Karl Polanyi in Beijing: Chinese Growth Model Reorientation and China

1
Karl Polanyi in Beijing Chinese Growth Model
Reorientation and Chinas Changing Role in the
World Economy

• Ricardo Molero-Simarro
• Third Seminar of the Fourth International on the
  Economic Crisis
• International Institute for Research and
  Education
• Amsterdam, 15th February 2014

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IntroductionAdam Smith or Karl Polanyi in
Beijing?

• Giovanni Arrighi (2007) Adam Smith in Beijing
• ? U.S.-China long-run global balance of power
• Katz (2011) Imperialismo contra economía de
  mercado? Imperalism versus market economy?
• Karl Polanyi (1944) The Great Transformation
• ? The self-protection of society against market
  self-regulation
• China to avoid social instability by the
  externalization of internal contradictions ?
  Changing role in World Economy

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1. The Chinese Growth Model (1978-2007)2.
Growth Model Reorientation (2008-2013)3.
Chinas Changing Role in the World Economy
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1. The Chinese Growth Model (1978-2007)
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1. The Chinese Growth ModelGrowth and Inequality
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1. The Chinese Growth ModelAgricultural prices
and rural-urban migration
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1. The Chinese Growth ModelInternal Migration
and Productivity-Wages Gap
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1. The Chinese Growth ModelThe World Market
Conquest
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1. The Chinese Growth ModelThe Symbiotic
Relation with the U.S.
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1. The Chinese Growth ModelWages, Consumption
and Exports
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1. The Chinese Growth ModelExports and Profits
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1. The Chinese Growth ModelProfits, Investment
and Growth Rates
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1. The Chinese Growth ModelProfits and Top
Incomes
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1. The Chinese Growth ModelWage Share and
Income Inequality
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1. The Chinese Growth Model Contradictions

• Lin (2006) The contradictions of Maoism among
  socialism, developmentalism and nationalism
• Hart-Landsberg and Burkett (2004) The
  contradictions of the Chinese economic reform
  the increasing power of the market in the economy
• Hui (2004) The contradictions of Tiananmen
  political system continuity and radical
  mercantilization of the economy
• Hung (2008) The contradictions of the
  relationship with the U.S. the rhethoric of
  conflict and the Americas head servant
• The contradictions of the growth model
  reorientation process redistributive policies
  and decisive role of the market

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2. Growth Model Reorientation (2008-2013)
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2. Growth Model ReorientationStrategy

• Scientific Development (kexue fazhan ????)
  concept (Hu Jintao y Wen Jiabao,
  2003-2012)
• Reorientation towards innovation, high
  value-added industrial and service sectors
• Reduction of dependency on exports and investment
• Boost of households consumption.
• Harmonious Society (hexie shehui ????) concept
• Sharing of the fruits of growth (urban-rural and
  interprovincial inequalities reduction)
• Social stability
• Stimulus plan against the World Crisis

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2. Growth Model ReorientationMeasures
Year Measure
2000 Western Development Strategy
2003 Rural cooperative medical scheme
2006 Agricultural tax abolition
2008 Labour contract law
2008 Huge fiscal and credit stimulus
2009 Health reform
2011 Social security law
2011 Personal income tax exemption threshold rise
2011 Provincial minimun wages increase
2013 Reform guidelines on income distribution (increase of taxes on SOEs)
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2. Growth Model ReorientationOutcomes
2008 2009 2010 2011 2012 2013
GDP (growth rates) 10.1 8.3 10.4 9.6 7.8 7.7
Gini Index 0.491 0.490 0.481 0.477 0.474
Agricultural prices (index 2007 100) 96.3 82.4 93.6 98.3
Rural-urban migration (annual variation) 2. 5 3.4 5.6 3.4
Real wages growth (annual variation) 10. 5 11.8 10.7 16.4
Wage share ( of GDP) n.a. 48.6 47.2 47.2
Profit share ( of GDP) n.a. 37.9 39.9 39.9
Consumption rate ( of GDP) 48.6 48. 5 48.2 49.1
Net exports rate ( of GDP) 7.6 4.3 3.7 2.6
Investment rate ( of GDP) 43.8 47.2 48.1 48.3
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2. Growth Model ReorientationLimits

• Overaccumulation of capital (Gaulard, 2011)
• Potential profitability crisis (industrial
  profitability rate decreased in the first half of
  2012)
• Housing and infrastucture bubbles (increasing
  housing prices and too many infrastucture
  projects)
• Increasing local public debt default risk
• Non-performing loans in State (major) and local
  banks

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2. Growth Model ReorientationThe Struggle for
Power inside China

• New signs of hope (Au and Bai, 2012)
• Peasants struggles against corrupt land
  expropriations
• Factory strikes
• Village and cities protests against ecological
  degradation
• Exporter bourgeoisie complaints of labour force
  shortages and lack of application of the Labour
  contract law
• Intelectual debates Chongqing vs. Guangdong
  models (Leonard, 2012)

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2. Growth Model ReorientationThe Struggle for
Power inside the CCP

• Party factions Communist Youth League (Populist)
  coalition vs Shanghai (Elitist) coalition
• Struggle for power in the XVIII National Congress
  of the CCP (November 2012) Unequal distribution
  of power and preeminence of the Scientific
  Development concept
• The Third Plenum Session of the XVIII Central
  Committee (November 2013)
• Decisive role of the market (further
  privatization)
• Establishment of a modern financial system
  (interest rates liberalization, financial
  deregulation, renminbi convertibility)
• Creation of a state security committee
• Innovation of systems to prevent social disputes
• Red line for ecological protection

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3. Chinas Changing Role in the World Economy
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3. Chinas Changing Role in the World EconomyThe
externalization of internal conflicts

• Growing pressure on raw materials providers in
  Africa and South American (land acquisitions and
  free-trade agreements)
• Low-wages industries offshoring to West and
  Central China and to other Asian countries
  (Bangladesh, Myanmar, Vietnam)
• Rising high-tech competition with major economies
  (United States, European Union, Japan)

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3. Chinas Changing Role in the World EconomyThe
Expanding Relevance of Chinas Finance

• Increasing convertibility of the renminbi
  (through Hong Kong), bilateral currency swaps and
  the new role of China in financial markets
• European states public debt purchases and the new
  role of China in Europes politics
• The debtor-creditor relationship and prospects
  for the China-U.S. conflict
• Subordination to the US (Chimerica) or
  reorientation towards South-South trade (Hung)
• Inability to control internal conflict and
  external pacification (Arrighi)
• Interimperialist conflict (Katz)
• Demise of the capitalist World economy (Li, 2008)