From: kwee@oracle.uucp (Karl Wee)
Newsgroups: soc.culture.china,soc.culture.hongkong
Subject: Re: Fundamental problem of China (Was Re: after 1997...)
Date: 21 Jul 92 03:19:38 GMT
Reply-To: kwee@oracle.uucp (Karl Wee)
Organization: Oracle Corporation, Belmont, CA
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              at Oracle Corporation.  The opinions expressed are those
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From: joe@astro.as.utexas.edu (Joe Wang):

>I seem to remember that the PRC's economy is about half agriculture
>and half industry.  All agriculture is now essentially private.  In
>the industrial sector, about 60% is state owned by the central
>government, the rest being either collective (i.e. local government)
>or private.
>
>I think that the amount of the economy that is directly owned by the
>central government is about 30-40%.  This amount is shrinking because
>the non-state owned factories are growing much more quickly than the
>state owned ones.

I think the kind of economic activities owned by the government is as
important as how much of the economy is owned by the government (both
central and local).  Private citizens and groups tend to own "end user"
types of products and services that affect narrow areas of the economy,
while the govt still owns the vast majority of the "utility" kinds of
products and services (transportation, power, raw material production, etc.)
that other economic activities must make use of.   Thus the govt has much
more control than is shown by revenue numbers.

Let's say the economy has a $20B tranportation industry and a $500B light
manufacturing (consumer goods) industry.  The govt does much more damage by
owning and stifling $20B of the former industry than it would do by owning,
say, $100B of the latter industry.  Every production activity must use
some kind of transportation, and the unavailability of good service because
of the lack of incentives in the transportation industry becomes a very real
and unremovable bottleneck for everyone.

>The PRC Central Government would REALLY, REALLY like to get rid of the
>old state owned factories, because those factories are causing a big
>drain on the annual budget.  The trouble is that privatizing those
>state factories would throw a lot of people out of jobs that they have
>had for decades.  This would cause a lot of social unrest that the PRC
>government would rather not deal with.

My guess is that the govt really wants to get out of the industries in which
there are private competitors doing the same thing, since it can't compete
at all.  However, as for industries in which the govt holds a monopoly, I
don't know if it has the political will or even the wish to get out.  For
example, the PRC "allows" Hong Kong private airlines to fly certain routes
into the mainland, but fixes the number of flights and pricing,
and there is usually a shortage of seats.  Of course,
the Hong Kong airlines' seats always get filled up first, but no matter,
Air China's seats will be just as filled, and the CCP officials in charge
can still stay lazy and wield their power by allocating seats as they see fit.
Of course, for routes inside the mainland, the airlines are virtually
completely owned by the govt.

Here we go back to the original problems I talked about.  Is the CCP willing
and able to back out?

I know people who do business in China, and from what they say, if you own a
business in China, it's still an unsurpassable advantage to be well-connected.
You will obtain transportation, govt approvals, etc. much easier than everyone
else.  (Actually I suspect that "approvals" are an artificially created
"necessary raw material" of production for the empowerment of officials.)  By
controlling certain key points in the economy, the CCP is still by and large
controlling and stifling it without looking like they're doing it.

I don't have good information about this, but sometimes I wonder if the current
"boom" of the economy is mostly created by speculations plus the
growth of certain narrow segments before they reach another plateau due to
being stifled by the govt.

The govt needs to change the fundamentally non-market character of the economy,
or else we'll probably see nothing more than a polished version of the '80's.
(Which was pretty good, don't get me wrong, but the economy can't hope to "fly"
like the West did and like the "4 Tigers(Dragons?)" are doing.  There is a
qualitative, not quantitative, difference in the kind of society and way
of life that results.)
Newsgroups: soc.culture.china