World Bank memos

Henry C.K. Liu hliu at
Thu Dec 10 11:00:36 PST 1998


Of course famines have to do with bad planning, but the program to eliminate mosquitoes was part of the planning. Chinese planners have since learned to consider ecological balance as an important goal in increasing production.

As for anti corruption campaigns, they are not new. In 1951, right after land and marriage reforms, and collectivization an nationalization of means of production, there was the Three-Anti Movement (Sanfan Yundong), against corruption, waste and bureaucracy. In 1952-3, there was the Five-Anti Movement (Wufan Yundong), against tax evasion, fraud, bribery, production mismanagement and theft of state property. It soon became clear to Chinese leaders that corruption was more a cultural problem than a management problem, a view that eventually led to the fearsome struggle for the correct line. A purge against bourgeois intellectuals began in 1955 with revival of the "Campaign against Counterrevolutionaries", originally launched in 1951, that finally evolved torturously into the Cultural Revolution of 1966-76. On January 9, 1957, the First Secretary of the Shanghai Committee of the CCP, Ko Qingshih, spoke for the first time of "contradictions" (maodun) in a socialist society which had to be resolved through discussion and by persuasion. )n February 27, Mao himself gave his famous 4-hour speech "On the Correct Handling of Contradictions among the People" before 1,800 leading cadres of the CCP, the non-Communist United Front parties and non-Party intellectuals. In this speech, Mao distinguished between contradiction with the enemy (di-wo maodun) and internal contradictions among the people (jenmin neipu maodun) which should not be resolved by a dictatorship of physical force, but by open discussion with criticism and counter criticism. Thus campaigns against corruption have a tradition of being the visible vehicles for political and doctrinal struggle. One can learn a lot more by analyzing the political aspects of the current anti corruption campaign which seems to be focused on a redefintion of the power relationship between the central authority and local autonomy.

As for privatization, the debate is also not new. Cao Siyuan is just trying to drum up business for himself from uninformed global capital through HK. In October 1, 1953, after a two-year-long dispute between Mao Zedong and Liu Shaoji, the CCP announced the New General Line of Socialist Transformation, in which private enterprise in agriculture, industry and commerce was to be curbed step by step and replaced by collective and state ownership. Liu's opposition Mao was based on free market economics. Yet land reform without collectivization could neither guarantee food to the urban population nor provide investment capital for industrialization. New landowning peasants preferred to sell in the open market rather than to state purchasing agents. Tax evasion was widespread in rural villages. Mao's uncompromising drive for collectivization was not only ideologically based but also pragmatically sound in relation to actual conditions at that time. The fundamental dispute was not so focused on the merits of planned or free market economies. The dispute centered on the proper solution to an obvious condition, the absence of capital, both due to internal historical conditions and external geopolitical conditions. Western capital was simply not available in the 1950s while a communist government sat in Beijing. Mao answer to the lack of capital was to substitute a comprehensive mobilization of China's vast labor reserve for the absent investment capital. The concept was to shift to a labor intensive path of development from the conventional capital intensive model. In the spring of 1958, the "Three Red Banners" (sanmei hungqi) policy was adopted by the CCP to initiate the simultaneous development of industry and agriculture through the use of both modern and traditional methods of production under the "General Line for Building Socialism" (shehui chuyi cungjian zung luxien). The policy had three interrelated objectives. It sought to use collectivization to break the the traditional family system in Chinese culture, the most tenacious force of resistance to socialism. Secondly, it sought to raise the consciousness of the masses through mass movement and general mobilization of labor. and finally, it sought use China's only available resource - people - to achieve the CCP's declared goal of leading China into the ranks of modern industrial power. To implement this policy, a new system called "Two Decentralization's, Three Centralizations, One Responsibility" (Liang fang santung ipao) was adopted in which was meant the decentralized use of labor and local investment, central control over political decisions, planning and administration of national national investment capital. The debate on centralization and decentralization, frequently misunderstood as privatization, has been going on the 5 decades. At the moment, the pendulum is swing toward centralization, for both ideological, political and economic reasons.

In Jiang Zemin's report delivered at the 15th National Congress of the Communist Party of China on September 12, 1997, he said: "The state-owned sector must be in a dominant position in major industries and key areas that concern the life-blood of the national economy. But in other areas, efforts should be made to reorganize assets and readjust the structure so as to strengthen the focal points and improve the quality of the state assets as a whole. On the premise that we keep public ownership in the dominant position, that the state controls the life-blood of the national economy and that the state-owned sector has stronger control capability and is more competitive, even if the state-owned sector accounts for a smaller proportion of the economy, this will not affect the socialist nature of our country."

Privatization is not going to be the major force in China's economic future, though its not to say that it will not be a huge market in absolute size, give the size of the Chinese economy.


Enzo Michelangeli wrote:

> -----Original Message-----
> From: Enzo Michelangeli <em at>
> Date: Thursday, December 10, 1998 11:57 AM
> [...]
> >(Besides, China's famines have much more to do with bad planning than
> >killing mosquitoes).
> Talking about which, here are two stories from yesterday's South China
> Morning Post...
> Enzo
> ======================================
> Wednesday December 9 1998
> Corrupt official gets 10 years
> The former deputy chairman of Hebei Provincial People's Congress has been
> jailed for 10 years after being found guilty of taking 170,000 yuan
> (HK$158,000) in bribes from Hong Kong and mainland businessmen.
> Jiang Dianwu took payments when he was party secretary of Baoding county in
> 1993. Jiang, 61, is an ex-member of the National People's Congress.
> Meanwhile, investigators have uncovered a web of graft so severe that a
> street where officials lived was known locally as "Corruption Street".
> Officials living in 16 of the 18 houses in a street in Guangxi's Hepu county
> were being investigated for serious offences, with seven under arrest, the
> Wenhui Daily said.
> ----------------------------------------------------
> Wednesday December 9 1998
> Beijing urged to drop privatisation 'taboo'
> Privatisation is the only way out for China's ailing enterprises, a leading
> reformer said yesterday.
> Cao Siyuan , who heads a consultancy on mergers and bankruptcies in Beijing,
> told a conference at the University of Hong Kong it was unfortunate
> privatisation was still considered a taboo in the mainland.
> "Some ideologues believe that Marx and Engels taught that the state must
> have total control over enterprises," Mr Cao said. "Yet the two philosophers
> were never advocates of state socialism."
> Mr Cao said the state sector in China should only account for 15 per cent of
> the economy.
> "At present, state firms take up roughly 70 per cent of the means of
> production but they are only responsible for 30 per cent of the value of
> industrial production," he said.
> Mr Cao quoted figures from the official press showing that up to September,
> state enterprises had run up losses amounting to 74.8 billion yuan (HK$69.56
> billion).
> However, the non-state sector, including private firms and village and
> township enterprises, was still being discriminated against in areas such as
> getting loans from banks, he said.
> "We must amend the constitution to ensure that the inviolability of private
> property is enshrined," Mr Cao said.
> The reformer, who helped draft the country's first bankruptcy law, said he
> was disappointed that the administration had, since July, asked regional
> administrations to slow down the pace of selling off medium-sized and small
> firms.
> "Some leaders say they are afraid state assets are being siphoned off
> through corrupt means," he said. "Yet if the ailing state firms are not
> privatised, they may soon become totally worthless."
> The economist, however, was not optimistic that Beijing would take radical
> steps to move reform forward.
> "More than 90 per cent of the reforms tried out since the late 1970s have
> been forced upon the administration rather than adopted at its own
> initiative," he said.
> ---------------------

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