Libmonster ID: UK-1397
Author(s) of the publication: E. P. PIVOVAROVA

E. P. PIVOVAROVA

Doctor of Economics Institute of the Far East of the Russian Academy of Sciences

Keywords: China, economic modernization, intensive development

Adopted at the 3rd Plenum of the 18th CPC Central Committee (2013), the "Resolution of the CPC Central Committee on some important issues of comprehensive deepening of reforms" essentially sets the country on decisive "practical actions" in the economic sphere. It provides for the implementation of tasks that have long been put forward, but are still poorly solved in the PRC: the transition from extensive to intensive development and the improvement of all quality indicators of production. By 2020, the country should reach the level of "average prosperity", and by 2050, the entire economy should be modernized, and a rich, powerful and civilized state should be built.

The very intention to modernize the Chinese economy by the end of the twentieth century, proclaimed by Deng Xiaoping at the National Conference on the Development of Science in March 1978, i.e., on the eve of economic reform, required a significant increase in the quality parameters of the country's productive forces. That is why Deng Xiaoping immediately stressed that "without modernization, without raising the scientific and technical level, without developing the social productive forces and building up the country's power, without improving the material and cultural life of the people, the socialist political and economic system cannot be stable, and the country's security cannot be reliably guaranteed." 1

The difficulties encountered in China in implementing the originally planned modernization plans exceeded expectations and required repeated adjustments to the country's socio-economic development plans. Both the terms and parameters of achieving a certain level of civilization were specified.

Initially, it meant "already in the XX century to reach and surpass the advanced world level, in 22 years to pass the path that others have passed in 40-50 years", etc. However, Deng Xiaoping himself warned against "too hasty modernization", attempts to "enter the ranks of the most advanced countries in the world" or "reach the level of medium-developed countries"at an accelerated pace. According to the Chinese leader, it was realistic to implement only "initial modernization" by 2000, "mostly modernization" - by 2020-2030, and "complete modernization" - for an even longer period of time.2

In a country with its huge population, the method of artificially dividing one workplace (and, consequently, remuneration) into several people has historically been used to solve the problem of employment. Under these conditions, it is very difficult to achieve the goal set by the reform of increasing employment and incomes of workers, relying mainly on technology-intensive production, without developing labor-intensive industries, and, therefore, it was necessary to continue following an extensive path of development for a long time.

Since science and technology were called" the key to the implementation of the four modernizations", with the beginning of the reform in the PRC, technical reconstruction on a large scale began. The course was set for the active use of new equipment, equipment, technologies, materials, professional development of employees, strengthening research work in the field of applied and fundamental sciences, stimulating scientific research in the field of economic science and management science to actively use their results in order to improve the level of planning and management of the national economy.

One of the main problems on the way to implementing the program of modernization of the national economy was the issue of its financial and material and technical support, and therefore the task was to radically improve the financial and economic situation of the country by increasing the efficiency of using funds, balancing state budget revenues and expenditures, identifying credit resources, and maintaining generally stable prices.

Already in the mid-1990s, the PRC was talking about the need to switch to an intensive path of development in order to ascend by 2050. "to the frontier of post-industrialization and informatization" and vozve-

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department of the "society of knowledge economy". However, the specific nature of China's technical and economic modernization lies in the fact that even after the planned tasks of economic growth are fulfilled, both at the beginning of the XXI century and in the longer term, the country's technical equipment will continue to have a pluralistic structure (although in other proportional proportions): advanced, medium-level and traditional manual equipment.

Obviously, due to such, in our opinion, somewhat fantastic forecasts (after all, we are talking about a country with a population of more than one billion three hundred million people, with a large proportion of the poor, manual labor and illiteracy), the 15th Congress of the CPC in 1997 focused on the duration of the deadline for completing the tasks set ("at least a hundred years", "the tireless efforts of several, even dozens of generations").

Back in 2002, at the 16th CPC Congress, Jiang Zemin, General Secretary of the Central Committee of the Communist Party of China, pointed out the need to "follow the path of a new type of industrialization" with its high knowledge and technology intensity, good economic efficiency, low resource consumption, low environmental pollution, and the ability to fully identify the country's advantage in human resources. Jiang Zemin explained that only in this way will it be possible to accelerate the solution of the "most difficult historical task" of China's modernization and achieve a quadrupling of the country's GDP by 2020 compared to 2000.The emphasis was placed on "identifying the important role of science and technology as the first productive force" and "improving the quality of workers".

At the 17th CPC National Congress in 2007, Hu Jintao, the next General Secretary of the Chinese Communist Party Central Committee, reaffirmed his commitment to the "new type of industrialization path". It was emphasized that by optimizing the structure, improving efficiency, reducing costs and protecting the environment, the PRC should increase the average per capita gross domestic product by four times by 2020 compared to 2000. The Congress set the task of improving the system of a socialist market economy, increasing the share of scientific and technological progress in economic growth, and becoming one of the innovative-type states.

A practical reflection of the Chinese leadership's desire to implement these plans was that even in the context of the global financial crisis, spending from the country's central and local budgets on education, science and technology, social security and employment, energy conservation and environmental protection was prioritized. Actual expenditures in 2009-2012 were significantly higher than planned: in 2009, expenditures on education increased by 23.6%, on science and technology - by 30%, and on environmental protection-by 10.7% .3

In the draft budgets for 2010, the increase in these expenditure items was planned to be 9%, 8% and 22.7%, respectively, while the actual increase was 28.6%, 14.3% and 25.3%, respectively .4 In 2011, the central budget expenditures on education increased by 27.5%, science and technology - by 17.7%, social security and employment-by 23.9%, energy saving and environmental protection-by 12.5%. Expenditures on these items have also increased at about the same rate for local budgets, which, as a rule, bear the main burden on expenditure items. In 2012, state budget expenditures on education increased by 15.7%, science and technology - by 12.7%, social security and employment - by 22%, energy conservation and environmental protection-by 23.3% .5

The 18th CPC National Congress, held in November 2012, reaffirmed the country's commitment to the socio-economic course of the previous decade. Budget expenditures for education, science and technology, social security and employment, energy conservation and environmental protection were expected to grow by 9.3, 10.4, 13.9 and 5.1% respectively in 2013.6, while the plans for 2014 indicate growth rates of 9.1 and 8.9%, respectively, 9.8 and 7.1%7.

However, in the process of implementing the conceived economic policy, adjustments were made to improve the quality indicators in each of the weakest links of the national economy, related to the need for emergency elimination of certain acute problems in a particular place and in specific cases. As a result, the actual increases in expenditures under these items in 2013 were lower than planned, but the budget spending plans for 2015 once again identify education, science and technology, social security and employment, and environmental protection as priority areas of economic policy in the PRC.

Such steps at the state level indicate a real desire to implement the " strategy of raising the country by the forces of science and education, building up state power through personnel."

At the 2010 session of the National People's Congress (NPC), this strategy was called "the cornerstone of ensuring the country's power and national revival" and "the core of the overall power of the state".

It should be noted that the plans for economic growth of GDP put forward in China during the reform, as a rule, were implemented ahead of schedule, and therefore only in the last decade, according to the overall quantitative indicators of the economy, the country moved from the 6th place in the world to the 2nd. However, the growth of " aggregate power

page 4

Even in the twenty-first century, it continued to be achieved mainly due to extensive factors of production development (increasing the use of labor, natural, and material resources), and not due to an increase in labor productivity.

A natural consequence of this development was the worsening shortage of not only financial resources, but also the shortage of physical laborers ("blue-collar workers"), which has become more and more noticeable since 2010. The question of putting the economy on an intensive path of development "stood up straight". Practical measures were needed to really move the economy along this path.

The chain of measures taken is structured as follows: in order to increase the efficiency of resource use and labor productivity, it is necessary to improve the skills of employees, which requires spending on their training and improving their well-being, contributing to the growth of their consumer opportunities, which, in turn (as the recent experience of the PRC's confrontation with the global financial crisis has shown), contributes to the growth of the real economy. This means that the tax and financial system needs to be reformed in order to improve the system of income distribution and, having achieved social justice, get the maximum return from all groups of the population.

That is why the three main tasks set at the forefront of the new Government's activities already at the NPC session in March 2013 were: reforming the fiscal system, the income distribution system,and stimulating reform that promotes social justice. These same tasks are listed as "important issues" that require "further deepening of reform" in the documents of the 3rd Plenum of the CPC Central Committee of the 18th convocation.

It should be noted that the implementation of these tasks in a hyper-populated and poorly resourced country is an order of magnitude more difficult than those that were solved in previous decades of market transformations in the PRC. It will be necessary to make qualitative amendments to almost all the innovations that were previously implemented in the course of market reforms that affected not only the economic life, but also the social system of the country.

The implementation of such amendments, while maintaining reliable stability in Chinese society, will require extraordinary decisions. I think that the long and rather successful experience of market reform in China will help the Chinese leadership to find such solutions. This work began in the late 1990s, when all the components of "socialism with Chinese characteristics" were actually defined and the need to "harmonize" the interests of various regions of the country, villages and cities was discussed. That is why, in our opinion, macro-regulation and macro-control became the most important methods of economic policy at the time of Premier Zhu Rongji of the State Council of the People's Republic of China.

It is characteristic that at the end of the first decade of the XXI century, almost all official forums of the country pointed out that the main reason for certain achievements in solving the most difficult issues of modern life was precisely "an unusually flexible policy of macro-regulation and macro-control", which helps "firmly and decisively correct development" in a complex and changeable situation in the modern world.

Huge hopes are pinned on the reform of the tax and financial system. Realizing the complexity of this reform, the Chinese leadership does not ignore the international experience, when by expanding the tax base, applying a system of progressive taxation and increasing funding for local budgets, it is possible to make the distribution system more equitable and reduce the income gap of the population.

At the meeting of the China Development Forum held in Beijing in March 2013, Chinese Finance Minister Lou Jiwei noted in his speech that over the past 30 years, the reform of the fiscal system has been the main breakthrough point in implementing reform policies. According to the minister, China is currently accelerating the pace of reforms and in the future intends to extend throughout the country the reform of the tax system related to the commercial transactions tax and value-added tax, which is now the main source of tax revenue in China.

Despite the fact that the task of adjusting the reform is very difficult, the Minister of Finance expressed confidence that the new stage of fiscal reform will be marked by rapid progress. There is no doubt that this confidence is fueled not only by the Chinese experience gained during overcoming the global financial crisis using the method of expanding domestic demand, but also by international experience. As is well known, a number of countries have managed to make the distribution system more equitable and significantly reduce the income gap between certain groups of the population by expanding the tax base, applying a progressive taxation system, and increasing local budget funding.

As a useful, albeit risky, addition to the Chinese financial market


* The shadow banking system (also known as the parabank system) is a collection of financial institutions that operate according to banking schemes, but are not formally banks. The main difference from conventional banks is that parabanks do not accept individual deposits from the public: they do not serve individual depositors, but other banks.

page 5

participants of the forum" Development of China " named shadow banking*, which can turn free funds stored in bank accounts into investment products with high efficiency and high return. The need for such measures was explained by the fact that during the transition from economic growth through exports to economic growth based on increased consumption, huge investment investments are needed. Interestingly, shadow banking was described as "a product invented by Chinese financiers with their own minds against the background of strict control over lending and strict separation of various financial markets in China."

It should be noted that during all 30 years of Chinese reforms, the country's leadership has constantly attracted funds from those of its citizens who succeeded earlier than others to solve the most acute socio-economic problems related to the most backward regions or the most disadvantaged segments of the population. Therefore, it can be assumed that in the coming years the PRC will actively use the system of progressive taxation. And this will help mitigate such major problems in China today as replenishing investment funds and improving the situation in income distribution and achieving social justice.

The current Premier of the State Council of the People's Republic of China, Li Keqiang, as well as his predecessors in the third and fourth generations of the Chinese leadership, believes that the main condition for the growth of people's welfare is the need to focus on promoting employment. In his report at the March 2015 session of the National People's Congress, he suggested continuing the strategy of increasing employment and encouraging employment through entrepreneurship. As the Prime Minister stressed, it is necessary to continue implementing the program of providing assistance to university graduates, encouraging them to get a job at the lower levels, as well as implement and improve policies to support enterprises in stabilizing jobs through unemployment insurance.8

In institutions and organizations of the non-industrial sphere, it is proposed to implement the measures provided for by the reform in the field of old-age insurance, simultaneously optimize the salary system, giving instructions with a tilt towards low-paid employees.

Over the past 10 to 15 years of Chinese market reform, the training of highly qualified personnel has been extremely important. In fact, the principle of "Cadres decide everything!"was applied. Noting the need to improve the quality of education and promote its fairness, Li Keqiang stressed that " modern education is the main source of hope for the country's future."

Through patronage and other measures, it is proposed to support the development of higher education in the central and western regions of the country. With the support of mass public organizations, it is planned to develop professional social work, volunteer services and charitable activities.

Apparently, to solve the main problems of the economy at the new, "decisive" stage of reforms in the PRC, first of all, both economic and semi-soft administrative methods that have already been tested in previous years will be used to "unroll the carpet" from rich regions to lagging regions and from high-income social groups to the poor part of the population. But not only that. It is also possible to use not only legal, but also so-called "risky shadow" methods.

It seems that the new stage of reforms should not be described as a stage of "accelerating transformation", as it has sometimes been done and continues to be done at the historically significant frontiers of Chinese reforms. Today we are talking about a "comprehensive deepening of reforms", which implies both a certain expansion of market principles, and, most importantly, in our opinion, strengthening and improving macro-regulation and macro-control.

* * *

Having confirmed its loyalty to the socio-economic course of its predecessors, the current Chinese leadership will make every possible effort to continue the country's socio-economic development at an accelerated pace. However, given the growing shortage of financial, material and labor resources, this will be possible only through a real transition of the economy to the rails of intensive development, i.e. entering, according to the definition of both Premier Li Keqiang and President Xi Jinping, the "decisive" stage of the country's modernization.

Parabanks help to group the received capital in the form of derivative securities and alternative financial instruments. The shadow banking system as a whole is characterized by a relatively high speculative component, which carries significant systemic risks for both developed and developing countries.


1 Xinhua News Agency Newsletter, 22.03.1978.

2 See: People's Daily, 01.01.1981, 26.06.1981; Jiefang jun bao, 24, 29, 31.01. 1981.

3 People's Daily, 16.03.2010.

4 Ibid., 17.03.2011.

5 Ibid., 15.03.2012.

6 Ibid., 18.03.2013.

7 Ibid., 16.03.2014.

8 Full text of the Report on the implementation of the economic and social development plan for 2014 and the draft plan for 2015-http://russian.news.cn/china/2015 - 03/18 / c_ 134075466.htm


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