Los rasgos terminales

Over the past few decades, few developments in the world economy have been more important and influential than the sudden change of China ’s policy to open up to the rest of the world. China’s economic progress during the reform era that began in 1978 has been one of the great economic success stories of the last three decades. Starting from an almost completely isolated economy in the mid- 1970s, China has gradually and systematically liberalized its international trade and investment policies. Since it launched the economic reforms and called for foreign capital participation in its economic development, China has received an extremely large part of the international direct investment flows. While FDI in China experienced rapid growth, its expansion has been subject to certain fluc- tuations. At particular times Chinese policy-makers have used a system of carrots and sticks to entice and curtail foreign direct investment by gradually adapting and changing the conditions for particular modes of entry, sectors and regions. Yet, the overall trend was one of continued liberalization.

Since the early 1990s, actual FDI inflows into China have averaged more than 50 billion US$ per annum. Although a large number of countries have made in- vestments in China, the primary sources of FDI have been highly concentrated among a small number of investor countries (Chen, 1997a). The largest propor- tion of the FDI received by China does not come from the so-called Triad econo- mies, namely the US, Japan and EU countries, but from “Chinese” in Hong Kong and other Asian countries. And although the authorities succeeded mainly in at- tracting overseas Chinese business to the mainland, investors from the Triad have gained some ground over the years.

Foreign, and especially Western-invested firms have performed relatively well in China (Van den Bulcke et al., 2002). These good results for Western multina- tionals are based on their strong presence in most of the high-tech and capital- intensive industries, such as pharmaceuticals, telecommunications and the au- tomotive sector; their rapid penetration into consumer markets by establishing

 Filip de Beule and Daniël Van den Bulcke

joint ventures with but also taking over existing Chinese companies, especially in sectors such as food, detergents and consumer electronics; their growing access to service sectors, such as business consulting, finance and insurance, and retail- ing; and their high export orientation and increasing integration of the Chinese subsidiaries in the regional Asian and global economy. In contrast to Western subsidiaries, overseas Chinese investors from the Asian newly industrializing economies, especially from Taiwan and Hong Kong, have relocated (part or even all of ) their export-processing activities to China in order to benefit from the supply of unskilled and cheap manpower in labor-intensive and export-oriented activities, such as textiles (Van den Bulcke and Zhang, 1998).

Foreign affiliates accounted for less than 5 percent of total Chinese exports in 1985, while their share jumped to 60 per cent in 2005. In 1985, exports of pri- mary products represented half of all exports, while in 2005 their share had re- ceded to less than 10 percent and that of manufacturers went up to more than 90 percent. This surge was even more remarkable in technology-intensive products. The share of high-technology industries in total trade increased strongly over the years, inducing a rapid industrial upgrading of the country.

China ’s performance is all the more remarkable in that its reforms have been gradual and its development has occurred despite extensive, though declining, state ownership and intervention in the economy. Contrary to many other tran- sition economies, China did not opt for quick privatization of its state-owned companies, but followed the gradual approach of stimulating the development of private enterprises, including foreign-invested ones. This gradual approach was also typical for the way in which the liberalization process and the development zones spread out over the country. After having launched its SEZs in the coastal area, the Chinese government set up smaller and more focused economic and technological development zones, first in coastal provinces and later on more in the inland and in the western region. Not only were more zones being estab- lished, there was also a proliferation in the type of zones.

The proliferation of the zones in China resembled international locational tournaments, where zones in different countries are competing against each other and the only winners are the companies which succeeded in obtaining extra ad- vantages from such bidding up among potential locations. Although most Chi- nese administrators understand that such competition has sometimes gone too far, the decentralized system of state, provincial, municipal and local industrial zones is not making life any easier for them. The decision by the national govern- ment to cut the number of zones dramatically to avoid inefficient and costly use of land and infrastructural investment is therefore understandable.

While the establishment of special economic zones at the beginning of China ’s open door policy was a careful attempt to open China’s door to the outside world

 China’s opening up: from Shenzhen to Sudan

and abandon its isolationist policy, the Chinese leadership today is undoubtedly very proud of these achievements. Almost thirty years after the establishment of the first four SEZs, however, development zones represent not only the good, but also the bad and the ugly in China. Shenzhen, for instance, has transformed itself from a rice paddy to a hotspot in the global economy. It has, in the process, also become a global environmental hotspot, suffering rapid environmental degrada- tion. It has, like most Chinese cities, also attracted millions of migrant workers that have virtually no rights. The new labor law, which makes a labor contract compulsory for all workers in China, will hopefully bring some improvement to their dire situation.

In the countryside, agricultural laborers still represent the majority of work- ers, albeit less and less so. Some 200 million workers have fled to the cities in search of a better life, some of whom are landless peasants. Estimates put the number of landless peasants at 60 million by 2010. After almost three decades of unprecedented growth, the number of people earning below one dollar a day has fallen dramatically. Using the Chinese government’s figures, the number in pov- erty went down to 42 million by the turn of the millennium. However, as a gauge of a household’s standard of living, consumption is often a more telling indicator. Using that measure, well over 200 million Chinese still live on less than one US$ a day, often without access to clean water, arable land, or adequate health and education services (World Bank , 2008b; Shimada, 2005).

China has also become an outward investor, both as a market seeker and a resource seeker. Especially since the turn of the millennium, Africa has received much attention from Chinese state-owned firms in search of natural resources through the promotion of the government-induced “go-global” policy. In its search for sources of fuel for its growing engine of production, China has targeted Africa for its raw materials. China’s booming economy, which has averaged almost ten percent growth per year for the last two decades, requires massive levels of natu- ral resources to sustain its growth. China seems to have adopted an aid-for-trade strategy that has resulted in increasing supplies of oil and other raw materials from African countries. China’s demand for energy to feed its booming economy has led it to seek supplies from African countries including Sudan, which has led to severe international scrutiny due to its suspected role in the Darfur genocide. China mainly imports materials from Africa to fuel its economy, such as oil, gas, minerals, and wood. Although trade between Africa and China is limited, at least for China, China’s import from Africa is important strategically.

As more African countries open their economies to foreign investment, Chi- nese companies seem to drive a hard bargain. There are concerns over how China operates in Africa, attaching no conditions to aid, paying bribes, underbidding local firms and not hiring Africans. It undermines local efforts to increase trans-

 Filip de Beule and Daniël Van den Bulcke

parency and good governance and international efforts at macroeconomic reform by institutions like the World Bank and the International Monetary Fund (Pan, 2007). The Washington consensus could well be supplanted by the so-called Bei- jing consensus. However, the (rail)roads, bridges, dams, and schools built by Chi- nese companies are low cost and completed in a fraction of the time such projects usually take in Africa (Servant, 2005). The Chinese have also set up several “com- fort” zones to develop local industrial infrastructure and help Chinese firms in- vest in Africa. The infrastructural improvements could help African countries secure other loans and investment opportunities. Also everyday life is changing for millions of Africans. Cheap Chinese imports mean that – for the first time ever – they can afford new clothes, shoes or radios (Alden, 2007). It seems that the Chinese presence in Africa is contributing to an atmosphere of development, similar to the one which transformed China some three decades ago. This trans- formation is a welcome, even if unintended result of China’s presence in Africa to secure raw materials as well as its search for new markets.

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Part II