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Thomas Heberer on the situation in China

Empire of the Middle – Quo vadis? China between mega development and stagnation

 November 30, 2016 

Thomas Heberer


Fifth modernization

Since 2014, the reports in our media have increased that political developments in China under Xi Jinping are increasingly repressive features. Scientists were more confined and narrow-minded in terms of content, international organizations and NGOs in China. It is indeed more centralized, regulated and institutionalized. This is the end of the year of China’s economic development.


The old model has been given by the concentration on pure (quantitative rather than qualitative) economic growth, investment in industrial overcapacities (steel, cement, etc.) and export sectors; increasing inequities in income and inequality, a widespread environmental and ecological problem, and weak domestic consumption. this

Model no longer meets the requirements for a continuously evolving modernization.


The political leadership of the European Union in November 2013 to develop a new growth and development model by 2020. It is called “Fifth Modernization” and aims to modernize governance. The new program includes three main points: (1) modernization of the governance of the state, ie the transformation of the state into a service, as well as extensive reforms of the financial, fiscal, tax and land system. (2) In addition , the new model is to meet the criteria of “sustainability” in the sense of environmentally friendly and ecological development. At the present time, it is not (yet) intended to create a legal state, but rather the legal system in the sense of “governing with the help of law”.First and foremost, as well as a sense of right and the right to exist. (3) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1). The state will therefore continue to be a regulatory role. The private sector, in any case of the engine of economic development, is to be further developed and promoted, in particular with regard to the superiority of industrial production, the efficiency of enterprises and more effective enterprise management,


Moreover, a reform of the state-owned enterprises is being pursued. Not only are they supposed to hold their ground in the market economy, they should also be used to finance the social systems. State monopolies such as oil, natural gas, electricity, railway, telecommunications, resource development and public services are now to be opened up to non-state capital. At the same time, state-owned enterprises are encouraged to acquire shares in private companies. Through the creation of a mixed ownership system, the capital allocation and the operational efficiency of the state-owned enterprises are to be improved.


Reorganization of society: urban and rural areas should be linked more closely, social security systems created for all Chinese, reformed existing residential and residence rights (Hukou system) since the 1950s.


Functionality of politics: the state as a developing state

The state and its function are at the center of Chinese development. Without thinking about its functionality, it is difficult to obtain a well-founded assessment of Chinese development. I call this state a ‘developing state’. A developing country differs from the concept of a “developing country”. The former is a state which deliberately and purposefully pursues the development of a country, beyond all social and political resistance. This development striving is successful and involves not only a modernization of the economy and the administration, but also a noticeable reduction in poverty and a significant improvement in the living conditions and living standards of the population.


The term “developing state” was originally applied to the analysis of development in Japan, later to South Korea, Taiwan, Singapore and Malaysia. In all of these societies, the state played a significant role as a development agency, designing and controlling the development or modernization with the help of control plans. This is exactly what we find in contemporary China.


In all cases “developing countries” were initially authoritarian structures, in which individual parties (Singapore, Taiwan, China) or the military (Japan, South Korea) had seized power, on the other hand, repressively reigned, but on the other hand successful development of the country forced. At the same time, they attack or use repressive means when internal opposition to their development goals and policies increases. In all cases, developing countries and today China also supported an effective bureaucracy, which put the respective policy into practice. Not only does the Chinese state regulate its market and business development, it also assumes macroeconomic and macropolitic control and regulation functions.


New development model and anti-corruption campaign

There is massive opposition from a wide range of stakeholders (government, local officials, banks, etc.) against the new development model of 2013, combined with a large-scale anti-corruption campaign since 2014. Anticorruption control is a specific mechanism to break this resistance. Corruption was never fought on its own, but always had a political function beyond the moment of deterrence (eliminating the opponents of a specific policy, now the opponents of the policy of rebuilding the development model). It also serves to restore central control and is in the interest of consolidating and creating new trust in the party.


In such reorganization phases, the state always reacts with more repressive measures to stabilize the system. The large majority of the population appreciates such an approach, since the anti-corruption campaign is not directed against the normal population, but against the officials. And the conversion to a new development model corresponds to the goals of a modern economic and social constitution. It is welcomed by the majority of the population if and in so far as it does not have a lasting negative effect, for example with regard to employment, social security or property security.


China to solve the problem: Quo vadis?

China is currently faced with a variety of economic, social and political problems:


The question of the “middle income trap” arises economically. What is meant is that with rising income and higher living standards the per capita

Income at an international medium level. Now growth is stagnating, production costs are rising and competitiveness on the world market is declining. For there, China competes on the one hand with low-cost countries, on the other hand, it can not keep pace with the quality of the products of developed countries. Economists in and outside China warn that China could fall into this trap, with negative consequences for the country’s stability.


Socially, the growing inequality of income, problems of urbanization and the integration of urban and rural areas, the uprooting of the rural population, the necessity of transforming the education system into a system of creativity and innovation, the aging society, enormous environmental problems, the moral decay of society as well as the erosion of the traditional value system, ethnic tensions and the rise of nationalism are the core problems.


From a political point of view, no regime change is to be expected in the short and medium term. There is also no reason to expect “major reforms” such as the establishment of an independent legal system or the division of powers. However, further reforms are foreseen, such as the transformation of the economic model, political institutionalization and the improvement of governance. Political reforms in the sense of deep political change are not foreseen. Too great is the fear of the political leadership, a simultaneous parallelism of basic economic and political reforms can lead to instability and the entire political system can shake. Only after the creation of a stable economic basis are fundamental political reforms foreseen. Whether the fears,


In order for a political structure to remain stable, it is necessary to create specific conditions for this. In addition to civil society structures include greater freedom for the media and NGOs, the development of citizenship and civic duties, a functioning legal system that ensures the rights of citizens, legal awareness of both the citizens and the civil service and civilian forms of conflict resolution. Civil society structures, a sense of citizenship and a functioning legal system are still at an early stage of development. However, the Chinese state now functions as a political entrepreneur and a political architect who wants to create functioning structures and develop the country. It remains to be seen to what extent the present leadership will succeed,