China: Capitalism with an Asterisk

Written By Brian Hicks

Posted April 11, 2007

As my host drove me through the western Chinese city of Xining, he smiled kindly. "Here you can really see socialism," he told me, contrasting this smallish provincial capital with the mega-cities of the east. "Where is this socialism?" I wondered. "In the KFC, or the Buick dealership?"

China calls its system a "Socialist Market Economy," which is sort of like a vanilla-chocolate swirl frozen yogurt. Why have one flavor when you can have both? The thing is, they could just as well have called it "Maoist Capitalism."

While China should be struggling with the changing nature of its economic and political identity, many in the government and among the hoi polloi choose instead to ignore the contradictions that are so apparent to us. "You have 10% GDP growth with an ever-widening wealth gap, peasant migrants flooding cities to work menial jobs and barely eat, and you espouse the benefits of a ‘harmonious society’ while using cattle prods on imprisoned priests."

Or so I would have said. But you learn after a short time in China that your blabbermouth Western ways and desire for discourse are not welcome. Extended to the international echelon, official criticisms of China, especially those having to do with how the Middle Kingdom has transformed itself into a land of relative plenty, are greeted with all the warmth of a land mine.

Cultural norms are a matter of government regulation to an extent unimaginable even in the sometimes-puritanical American media. For a case in point, look no further than last week’s admonition from the State Administration of Radio, Film and Television, the Beijing body that controls content, to the makers of "Happy Boys Voice," an American Idol-style show. The show’s producers were told to eschew "weirdness, vulgarity and low taste" in favor of the promotion of socialist values.

 

So it follows that when the United States government finally grew a pair this Monday and filed two cases against China at the WTO, the official Chinese response was bristly.

A Sensible Move

"It is not a sensible move for the U.S. Government to file such complaint," said Tian Lipu, China’s head intellectual property rights official. The complaints revolve around the copious amounts of pirated patented material circulating in–and emanating from–China.

You see, CDs, DVDs, books and software from outside the country are widely available in China, but they never enter the country. No, the Chinese have not mastered the technology of teleporting (though that would be a handy way to invade Taiwan). Rather, these products are blocked from importation by the watchdog culture ministry in charge of promoting that "harmonious society" by banning the Da Vinci Code and films with overt sexuality. They then magically materialize in the Middle Kingdom.

If you’ve ever been to New York’s Chinatown, you have just an inkling of what kind of counterfeit cargo we’re talking about. Knock-offs of designer handbags and watches fill back rooms along Canal Street in the Big Apple, right alongside DVD copies of movies that just hit theaters. Now extrapolate those small operations from a neighborhood up to a national level, and you get the picture, complete with a glossy case and shoddy translation.

Is it just a coincidence that news of this American move on movies and such comes on the same day as the announcement that China’s international trade surplus nearly doubled in the first quarter of 2007? Yes, but only as much as running into your barber at the barbershop would be considered a coincidence.

These trade surpluses are helpful in their predictability, giving trade officials a regular shock they can set their clocks by. Even Chinese exporters predicted a jolt this winter, as according to reports many businesses hurried to send their wares seawards before the trade tide turned.

I have often said that the American consumer market has painted itself into a corner vis-à-vis its dependence on cheap Chinese goods. Almost every item–down to the little plastic American flags little kids get on Independence Day–is made in some factory in Wenzhou, Shenzhen, Jilin, or some other city of many millions that you have never heard of.

But the Chinese need these clueless clients just as much as the wholesalers and importers need low-priced goods.

This is not just a matter of movies and music. The new WTO suits mark an attempt to dent China’s armor in a more effective way than Washington’s currency criticisms (the yuan has gained only 7% against the dollar since it was allowed to float freely during my July 2005 stay in China).

China’s State Administration for Industry and Commerce released its 2006 figures for bribery in the Chinese industrial sector on Monday. The over 9,000 cases the SAIC investigated marked a 200% increase from 2005, totaling 250 million dollars. Fines also increased by 156%, but if these numbers reflect only those transgressions that are actually investigated, you can be sure there is plenty of vibrant venality left in the shade.

This goes especially for government officials and Communist Party members, whose bribes and guanxi (balance of favors) can, ironically, thwart corruption investigations.

Yet there is hope. With a combination of internal awakening to the reality of a true market economy and consistent pressure from China’s biggest trading partners, Beijing will get serious about its international role.

Then one day the Chinese may yet realize what they have become–capitalists.

Regards,

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Sam Hopkins

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