China: problems of success

Since Deng Xiaoping's aphorism "Black cat, white cat, who cares as long as it can catch mice" was burnt into Chinese souls by the successive horrors of the Great Leap Forward, its following famine and the Cultural Revolution's shambolic savagery, for three decades China has seen 10%-plus growth rates.

While China's population has grown by a third, its economy has grown 13 times meaning GDP per head is up by a factor of 10. The consequence is a cascade of goods from China flooding into the global marketplace gifting enormous gains to people as consumers while menacing their role as producers.

The overall balance of interest is misrepresented by the asymmetrical response. Jobs lost in Europe, US and Africa see demonstrations and demands for quotas, bans and retaliation; while no-one marches to celebrate dramatically cheaper goods in the shops and the extra jobs created by the new spending inspired by the initial savings.

The myth is that Chinese manufacturing is low paid. Compared to the developed world, that may be, but compared to its competition, certainly not. China marries lower pay with technology - not yet the highest - to beat the competition on productivity rather than poverty wages.

The average salary in 2006 at Shanghai's Three Gun textile and clothing company was euro2700 (£1,850), roughly what my father, a skilled toolmaker, earned in the 1970s in Gloucestershire.

China's three problems

China faces enormous problems that Hu Jintao and the leadership of the Communist Party must tackle at the 17th National Congress later this year, but these are problems of economic success not failure.

They are threefold: internal immigration, corruption and pollution. Today mainland China is two countries inside one nation. Hundreds of millions in the predominately urban East have a better standard of living than that of the inhabitants of the two newest EU Member States, Romania and Bulgaria after taking into account comparative purchasing power; yet the rural West is in parts worse than sub-Saharan Africa. The result is a migration on a colossal scale. More than 100m peasants have flooded into the cities looking to escape grinding rural poverty and find the good life.

This places enormous pressure on the urban infrastructure - with overcrowding, soaring property prices and internal migrants outside the safety net of the state in terms of healdi, education and workplace protection.

All this is leading to increasing unrest throughout China with thousands of civil disturbances occurring as people refuse to bear the unbearable any more in fields, factories and workshops.

The 17th National Congress will have a twin track strategy. First to shift resources from East to West, from Urban to Rural to try to narrow the yawning income gap that is making internal migration so compelling. The aim is also to improve social conditions, reduce or remove education fees and abolish agricultural taxes.

Putting a television in every village was not entirely a success, as it provided the visual confirmation of the better life elsewhere. Secondly, providing basic education and welfare for the children of migrant workers in the cities. The result may be to slow slightly China's breakneck growth, but it will be a price worth paying if it improves social cohesion in town and country. At the same time Beijing will strengthen the rule of law, albeit of a very draconian stamp.

China's booming economy is also inciting corruption amongst the cadres. The boom in real estate, massive foreign direct investment, privatisation and company restructuring mean those at the top of the Party in places like Shanghai, with a maximum income of euro700 month, are making decisions worth billions.

The consequence is that Qiu Xiaolong's fictional Inspector Chen has now spent four novels rooting out graft in Shanghai, while in real life dark clouds hang over parts of the administration. The selfless dedication of the past is fast eroding as the last of the revolutionary generation pass away.

Ruthless punishment

The only control over the 'red princes and princesses', the second and third generation children of the revolution, is the threat of ruthless punishment.

The recent execution of Zheng Xiaoyu, the ex-head of the State Food and Drug Administration, for colluding in the production of counterfeit medicines that may have killed hundreds is one recent example. A similar fate is likely to befall those recently arrested in Henan and Shanxi provinces for employing slave labour.

In current circumstances, while China is narrowing the range of offences for which the death penalty applies and now requires final authorisation from the Supreme Peoples' Court before execution, the death penalty is more likely to be abolished for murder than economic crime. The problem is that this is only a short term stopgap. When top cadres can increase their salaries 50 times by moving into the private sector, in future only the most mediocre will view promotion to top party positions as anything but a way station to wealth.

As for the environment it's a classic case of 'where there's muck there's brass'. Industry and pollution have risen as one. China's cities are blanketed in acrid smog, searing throats and burning eyes, while the rivers resemble chemical drains more than flowing water. Mao's swim in the Yangtze couldn't happen today; track events at next year's Beijing Olympics are not expected to yield too many world records with the poisonous atmosphere choking lungs.

Even so those eager for China to fail may be disappointed. Hu Jintao and the Party seem determined to act and start redressing the balance between city and country. This will be easier to do when the cost to the conurbations are slower growth rather than diverted resources.

As for corruption and pollution Beijing may well learn from Tokyo. In Japan public penury and private wealth is overcome by bureaucrats parachuting into the private sector after the age of 50 and thus redressing the financial balance en route to retirement.

In the 1960s and 1970s, Japan was as dirty and diseased as China is today. It was public pressure and technology change, as the best replaced the rest that saw Japan's cities bloom with street monitors providing a public record of pollution. With each passing year the numbers tumbled and tumbled until the displays were endless lines of zeros and they disappeared as quickly as they came.