Session #2 - February 11

[cgao]

REQUIRED

Readings 

• Wayne A. Morrison, China’s Economic Rise: History, Trends, Challenges, and Implications for the United States, Congressional Research Service, 2018. (CRS is the "think tank" for the US Congress. It is run out of the Library of Congress. We have collected many of their China-related reports.)
• Li and Yuan, Skills Shortages in the Chinese Labor Market, 2017.

Please scan the following (don't worry about reading every word, look at the graphs, read those sections you find interesting):

• China Daily, Infographic on eradication of poverty, 2018 (a paid ad in the Telegraphnewspaper)
• Economist Intelligence Unit, The Chinese Consumer in 2030, 2016.
• Week in China, Our Guide to the Pearl River Delta, 2016. (This is a good introduction to the area that launched China's economic reforms. This has many interesting charts and maps.)

Questions to guide your reading:

1. China's reform period begins 40 years ago at the end of 1978. What caused the Chinese Communist Party to change its economic policies? How did policies change and what difference did those changes make? What factors made China's economic rise possible?
2. China's state-owned enterprises (SOEs) are some of the biggest companies in the world (e.g., banks, energy companies, telecommunications companies). What is the role of SOEs in today's China? How important are they to China's total economic output (GDP)? To employment?
3. In what economic sectors are private companies most important? Which Chinese companies (either state owned or private) are most influential outside China? What Chinese brands do you know? What brands do your students know?
4. While China's economic development has helped hundreds of millions of people escape poverty, many remain poor and inequality has increased in recent years. What has exacerbated inequality? What is being done to address this inequality and to provide greater opportunities for Chinese?
5. How has consumption changed in China? What does increasing Chinese consumption mean for the world?

Videos

2a. Reform and Opening

The first video begins with a quick look at the nature of the Chinese economy 1949-1978. China's economy was among the poorest in the world. On a per capita basis, the Chinese economy only generated $90 in 1960 and $113 in 1970. At the dawn of the economic reforms initiated by Deng Xiaoping and his associates, in 1980, the economy still only generated $195 per person. By 1990, the figure was $318, markedly better.

 

 

2b. China Shakes the World

The second lecture in this section focuses on the rapid growth over the last 25 years. We explore the East Asian Development Model that helped Japan, South Korea and Taiwan enter the ranks of rich economies. We look at how China hopes to avoid the middle income trap and join those places among the high income societies. It faces numerous challenges that we highlight.

 

 

OPTIONAL

• Li Hongbin, China's Educational Inequality, 2011 (22 minutes)
• Discovery (China Channel), WeChat, 2016 (13 minutes) Or NY Times, WeChat, 2017 (6 minutes)
• Reuters, Chinese consumers move away from pork, 2017 (2 minutes)
• World Bank, Empowering Farmers and Implementing Modern Irrigation, 2016 
• UN Food and Agricultural Organization, Growing rice and raising fish for income security, 2016 (2 minutes)
• Gobetweenfilms, Growing Rice, 2014 (3 minutes)

 

[Amir Osterweil]

I do not want to be cynical but the first thing that popps into my head while looking at these statistics is can they be trusted? Isn't the China People's Daily an arm of the communist government? It would have a big motive for helping China look good to attract more investment. What is the significance of the areas with concetrated animal rearing?

[clay dube]

Amir is correct that 人民日报, People's Daily is the official mouthpiece of the Chinese Communist Party. Global Times is owned by the People's Daily and makes more money that the parent paper. China Daily is also part of the propaganda apparatus, something that is pretty easily discerned. Poverty alleviation is part of the CCP's great claims and it is also a current priority, which is why it was featured in the ad in the British newspaper. Acknowledging all that - China has succeeding in greatly reducing dire poverty, brink of subsistence poverty, among many people. It may be more accurate, however, to say that China's government made policy choices that allowed people, through their own work and enterprise to move ahead. The main poverty alleviation policy for the past twenty years has been to encourage people to move to the city and find better paying work. But that approach is probably nearly tapped out, so now there's an effort to develop tourism and other businesses to improve the lives of the rural poor. Still, there are many in China who are poor and live in the city. Here is a discussion of how some solve their housing challenges: https://china.usc.edu/watch-presentation-housing-panel-china-finding-solutions-conference

[Amir Osterweil]

What caused the Sino-Soviet Split?

I remember as a child in the 80's most of my toys being made in Taiwan. When/why did manufacturing switch over to China?

Deng Xiaoping's policies remind me of Lenin's NEP, allowing small scale capitalism among farmers. 

[clay dube]

A lot could be said about these matters, but let me just offer a couple of observations.
China and Mao weren't happy with Khrushchev's denunciation of Stalin in 1956, nor were they happy about the Soviet invasion of Hungary at that time. They were not willing to coincide socialist leadership to anyone. The break only became open in 1958-59 and the 1960s. Here is a collection of translated documents on the break: https://digitalarchive.wilsoncenter.org/collection/73/sino-soviet-split-1960-1984.

Here's a good article on how antagonism bubbled during a visit the Soviet chief made to China in 1958.

On Deng Xiaoping - he was convinced that they had to do something to enliven the economy. Lenin's NEP was similar, but Deng's reforms went much, much farther. One thing they had in common, though, was Armand Hammer.
https://www.nytimes.com/1981/11/29/magazine/the-riddle-of-armand-hammer.html
 

Project opens: https://apnews.com/e7e426083ca93fc68a24fea100c6a1d3
 

[Diana Corey]

You showed a couple of clips from different propaganda videos in your second video. They both sound like children's songs, and both were a little confusing to me as to what exactly they were trying to teach or communicate and why. Who exactly is the intended audience for these videos, and where did they air? I was honestly super confused by the 13.5 one. It seems to merely be announcing that a 5 year plan exists, but doesn't seem to say anything about what it entails... Perhaps there would be more information if I watched the rest of the video? Either way, super strange choices of imagery and delivery.

[Diana Corey]

This is actually the first I have heard about the Canton Fair, and I am pretty fascinated by this new information. I had no idea it existed throughout the 60s, through even the "tensest moments of the Cultural Revolution," offering opportunities for trade with foreign companies. This fair may have only been for a few weeks every couple of years, but I didn't think there was much foreign exchange at all during the Cultural Revolution.  

Thinking about how this fair operated in the 70s, with Chinese officials compiling lists of the country's import needs and negotiating for those needs at this fair, just blows my mind. These days everything is available to everyone in the world (practically) with the push of a few buttons, and I don't think of my government providing for my "country's import needs." My millineal mind is having trouble processing what that would even mean. 

I lived in Shenzhen for a short time in 2006-8 and have been back a few times to see how it has grown and changed, so I really enjoyed reading about the Canton Fair, about Deng Xiaoping's Reform and Opening up Policies and proposals for special economic zones, and seeing how Shenzhen's development looks compared to other SEZs. I have occasionally wondered why Shenzhen was chosen, and I'm sure I've heard it before, but in this article it struck me that these areas in Guangdong were chosen because they are far enough away from the cities of Beijing and Shanghai that they could be shut down and quarantined if things did not go well. I wonder what outcomes would have caused that to happen. 

[Billie Johnson]

First of all, great pic in the first video!

What stuck out to me the most is how China is looking to create a consumer economy, one that mirrors ours and essentially model after the American business model as a nation. As I was reading it struck me that you the US and China were interchangeable. With the need for education reform (preparing youth and young adults for the jobs of the future), relevant job training, and the ghosting of new workers who are going through the interview process or newly hired.  I do wonder though, with China looking to enhance its manufacturing and creating quality products, how with this impact South Korea and Japan who are known for producing superior products? Also, I read a while ago that China is seeking more investments in Africa. If Africa's economic development continues on the upward trajectory it is expecting to, this could mean huge capital gains for China. With all the talks of social and economic reforms, do you think the Hukou system will be eliminated? 

I am supposing this is why we are hearing about China so much on the political front: "Many U.S. firms find it difficult to do business in China because rules and regulations are generally not consistent or transparent, contracts are not easily enforced, and intellectual property rights are not protected (due to the lack of an independent judicial system)." The Belt and Road Initiative also reminds me of when Trump spoke at the SOTU Address in regard to infrastructure, high speed internet, and many other proposed intiatives.

It is intriguing to me that although China is going through these major economic, education, and population changes there's so much room for growth. The really neat thing is that we will see this in real time certainly within the next few years. Do you think that growth will take off once the focus is back on the people and not the power structure in place? Perhaps something similar to Japan as a whole. I think ideologically the US believes in this philosophy, but when you break this down into many differernt corporations or public institutions the vision and how the power structure treats its people vary of course.

It does feel like things are a bit backwards. We know what happens in societies that are undereducated with little skills and yet it feels like we are not doing enough to reverse course. We already know what this looks like. While other countries are realizing like Lorenzo De Medici did in the1400's that a prosperous society has educated people who are skilled and a strong innovative sector...one that is rich in culture and arts...Seems like the struggle is between retaining power versus sharing that power with one's citizenry.

[clay dube]

Anything in English is aimed at foreign audiences. The 13.5 video was intended to help foreigners understand the process and scope of the five year plan. As you note, the video doesn't get into any of the specifics of the plan. Check out the documents section of our website to see the plan as well as discussion of it. https://china.usc.edu/resources/documents/all

[clay dube]

There were multiple reasons to locate the special economic zones in Guangdong province. At that time, Guangdong had the closest ties to Hong Kong and the wider diaspora. It was Hong Kong and overseas Chinese who powered the initial opening up. Multinational giants came in later. Distance from Beijing was probably appreciated by all sides, but the key idea was to tap external capital, technical expertise, and market connections. Fujian and Taiwan would function this way as well, though not as quickly.

On the Canton Fair:
An anonymous Pakistani from 1962, 1968
http://www.cantonfair.org.cn/en/common/detail.aspx?oid=10363

Stats (according to the folks running the fair)
http://pdc.cantonfair.org.cn/html/cantonfair/en/about/2012-09/138.shtml

A CIA report from 1968:
https://www.cia.gov/library/readingroom/docs/CIA-RDP85T00875R001600010004-6.pdf

Illustrated Chinese account (on Zhihu, the Chinese Quora):
https://www.zhihu.com/question/19600438

Propaganda painting displayed at the 1968 fair:
http://www.sohu.com/a/217006804_651410

Ministry of Commerce offical history of the fair
http://history.mofcom.gov.cn/?page_id=2168
 

[clay dube]

Billie's right about the priority of the Belt and Road within China and how nervous it has made some outside China. For the US, we've been engaged in both the public and private sectors in SE Asia a lot and to a lesser extent in much of Africa and Central Asia. However much the US occasionally talks about infrastructure, in recent years the US federal government has not done much. (And some of what it did, in response to the financial crisis of 2008, ended up being criticized by some -- here's a less partisan assessment by the Congressional Budget Office: https://www.cbo.gov/publication/43014)

But the US has done big infrastructure projects in the past (building canals, rail systems, power grid, highway systems) and we continue to benefit from those investments. Stay tuned for BRI results.

[Aleida Rojas]

a. I was really surpirse to see how the U.S. and China seem to share the same educational problems. In the U.S., we seem to be graduating kids from college with a huge amount of debt and with very few skills to find a jobs in this market economy. China is also experiencing the same issue. Many migrant workers in China lack the vocational skills to be employed in what China sees as their future economy. This includes jobs that requiere a highly skilled workforce; but because of Hokou, China has made it almost impossible to create the skilled workforce that they need for their new economy. China is now facing a severe labor shortage in the skilled and highly skilled workforce, which is a major contributor to China's labor cost. The U.S. is also having a hard time getting kids to enroll in vocational schools and that is having an impact on our labor force as well. 

b. The other thing that I found really interesting is China's debt. Most importantly, where the debt is coming from. Years of corruption and State Owned Enterprice has created a very unstable banking system. It has also led to a lot of unfainess since these enterrices dont pay the same interest rates as the private firms and they do not have to pay their debts. There are so many Zombie institutions due to overcapacity, but China must keep these companies afloat to avoid high unemplyment rates. It remainded me of The Bank bailout during the American economic crises. 

c. I think that all the economic problems that China faces today have root on the one child policy. They now face an aging work force, they face a decrease in child birth, and an economic downturn. 

d. I learned that China is the largest foreign holder of U.S. Treasure Securities. Because of this Chinese-American economic transaction, the U.S. is able to keep interest rates low. I have always say to my students that if the Chinese economy goes down, we are going down with them, and after doing the reading this week, I think that this is very true.

[Lynne Szczepanek]

Could the "new economic" growth concentrations be a result of President Trump's policy with tariffs or a lot of backlash of the products coming out of China? For example lead in crayons and on toys? These mistakes brought embarrassment to the Chinese?

[Kevin Bailey]

The economic reforms in China over the last 40 years are truly remarkable. I just finished up a book on Mao’s reforms (The Tragedy of Liberation) that took place through the 1950’s and it was failure after failure, much like Stalin’s early reforms. Dr. Dube talks about the problems that stemmed from Mao’s land reforms and how the shift to economic reforms paved the way for the miraculous change in the poverty rate in China. Deng Xiaoping is the figure who truly brings about economic reform and not Mao. The infographic provided states that 740 million people in rural areas out of poverty from 1978-2017, that is 19 million people every year. 

 

My AP Comparative course focuses a lot on societal cleavages within the six countries of study. I always bring up the Urban vs. Rural divide and I spend some time discussing the migration of the able to the cities because that is where the industrial jobs are and thus causing the divide to become even bigger. In the comments Dr. Dube you touched on the strategy being “nearly tapped out”, does this connect with the ghost cities? China is slowly expanding the urban area and eradicating the rural? I know that part of the ghost city problem stems from limited investment opportunities, but is it also China trying to keep the engine of change chugging along, understanding that this is one of the only reasons for the poverty alleviation?

 

Still finishing up the Congressional Research paper, but thanks for the lectures.I had hope that I might be able to show a portion of your 2nd lecture to my students in class if it is alright with you?

 

[Virgina Jackson]

The economic development of China over the decades has been nothing less than amazing.  Development definitely is a contributing factor to the growth of any city/country.  The Five Year Plan(s) and the Belt and Road Iniative are very uniformed.  

Based upon my personal and professional background(s), I was wondering how China's population has embraced the overall development within the country over the years.  In the United States, gentrification (as an example) has been a major ongoing discussion as it relates to the development and economic growth of certain areas.  How have China's citizens embraced such growth?  Is the voice of the citizens heard in any decision making?  Development has been a key focus of the Communist party's priorities, but has the inequality aspect of development changed since the late 1970's?   What are the demographics of foreign investors/developers in China?

The compare/contrast of development in China and the United States is very interesting.  Has the global economic aspect of China overriden the historical preservation of its land and territory?  

 

 

 

 

 

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