|
 |
|
|
| Regional imbalances in China |
Rajiv Ranjan analyses the preferential policies of Deng Xiaoping. From New Delhi
The miraculous growth rate of the People´s Republic of China, ushered by economic reforms of Deng Xiaoping, has placed Beijing as the third largest economy in the world. It invariably helped China, one of the case studies of economic development, to secure its due place in world politics as envisaged by helmsman of China, Mao Zedong. Nevertheless, the high rate of growth is not evenly distributed in China. In other words, the fruits of economic development are concentrated in the hands of few urban dwellers. Chinese statistics show that the gap in incomes between urban and rural areas in China was 2.3 in 1984 and 1985, then increased to 2.6 times in 1987, 2.9 times in 1989 and 1990, 3.2 times in 1992, and 3.5 times in 1993 and 1994.
Apart from rural-urban divide, the development policy also led to regional disparities between coastal and hinterlands. The GDP per capita in the coastal/eastern regions was 1.53 times larger than in the central regions, and 1.80 times larger than that in the western regions. In 1990, these figures grew moderately to 1.62 and 1.90 to reach 2.08 and 2.63 in 2002 respectively. But then, the divergence between rich and poor provinces also increased. The GDP per capita in the most prosperous province of Zhejiang was 2.16 times larger than that of the poorest province of Guizhou in 1980; this ratio increased to 5.0 in 2002 (A Statistical Survey of China, 2002).
This article seeks to analyse the developmental policy of Deng Xiaoping comparing with that of Mao Zedong and their impacts on regional development in China.
Regional Development Policy
Deng Xiaoping, in 1978 discarded his predecessor’s regional policy and opted for a strategy focused on uneven development, the so-called coastal development strategy. This strategy and related ‘preferential policies’(1) were formally adopted in the Five-Year Plan of 1986-1990. The basic idea was to develop those regions which had most favorable economic conditions, and then to help the less advanced regions, so as to finally achieve common prosperity and balanced development. On the basis of this strategy, the country was divided into three economic belts: eastern or coastal, central and western regions. Each of these regions obtained a mission. The economic conditions of the eastern regions were seen as most favorable, since there were more industrial activities, more human capital and more advanced technologies. The coastal development strategy proposed that this area should be developed and opened to the outside world. The central and western regions, endowed with rich natural, agricultural and mineral resources, were seen as areas that should be developed and open later.
Before going with Deng’s model of development it is essential to have some understanding of Mao’s policy of development. The guiding principle for Mao was economic self-sufficiency. A region, for Mao, should be self-sufficient not only in food production but in industrial goods as well. The self-reliance principle had several merits(2). Firstly, it overlapped with the egalitarian principle because it reduced provincial inequality, which Mao had identified as one of the key social contradictions to be eliminated in the new China. Secondly, the biggest beneficiaries of the self-reliance principle were the poorest provinces and this distributional outcome was in accordance with the gratitude that many veteran party leaders felt toward these provinces. Many of the poorest provinces provided a haven in which the CPC could rebuild its strength after the Kuomintang had driven it out of the urban areas. And finally, most vital asset of self-sufficiency was that, beginning in 1963, it coincided with the national security considerations of China. The worsening Sino-Soviet political relationship and the growing military presence of the United States in Vietnam convinced Mao that regional economic self-sufficiency was key to China's being able to engage in a protracted defense of its territory. Mao and his generals visualized three lines of defense (coastal, central, and western), and they decided in 1964 on a massive construction of military industrial complexes in western China, the third line of defense, popularly translated as the “Third Front”(3).
Deng’s model must be understood in the contexts of China’s re-engagement with the world’s economy(4) and realization of Chinese leaders that Beijing was lagging behind in economic development with compare to Japan and Taiwan. Therefore, Chinese government sought to take a ‘paradigm shift’ and adopted the ‘comparative advantage’ (Bijiao li yi) as a guiding principle of regional development. The 5th Five Year Plan (1981-85) proposed the idea of regional division into east and west and the 7th Five Year Plan formally adopted the ‘Three Regions Belts’ consisting eastern, central and western(5). Moreover they were assigned specific jobs like, export orientated industrialization and foreign trade in eastern region; agriculture and energy development in the central region and animal husbandry and mineral exploitations in the western regions. The idea of uneven development policy was based on ‘Ladder Step theory’(6). It is basically to allow some region to develop first then the fruits will be distributed among the other regions.
Apart from these preferences, there were also some preferences given to these regions in policy as well. First, coastal areas received more investment from state via state appropriations, loans and subsidies and joint central and local projects. Second, open zones such as SEZs enjoyed higher foreign exchange retentions rates than others. Third, some coastal provinces like Guangdong were allowed to remit smaller portions only. Fourth, primary and agriculture goods priced substantially lower than finished and industrial goods. It was called ‘scissors differentials’ (Jian dao cha). Lastly, provinces and enterprises were given greater financial autonomy. However it was not uniform to whole country. The degree of the autonomy enjoyed by coastal and open zones are in currency circulations, credits and loans, issuance of construction bond and establishment of private financial institutions.
The strategy reversed the earlier policies of development in following ways. Firstly, it took a shift from commune system to the household responsibility system in agriculture. Secondly, granted freedom to township and villages to establish industrial enterprises. Thirdly, allowed gradual opening of Chinese economy, both for trade and for foreign investment.
Impacts of uneven regional development
The Deng’s model of regional development did not guarantee a harmony among the various regions. The notion of ‘comparative advantage’ failed to fulfill the idea to ‘ladder-step’ notion of development. Albert Hirschman points out that "not only growth has tendency to be concentrated around some starting points, it also has the ability and tendency to round itself out for a long time within some subgroup, region, while backwardness retains it hold elsewhere”(7).
He meant that centres of innovation would dominate the periphery through trade, productions and market and between this, new desires and frustrations would grow in periphery demanding greater autonomy. Moreover, it increased migration of workers from rural areas to urban and coastal areas and thereby, gradual reduction of centralized controls on prices, inputs and outputs and the rising share of production outside of the state enterprise sector.
The case of Guangdong province is illustrative of both the manner in which the coastal provinces took advantage of the preferential policies as well as their increasing assertiveness or even intransigence vis-à-vis central directives. In 1984, Guangdong transferred only 3% of its total revenues to the central government, in sharp contrast to Shanghai which handed over 81% of its revenues to Beijing. On the other hand, in 1979, Guangdong received 80% of its investment funds from Beijing; by the early 1990s, this had dropped to only 2% (Alka Acharya: 2006 )
Regional development policies of Mao and Deng depended on different factors. Maoist developmental strategy was focused to create balance industries in the interior 5 regions, focusing on creating an egalitarian society based on the concept of socialism. But, the Dengist model of uneven development was basically to catch up with the developed economies of the world and build China as a developed country. Deng though, also sought to develop the interior regions but only after coastal development. The lack of management to distribute the fruits of coastal progress to interior in proper manner created regional disparities within China. The theory of underdevelopment of development indeed, defined the development of China in terms of periphery and core relation though, within China.
Notes:
1. Greater fiscal autonomy, tax breaks, favorable terms in loans, credits and subsidies, higher foreign exchange retention rate, and faster financial and legal approval.
2. NBER Working Paper No. 8897/ April 2002, Geography, Economic Policy and Regional Development in China, Website: http://www.nber.org/papers/w8897
3. Yang, Dali L. (1997), Beyond Beijing: Liberalization and the regions in China (London: Routledge), pp 19.
4. The rise of four Asian tigers led the Chinese leader to think their developmental policies.
5. Beijing Review,1986b in C. Cindy, Of Belts and Ladders: State Policy and Uneven Development in Post Mao China, Annals of the Associations of American Geographers, Vol. 85, 1995, pp 421-449.
6. Fan C. Cindy, Uneven Development and Beyond: Regional Development theory in Post Mao China, International Journal of Urban and Regional Research, Vol. 21, 1997, pp 625
7. Albert Hirschman, The strategy of economics Development in Dali Yang patterns of China´s Development Strategy, China Quarterly, No. 122, June 1990 pp. 252
|
|
|
|
 |
|
 |
PhD Candidate in Chinese Studies, Centre for East Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi. M.A. in Politics with specialization in International Relations and M.Phil at the same university. |
|
|
|
