Asia Centre

At the close of the Plenary Session of the 16^th Central Committee assembled in Beijing between October 8 and 11 2006, the notion of "a harmonious society" was firmly installed in the political jargon of the Hu-Wen partnership.

The Plenary session's final communiqué, and the favourable press coverage which accompanied it ("Social formula of hope" as the China Daily put it^[1]) show that a political consensus has been established about the urgency of social problems. "A harmonious society" had thus become "an essential quality" of socialism with Chinese characteristics.

The communiqué identifies income differentials, corruption, pollution, and access to education and health care as being the principal "contradictions", and proposes, by 2020, "real respect for and protection of civil rights, an increase in family property under an orderly and reasonable system of redistribution, and job security and social security for the rural and urban population"^[2].

But how, beyond making declarations, can a harmonious society be created in China? While symptoms such as corruption and income differentials are obvious, the answers are the subject of debates, one of which is reported in the liberal journal 21 Shiji Jingji Baodao.

The authors brought together three analysts for a debate about this question: Ding Ningning, director of the social development department of the Development and Research Council (a research centre subordinate to the Prime Minister's office), Wang Dongjing, director of the economics department of the Party's Central School, and Liu Fuyuan, deputy director of the macroeconomic research department in the NDRC.

The discourse of these three researchers, who have close ties with the country's decision making authorities, is swathed in Marxist quotations and argues for a prudent beginning of democratic reform, which consists of strengthening an independent judicial system and increasing public participation. Without going so far as advocating a multiparty system, they nonetheless refer to "the necessity for the reform of the political system" (Wang Dongjing) and for "moving towards a democratic system" (Liu Fuyuan).

As they see it, the fundamental problems are as follows:

1.       Income differentials. While this is not a recent subject, debate about it remains constant. However the discourse is often limited to the necessity for increasing the incomes of the most disadvantaged in China, in particular the peasants and nongmingong (worker peasants), by establishing a minimum  wage, or through public allowances: the present imbalances are the result of the market economy and cannot be corrected by a dose of social protection. However, the authors assert that these inequalities are due to the illegal enrichment of some businessmen and to the takeover of public property, which is then perpetuated in a system of accumulation of wealth by a small minority. Indeed, Deng's call to "let a part of the population grow wealthy first" has now been reformulated with a correction: "grow wealthy honestly", so that wealth will spread to "those who work diligently".  But this is not the case in reality. The original accumulation was carried out by the State and its distribution was thus only partial. Whence also the "hatred of the rich". The solution is therefore not only to increase the incomes of the poorest, but also to guarantee access to public goods and services such as education, health care, social security, etc. Not only the distribution of wealth needs to be revised but also that of public goods and services, without however sacrificing economic efficiency "in the name of social equity". The authors wonder why the maintenance of infrastructure in urban areas is paid for by the public finances, while in the countryside it is paid for by the local population. This imbalance is therefore linked above all to the definition of the role of government, and its ability to provide the population, over and above a minimum income, a minimum standard of living.

2.       This problem is closely linked to the question od demographics and therefore of employment. In the West, the economic transition and the rise in living standards were essentially produced by the reduction of the agricultural sector. The rural sector, however, does not benefit from an education system on a level with that of the urban system, nor from a social and medical network. But the problem is not limited to the position of the peasants. The demographic problem is twofold: on the one hand the demographic structure is such that the Chinese baby boomers (born after 1958 and after the Cultural Revolution) are, at the moment, all in the job market. In terms of the present situation, they are likely to retire at 52 years old: a twenty-year retirement without any pension funds and with a family reduced to a single child who will be unable to take on all the burden. On the other hand the abundance of labour remains a problem in this transition stage. In the West, demographic growth was accompanied by territorial expansion and widespread migration, which is impossible in China^[3]. While in Western economies an unemployment rate of 4% is considered to be full employment, in China that would amount to 24 million unemployed!

Moreover the job market, which at present is saturated in China, restricts the possibility of a rise in wages: firstly the law of supply and demand imposes low labour costs; secondly any attempt to introduce a minimum wage protected by a contract could be subverted by the growth of an unofficial and illegal market, encouraged by jobseekers prepared to accept less favourable conditions than those stipulated by the law.

Lastly, in relation to corruption, to the links between officials and economic players and to the increasing role of interest groups in the Chinese political system, the researchers also favour a greater role for judicial control, because at present "the higher up you go politically, the weaker the judicial control".

Finally we get back to the State and its role, and just beneath the surface, its nature itself. The authors all agree that the State plays an inappropriate role in the management of economic regulation: it will perhaps be impossible to break the seamless link between officials and businessmen which is inherent in the Chinese system, but it should be counterbalanced by a redistribution of public goods and services and by new ideas about the allocation of public funds.

The authors believe that the monopolies should not necessarily be broken, particularly if it's a question of replacing them with local monopolies and an interruption in services. "Even the monopolies can be regulated" and can be subjected to inspection by the media and the population. Liberalisation is not the objective to be desired at any price, and the authors do not consider the existing monopolies to be the source of the problem. Indeed, they maintain that it is not in the sectors where the monopolies operate that salaries are the highest, but it is the protection and thus the power given to them by the State which causes difficulties.

Thus the State should take up a clear position in the management of national security (without the latter being any more precisely defined), of social equity, of public goods and services, and in the measures against poverty, but should with draw from the management of all the other sectors (有进有退, youjin youtui) and, above all assess its own role in the country's economic activity. The authors conclude that the real changes to be made are therefore the following:  firstly a redefinition of what constitutes political merit (the assessment and promotion of cadres should be linked to services rendered to the population rather than to GDP growth), secondly the pursuit of democratic reform, and lastly "the leadership should go through training at the lowest grades".

Indeed a fundamental contradiction needs to be resolved: "How is it possible to promote responsible leaders in a system of collective leadership, and to promote officials through a democratic process within the Party? ".