Neo-liberalism encourages economic liberalism, promoting the divide between the rich and the poor; it is active today, that is why it’s neo or new. However, it has lost dominance since the 1990s because of growing awareness of, and resistance to, its negative consequences. Peters and Bourdieu point out that The World Bank, the IMF, the WTO, the Asia Development Bank (ADB), the OEC, the General Agreement on Tariffs and Trade (GATT) and the GATS have promoted neoliberal policies like privatisation, free trade, lowering labour costs and shrinking public expenditure (qtd. in Jiang 13). The neoliberal policies imposed by these powerful organizations arguably aim to give top priority to the interests of global companies and the super-rich, and assist them to obtain the greatest profits by enhancing access to ‘free’ markets at the cost of working people and the environment (Jiang 13).
China has been dubbed the “modern economic giant,” and has been unofficially declared the second world economic power, developing at the beginning of the 21st century. China’s accession into the WTO, “normalization of trade relations” with the U.S. and its most favoured-nation (MFN) with 140 trading partners (Jiang 193) clearly demonstrates that China has become an emerging economic power in the globalized world. It is the most populous country of 1.3 billion people under one single government.
China is the third largest country in the world next to Canada and Russia and accounts for one-fifteenth of the world’s land mass with a total area of 9.6 million square kilometres. This is larger than either Western Europe or the United States mainland (Jiang 194). China is characterised by enormous regional and cultural differences. It has maintained its socialist system and is being ruled by the Chinese Communist Party (CCP), but co-exists with other eight democratic parties (minzhu dangpai in Chinese). However, the eight parties are “in no sense opposition parties” and they are expected to cooperate with the CCP for China’s national construction and development. The CCP’s highest body is the National CCP Congress.
With an estimated one-fifth of the earth’s population and the largest potential market behind it, China is emerging as a major actor in the global market and is increasingly attracting attention for the sheer size of its economy. Protected from the direct consequences of the 1997 Asian crisis and the 2008 financial crisis because of exchange control, China has become a model of economic success amid uncertainties and challenges of globalization.
The country averaged 9% annual growth rate in the two decades of economic reform (1978-1998) though this has since lowered to 6% (Song 1). Trade and investment flows between China and the rest of Asia have multiplied, and exports from the Association of South East Nations increased 55% in the first half of 2003. Regional trade with China has been expanding much more speedily than Asian trade with the U.S. as clearly evidenced by Japanese, South Korean, Thai, Malaysian and Singaporean bilateral trade (Jiang 195).
China’s Integration into the World Economy
Before opening up to world market, China was virtually isolated (Clark 17). Chinese foreign policy before the early 1970s kept China as a revolutionary power characterised by “its most radical, militant and uncompromising period” supporting revolutions throughout the world (Zhang 88). Zhang further states that before 1972, the United States, dominating the world political climate, had adopted a policy of disregarding China “as part of its global containment strategy against communism” (88).
After the Cultural Revolution from 1966 to 1976, the Chinese government realized that its centrally planned economy had proved ineffective in meeting the challenges of globalization. Meanwhile, successful economic development in other capitalist parts of Asia encouraged the Chinese government and its people to be aware that a market economy is in many ways more effective than an entirely centrally planned one. When Deng Xiaoping came to power in 1978, he introduced economic reforms patterned in market-oriented economy but still socialist in nature; China opened up to the world. This was the start of an unprecedented economic growth and prosperity (Woo 13).
Webber et al. indicated that China started to reorganise its economy (qtd. in Jiang 196). Like other communist states, China has experimented with various market-oriented forms of economic organization. However, China has reaped economic growth benefits and had comparatively few “social or political dislocations” (Jiang 196). This is attributed to not taking a single approach in its integration into the world economy. In other words, the Chinese government has been more or less free from “external constraint,” such as structural adjustments imposed by the IMF with its harsh provisions, since China did not borrow from the IMF. China’s transition from a centrally planned to a socialist market economy was not forced but it was a gradual and partial transition.
China’s integration into the world economy is also witnessed by its increasing interaction with international organizations, as a permanent member of the Unit Nations Security Council, a recent member of the WTO, and a leading actor in APEC and the ASEAN Regional Forum (Jiang 197). China’s accession as the 143rd member of the WTO on 10 November 2001 symbolized a landmark both in its economic reform and in the development of the international trading system. It was one of the most important events in the world at the start of this century and further accelerated the process of developing China into the most open of all developing countries. China’s entry into the WTO significantly impacted its economic growth, domestic reforms, and integration into the world economy (Jiang 198).
As a result, the Chinese government had to accept WTO commitments for the purpose of speeding up its domestic economic reform programs, enhancing economic efficiency, maintaining high growth rates and stepping up the development of a commercial credit culture in its banks. Most importantly, China can apply the WTO dispute settlement process to secure its economic interests, resisting countries which do not “apply fair procedures” and “challeng[ing] the way the nonmarket economy methodology has been applied by another member” (Jiang 198).
However, there were some conditions that have to be reached. China may increase its joint ventures in different industries, and would have to remove and reduce many existing restrictions facing present foreign corporations. This has created more competition for the domestic companies and “accelerates the development of unemployment insurance programs and other elements of a social safety net” (Jiang 198). On the other hand, the increase in competition may lead to a more reasonable allocation of resources, promote productivity and reinforce administrative and cost-management systems.
In joining the WTO, there were some political and economic conditions. WTO membership has enabled China to be significantly involved in global trade and markets, and must more be integrated into the global economic system (Jiang 198). Furthermore, accession to the WTO enables China to increase its political influence through its increased economic interactions with the US, EU countries and Japan within its bilateral affairs with these countries (Jiang198). China’s admission into the WTO might change the balance among conflicting interests and counterweight the U.S., EU and Japan in future negotiation processes in the WTO.
China’s first two stages of reforms in 1978 and 1993 included political devolution, slow financial sector reform, and the dismantling of collectivism by leasing out land for private cultivation, which were among market reform measures aimed at boosting export-led growth. The changes led to the quadrupling of growth rates, the tripling of per capita income and a sharp fall in the number of people living below the poverty line from 300 million (31%) in 1978 to 30 million (7%) in 1998 (Jiang 199).
Conclusion
China’s ‘Tenth Five-Year Plan’ (2001-2005) for national economic and social development accelerated the “socialist market economy,” which carries an “implicit acceptance of the need to operate in a capitalist market” (Zhang 1). A significant content of the Plan is that China openly embraces investment by multinational corporations (MNCs) and abandons its old tradition of government paternalism, manifested in a highly centralised planned system (Jiang 200). Chinese leaders are increasingly aware that traditional Marxist and Leninist doctrines are not sufficient to resolve current problems and therefore advocate some democratic reforms but not losing the socialist structure.
China’s position in the global knowledge economy is unique. On the one hand, it must cope with the pressures facing all developing countries; on the other, it possesses some specific advantages but also faces some very particular challenges. Knowledge has been highly respected and stressed in China, as demonstrated in the strong national education system and the priority given by parents to their children’s education.
China is experiencing a historic shift from a central planned to a socialist market system in its quest to catch up with or overtake the developed countries in response to the global knowledge economy. China is also facing many issues and challenges, most of which are also shared by other countries, be they developed or developing.
Works Cited
Clark, Helen . “New Zealand – China Relations: Leaping Ahead”. Foreign Affairs and Trade Record, New Zealand. 11.4 (2002): 17-21. ProQuest. Web. 23 Aug. 2016.
Jiang, Xiaoping, “Globalization, Internationalisation and the Knowledge Economy in Higher Education: A Case Study of China and New Zealand.” PhD thesis, University of Auckland, 2005. ProQuest Dissertations Publishing. Web. 4 Aug. 2016.
Song, Ligang. “Conditions and Prospects for Sustaining China’s Economic Growth: Dilemmas of Economic Growth.” Dilemmas of China’s Growth in the Twenty-First Century. Ed. Ligang Song. Canberra, A.C.T.: Asia Pacific Press, 2002. 1-10. Print.
Woo, Wing Thye. “China: Confronting Restructuring and Stability.” Sustaining China’s Economic Growth in the Twenty-First Century. Ed. Shujie Yao and Xiaming Liu. New York: Routledge, 2003. 1-20. Print.
Zhang, Lawrence. “Great Changes, Great Challenges: The Professional Experiences of Mainland Chinese Academic Staff at the University of Auckland.” Master’s Thesis, University of Auckland, 2008. ProQuest Dissertations Publishing. Web. 4 Aug. 2016.
