China Communist Party & Economics Essay

Introduction

China is considered to have been one of the largest and most advanced economies in the world during the nineteenth century. The country’s economy stagnated since the 16th century (Liao 191). In totality, China’s economy deteriorated between the nineteenth and twentieth centuries. However, there was a brief recovery during 1930s. Economic reforms that ushered in capitalistic market principles were introduced in 1978 (Cai 241). The reforms were implemented in two stages. Hart-Landsberg, Burkett and Lardy have extensively discussed the issue of economic reforms in China. This is the subject of this paper.

Market-Based Reforms in China

The leaders of China’s Communist Party had envisaged a program of market socialist reforms so as to deal with the country’s economic stagnation. Nonetheless, the economic reform process resulted in what has been described as an increasingly hierarchical and brutal form of capitalism (Hart-Landsberg and Burkett 34). Economic scholars have explained why the market-based economic reforms in China were not fully planned.

One of the reasons is that the process of pursuing a new form of socialism was taken-over by party elites who were afraid of losing their privileges (Hart-Landsberg and Burkett 34). In this case, the elites were faced with the popular demand for economic reforms. Following this, they initiated a reform process that would allow them to get more control over the resources of China. This is what actually resulted in market-based reforms in the country (Hart-Landsberg and Burkett 34).

The Chinese government might have greatly considered marketization of China’s economy; however, market imperatives swiftly proved overwhelming. This was witnessed in each stage of the country’s economic reforms which was geared towards achieving a new form of socialism but ended up expanding the market power (Hart-Landsberg and Burkett 40).

Even though China has persistently pursued a new form of socialism, known as market socialism, its internal dynamics seem to have failed to prevent or contain the imperatives of market forces. As a result, capitalism is thriving in place of the planned market socialism. In addition, the planned economic reforms have resulted in the progressively exploitative growth process. The process generates wealth for a small Chinese minority at slightly higher costs, which are borne by the majority of the Chinese working class (Hart-Landsberg and Burkett 41).

It is also important to note that even though China has been using market socialism as its main goal of economic reforms, its entire economic operations are greatly dependent on the operations of a wider process of regional and international restructuring, which is subject to the control by international or cross-border capital. Therefore, it has been forced to provide support and strength to existing international power structures and the global tension and imbalances they create. In this case, the reforms are achieving capitalism instead of the planned market socialism.

The international market structure is based on the free market. Therefore, since China’s economy significantly depends on the global economic operations, it cannot escape the imperatives of a free market economy. Consequently, its plans to achieve some forms of socialism do not have any basis for success. This proves the claim by Hart-Landsberg and Burkett that the market-based reforms in China were not planned out is realistic.

The Four Major Imbalances in the Current Chinese Economy

In pointing out the imbalances in the economy of China, four approaches are used: the expenditure approach, the production approach, the income approach and the savings-investment approach (Lardy 44).

Expenditure imbalance is one of the imbalances identified in China’s economy. It is noted that the growth of both government and household consumptions has been fast throughout the period of China’s economic reform period. It is further pointed out that in most cases the growth of household consumption has been lagging behind the underlying growth of the country’s economy.

According to this approach, the average household consumption has not been stable during the period between 2002 and 2010; the consumption has been fluctuating (Lardy 47). It is further noted that the strongest indicator of imbalance in the economy of China, as shown by the expenditure approach is an extremely low share of private consumption in the country’s GDP (Lardy 47).

The second imbalance is with respect to the production approach. In this case, it is argued that the imbalanced character of China’s economic growth is clearly shown in the structure of its production process (Lardy 52). Considering agricultural production, it is revealed that when China’s economic reforms commenced in 1978, the share of agriculture in terms of total output was approximately 30%. During the 1980s, the output increased. However, according to Lardy’s argument, by mid decade, the expansion process of agricultural production lagged hence resulting in a gradual decline of agriculture with respect to GDP share (Lardy 54).

Furthermore, the imbalance has also been witnessed in the industrial sector (Lardy 54). As market forces became more significant between 1980s and 1990s, the share of services in China’s economy increased while that of industry shrank. However, in 2000s, China experienced a change in growth patterns with respect to its productions (Lardy 54).

The third imbalance in China’s economy relates to income approach. By evaluating relevant data for the period between 1993 and 2009, it is concluded that labor compensation remained fairly constant at 50% of GDP during the 1990s (Lardy 58). However, by 2009, the figure slipped slightly to 47% (58). It is further shown that the share of national income for the government in terms of net taxes increased significantly between 1993 and 2009. Conversely, the share of corporations reduced slightly between the same periods (Lardy 58).

The last economic imbalance is with respect to the savings-investment approach. It is therefore suggested that the best approach to debunking the external imbalance with respect to China’s economy is to consider the difference between national investments and savings (Lardy 61). Lardy averaged China’s economic data for the period between 1998 and 2002 and again data for 2007 and 2008 to come up with an evaluation of China’s economic imbalance using the savings-investment approach (Lardy 61).

In this case, he looked at three sectors of China’s economy: households, the government and corporations. The evaluation of the economy has been divided into two periods. In the first period, it is argued that the economy experienced a balanced growth (Lardy 61). In relation to this, he contends that the exchange rate steadily appreciated and the external imbalance was uncertain. However, he posits that in the second period the growth of China’s economy was reasonably imbalanced; the development that commenced in 2003 saw the actual trade-weighted value of the Chinese currency first experiencing depreciation before gradually appreciating as from 2005. Nonetheless, the external imbalance reached a record high between 2002 and 2008 (Lardy 61).

Conclusion

It is noted that the government of China has been pursuing a form of economics that should place China’s economy under market socialism (Hart-Landsberg and Burkett 34). However, the imperatives of market forces have driven the reforms in the direction of capitalism. The internal conditions are not conducive to the establishment of market socialism as envisaged by the government’s plan.

Therefore, Hart-Landsberg and Burkett have rightly argued that market-based reforms in China were not fully planned out. Besides, Lardy has identified the economic imbalance in China on the basis of the expenditure approach, the production approach, the income approach and the savings-investment approach (Lardy 44).

Works Cited

Cai, Fang. Transforming the Chinese Economy, Danvers, USA: BRILL, 2010. Print.

Hart-Landsberg, Martin, and Burkett, Paul. “China and Socialism: Market Reforms and Class Struggle.” Monthly Review Press (n.d): 34-62. Print.

Lardy, Nicholas. “Economic Growth After the Global Financial Crisis” Imbalances and their Implications for China’s Economy, New Delhi: Peterson Institute, 2012. 44-63. Print.

Liao, Xuanli. Chinese Foreign Policy Think Tanks And China’s Policy Toward Japan. Beijing, China: Chinese University Press, 2006. Print.