Introduction
Although there is no concise definition of Capitalism, but the way China has encompassed capitalism since 1990 is exemplary to the universal economic system. It is said by many capitalist philosophers and politicians that Capitalism and democracy go hand in hand. China has not only in this context been able to maintain a successful capitalist system but also been able to prove the above notion wrong by surviving successfully without democracy. Chinese people experience authoritarian regime. According to the Western democratic concepts, Capitalism in China emerged as a threat which challenged sovereignty and autonomy on one hand while making the Chinese Government accountable on the other (Scott, 2008).
Main Text
In order to introduce capitalism and to be a global market power, China borrowed economic theories from capitalist countries, but incorporated them ‘on its own terms’, leaving the communist government in control. Ramey (1998) mentions in his article that this way the capitalist economy assigned the government role of ‘chief executive officer’ and ‘controlling shareholder’ of the economy and its enterprises (Ramey, 1998).
Being a communist nation, the working class in China surprised the world by their lack of support for the communist regimes that seemed to be giving them what they had always wanted, that is guaranteed secure jobs, pensions, vacations, family benefits, health benefits, limited working hours, and so on. Although the working class appreciated the security, safety net, and welfare state programs provided by the communist regimes, but it remained unable to overcome the negative factors that were inherent in the working class life-style in communist societies.
Chinese people marked the negative features of communism, particularly workers, if they had job security, they lacked in having much job choice. They were placed by government officials into jobs that officials need to fill and if the workers were unhappy with this, there is little they could do. Workers also resented the lack of ability to move to areas of the nation, or neighbourhoods in a district, which they would prefer. Of course, many workers were contented to stay where they were, but many wanted capitalist society where more freedom of movement was to be followed. In an overcrowded and overpopulated nation such as China, restricting the movement of workers was not a thoroughly irrational policy. There was a threat to the Government that if many workers crowded the bigger cities, such as Shanghai and Beijing, the emergence of giant slums would occur. Therefore barring this phenomenon, however, many workers preferred at least some freedom of movement within their nation (Glassman, 1991, p. 25).
Before 1990 the majority of younger workers preferred the accumulation of consumer goods to job security and low rents. At that point they were willing to take the risk of unemployment by bringing in capitalist economic mechanisms in order to gain the fruits of such capitalism. That clearly indicates that Chinese believed in a capitalist economy where they had been able to practice their interest according to their own job choice and freedom. There were reasons behind believing in capitalism as the working class was willing to give up job security because they see two things on their jobs, inefficient production, and due in part to over employment of labor; and careless products being produced by the bureaucratic communist economy.
In actual by capitalist state Chinese dreamt of living a life style free of bureaucracy so that they may be able to offend their sense of pride and demean the life-style of the workers’ families. Another factor that pushed many workers away from communism towards capitalism was the possibility for opening a small business. Chinese were aware of the fact that even if one makes slightly less, one works for oneself, without the interference of the communist party officials. Workers in the communist system didn’t like to be demeaned any more than those in capitalist systems. Chinese at that time believed that small businesses would help them in gaining the possibility of greater income, and to gain independence from bureaucratic control. In China, this process rapidly drew workers to its midst though so many of these workers end up as labourers attached to small businessmen and lacked benefits, but at least they were happy they had freedom to improve their condition, though it never improved.
China from 1990 to 1997
The political outbreak followed a period of tension during which Chinese feared the break out of Civil war, however the government took various steps to control inflation in 1990. Jiang Zemin was the political figure who benefited in the era where repression was practiced. In 1992 after feeling the need for a rapid economic reform, the line of action was confirmed at the Fourteenth National Party Congress which gave a boost to the Chinese market economy while analyzing economic growth and consumerism. Mean while Chinese culture was flourished and promoted with an effect to strengthen the Chinese values of making money while maintaining a strong hold on political stability. This was the era which is said to have socialist views blended with Chinese features forming a strong Capitalist nation but with Confucian characteristics (Mackerras et al, 2001, p. 7). Capitalism in China was marked with a cultural view of economic transition that suggested cultural differences forming various types of capitalism. This is especially true within the literature on economic transitions that view the economic changes in China as the result of Chinese-style capitalism.
China practiced its own features of Capitalism which comprised of traditional values associated with Confucianism; this included Chinese characteristics such as hierarchy, discipline, filial piety and obedience to authority and gathered a strong momentum (Mackerras et al, 2001, p. 7). Mackerras et al (2001) mentions that “The standard of living continued to grow at an astonishing rate overall, but it was very uneven, with concentrations along the eastern seaboard, especially the urban regions of the southeast, but much less spectacular growth in the inland and west” (Mackerras et al, 2001, p. 7).
In order to implement the sense of ‘capitalism’ into their businesses, the Chinese deployed ‘privatization’ with a hope to modernize their economic practices. Privatization, being a significant part of Chinese economy entailed the sale of state assets to private entities so that the state may use the capital in other areas. The difference that exists between Chinese capitalism and Western capitalism is that other countries sought privatization processes as a way to depart from communist philosophy. On the contrary Chinese practice a derivative of privatization referred to as ‘limited privatization’ which entailed selling state assets to private entities to raise capital for use by the state. This way the People Republic of China retained a controlling interest in its privatized entities (Ramey, 1998).
The aim of the Government was to incorporate capitalist functions to allow economic growth while retaining control by implementing underlying social policies. When in 1978 Deng Xiaoping while remaining in power initiated a series of reforms devoted to civil matters, the purpose was to fulfil the practical necessity. Xiaoping’s efforts are still remembered for introducing the ‘open-door policy’ centred on utilizing market mechanisms and foreign resources that included foreign capital and technology to speed up the growth and modernization of the economy. Among his efforts towards a capitalist economy are the steps he took for including banking and securities market reforms which not only strengthened the Chinese economy but also provided investment capital to Chinese industries.
Chinese path-dependent nature which ultimately drove them towards transition of allowing China to fit well with the comparative capitalisms, argue that there is little convergence of capitalist forms in the world economy. Market emergence and transformation were dependent on the pre existing institutional structures that were in place before Chinese reform. Being a capitalist nation from 1990 onwards helped Chinese foreign investment to play a pivotal role in the types of decisions and practices Chinese organizations adopt and the ways they think about economic change.
During the era from 1992 to 1997, formal relationships with foreign organizations through joint-venture partnerships performed a positive effect on the Chinese institutionalization of complex pricing systems. Location under bureau governance also increased the likelihood for a firm to adopt more complex price setting practices than were firms at lower levels of the industrial hierarchy.
On the other hand, Chinese through presenting in a spirit of piety in the cultures of Confucianism, deployed what they learned but never abandoned the knowledge they acquired, through conventional understanding of Confucianism, into the cultural foreignness of China (Jensen, 1999, p. 281). Political and International theorists believe that while reconciling the plural discourses common to an economy of delight with the singular representation of tradition as ‘Confucianism’ favored by Western and Chinese modernity, we must choose either to accept the obvious or to criticize it.
If we analyze Chinese capitalism blended with its own cultural heritage of Confucianism, it is clear that on the surface, history and the nature of capitalism offer compelling arguments for the sanction and isolation positions in China. Political theorists argue that China would have much to lose if the international community was united on the issue of sanctions, and this approach has been successful in notable cases such as South Africa. Further examples of exploitative practices among businesses seeking cheap labor is in front of us so what reason do we have to expect that the case of foreign investment in China would be any different?
Still, the Chinese case of implementing Capitalism is unique in a number of ways, and the particularities of investment and economic development in China lead to an argument for engagement and the importance of foreign investment in systemic change (Guthrie, 1999, p. 211). First of all, with vast untapped markets and much money to be made, it is inconceivable that the international community will ever by unite on the sanctions position with respect to China. However, the most important fact of investment in China is that most foreign investors are more interested in setting up foreign Chinese equity joint ventures and capturing a share of the domestic market in China than they are in seeking out cheap labour. That means they are interested in stable, long-term investments many joint ventures are twenty-year renewable agreements.
Because foreign businesses setting up joint ventures are investing for the long term, finding a stable investment partner that understands rational-legal business and labour practices is among foreign investors’ highest priorities. Chinese firms, for their part, want the opportunity to attract foreign joint-venture partners which bring capital, technology, and status so many of them are changing in radical ways to appear as stable investment partners that are savvy of Western business and labour practices (Guthrie, 1999, p. 211). Today despite the fact that foreign investors are not motivated by goals associated with human rights in the foreign-Chinese joint-venture relationship, Chinese Government coupled with the emergence of laws, is still on its way to be a global market power.
References
Glassman M. Ronald, (1991) China in Transition: Communism, Capitalism, and Democracy: Praeger Publishers: New York.
Guthrie Doug, (1999) Dragon in a Three-Piece Suit: The Emergence of Capitalism in China: Princeton University Press: Princeton, NJ.
Jensen M. Lionel, (1997) Manufacturing Confucianism: Chinese Traditions & Universal Civilization: Duke University Press: Durham, NC.
Mackerras Colin, Mcmillen H. Donald & Watson Andrew, (2001) Dictionary of the Politics of the People’s Republic of China: Routledge: London.
Ramey Todd Kennith, (1998) “China: Socialism Embraces Capitalism? An Oxymoron for the Turn of the Century A Study of the Restructuring of the Securities Markets and Banking Industry in the People’s Republic of China in an Effort to Increase Investment Capital”
In: Houston Journal of International Law. Volume: 20. Issue: 2. Scott Bruce, 2008. Web.