China: Don’t believe the hype

A press release titled ‘China: Don’t believe the hype’ and a report released by the International Confederation of Free Trade Unions (ICFTU) to coincide with the WTO ministerial conference in Hong Kong claims, in stark terms, China’s ‘brighter than bright economic miricle has blinded admirers to its dark side’ i.e. that China’s rise in social inequality is unprecedented in history. And, in turn, the country has become the sweat shop of the world as huge numbers of agricultural and former state enterprise workers, deprived of any real representation, chase work in the cities.

700 million people live on less than two dollars a day. More than 15,000 people die in industrial accidents each year. Millions of workers do 60-70 hours per week, earn less than their country’s minimum wage and live in dormitories of up to 20 people in each room. Inequality is rising and there are almost as many recently unemployed people as in the rest of the world combined.

These statistics are normally not associated with something that is dubbed miraculous, but in the case of China these facts have been overshadowed by the hype.

The reasons cited include deeper integration into the WTO which has, in turn, stalled the eradication of poverty in China. For instance, over 75% of rural households are expected to suffer a cut in real incomes between 2001 and 2007. Also, the government’s relentless drive to attract foreign technology and investment and maintain an attractive and disciplined workforce that is able to produce US$30-50 DVD players.

The report states that the winners of WTO membership in China are those are already benefiting from economic reforms: government officials, private capitalists and white collar workers. The losers are blue collar workers, farmers and unskilled office workers, “whose income has remained stagnant for the last 10 years”.

“China might be on the path to full integration in the world economy but it is still far from the road to democracy. As China becomes further integrated into global trade, increased focus must be put on respect for basic human, social and political rights. As long as it fails to do so, the country won’t be achieving miracles for its people.”

China will have to create create over 300 million new jobs over the next 10 years in order to make up for job losses in agriculture and defunct state-owned enterprises. It goes without saying that this requirement is “much higher than China’s current job creation capacity”. As long as the CCP maintain a long-held policy of securing a larger share of global trade, then unemployment and inequality will continue to rise – and China’s people will continue to lose big-time.

The Discussion: 18 Comments

The hype stems from the fact that China’s current development environment is many Western economists/planners/officials’ secret wet dream.

They cherish the ability to rapidly and arbitrarily undertake mind-bogglingly huge infrastructure/industrial/urban redevelopment projects without worrying about such petty things as human life or those pesky ‘citizens’, who always seem to get in the way of what’s good for them.

Praise for the ‘China Miracle’ comes from the repressed authoritarian in all of us. It’s Modernism at it’s most brutal: seing the world as an abstract, blank slate to be manipulated and restructured at will.
It’s the city as nothing more than a map, an abstract space of ‘efficient’ transportation, production and infrastructure. This becomes all the more brutal, unfortunately, when that ‘blank slate’ happens to have 1.3 billion people living on it.

Oh well, pave over them I say!

December 9, 2005 @ 9:50 am | Comment

Great comment, Patrick.

December 9, 2005 @ 1:03 pm | Comment

If a bird falls in the forest , the ICFTU blames it on globalization.

However, the ICFTU is right in one respect. Globalization IS to blame for income inequality in China.

Before globalization, everyone was dirt poor. Now only some are.

Bad, bad globalization. Much better when everyone was living in squalor. Like in North Korea.

December 9, 2005 @ 7:18 pm | Comment

However, the ICFTU is right in one respect. Globalization IS to blame for income inequality in China.

Before globalization, everyone was dirt poor. Now only some are.

It deserves to be said again, Mr. Question Mark!

December 9, 2005 @ 8:41 pm | Comment

Sam_S and ???,

Your point is certainly well taken. The problem as I see it, however, lies in the fact that those who are not part of the “only some” profit, more often than not, from the very fact that most of their fellow countrymen are still dirt poor and desperate.The big question is: how long will this economic structure last before the “only some”,which is probably, oh, 800 million people or so minimum, get pissed off enough to try and negate those who did get better off?

And besides, ‘globalization’ is responsible for nothing. ‘Globalization’ means nothing. You want Chinese lifted out of poverty? Well, maybe we should be looking at DOMESTIC policy in the agricultural sector back way back in the day.

Just a guess, but the current ‘tall buildings and big highways and flashy lights’ mania is, in the end, screwing over a whole lot more people than it is helping, pure numbers wise.

I, ultimately, have hope for China’s future, but it’s going to take a huge bump in the road before it sets off on the right path. This current nonsense is just not sustainable in any sense of the word; economically, environmentally, socially, physically, whatever you want.

Want a bank loan? I’ll give you ten, no questions asked. As long as some farmers get beaten and displaced.

December 9, 2005 @ 11:26 pm | Comment


You are absolutely right.

December 10, 2005 @ 6:10 am | Comment

Patrick! Nice comments! I fully agree!

December 10, 2005 @ 6:15 am | Comment

While it is definitely true that there are 100s of millions of poor peasant (and migrant workers), and inequality is on the rise, it cannot be denied the fact that overall income has risen, including the poor.
and globalization, WTO, trade are the main factor for reductin of poverty.

if there is failure in reducing the gini index, blame the system. do not blame free trade.

what the article failed to compare is the same statistics across the years.

i am sure, before WTO, the income of the 700M peasant was lower, and their condition worse.

i can see there is a possibility the ‘inequality’ would continue to rise. but i seriously doubt that the income of the lowest quartile will decrease. inequality rise most likely is due to the fact that the income of the poor RISES slower than the income of the rich.

i also do not see the logic that “unemployment” will continue to rise. as a matter of fact, unemployment has been decreasing all the past 15 years. (also was underemployment)
the only consequent of job creation is decrease in unemployment.

December 10, 2005 @ 11:19 am | Comment

let’s compare the 2 scenarios side by side. free trade and no free trade (WTO vs no WTO for China).

the no free trade case will definitely mean less employment, lower income and more miserable lives for the poor in China.

December 10, 2005 @ 11:23 am | Comment

Sun Bin,

I’ve always been under the impression that China’s real push out of across-the-board poverty came with the dismantling of socialist agriculture and the rise of rural enterprises- and this happened a while ago, nothing to do with the WTO.

And I have trouble with crediting empty buzzwords like ‘globalization’ with any sort of agency- anyone care to tell me what that actually means?

Besides, like you implied, trade is not good or bad. It just is. It is what people do with that trade, or how they do it, that really matters. And, unfortunately, China’s current policies seem to be fueling a rather unbalanced and perhaps unsustainable economic structure/growth pattern based on a ruthless exploitation of their own majority and land. So, from a long-term perspective, what good is a rise of living standards if the very way those standards are raised (think labour abuse, environmental devastation, corruption) ultimately threatens them?
(And yes, you could say this question applies to many countries, not just China).

Look, in the end I’m just being a bit cautious. I think it is waaay too early to declare the great Chinese experiment an unqualified success. It could continue for years, it could change course and take a different, more stable path- or it could crumble into economic chaos next week. Who knows, really.

December 10, 2005 @ 11:51 am | Comment

my point is, simply, more opportunity leads to more businesses, and hence more employment.

true, the curcial step happened during rural reform in the 1980s. but trade leads to the factories, factories employ (mostly) migrant workers. even though the condition is harsh and i feel the pain of the migrant workers, they are still at much better condition than had they stayed at the villages.
they sent money back home, which also helps the living condition of the rural parents/brothers.

December 10, 2005 @ 1:43 pm | Comment


i agree with you that one should be cautious about the current policies. there are a lot fo potholes in front and many probelm even as of today.

however, the problem lies in how the policies are set. not in free trade.

therefore, giving everything else the same. free trade (and WTO) only helps the poor in China.
since 2001, the GDP growth and also average growth in income has accelerated, WTO is one of the major reason.
in many areas (eg Pearl Delta), some factories have difficulty finding enough worker, because more migrant workers were employment, and there are more opporutnity in inland provinces. the consequence is that wage and working condition have to improve (simple demand and supply relationships).

however, if you stop free trade (keeping everything else the same), this is not going to happen. and the poor migrant workers’ negotiation position would be much weaker, and they will continue to be exploited.

December 10, 2005 @ 1:50 pm | Comment

The problem I have with the ICFTU article is that, its argument is extremely muddled and misleading, serving to achieve its own agenda (of Trade Union).

We all know how the Trade Union works in Europe and US.

I believe we should find a solution to improve the condition of the workers, some organization for the workers will be one of them. China actually requires all companies to allow trade unions. but the trade union is sort of under the party control.
so neither the trade union in CCP sense, or European sense is the proper solution.

what we need is perhaps international monitoring and discipline of MNC. so that they ensure the minimum standards are respected in the factories they source their goods from.
and this actually is sort of working.

December 10, 2005 @ 1:58 pm | Comment

this is what i disagree with ICFTU:
it said “The losers are blue collar workers, farmers and unskilled office workers”, i would say they are also winner, but relative losers compared with bigger winners (businesses)
ICFTU failed ot recognized that the number of people making RMB600-1000/month multiplied in the past few years. and these people would otherise be unemployed or stay in rural making 100-200RMB/month

i also disagree with Martyn’s statement that “As long as the CCP maintain a long-held policy of securing a larger share of global trade, then unemployment and inequality will continue to rise”.
i do not see the logic of that statement. getting more trade/business will only decrease unemployment.

December 10, 2005 @ 2:05 pm | Comment

sun bin,

You make some good points. I, as well, am a bit wary of knee-jerk free trade bashing. However, the flip side of the knee-jerk coin is those who believe that trade is inherently good, and its presence alone is automatically beneficial.

I tend to take the middle ground: trade is neither inherently good or bad, its benefits/shortfalls depending completely on the particulars of a situation.

And I agree with you in China it is not transnational trade itself that is a problem, but rather a fundamental inability (or unwillingness) of the gov’t to deal with the huge domestic problems, some of them admittedly caused by the blind pursuit of trade/exports at all costs. So like you said, we shouldn’t blame trade but rather domestic policy and politics.

And without a serious, concerted, long-term effort at addressing fundamental structural problems (reliance on overinvestment in fixed capital for growth, troubled financial system, state-owned industries,etc.), more free trade isn’t going to help much.

December 10, 2005 @ 2:23 pm | Comment

Socio-economic reforms and the dismantlement of Maoist lunacy have created the largest steps forward for China. The Cultural Revolution etc. were “unnatural” and more so than any recent economical reforms, the mere ending of obvious insanity has helped China immensely.
I don’t suppose anyone suggests going back that road will do any good. That doesn’t mean, however, that WTO is such a brilliant thing either.
China was for a long time a closed market and even today large numbers of Chinese are employed in obsolete state owned factories. With full accession to the WTO foreign companies will (in theory) be able to compete on a level that the state owned companies are simply not ready for. That could – and probably will – cause massunemployment and discontent among the less fortunate in Chinese society. The ranks of less fortunate are already swelling and trying to make themselves heard. That will get worse. The WTO-membership, not globalisation, is to blame for that.
A slower adaption of the Chinese market to world standards would maybe compromise growth rates somewhat but at least make for a more even ascent than the current.
I think.

December 10, 2005 @ 4:41 pm | Comment

patrick….i think our views have a lot in common.

the problem with state-owned enterprises have to be dealt with sooner or later, with or without WTO.
WTO only helped to absorb some of the unemployment/ underemployment. so i still think it is positive (as it gives more opportunity to these people).

in your scenario, without WTO, the problem of state-owned-enterprise is still there. many workers do not receive their pay-check (back log for 6-12 months is common) because the SOEs have no money.

competition inside China market is sort of a zero-sum game, it would not decrease total employment. (it is not really zero sum, because it usually lead to productivity growth and better use fo resoruces).
WTO provides a large pie for SOE and FIE and private enterprises, so overall employment should increase.

December 10, 2005 @ 6:38 pm | Comment

Re: Sun bin
The problem with the SOEs is definitely there and no magic trick will fix it. WTO or no WTO.
China’s WTO membership has helped increase FDI and therefore also helped create jobs. The limited access of foreign companies in China is very beneficial to their economy.
My concern, however, is that when the excemptions from the entire WTO rule-set is removed next year (?) SOEs will be too vulnerable and they will drop like flies, creating massunemployment and unstability.
Foreign companies generally have better efficiency and can cover the market with less people employed. For that reason I don’t believe it’s a zero-sum-game.
When the market expands more people can be hired but my impression is that it is not realistic for foreign companies to soak up the entire laid off work force frm the SOEs.
My scenario is, however, a little starker than what is actually most likely to happen. In reality foreign companies have only limited access to large parts of China due to language, culture, infrastructure, red tape, etc.
The government’s implementation of WTO rules is also seriously delayed so my wish for a longer transition period than the 6 years given by WTO will more or less come about by itself.
Still, I’m pretty sure that changes in the economy will pick up even more speed than at present.

December 11, 2005 @ 5:50 am | Comment

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