Now a bit of Social, a bit of Political and a bit of Economic (post 1989)

The leadership in the period we are now considering was as follows:

General Party Secretary Premier

1989-1997: Jiang Zemin Li Peng

1997-2002: Jiang Zemin Zhu Rongji

2002-2011: Hu Jintao Wen Jiabao

Jiang was the key to much of the social and economic happenings immediately following on from the events of 1989. Deng Xixian (another of Xiaoping’s names) had limited ongoing influence until his death in 1997. Firstly, Jiang engaged in economic restructuring and the impacts were predominantly felt by the new unemployed and the new migrant workforce. Zhu was also a particularly strong promoter of growth and reform and the current leadership has continued the process. Privatisation of housing was also continued.

Foreign trade and investment, rapid private sector expansion and state restructuring continued to be increasingly on the agenda. Integration with the global economy also proceeded and China finally joined the World Trade Organisation in December 2001. Utilised foreign direct investment that had been in the region of 5 to 10 billion US dollars at around the time of Tiananmen was in the region of 50 to 60 billion before the next decade had ended (it appears that only the 1997 Asian Financial Crisis kept it from being greater). Trade (both imports and exports) followed a similarly exponential-style trend as did GDP (it grew at 9.4% per annum in the period 1980 to 2004 and hasn’t really slackened since).

With that growth there was also increasing income inequality along several dividing lines. The greatest beneficiaries in terms of income growth and absolute income were the employed urban workforce and rural workers in the eastern provinces. Western province rural workers and the unemployed benefited least relatively and central province rural workers were somewhere in the middle on these relative and absolute income measures.

At 2004 the UN-determined poverty line was 3,000 Yuan (Renmin Bi – People’s Currency (RMB)) per annum and while urban workers were averaging nearly 10,000 Yuan rural workers averaged just under the 3,000 nationally at 2,936 (the Chinese government’s official poverty line was 650 Yuan). Shanghai had the highest average rural income of the thirty traditional mainland provinces at 7,066 and Guizhou had the lowest at 1,722 RMB.

China’s Gini coefficient (an indicator of inequality) was 0.30 in 1980 and in 2004 it had grown to 0.45 (a coefficient over 0.4 is considered dangerous inequality for social stability by some authorities – Sweden’s is around 0.2, Australia’s is around 0.3 and the US’s is also around 0.45). The UN Development Programme concluded in 2004 that China was the 90^th highest level of equality of 130 countries assessed.

Now let’s consider what happened to the labour force especially in the SEZs and cities. With foreign direct investment came foreign management practices, knowledge and technologies. This was also guided, however, by what was deemed acceptable to the government so a new composite labour relations system developed. On the negative side was the inadequacy of the legal system and weakness of regulatory regimes.

It’s fair to say that enterprise managers came to have greater power over their workforces (with the power to hire and fire) and operational decisions along with discretion in setting wage rates and bonus rates and criteria. This, CCP acquiescence in it and the new labour contract system severely weakened the CCP-based trade unions. Also weakening the bargaining power of workers was the massive volume of retrenchments announced by Zhu from the state system (in preparation for the new competition from other sectors) and the large numbers of migrants from rural areas now competing for city jobs. The iron rice bowl (guaranteed life-time employment and the cradle-to-grave employment-based welfare system) unravelled especially from the mid 1990s.

On the plus side for workers able to demonstrate their value, the new competition among all the sectors (the state sector, the new Town and Village Enterprises (TVE) sector, the private sector and the foreign sector) for the now large pool of job seekers in a new job marketplace was quite fierce, regions and local governments competed strongly for the best workers, as well (though also for the best price possible as they also competed for investment) and the market was fairly free. On the whole, it was a major bear market, however, in the circumstances.

The state sector restructuring was overdue with local work units overburdened by over-employment, overly high wages and excessive and ongoing further iron rice bowl type obligations. It had been delayed as long as it had for fear of the political consequences. One third of all State Owned Enterprises (SOEs) were in debt. Only workers in some key sectors were able to avoid retrenchments. Some 60 million workers were laid off in the period from the mid 90s to 2001 in order to ‘save’ the sector.

The timeline below shows the development of the new urban and regional sectors:

1979: joint Chinese and foreign enterprises allowed;

1981: small-scale (less than 8 employees) private business;

1986: 100% foreign ownership of businesses allowed;

1988: limits removed from size of private businesses;

2001: in joining the WTO China agreed to progressively open banking, insurance, telecommunications and media sectors to foreign direct investment.

In the rural sector, Decollectivisation led to surplus labour of from 200 to 300 million people. The rural economy also became diversified as a result of the Decollectivisation. The Mao era hukou household registration system which had attempted to regulate migration and particularly to limit rural-to-city migration was relaxed from 1978 as it had to be in the circumstances but it was a gradual relaxation. Migration to cities was a rational decision for many because of the ‘pull factor’ of rural/urban income disparities.

Major changes had occurred in the macroeconomy in the first twenty years post-Mao. In 1980 the rural economy had produced 30% of China’s GDP and that percentage had halved by 2003 to 15% while the percentage produced by the services sector increased from around 20 to around 46 percent and the industry share reduced from around 50% to around 39%. That 15% rural production in 2003 was produced by 49.1% of China’s 744.23 million workers. The services sector was the most efficient in this sense requiring only 29.3% of the workers for its 46% percent contribution while industry was the next most efficient requiring 21.6% to produce its 39% share.

Non-agricultural employment trends show the speedy development of the rural-to-city-or-regional migrant labour market and TVE sectors between 1978 and 2004. The five other sectors that existed in 2004 were state, collective, small business, foreign and private and only the last three had increased employment numbers compared to 1978 though the state sector still employed around 60 million people and the collective sector nearly 10 million. In 2004 the small business, private and foreign sectors employed similar numbers adding up to a combined total of nearly 80 million and the migrant labour and TVE sectors each employed around 140 million.

So by 2003, only 20% of the 378.8 million actual non-agricultural workers remained in the labour sectors considered regulated, meaning exploitation was likely to be occurring at a high level. Figures of welfare insurance participation rates in the private sector weren’t especially encouraging. Those covered by aged pension insurance amounted to 33.7%, unemployment insurance 10.3%, medical care insurance 21.6%, occupational injury insurance 31.8% and maternity leave insurance 5.5%.

As far as unions were concerned at least 100 million (30% of the non-agricultural workers) were not even represented by the toothless tigers that were the officially approved trade unions. Independent unions were illegal and the official union director was frequently also the enterprise manager or party branch secretary (after the 4 June massacre around Tiananmen, people who had tried to form independent unions had actually been treated much worse than the student leaders of the demonstrations had been (and that’s saying something)).

In response to some of the issues that the restructuring raised mentioned above and others, Chinese people have recently taken to protesting en masse. Official Chinese statistics of ‘mass incidents’ show a trend rise in such incidents since 1993 from a base of under 10,000 incidents and almost exponential growth since 1997 so that by 2005 there were around 75,000 such incidents noted. So the social protest movement is keeping pace with the recent economic growth.

With all this, provincial differences and prejudices have remained a feature of the Chinese landscape in the new world of regional growth to the extent that recently provinces such as the central province of Henan have found it necessary to advertise throughout China to the effect that the province and its people aren’t so bad after all.