1631100.THE RISE OF CAPITALISM IN CHINATis chapter tells the story of how the Chinese communist party after Mao decided to build economic strength through establishing market economy in China while keeping full control of the state apparatus.Te rise of what?During the last 20 years, but specically since the beginning of the 21 century, the world has witnessed something we could choose to call the rise of Chinese capitalism. What is rising in China is denitely some kind of capitalism: Capitalism dened as the Capital being the ruler, with the private enterprises setting the agenda for the shape and structure of society, thus also determining the life and welfare of ordinary people. But capitalism in China is in some ways dierent from the capitalisminothercountries.Ithasthewellknownuglyfaceofmoneyrst, people last. It also has the disastrous consequences of growth at all costs, nature last. But the society in which it occurs is of another substance than many other countries where capitalism is ourishing. Strangely enough, the Chinese Gov-ernment does not itself label it capitalism, but calls it: Socialism with Chinese Characteristics. In the following, we will try to describe it and analyze it. Ten HISTORY FRONT1632you can judge for yourself. Irrespective of being called one or the other -ism, the hugechangesgoingoninChinaseconomyduringtheseyearsarewellworth taking a closer look at. Made in China the factory of the worldSince the mid 1980s, China has become the factory of the world. China produces 70% of the worlds toys, 60% of the worlds bicycles, and 50% of the worlds shoes. Te economy has grown at an exceptional pace. Te growth rate is staggering. We talk about a growth rate of, on average, 9% per year with lower rates before year 2000 and higher rates after year 2000 (in 2007, it was 11.9%).Within the last 5-10 years, the kind of products made in China has also changed. Today, it is not only the light industry, like toys, clothes and shoes, that are made in China. It is also half of the worlds microwave-ovens, one third of the worlds TVs and air conditioners, and one fourth of the worlds washing machines. Chinaisshippingenormousamountsofgoodstotherestoftheworldevery day. Not much is shipped the other way. It is now very cheap to ship something from Europe and the US to China, and the freight companies have a problem: Te containers from China are full, thecontainerstoChinacanhardly be lled. A Danish freight company inShanghaitoldus: Toshipacon-tainer from China to Hamburg costs 2,000 Euro. To ship a container from Hamburg to China can be done for 50 euro. In Los Angeles, the empty containers are piling up, as they are coming in full from China, but have only little to bring the other way! Since the 1980s China has become the factory of the world. Here workers assemble dolls at the production line of Jetta (China) Industries in Guangzhou, Guangdong.THE RISE OF CAPITALISM IN CHINA1633TeChineseeconomyisnowthe secondlargestintheworld,only behindtheUSinPPP(Purchasing PowerParityameasurementto compareeconomiesbyhowmuch you can buy for your money). Te GDP of China has quadrupled from 1978 till the present day. Te living conditions for the Chi-nese people have also improvedDuring the last 30 years, more than 200 million Chinese have been lifted out of poverty. Te Chinese middle class has grown immensely. Te living conditions, especially in the towns and cities, have improved a lot. Even though the countryside is lagging behind, there are only few people starving in China these days. Tis is a big achievement, as the Chinesepopulationhasstruggledwithfrequentfaminesandmassstarvation not only for centuries, but for millennia. It is a new thing to be able to say that people in China are not starving. Asking grown-up Chinese today, you will nd that most of them remember times with very little food. People coming from the countryside still vividly remember how it feels to go to bed hungry. Te gap between rich and poorBut the disparities of the Chinese society have risen dramatically. Te economic boom has created 500,000 millionaires. Recently, the Chinese Government ad-justed its ocial poverty line. It has nearly doubled, from less than US$ 0.2 to approximately US$ 0.4 a day. But still, 49 million people are surviving below this new poverty line. And the gap is not closing. Te rich are getting richer, the poor, poorer. Tis is one of the biggest challenges of China today. During the last 30 years China has been able to bring more than 200 million poor people out of poverty, also this family of 3 generations from Northern China.HISTORY FRONT1634Te poorest 10% of the people of China earn 1.6% of the money, while the richest 10% earn 34.9%. To compare with some other countries, have a look here: Te poorest 10% earn Te richest 10% earnChina1.6%34.9%Te US2.0%30.0%Japan4.8%21.7%India3.6%31.1%Denmark2.0%24.0%Mexico1.2%37.0%Te rise from what?To understand what is going on in China today, it is necessary to take a brief look at the long history of China. From what did the Chinese capitalism rise? From other countries, we have learned about the rise of capitalism. In very gen-eral terms, you can say there are two ways in which capitalism has risen in the countries of the world: Te imperialist countries, the so-called North, devel-oped capitalism through transforming their agrarian societies into capitalist, in-dustrialized societies. Te development was sparked and supported by robbery and plundering of the South in one of the biggest crimes in human history, thecolonizationofAfrica,AsiaandLatin-America.Ontheothersideofthe table, you nd the victims of colonization. Te colonized countries have often imported capitalism more or less voluntarily from their former oppressors, now trying to play the same game. But the losers and the winners of the game remain the same. So where is China in this picture? ChinawasthebiggestandwealthiestempireintheWorldaroundyear0.At that time, it produced around 40% of the worlds GDP. China did not colonize THE RISE OF CAPITALISM IN CHINA1635othercountries.NeitherwasChina acolony.(Although,forshortperi-ods of time, the British, the Germans andtheJapanesedidoccupy,ruleor force their own interests upon China, or parts of China. But this is another long story.)So Chinas capitalism did not rise ei-therfromboostingindustrialization by colonizing other countries or from beingforcedintoitbyformermas-ters. Chinas capitalism was consciously installed by the leaders of the socialist country in the late 1970s, promoted and supported by the same leaders. Teir reasons for doing so were to release the entrepreneurial spirit among the Chinese people to spark a much needed economic growth, increase productivity and -nally succeed in making the shift from an agricultural to an industrial society. What is capitalism?Capitalismisnotthesameasindustrialism,butiscloselylinkedtoit.Under capitalism, the means of production are privately owned. If you do not own any-thing, you sell your labor. During the feudal society and as a serf, this was not an option, because you were bound to work for the landlord, and were not allowed to move or to do anything else. Under capitalism, the owners of the means of production trade their products, either with other owners or with traders, with the purpose of making the biggest prot for themselves. Te state only interferes if necessary, and basically it is the market that rules. If you are not a capitalist or a trader, you can try to sell your labor at as high a price as possible. Unfortunately, the more the number of people who are trying to do this, the cheaper the price you will be able to command for your work. Even though living standards have risen in general, 50 million people live for less than half a dollar a day, while the economic boom has created 500,000 millionaires.HISTORY FRONT1636China in the 20h centuryOn the brink of the 20h century, the last Chinese Dynasty the Qing Dynasty was still ruling, but was rapidly marching towards its end. It ended its rule in 1912. Tere was some industry around the Pearl River Delta on the south-east coast of China. Te industry was close to the ports of Hong Kong, Shanghai and Canton (now Guangzhou). Many of these industries were run by the British. During the previous century, China had been forced to let the British into its mar-ket through a humiliating Opium War, in which they were beaten by the British who had advanced weapons and more experience in conquering other countries. At that time, there were smaller workshops and trade in Chinese towns and cit-ies, but the majority of the people lived in the countryside. Te Chinese rural populationlivedahardlife.Teywereworkingfortheirlandlord,struggling against numerous natural disasters and famines, and had to pay taxes or work for the ruling Emperor. Te two great rivers, the Yangtze River and the Yellow River,frequentlyoodedtheirbanks,killingtensofthousandsofpeopleand destroying houses and farmlands. After the fall of the last dynasty, from 1912 andonwards,thingsdidnotgetanyeasier.Tecountrypracticallycollapsed, andwasruledbylocalwarlordswhocollectedtaxesfromthealreadystarving peasants. Te Communist Party was bornItwasinthiscontextthattheChineseCommunistPartywasborn.Itwasa movement based on the rural population. It was the support of the peasants that madeitpossibleforthecommuniststowin,bothovertheKuomintang(the Nationalists who currently rule Taiwan) and also over the Japanese occupation forces through a bloody war that cost millions of lives. One of the rst things the Communist party did after taking power in 1949, was to take the land from the landlords, give it to the peasants, and burn all records of the debts the peasants owed to the landlords. For the rst time in history, the THE RISE OF CAPITALISM IN CHINA1637rulers of China were on the side of the poor peasants. Te peasants will never forgetthis,andeventhoughpartsoftheurbanpopulationtodayfeelbitter because of what Mao Tse-tung did during the Cultural Revolution, the peasant population still remembers who stood up for them, and they often have a big portrait of Chairman Mao on the most prominent wall of their sitting room. Te preconditions on the brink of the Deng Xiaoping eraTe period from 1949 to 1978 was 29 years of trying to transform a society that hadbeenrunonfeudalist,imperiallinesforover4,000years,intoamodern society. It was an enormous task. Te landlords and their families were still there, the British were still there, the Kuomintang was still there, and the world was watching. Te US and Europe were terried that such a big country was turning into a communist country, and the Cold War was raging. Te Yangtze River did not bother about who was the ruler, it went on ooding its banks regularly and the common people still needed food every day. Someactionsweresuccessfullyconcluded:Telandwastakenfromtherich andgiventothepoor.Tepoorpeople,forthersttime,gainedaccessto education and health, and some modernization took place. Some things failed disastrously:TeGreatLeapFor-ward(1958-1960),whichshould haveboostedtheindustrialization of the country, instead turned out to beatragedycausingstarvationand suering throughout the country. In the1960s,inghtingintheCom-munist Party caused another nation-wide set-back: Te Cultural Revolu-tion (1966-1976). Even though the intention of the Cultural Revolution One of the rst things the Communist Party did after taking power in 1949, was to take the land from the landlords, give it to the peasants, and burn all records of debt owed to the landlords.HISTORY FRONT1638was to ght corruption, to promote equality between intellectuals and common people, and to ght the enemies of the Revolution, it actually resulted in schools being closed down for a decade, and in violence, distrust and chaos in society. Te period did not improve the life of the people. On the contrary, it caused a decrease in production and a scattered and confused population. Another conse-quence of the Cultural Revolution has been felt much later: Many of the people who were re-educated in the countryside worked alongside the poor farmers, andbecameawareoftheharshconditionsunderwhichtheruralpopulation lived. Tis became an experience that many intellectuals, party cadres and con-cerned middle and upper class people will never forget. It created a respect for common people that can still be felt in Chinese society today.About Deng Xiaoping and what happened in 1978In 1978, 80% of the population was still living in the countryside. At that time, people were organized in Peoples Communes. 250 million people were living in deep poverty. Agricultural productivity was low, and there was not enough food for the overcrowded countryside. People were not allowed to move to the cities. Te industry was inecient, consisting of big state owned enterprises. In spite of low productivity, these enterprises provided people in the cities with a life-time security, called Te Iron Rice Bowl, with free health care, very cheap or free housing, free education for their children, and pension when they became old. Tese were some of the benets that were lost during the following 30 years due to the dramatic changes that followed during that time and until today. After Mao Tse-tung died in 1976, there was a period of two years with disagree-ments in the leadership of the Communist Party about which way to go. But in 1978,DengXiaopingandhisfractionwonpower.OntheTirdPlenum(an important meeting in the Communist Party) in 1978, Deng Xiaoping launched the Reform and Opening-Up Policy that was to set the agenda for the coming decades and is still there today. THE RISE OF CAPITALISM IN CHINA1639Te color of the cat and oth-er slogansOne of the most famous slo-gansofDengXiaopingwas: It doesnt matter whether the cat is red or black, as long as itcatchesmice.Withthis slogan,heopenedupforre-formsthatwouldallowpri-vateenterprisetotakeover ownershipfromthestate, and, by this, started to steer the country towards capitalism to see if this could catch mice, which meant increase the production. DengXiaopingalsolaunchedanotherslogan:Letsomegetrichrst.With this, he wanted to open up for developing the southeastern part of the country and letting some people there get rich. Te idea was that the auence should trickle down to the rest of the people, and increase the living standards of ev-eryone. Te slogan Getting rich is glorious was supposed to send a signal to everybody that it was accepted, and even promoted, by the Government, that somepeoplewhobecamerichcouldopenlystatesoandgoonstrivingtodo even better. Tis may have been a necessary policy in the aftermath of the Cul-tural Revolution, where having the correct class background was important for getting anywhere in Chinese society, and where for instance children of former landlordswerelookeddownuponasbeingcounter-revolutionariesorpartof the bourgeoisie. Agricultural reform was the rst stepIn some provinces, people had already started to dissolve the Peoples Communes and to distribute the land among them for each family to cultivate. Tis was very Te Pudong is a new area of Shanghai, built at the delta of the Yangtze River from 1990-2006, covering 570 square km with 3 million people and dierent development zones.HISTORY FRONT1640successful,andtheproductivityofthesefarmsincreased,becausepeoplewere more directly responsible for the outcome of their work and could benet per-sonally from increased productivity. Agriculturalreformnowspreadtotherestofthecountry.AllPeoplesCom-munes were dismantled and all land divided to the families, depending on the size of the family. Still, the Government owned the land, but the families now had the right to use it. Tey could not sell it, or let other people grow crops on it. Nor could they move to the cities. But now, they could take the prots of work-ing on the land for themselves. Te state still demanded compulsory delivery of grain and cotton, but it secured an increase in the prices of food grains, which in turn improved the living conditions of the rural population. Peasants still had to pay taxes to the state. But the reforms allowed people to try to earn an extra income by growing fruits, starting sh-farming or raising livestock. Tese com-modities were allowed to be traded on a relatively open market. Village and township workshops in the 1980sTe Household Responsibility System was the name of a system that allowed people to start up private enterprises in the countryside. Each household was re-sponsible for itself, in contradiction to previous times where the working unit had the sole responsibility for all its members from cradle to grave. It resulted in the ourishing of village and township workshops. Te rst ones to benet were mainly workshops repairing and producing agricultural tools, bicycles and the like. Later they developed into small and medium size light industries. Tese units were actually started under Te Great Leap Forward, but it was rst after 1978 that they really thrived. Inthe1980s,thecountrysidewasthemostdynamicsectorofthecountrys economy. During the period 1980-86, the gross output of the rural society more thandoubled,andtheruralpopulationdeclined.TeVillageandTownship workshops were more exible than the giant State Owned Enterprises (SEO). THE RISE OF CAPITALISM IN CHINA1641Tey did not have the same obliga-tionstotheworkerswithpension, healthinsurance,housingetc.Tey didnotrequirelargeinvestments andcouldmoreeasilyshifttheir productionifthemarketschanged. Teyalsoenjoyedlesstaxandhad fewerregulationstofollow.Allthis made it possible for them to turn to-wards the international market. Local ocials and local entrepreneurs linked upA new law made it easier for the Village and Township workshops if they regis-tered as a collective. Tis resulted in many of them making alliances with local party ocials and setting themselves up as local collectives. A side eect of this wasagrowingcorruptionandadecentralizationofpower.Italsosowedthe seeds for future common interests shared by local capitalists and local ocials. In the 1980s, the collectives grew by more than 20% per year. Te cities follow in the move to the marketIn 1984, it was ocially decided to extend the reform to not only include the possibility of making Village and Township workshops in the countryside, but to also allow private and collective enterprises to start up in the cities. Soon the cities overtook the rural areas. Te Special Economic ZonesIn the mid 1980s, a new reform was launched. It was the establishment of Spe-cial Economic Zones along Chinas southeastern coast, by the Pearl River Delta (Guangzhou, near Hong Kong), and the Yangtze River Delta (Shanghai). Tese From 1978 small and medium-sized light industrial production thrived in rural areas, and in the 1980s the countryside was the most dynamic sector of the economy. HISTORY FRONT1642economic zones were made to attract foreign investments. From the state, they received tax reductions, had fewer rules and regulations to follow and also had easier bureaucratic procedures. In the beginning, it was called Te Five Open WindowstotheWorld.Later,theywereexpanded,andmanymoreregions were developed. First and foremost, these zones were attractive to multinationals and other foreign companies, because they had unlimited access to cheap labor. Incontrasttootherdevelopingcountries,theChineseworkforcewasbetter educated, healthier and very stable. During this time, people from the country-sidestartedmovingintothecitiestoseekemployment.Inthebeginningthis was all illegal, but by the beginning of the 1990s this movement was ocially legalized. People were allowed to move away from where they were registered. (Te people who moved would not enjoy the same benets as city residents if they came from the countryside. Tis is because they had their Hukou, a kind of ID-registration, in their village.) Tis system is now becoming more exible. Unfortunately, it is a growing trend to move to the city, as even with low-paid jobs in the cities and the New Economic Zones, the former peasants are still able to earn a better living than by staying in the villages. Te State Owned Enterprises SOEDuring the rst 20 years of reform, the State Owned Enterprises (SOE) lagged behind,andcontinuedtoproducewithoutmuchprot.Butthegovernment hesitated to take away the protection that the planned economy had provided for these productions. Tey knew that as soon as they let the competition rule and the SOEs had to compete on the same conditions as the private enterprises, the rst thing most likely to happen would be a modernization, causing millions of people to lose their jobs. In 1996/97, two thirds of the urban population were employed in the SOEs. 120 million people were on the move from the country-side to the cities, and 13 million workers were added to the work force every year whenyoungpeoplegraduatedfromschool.InsteadofprivatizingtheSOEs, THE RISE OF CAPITALISM IN CHINA1643thegovernmentpromotedprivate investments,givingtheprivatesec-tortimetobuilduptobereadyto receivethelaid-oworkersfrom the SOEs at a later stage, and hoping that the State sector would be forced to reform itself. Te prot from the state sector went from6%oftheGDPintheearly 80stolessthan1%in1996.Te banks in China, which were all state owned at that time, were nearly bankrupt, because they were obliged to bail out the declining prots of the SOEs.In 1997, the Party Congress nally decided to privatize the SOEs. Te excep-tionswereindustriesconcernedwithenergy,themilitary,naturalresources, chemicalsandgraindistribution.Tesewerekeptundergovernmentcontrol. Even though this happened 19 years after the reform policy started, it still hurt. Millions of workers were laid o, losing their Iron Rice Bowl with pensions, health insurance, housing and other benets. Some of the SOEs were in a very bad shape and did not even manage to pay the workers salaries. Te total situa-tion caused much suering and protest among the former state-employed work-ers. Especially hard hit were the provinces of Manchuria, Shaanxi, Hubei and Sichuan. In Chengdu, a 10 million city in the south-west of China, the number of laid-o workers exceeded 100,000. Many of them are still to be found in the tea-houses and in the parks of the city, having nothing to do, and having lost their pension. Some of the workers managed to nd employment in the private companies, but they were very few. After 1984 special economic zones were estab-lished and more cities were allowed to start up private and collective enterprises. View over Dalian, Northern China.HISTORY FRONT1644In 1999, these SOEs were closed down:435 large and medium frms31,000 coal mines70 small oil-refneriesFrom 1998 to 2002, the number of SOE workers declined from 94.7 to 77 mil-lion nearly 18 million people lost their jobs. In the same period, the number of people in the private sector increased from 9.7 to 20 million, an increase of a little more than 10 million. And still, the rural population was pouring into the cities looking for work. Foreign investments starting with wholesale import of manufacturing linesFromtheverybeginning,theChinesegovernmentimposedtherulethatall foreign companies should form a joint venture with a Chinese company to be abletoinvestinthecountry.TiswasawaytosecuresomekindofChinese control, but also to make sure that some of the know-how and technology from the foreign companies was transferred to China. In the beginning, the foreign currency was spent for importing manufacturing lines from European and US companies.Tesetypicallyconsistedofequipmentthatwasgettingtooold-fashioned for the production in these countries, and productions that were too labor-intensive and thus too expensive toproduceintheWest.Tiswasan easy way to start. Inthebeginningofthe1990s,these kinds of manufacturing lines made up 90% of all technology import to Chi-na.Later,itbecameclearthatChina needed to develop better skills in deal-ing with and modernizing technology byitself.Ifsomethingneededrepair, China exports all kinds of goods to the whole world. Te workers are very disci-plined and hard-working. Factories are often big and employ thousands of people.THE RISE OF CAPITALISM IN CHINA1645theChinesewerecompletelydependentonsparepartsandservicefromthe country of origin. In 2002, only 10% of the technology import was complete manufacturing lines, which is a sign that the Chinese are picking up and improving their industrial and manufacturing capacity. China in comparison with other South East Asian countriesIn the other South East Asian countries, the pattern was well known: Electronic industries owned by multinationals were exploiting cheap labor. Tis was seen in Malaysia, Singapore, South Korea and Hong Kong. China did partly the same, butChinawantedthemultinationalstosharemoreoftheirtechnologywith their Chinese counterparts. China also had something that the other South East Asian countries did not have: A huge market, to which everybody wanted ac-cess! So they had bargaining power that made it possible to make rm demands onthemultinationalcompaniestotransfertechnology.Tismeantthedevel-opment of a more advanced industry in China. In many countries, this would meanaturningawayfromlaborintensiveindustry,butChinawantedboth, because it had millions and millions of people who were ready to work for a very low wage in the electronic, textile and toy factories of the east coast. A side note about Chinese innovationChina is famous for many important inventions in its ancient history: Printing, iron casting, paper money, reworks, gunpowder, the compass and the abacus, besides great achievements within astronomy and maths. ButthroughoutChinesehistory,scienceandtechnologyhaveplayedaminor partinthesocietyandhashadminimumpriority.Tiscanbeduetomany reasons.Onemightbethenon-imperialisticcharacterofthevariousChinese empires. It is a sad but well-known fact that war and conquest of other countries havebeenmainsourcesofinnovationthroughouthumanhistory.Chinadid HISTORY FRONT1646not have a policy of conquering other countries; it rather explored them, nursed diplomatic relations with them, invited them to honor the empire, traded with them and gave them gifts. Sometimes, outside forces tried to conquer China. It did not happen so often, as China was both very big and also well organized. But when would-be conquerors were strong enough to get into China and get holdofpower,inevitablytheywereSinied(madeChinese)intheprocess, meaning that the Emperor for some hundred years maybe was a Mongol or a Manchu, but life went on as always in the Chinese ways due to the power and organization of the Chinese society and culture, and the Mandarins (the scholars and the bureaucrats) continued to run most parts of the society, while Mongols or Manchus gradually developed into Chinese.AccordingtoChinesephilosophy,themostimportantvalueisharmonybe-tween people, between groups of people, and between the dierent classes in the society. You often look at the context within which things happen, rather than splitting things into smaller pieces and observing them separately. Tis way of thinking is very useful when many people have to function together, meaning that Chinese people are very good at working as a group and dealing with dier-ences within the society, even when they are complicated. Butwithinmodernscience,youalsoneedtheskillsofbeingabletoseparate things, to be able to research and un-derstand their formula and content, andtocategorizeandclassifythem according to their features.InChina,scienceandinnovation havebeenweakskills.TeChinese governmenthasrealizedthis,and initsnewest5yearplanitempha-sizestheneedofdevelopinginde-pendentinnovation.Comparedto In June 2008 Volkswagen Shanghai launched its new Lavida in China, a model jointly de-veloped by Chinese and German technicians.THE RISE OF CAPITALISM IN CHINA1647many Western countries, China is lagging behind in the eld of science, but the country is working hard to catch up. More and more Chinese are now study-ing in areas within science and innovation, and this is rmly promoted by the government.Bynow,Chinaisworkingondevelopingthenextgenerationof DVDs, the EVD, which is expected to outperform the DVD. Tey are also in-vesting heavily in bio-technology and nanotechnology. Chinese technology in the modern eraBy now technology products are the fastest growing part of Chinese export. Te Chinese industry needs to develop its skills within technology even further. Te government gives advantages to foreign companies on 5 dierent conditions:Te rst three conditions have to do with transferring and imposing new tech-nology. Te fourth is about meeting the standards of the international market, and the fth is about taking part in developing Western China (which is by far the poorest part of China, and which is now the next priority for the govern-ment to develop). Companies moving the technological part of their production to China will also get VAT-reduction. Chinahassucceededingettingsomefavorableagreementswithforeignmul-tinationals: Tere are now more than 200 Research and Development Centers (R&D) set up in the country by foreign companies like Siemens, Nokia, IBM and HP. US companies expenditure in R&D in China grew from US$ 7 mil-lion in 1994 to US$ 500 million in 2000. Tis has increased the capacity of the Chinese industry. In 1990, China exported high tech goods for US$ 5 billion, while in 1998 the number was US$ 30 billion.Even though China will continue with labor intensive production, the turn to-wards more capital intensive and technology intensive production is inevitable. In only a short period of four years, these three kinds of product lines have de-veloped in the following way:HISTORY FRONT164819951999Labor intensive product lines:50.42%41.44%Capital intensive product lines:22.73%25.35%Technology intensive product lines: 26.86%33.21%Chinas export to the US has changed character. In 1999, clothes and shoes were the second and third biggest export categories from China to the US. In 2003, the four biggest import categories were all technology related, and clothes and shoescameasnumberveandsix.Tisshowsaremarkableturnfromlabor intensive production towards a more technology based industry. Upgrading Chinas human resourcesAnother area needed in order to develop the economy further is the education of the Chinese people. Te general educational level in China is better than in most developing countries, because of the free education introduced during the revo-lution. Later on, school fees have been reintroduced, but in the 11h ve-year plan, from 2006, education is again free in the countryside. Chinese families are willing to invest a lot in the education of their children. Private English schools are booming, and the number of Chinese students studying abroad is increasing rapidly. In the US, Chinese students are the biggest foreign group: 64,000 from Mainland China and an additional 36,000 from Hong Kong and Taiwan. In to-tal, there were 160,000 students from China studying abroad in 2002. Tis will have a big impact on the development of the Chinese economy. Even though some of these students are planning on staying in US or Europe, more and more of them will probably return as China becomes more modernized. China on the world market todayChina has entered the world market at a pace and speed not seen before. Not only as producers, but also as consumers. China is now the biggest market for Boe-THE RISE OF CAPITALISM IN CHINA1649ingandthebiggestforeignmarket for Volkswagen. China is also South Koreas biggest export market. ChinaisnotonlyChina.TePeo-ples Republic of China is also called MainlandChina.ButChinaisin-termingled,botheconomicallyand also culturally, with Hong Kong and Taiwanandtoanextentalsowith Singapore, because the population of Singapore is 77% Chinese. So when look-ingatChinaontheworldmarket,youoftenlookatwhatiscalledGreater China, meaning the Mainland and Hong Kong and Taiwan. Hong Kong and Taiwan have invested heavily in Chinese industry, and have harvested a consid-erable prot from this. Both Mainland China and Greater China have a growing trade surplus with the US. For Greater China, this has risen from US$ 50 billion in 1996 to US$ 139 billion in 2003.For Mainland China it has risen from US$ 39 billion in 1996 to US$ 124 bil-lion in 2003.Also, the China-EU trade results in a huge surplus for China. In 2002, the sur-plus of this trade was 50 billion Euros, roughly equivalent to US$ 64 billion. Liberalization or more state control? Within the Chinese government and among intellectuals in China, there are deep disagreements about which way China should take for the future, and the debate isaveryheatedone.TesedirectionsareoftenreferredtoastheNewRight and the New Left. One of the leaders within the New Left is Wang Hui. He was originally among the student protesters at the Tiananmen Square in Beijing in1989.Afterthemilitaryintervenedinthedemonstrations, WangHuitried Te Chinese government emphasizes the need of developing independent business skills. Here an executive is lecturing young students. HISTORY FRONT1650to escape, but a few weeks later he was arrested and sent to the countryside for re-education. Today, he appreciates this very much. Before his re-education, he demonstrated for more democracy and stronger reforms. But after having seen and experienced how the poor people in the countryside have had very little to gain from the fast economic development, he has now instead started campaign-ingformoregovernmentcontroloftheprivatesector,moreemphasisonfree education and free health, less liberalization of the market, and more protection of the common property and not only of the private property. Yellow River capitalism or Pearl River capitalismTis path is also called the Yellow River Capitalism, referring to an experiment in Henan province, south of the Yellow River. People in a village called Nanjie have developed a model with a combination of market economy and collectiv-ism. Tey have modern industries, but with free health, cheap education, free housingandwithmorethanaveragesalaries.Teytrytodevelopacommon culture, and they have compulsory studying of Mao Tse-tung.Te New Right consists of those who think the reforms are too moderate. Tey want the government to go all the way, meaning privatizing the last segments of the industry, liberalizing the market, and removing all obstacles for China to become a full-blown member of the globalized market. Tis path is often called Pearl River Capitalism. At the Pearl River Delta, the biggest economic boom in China has taken place, and this area produces 5% of all the goods manufac-tured in the world. It stands for hard core capitalism, free market at any costs, heavy foreign investment and as little state inuence as possible. Te Chinese workerTose who have made the big economic boom in China possible are the millions andmillionsofChineseurbanworkersandruralmigrants.Teyhavedeliv-ered the much desired cheap labor. Tey have worked from morning to evening THE RISE OF CAPITALISM IN CHINA1651under little protection, and little by little,theyhavetrainedthemselves indealingwiththedemandsofthe modern market. Amongthem,themigrantworkers have suered the most and paid the toughest price for the rise of Chinese capitalism.Terearebetween150 and200millionmigrantworkers. Many of them come from the poor western part of China. In Sichuan alone, there are 20 million migrant workers. Tey work from early morning till evening. Tey live in cramped barracks, 8-12 people in one room, and work 7 days a week. Te only time they go home is mostly for the Spring Festival, which is the Chinese New Year. Because they are not registered in the cities, but back home in the rural areas, they do not have thesameaccesstohealthandeducationastheurbancitizens.Inspiteofthe harsh conditions, the living conditions in the countryside are even tougher, and in order to lift their families out of poverty, the migrant workers are toiling on Chinas many building sites or in the factories of southern and eastern China. Te environmentNature is another victim of the economic boom. Here are some numbers that speak for themselves: Because of deforestation 25% of the land has turned into desert 30% of China suers from acid rain 75% of all lakes are polluted 300 million people have no access to clean water 700 million drink bad quality water 90% of underground water in the cities is aected by pollution Te farmers in the rural areas and the urban workers are the backbone of the big economic boom in China.