From Dynasties to Communism to a Free(er) Market Economy
China is one of the oldest ongoing civilizations in the world, with organized city-states having been developed about 5,000 years ago. Early human beings are believed to have inhabited the region 65,000 years ago, and agriculture is known to have developed around 6000 BCE. Two thousand years ago the region was unified for the first time under a single system of government, although over the centuries China experienced periods of political upheaval followed by reunification.
Until the early twentieth century China was governed by a series of dynasties—that is, unified governments controlled by a single leader, with leadership passed down to successive generations. This system of political elitism depended heavily on a massive rural peasant class, who provided all of China with crops for food and other purposes. This social and political organization is known as feudalism and still exists in China.
Over the centuries conflict between the ruling elite class and the poverty-stricken peasants often erupted into rebellions. The Republican Revolution of 1911 brought an end to the dynastic system. For the next several decades, China was nominally unified at best. Warlords and factions controlled various regions, sometimes supporting a national government and other times not.
Among the groups vying for power were the Communists. The Chinese Communist Party (CCP) officially formed in 1920, and quickly grew in strength. It benefited from the anger many Chinese felt towards Western nations, which were supporting Japanese control over the Chinese region of Shantung. Mao Tse-tung was one of the early members of the CCP, by the 1931 he rose to become its leader. By this time the CCP was one of the two most powerful factions in China, the other being the Nationalists, also called the Kuomintang.
When Japan invaded China in 1937, both the Communists and the Nationalists fought back, while remaining at odds with each other. Fighting with Japan continued throughout World War II (1939–45) and was marked by brutal atrocities by the Japanese. Under Mao's direction, the Communist Red Army succeeded in waging guerrilla warfare against the Japanese, gaining further support for the CCP. Mao also further developed his political theory during this time, refining his beliefs that the answers to the poverty among China's peasants lay in land reform and full participation in the social and political arenas. With the surrender of Japan at the end of World War II in 1945, China was free from occupation, but the country was soon plunged into civil war between the Communists and Nationalists. The Red Army conquered most of China by 1949, due largely to Mao's successful recruiting of peasants, and the formation of the People's Republic of China (PRC) was declared. The Nationalists remained in control of the island of Taiwan.
Mao created what was called a "democratic dictatorship," meaning that all the classes of Chinese society were represented by the centralized government; however, detractors from Mao's system were dealt with in prison camps or were simply executed. No one knows exactly how many people were killed under Mao's democratic dictatorship; he admitted to having approximately 800,000 people executed, but the number is believed to be in the millions.
Despite Mao's stated commitment to empowering the peasantry, many of contemporary China's problems with rural poverty can be traced to his economic policies. As a communist country, the government strictly controlled most aspects of the economy, and Mao directed much of its resources towards collectivization, industrialization, and modernization, regardless of the cost to average Chinese. The purges of the Cultural Revolution (1966–76) nearly bankrupted the country intellectually and economically by ridding China of anyone accused of holding "counterrevolutionary" ideas.
China was drawn back into the international community after years of isolation due to communism and the split with Taiwan when U.S. President Richard Nixon visited the country in 1972 and reestablished relations, officially recognizing the PRC as the only legitimate China. Mao died in 1976, and reforms began soon after that loosened state controls somewhat and boosted productivity. Calls for democratic reform were suppressed, however, including the massacre that ended the Tiananmen Square protests of 1989.
In 1998 the Chinese government began a program to privatize some of the economy. Diplomatic relations with the United States improved after a summit with U.S. President Bill Clinton in 1998. By November 1999 the United States and China had reached a trade agreement that loosened trade barriers and made way for China's acceptance into the WTO; China officially earned WTO membership in December 2001. Since then, China has experienced unprecedented economic growth—nearly 10% annually, according to most estimates. It has become one of the world's largest and most important manufacturing centers, much of it for export but also for its expanding domestic market.
China's Growing Middle Class
A large part of the success of China's economy since the late 1990s has been the expansive building and business boom in its cities, which has fueled the urban economy by increasing employment opportunities. With so many more people finding work in China's large cities, and massive government investment in fueling this urbanization, the urban middle class has expanded. Although China's per capita annual income was just $1,000 in 2004 ("China's Middle Class Revolution," October 11, 2004, http://news.bbc.co.uk/1/hi/world/asia-pacific/3732914.stm), People's Daily Online (English version; "Chinese Middle-Class Families Defined," June 2, 2004, http://www.sinoptic.ch/embassy/presseschau/2004/20040601-0604.htm) reports that by 2010, 100 million Chinese families are expected to be included in the middle-class category of people with assets totaling approximately $75,000. Most of those included in this group are the highly educated professionals, managers, and other white-collar employees. In September 2005 People's Daily Online reported that 11.9% of Chinese citizens could be defined as middle class, meaning they earned 5,000 Yuan per month, or about $617, had earned at least a bachelor's degree, and were employed in professional or technical occupations (http://english.people.com.cn/200509/03/eng20050903_206346.html).
This new middle class is both the result and a cause of China's evolution from an agrarian economy to an industrial one. The more people move to urban settings, the more they need items such as automobiles, which changes the way they shop and do business, which in turn increases the likelihood that they will pay for goods and services they would not have needed before, thus increasing overall consumerism. In "China through the Middle Class—Some Distortion but Real Nonetheless" (February 6, 2004, http://www.asiapacificbusiness.ca/apbn/pdfs/bulletin144.pdf), the Asia Pacific Bulletin reports that private ownership of vehicles and property—which had been anathema to Communist Party leaders throughout much of the twentieth century—was on the rise: in 2003 there were 12.4 million privately owned automobiles in China (up 24.8% from 2002), and private ownership accounted for 82% of real estate in urban areas. In addition, Asia Pacific Bulletin notes an increasing demand for improved health care and education services, as well as more personal spending on travel and eating out—formerly looked down on in the country as indulgent luxuries.
A History of Inequitable Income Distribution
Inevitably, as a large segment of a country's population moves up in social and economic status, the divide between the rich and poor becomes wider and deeper. In countries that have had a planned economy, in which the centralized government controls prices and wages, income is distributed to ensure a certain level of equality, and market competition is discouraged. In China, however, the rural communal farm system was never really equitable. While urban factories were owned and wages administered by the central government, with workers receiving a low but dependable level of health care and compulsory education, the farm communes in the countryside were operated, and wages were controlled, by provincial landlords. To guarantee the health of the urban economy so that China could compete on the world market, investment was concentrated in manufacturing centers along the coast, while the prices of crops produced in the interior were suppressed. This guaranteed that more money would be available for the country to pursue industry, but it also created inequalities between urban and rural dwellers' incomes and standards of living. According to the China Human Development Report 2005, the urban per capita income in 1978 was already 2.6 times that of the rural provinces. The World Bank reports that the disparity in the incomes between rural and urban dwellers continued to increase from 1990 through 2002. (See Table 4.1.)
Government economic reforms in the 1980s and 1990s sought to gradually privatize certain businesses; at this point even some rural farmers who took advantage
TABLE 4.1 Poverty reduction and rural-urban inequality in China, selected years 1990–2002
| TABLE 4.1 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Poverty reduction and rural-urban inequality in China, selected years 1990–2002 | ||||||||||
| 1990 | 1993 | 1996 | 1999 | 2000 | 2001 | 2002 | Change (avg. annual, %) | |||
| 1991–93 | 1994–96 | 1997–02 | ||||||||
| SOURCE: "Table 1.5. Poverty Reduction and Rural-Urban Inequality, 1990–2002," in China: Promoting Growth with Equity: Country Economic Memorandum, Report No. 24169-CHA, World Bank, Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, October 15, 2003, http://www.worldbank.org.cn/English/content/cem03.pdf (accessed April 10, 2006). Data from China Statistical Yearbook. | ||||||||||
| Household real income | ||||||||||
| Rural | 686 | 765 | 922 | 1,044 | 1,066 | 1,111 | 1,164 | 3.7 | 7.1 | 3.6 |
| Urban | 1,510 | 1,945 | 2,299 | 2,749 | 2,925 | 3,174 | 3,599 | 8.8 | 4.4 | 7.2 |
| Urban/rural | 2.2 | 2.5 | 2.5 | 2.6 | 2.7 | 2.9 | 3.1 | 4.4 | −1.9 | 4.4 |
| Household consumption spending | ||||||||||
| Rural | 585 | 632 | 826 | 829 | 878 | 908 | 961 | 7.3 | 4.0 | 3.0 |
| Urban | 1,279 | 1,593 | 1,862 | 2,167 | 2,328 | 2,456 | 2,818 | 4.8 | 2.7 | 7.9 |
| Urban/rural | 2.2 | 2.5 | 2.3 | 2.6 | 2.7 | 2.7 | 2.9 | 4.3 | −2.7 | 4.7 |
Poverty Decreases, Especially among Rural Peasants
Nonetheless, great advancements have been made in the country's human development indicators since government reforms began in the late 1970s. The China Human Development Report 2005 states that the number of rural citizens living in absolute poverty dropped from 250 million in 1978 to 26.1 million in 2005. A direct result of this is that between 1980 and 2001 the average life expectancy rose from sixty-seven to seventy years, while the infant mortality rate dropped from forty-two deaths per 1,000 live births to thirty-one deaths per 1,000 live births. (See Table 4.2.) Furthermore, the China Human Development Report 2005 reports that in 2002 the adult literacy rate was 85.8% and the youth literacy rate 95.4%, better than the average levels in developing countries, which were 75% and 85%, respectively. Overall, China's incidence of poverty has been steadily decreasing. In 1990 the national rate of poverty at one dollar per day of income was 23.1, and by 2000 it had dropped to 8.8. There was a similar decrease in the national rate of poverty at one dollar per day of consumption, from 32.9 in 1990 to 16.1 in 2000. (See Table 4.3.)
While the poverty rate has declined and the human development ranking has improved, the gap between the rich and poor has grown. CHINAdaily.com reports that, as of June 2004, there were 236,000 Chinese whose
TABLE 4.2 Progress in health, by selected regions and selected characteristics, China and East Asia, 1980 and 2001
| TABLE 4.2 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Progress in health, by selected regions and selected characteristics, China and East Asia, 1980 and 2001 | ||||||||
| China | East Asia and Pacific | Lower middle-income countries | High Income countries | |||||
| 1980 | 2001 | 1980 | 2001 | 1980 | 2001 | 1980 | 2001 | |
| SOURCE: "Table 1.3. Progress in Health," in China: Promoting Growth with Equity: Country Economic Memorandum, Report No. 24169-CHA,World Bank, Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, October 15, 2003, http://www.worldbank.org.cn/English/content/cem03.pdf (accessed April 10, 2006). Data from World Health Report and World Bank World Development Indicators. | ||||||||
| Life expectancy at birth (years) | 67 | 70 | 64 | 69 | 65 | 69 | 74 | 78 |
| Mortality infant (per 1,000 live births) | 42 | 31 | 53 | 34 | 55 | 33 | 12 | 5 |
| Mortality under 5 (per 1,000 live births) | 64 | 39 | 79 | 44 | 83 | 41 | 15 | 7 |
TABLE 4.3 Recent trends in poverty reduction in China, selected years 1990–2000
| TABLE 4.3 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Recent trends in poverty reduction in China, selected years 1990–2000 | |||||||||||||
| 1990 | 1992 | 1996 | 1998 | 1999 | 2000 | ||||||||
| Note: Estimates based on official household survey data available only until 2000. | SOURCE: "Table 1.4. Recent Trends in Poverty Reduction," in China: Promoting Growth with Equity: Country Economic Memorandum, Report No. 24169-CHA, World Bank, Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, October 15, 2003, http://www.worldbank.org.cn/English/content/cem03.pdf (accessed April 10, 2006) | ||||||||||||
| Poverty headcount rate at $1/day income | |||||||||||||
| National | 23.1 | 21.6 | 10.6 | 7.9 | 7.8 | 8.8 | |||||||
| Rural | 31.0 | 30.0 | 14.9 | 11.4 | 11.2 | 13.7 | |||||||
| Urban | 0.9 | 0.0 | 0.2 | 0.0 | 0.25 | 0.3 | |||||||
| Poverty headcount rate at $ 1/day consumption | |||||||||||||
| National | 32.9 | 30.2 | 17.4 | 17.8 | 17.8 | 16.1 | |||||||
| Rural | 44.4 | 41.4 | 24.8 | 26.2 | 27.0 | 25.0 | |||||||
| Urban | 1.0 | 0.8 | 0.4 | 1.0 | 0.5 | 0.5 | |||||||
assets totaled at least $1 million (http://www.chinadaily. com.cn/english/doc/2004-06/18/content_340483.htm). At the same time, China is home to hundreds of millions of peasants, most of whom live in poverty. Although the per capita income for both urban and rural citizens has risen from 1990 to 2003, the urban per capita income saw a considerable increase. (See Figure 4.1.) A 2002 study by the Chinese Academy of Social Sciences found a remarkable income discrepancy between those who reside in urban and rural centers: 93% of those in China's highest income category were urban dwellers, while 7% were rural dwellers (UNDP, China Human Development Report 2005). Income inequality between urban and rural residents fluctuated during the 1990s and then rose dramatically between 1997 and 2003. (See Figure 4.2.) Table 4.4 shows the level of dependence of poor and nonpoor Chinese households on agriculture; peasants living in rural regions are obviously most dependent.
Besides the inequality of incomes, there is also a significant difference in health. The infant mortality rate
FIGURE 4.1 Trends in per capita income of urban and rural residents in China, 1990–2003
SURVEY OF CHINESE PEASANTS
In October 2004 the German magazine Lettre International (http://www.lettre-ulysses-award.org/authors04/chen_wu.html) awarded its top prize—the Lettre Ulysses Award for the Art of Reportage—to a married couple from China's peasant class whose book, Survey of Chinese Peasants, became the country's most notorious publication in decades by exposing the true conditions of life for China's 900 million poverty-stricken peasants. The Survey's authors, Chen Guidi and Wu Chuntao, spent their life savings to travel for three years to fifty towns in the agricultural province of Anhui, living among the peasants and interviewing thousands of them as well as local and central government officials.
The study was initially published in the Chinese literary magazine Dangdai in late 2003. The issue sold
FIGURE 4.2 Changes in China's urban-rural income inequality, 19990–2003
TABLE 4.4 Poor and nonpoor households' dependence on agriculture by region in China, 1998
| TABLE 4.4 | ||||||
|---|---|---|---|---|---|---|
| Poor and nonpoor households' dependence on agriculture by region in China, 1998 | ||||||
| Non-poor average | Poor average | Region I | Region II | Region III | Region IV | |
| Notes: Region I: Economically developed with limited poverty, less than 5% of Chinese poor. Provinces: Shanghai, Beijing, Tianjin, Zhejiang, Jiangsu, Fujian, and Guangdong. Region II Large areas of shallow poverty, home to 55% all poor. Provinces: Hebei, Shanxi, Liaoning, Anhui, Jiangxi, Shangdong, Henan, Hubei, Hunan, Guangxi, Hainan, Chongqing, and Sichuan Region III: Areas of concentrated and extreme poverty, home to 35% of the total poor. Provinces: Guizhou, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang. Region IV: Cold area with limited poverty, home to 68% of the total poor population. Provinces: Inner Mongolia, Jilin and Heilongjiang. 1 mu=666.67 square meters. RMB is Ren Min Bi (currency of People's Republic of China). | ||||||
| SOURCE: "Table 4.3. Poor and Non-Poor Households' Dependence on Agriculture by Region, 1998," in China: Promoting Growth with Equity: Country Economic Memorandum, Report No. 24169-CHA, World Bank, Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, October 15, 2003, http://www.worldbank.org.cn/English/content/cem03.pdf (accessed April 10, 2006). Data from China Rural Poverty Monitoring Report, 2000, National Bureau of Statistics, Rural Social Economic Survey Team. | ||||||
| Agricultural income (including forestry) (%) | 49.6 | 68.3 | 49.5 | 70.1 | 69.8 | 84.8 |
| of which from crop production (%) | 45.0 | 58.4 | 47.0 | 57.5 | 60.0 | 78.3 |
| Income from other household business (%) | 26.7 | 18.1 | 24.0 | 16.2 | 17.7 | 8.4 |
| Other income (%) | 23.7 | 13.6 | 26.5 | 13.7 | 12.5 | 6.8 |
| Land per capita (mu) | 2.1 | 1.6 | 0.7 | 1.3 | 1.6 | 5.9 |
| Grain yield per mu (kg/mu) | 347 | 165 | 400 | 268 | 181 | 147 |
| Grain production per capita (kg) | 714 | 406 | 266 | 353 | 295 | 865 |
| Production inputs per capita (RMB) | 668 | 289 | 259 | 316 | 274 | 572 |
| Production inputs per mu (RMB) | 318 | 181 | 370 | 243 | 171 | 97 |
100,000 copies and went through ten printings. In January 2004 the unabridged version appeared in book form, selling an estimated seven to eight million copies despite being officially banned by China's Communist Party Propaganda Department in March 2004; it has since continued to circulate in pirated editions. Because much of the book focuses on corruption among the party officials who govern peasant villages, and exposes conditions that do not match the government's official version of poverty in China, Chen and Wu were the targets of a libel suit filed against them by one of the officials they discuss in their book. The trial, which was called China's "trial of the century" (Pepe Escobar, "Part 4: The Peasant Tiananmen Time Bomb," January 21, 2005, http://www.atimes.com/atimes/China/GA22Ad01.html), had massive implications for the future freedom of Chinese journalism. Chen and Wu were permitted to travel to Berlin, Germany, to accept the Lettre Ulysses Award, and they were allowed to grant some interviews, but they were also forced to send their young son to live elsewhere for fear of government retaliation. In March 2005 Chen and Wu were found guilty of libel and given heavy fines.
What the Survey of Chinese Peasants reports is a situation far worse than anything nonpeasants and Westerners have imagined: rural farmers and laborers sometimes earning less than $30 a year, living in mud huts, and paying exceptionally high taxes (taxes on peasants are four times higher than those on city dwellers) to support the government's urban industrialization program, without any of the health, pension, or education benefits of the cities. Furthermore, Chen and Wu assert that systematic bribery and extortion, as well as beatings, mass arrests, and murders, are commonplace in rural villages, where local officials rule without repercussions.
TABLE 4.5 Recent trend in health indicators for maternal and child mortality in China, 1991–2000
| TABLE 4.5 | ||||||
|---|---|---|---|---|---|---|
| Recent trend in health indicators for maternal and child mortality in China, 1991–2000 | ||||||
| Infant mortality | Under 5-year mortality | Maternal mortality | ||||
| Rural | Urban | Rural | Urban | Rural | Urban | |
| Note: Infant mortality and under 5 year of age mortality rates are per 1,000 of live births. Maternal mortality rate is per 10,000 of live births. | ||||||
| SOURCE: "Table 1.9. Recent Trend in Health Indicators," in China: Promoting Growth with Equity: Country Economic Memorandum, Report No. 24169-CHA, World Bank, Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, October 15, 2003, http://www.worldbank.org.cn/English/content/cem03.pdf (accessed April 10, 2006). Data from China Health Statistical Digest, 2001. | ||||||
| 1991 | 58 | 17 | 71 | 21 | 100 | 46 |
| 1992 | 53 | 18 | 66 | 21 | 98 | 43 |
| 1993 | 50 | 16 | 61 | 18 | 85 | 39 |
| 1994 | 46 | 16 | 57 | 18 | 78 | 44 |
| 1995 | 42 | 14 | 51 | 16 | 76 | 39 |
| 1997 | 38 | 13 | 49 | 16 | 80 | 38 |
| 1998 | 38 | 14 | 48 | 16 | 74 | 29 |
| 1999 | 38 | 12 | 48 | 14 | 80 | 26 |
| 2000 | 37 | 12 | 46 | 14 | 70 | 29 |
One phenomenon peculiar to China and its feudal socioeconomic system of peasants and elites is the mingong: the migrant peasant worker. According to Escobar, more than 200 million mingong throughout China have migrated to cities to take on jobs in construction, manufacturing, food service, and other manual labor. Ten-plus-hour workdays are common, and 97% of mingong have no medical coverage. Robert Marquand, writing in the Christian Science Monitor, reports that most of the peasants work at least twenty-eight days per month, and their pay is frequently withheld from them by managers ("China's Peasants Opt for Urban Grindstone," January 23, 2004). They live in city shelters and are required to register with the government every two months. According to David Wank of Sophia University in Tokyo, the growing Chinese economy depends heavily on the mingong. He told Marquand: "Without migrants, the whole structure would collapse. They staff the shops, restaurants, factories, construction. It all depends on migrants."
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