending more than ever on buying electricity supplies from its nearby regions Hunan, Guangxi, Sichuan, and even Hong Kong.

But the imbalance in the supply and demand of electricity is one of the easiest to solve; by simply building more power plants. There is news that some US suppliers of nuclear power plant technology have studied potential opportunities and are negotiating deals with China.

There are many more imbalances that warrant careful planning by leaders in Beijing. In the last 20 years or so, these imbalances have remained largely unanswered as the focus of the economy changed from a domestic economy that was not quite so competitive, to a new one on the level of world trade.

Although it is an everyday phenomenon in real life, and none of the imbalances can discredit the Chinese reform and opening up, Beijing cannot afford to let them deteriorate either, much less let them divide the nation into geographically defined rich and poor, have and have-not regions.

The greatest challenge for China at this point is not trying to spread wealth evenly between its more industrialized coastal cities and interior cities or its better-off urban sectors. The key is letting more people from its under-developed regions have their turn at opportunities in the coastal areas.

For instance, it is unnecessary for the government to build copies of Dongguan in China's interior provinces and its western frontier regions. All it has to do is be bolder in encouraging residents from these less-affluent areas to flow to the regions and cities already conducting business with the world market as they are equipped with better foreign investment, transportation, and manufacturing facilities.

Viewed in this perspective, Dongguan's 1.5 million migrant workers are still too few. There are 100 times more people in China waiting for their off-farm assignments. China's economy can become much stronger, both in world trade and in internal quality, if migration flow can become more free.

Copyright 2004 by All rights reserved.