State Failure and Distorted Urbanisation in Post-Mao's China, 1993–2012

Yazhuo Zheng, Kent Deng

• Publisher: Palgrave Pivot
• Year: 2018
• Print ISBN: 9783319921679
• eBook ISBN: 9783319921686
• Topic: Economics
• Subtopic: Business General
• Index: Economics

This book examines failure in the urbanisation of Northwest China as a result of government industrial policies that have impacted on the economic development of the region. By looking at the under-researched provinces ofGansu, Qinghai and Inner Mongolia, which make up a quarter of China's territory, Zheng and Deng challenge the common story of China's miracle growth and reveal the dark side of the country's pursuit of modernity.

Severe weather conditions, chronic drought, permanent lack of oxygen and unforgiving terrain in the Northwest make farming, manufacture and services difficult simply because people tend not to stay. Yet, China's current political system forces growth to take place even though basic conditions and prerequisites for market-based growth are missing. This volume analyses 'ghost cities' and social tension in the process of 'forced urbanisation' in which huge amount of resources are wasted, the local environment is systematically damaged and ordinary people's basic rights are brutally violated in the name of higher GDP and greater government glory.

© The Author(s) 2018

Yazhuo Zheng and Kent DengState Failure and Distorted Urbanisation in Post-Mao's China, 1993–2012Palgrave Studies in Economic Historyhttps://doi.org/10.1007/978-3-319-92168-6_1

Begin Abstract

1. Introduction

Yazhuo Zheng¹ and Kent Deng²

(1)

Beijing Enlightenment Institute for Economic and Social Research, Beijing, China

(2)

London School of Economics, London, UK

Yazhuo Zheng (Corresponding author)

Kent Deng

Abstract

This chapter aims to briefly introduce the aim of this book (to reveal what China is really like and how its systems work), the real factors for China’s growth and development, the role of the state in China’s economy and the reason why we focus our observation on the Northwest region.

In this chapter, it is demonstrated that the China economy is far from success. The party-state owns and allocates key resources including capital investment and mass consumption to generate fast growth. Although the outcomes are often negative, the party-state keeps doing so for continuously high growth, which gives the centralised state legitimacy. We can see the state’s role more clearly in the underdeveloped Northwest region.

Keywords

KeynesianismCoastal growth engineNorthwest regionEconomic reformEconomic growthParty-stateChina Model

End Abstract

1.1 The Aim of This Book

The aim of this book is to allow the reader to better understand what has been going on in China and its economy and why.

Granted, China has been roller-coasting faster than ever in her millennia’s long history from the adoption of Marxian communism to Stalinist planner economy, via the ‘Cultural Revolution’ (with the same spirit of the Trotskian ‘permanent revolution’) to the approach of the Leninist ‘New Economic Policy’ to deregulate and revive the timeless market economy . With these changes, China has also stumbled into external globalisation fuelled by new technologies such as internet and artificial intelligence. This means that the country is a collage of at least seven generations, each possessing distinctive manners, values and outlooks which clash inevitably. And no generation can transcend its counterparts easily. This is China’s reality today.

One factor which has, however, remained unchanged over the past 70 years of dramatic changes taking place in every decade: the rule of the Chinese Communist Party.

An internal observer may thus see China as the most transformable country or the one of the most anti-change. Likewise, China may be seen as being experiencing its best age or its worst. Opinions are divided at each and every level of society.

Many external observers have been stunned by what China has done in particular regarding a large country that has made abundant policies in the West, be it Keynesianism, not only work again but work remarkably better. So much so, there is an undercurrent to see China as a model for a new global order and global governance.¹ The logic is simple: If China can rule 20 per cent of the world population so well and achieve the status of the number two economy in the world so easily, its model may suit the whole world better than any of what the humankind has hitherto tried. For them, variety (such as Alibaba e-commerce and Huawei 5G broadband) and speed of growth (high-speed train and high-speed urban expansion) mean outright efficiency. China must have a lot to offer to the outside world. The rival view insists that China’s model is costly or dangerous in terms of the lack of the rule of law and human rights, runaway industrial pollution , income inequality, official and business corruption, increasing tendency towards external expansion and so forth.

In this context, there are several ‘Chinas’. The differences between the prosperity and optimism in China’s coastal growth engine (called BSGS: Beijing-Shanghai-Guangzhou-Shenzhen) and the backwardness and pessimism in China’s sleepy Far West region ( da xibei ) are striking and self-evident (Fig. 1.1).

Fig. 1.1

Shanghai’s Pudong Financial District vs. Rural Xinjiang (Kashgar). (Photographer: Liang, Hongjiu and Yazhuo Zheng)

Our ambition is to reconcile trees (fragmented and often intuitive impressions of China) and the forest to reveal the myth of China: what China is really like and how its systems work. Our starting point is 1993, the year in which the foundation of post-Mao neo-statism was laid, an approach that makes a huge difference, ceteris paribus.

1.2 Factors for Growth and Development in China

China has been successful in economic growth. This has been accepted as a fact. But behind all the high-growth data, what are health muscles and what are edemata? In addition, what are the key factors for China’s growth to be generated? Is it a high savings rate that leads to a high investment rate, theorised by the endogenous growth model?² If so, where does a high savings rate come from? Is a high savings rate quintessentially of a Chinese cultural and traditional virtue? If true, why did it take so long for China to take off since the 1840 ‘Opium War’ when industrialisation displayed its power at China’s doorstep, or the 1860 ‘Westernisation Movement ’ when Qing mandarins took their initiative to learn from Europe?

If we take China’s unchanged rule by the communist party, everything becomes easy to explain: The ruling party gave up its ideological purification and political purges and amassed key resources for economic growth. The result is an enlarged cake made of more GDP, more cities and more infrastructures.

However, the cake may be fluffy and China’s growth is unstable. The economy is facing overproduction , a housing bubble, a debt crisis, environmental degradation, income polarisation and so forth. Each alone may wreck the economy. Our task is to trace a common root cause of all such problems. The housing market matters to local government revenues and the health of state-owned commercial bank s.³ Most of local government revenues come from housing market especially from land leasing incomes while more than half of state-owned commercial bank loans go to housing market. Housing market is the interface between ordinary consumers and the state sector. Apartment blocks channel and syphon ordinary citizens’ income s (includin...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. Theoretical Foundation and Literature Review
• 3. Typical Cases in Northwest China
• 4. Understanding of China’s State and Market
• 5. Conundrum with Distorted Urbanisation
• 6. The Central Government and Its Goals
• 7. State-led Growth and Domestic Debts
• 8. Final Conclusions
• Back Matter