Is Red China an Economic Paper Tiger? E. Brodin

200 per cent rise in Swedish .. Chinese trade. Did Nixon's visit with Chair .. man Mao thus open vast new trade possibilities between Communist China and the world of business beyond the "Bamboo Curtain" ? We can only make guesses from some of the statistics published in China, from reports from re cent visitors, and of course from the "gnomes of Hong Kong" who often have amazingly accurate re ports from "contacts" who can freely pass from the British Crown Colony to Mainland China. First of all, we are not even sure of the population of Main land China, which has been vari ously estimated as 750 or 800 million. But numbers alone do not make China a consumer of inter national goods. Mainland China's foreign trade has risen from $1 billion in 1950 to $4.2 billion in 1971. This is comparable to the foreign trade of Italy, or of Yugo slavia, and some 20 per cent less than that of tiny Hong Kong with 143 144 THE FREEMAN March its four million population. Even with one-fourth of the world's population, Red China's share of world trade is but two-thirds of one per cent.

Peking's income from external trade amounted in 1970 to $2.8 billion, with imports of $2.1 bil lion. Such imports amount to about $2.50 per person per year. Only four percent of, China's Gross National Product is ascribed to foreign trade. It is evident, there fore, that China may either (for economic reasons) be incapable of being a viable international trad ing partner, or it chooses (for ideological reasons) to be a self sufficing economy. That the latter might be the objective is evident from many official statements which insist on' self-reliance and reflect the traditional Chinese hatred of foreigners. Expressed in Maoist terminology, reliance on foreign trade is "bourgeois" think ing full of "veneration of foreign technology." Trade patterns of Mainland China since the revolution show several changes. Foreign trade in 1966 was higher than that of 1971. It declined to $3.7 billion in 1967, then started slowly to rise again.

Communist China's main trading partner in the past had been the Soviet Union - $2 billion in 1959 - but by 1970 it had declined to a mere $55 million, indicating a complete reversal of Chinese for eign trade patterns. Formerly, 60 per cent of Mainland China's trade was with Communist countries; now the main trading partners are Japan ($822 million in 1970), Hong Kong ($477 million), the Federal Republic of Germany ($253 million), and Great Britain ($187 million). And where does .the Uni ted States fit into this trade picture? It is too early to know what future trade relationships may be, except that they are not likely to be very significant. United States' trade with Communist China, since re strictions began to be gradually removed in 1970, had risen by February 1972 to a mere $5 mil lion of imports by the United States. (United States imports from Nationalist.China (Taiwan) during the first nine and a half months of 1972 amounted to $2.3 billion. U.S. imports from Japan amounted to $4.9 billion in 1969, $5.9 billion in 1970.) · .The problem in international trade for Mainland China is that they have so few products which are attractive to or needed by in dustrialized nations; or, if they have these products, a poor or inadequately developed infrastruc ture makes transport and shipping difficult. If tempted to think of 800 million potential consumers, one ought to take a closer look at 1973 IS RED CHINA AN ECONOMIC PAPER TIGER? 145 the internal economy of China.

China is an underdeveloped country with a per ·capita income among the lowest in the world. In an authoritative series of articles in November 1971, the Italian journal Successo estimated the an nual per capita income in Red China to be between $93 and $97. Richman in Industrial Society in Communist China· puts the figure (in 1966) at between $70 and $100, whereas the more optimistic report on China by Business In ternational estimates it to be $111 in 1969, with a possible rise to $122 by 1980. (By that time, for comparison, estimated annual per capita income would be $3,600 for Australia, $4,517 for Japan, and $6,655 for the United States.) It is evident that such income severely limits what the Chinese peasant can afford to buy from abroad. By the best estimates pos sible, a Chinese peasant today may have a monthly income of· about $20,an industrial worker about $25. One of Red China's leading authors, Hao Jan, reports a monthly income from the Peking government amounting to $44. But, it can be argued, if foodstuff and other necessities are cheap, these statistics might not be meaning ful. This does not seem to be the case, however. From visitors, and chiefly from some of the refugees who are still fleeing Communist China at about 30,000 a year, we learn that the Chinese worker (with an average wage of $24 a month) will have to work from 7 to 15 days for a sweater, 70 to 80 days for a raincoat, and three months for a bicycle or a sewing machine.

Mainland China is in desperate need of industrialization in order to become self-sufficient in the goods necessary for its citizens, let alone any surplus for export. Its "Great Leap Forward" and other economic innovations turned out to be costly mistakes for the Chinese economy. It is evident that Red China· needs first of all to make technical· advances in its ag ricultural sector, and then to ex pand and modernize its industrial sector. Visitors to China are in variably shown a mechanized com mune and a chemical fertilizer fac tory - showing the priority of their interests. As in any develop ing society, the agricultural sec tor is very important; China must first feed its large and expanding population. (The rate of growth has been variously estimated at 1.4 per cent to 2.5 per cent per annum, and the higher figure is more probable.) But it is the in dividualistic Chinese peasant who has been one of the chief head aches to the Communist regime, what with his opposition to com munes and collectivist thinking. It 146 THE FREEMAN March is also in the agricultural sector where most charges of "sabotage"

have been leveled. "Class enemies and capitalists are always finding opportunities to try to wreck the collective econ omy" reports the Red Chinese theoretical journal, Red Flag, and this was due to the "failure of low-echelon party-cadres of follow ing Mao Tse-tung's line." Peking's Kwangning Daily of November 9, 1972, reported that "capitalism has reared its ugly head in productive teams in Sinkiang Province." And according to People's Daily (Peking) an "evil anarchism wind" has also swept across Mongolia which has "encouraged many to lean toward capitalism." It ap pears that some of the "sabotage" is due to dissatisfaction among the thousands of students who are be ing shipped into the interior for compulsive (corrective) farm la bor. China Mail for September 2, 1972, reports that a veritable black market in rationing cards has be gun by such students "after they had been banished to the country side."

As long as agricultural and tech nical improvement and changes can be determined only by the Thoughts of Chairman Mao (poeti cal though they may be) there are slim chances for any real expan sion in the economy of Mainland China. The Hopei Daily of Novembel" 13, 1972, in a typical reaction to a farm problem: "Under the criticism and rectification cam paign, sllstained anti-drought ef forts have led to comparatively satisfactory harvests ... Chair man Mao's policy must be strictly observed .... [and] vehement at tacks must be launched against Liu Shao-chi. ..... " Such ideological, rather than technical, ideas are also at work in the embryonic Chinese indus try. Jonathan Unger, writing a perceptive article in Far East Economic Review, attributes the slow growth of Red Chinese in dustry to chauvinism and ideologi cal preoccupation which prevents the Chinese from learning new methods and importing technical innovations from abroad. The chairman of Alfa-Romeo of Italy commented, during a visit to China in 1971, that the technical efficiency of a Chinese automobile plant in Shanghai was comparable to that of his own plant in 1910.

It will be a long time until the visions of massive trade with Mainland China by the world's businessmen and industrialists can ·be realized. First, the Chinese will have to abandon the unwork able ideas of Communism and the equally unworkable ideas of Chair man Mao. Until then, it is likely that Communist China will re main an "economic paper tiger." ~ 147 The Pros and Cons of SOCIALISM HENRY HAZLITT MICHAEL HARRINGTON'Smassive book on socialism is a strange and baffling performance. What is baf fling first of all is how such a book - so piously reflecting the century-old and long-discredited Marxian ideology, vocabulary and prophecies - can come to··be writ ten in this day and country. Even more baffling is how its author manages to combine such a for midable range of book-learning and current factual knowledge with such profound ignorance of basic economics and of the devas tating refutations of Marx that have appeared over the last cen tury.