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[TODAY]The impact of China’s new plan

Oct 16,2005
The planned economy has been changed into a pre-arranged economy. The selective wealth distribution theory has been changed into an equal wealth distribution theory. This is the essence of the 11th five-year economic development plan China adopted at the 5th plenary session of the 16th Central Committee Meeting of the Chinese Communist Party held under the leadership of President Hu Jintao. China specialists all over the world have pondered the meaning. What is the difference between a planned economy and a pre-arranged economy? If they change their goal from making a few people rich first to making everyone equally rich at the same time, does this mean they say good-bye to Deng Xiaoping’s reform policy that developed the Chinese economy by an average annual growth rate of over 9 percent since 1978?
There is a clear difference between making a few people rich first and making everyone equally rich at the same time. The former theory of Deng Xiaoping is that if a minority becomes rich first, they become models for more and more people in the country to be rich. Regionally, the idea is that the coastal and southern areas are developed first, and then the energy from the developed areas will be used to develop the northeastern and western inland areas later. The unavoidable problem from this is the big gap in wealth among industries and between urban and agricultural areas. And that is why the theory of a harmonious society where everyone lives equally rich has surfaced. If we put it in the Korean way, it means that a policy focusing on development has been changed into a policy based on an equal distribution of wealth.
If this interpretation is correct, this is no ordinary affair. It is a problem because an economic and social policy that focuses on distribution more than development to create a harmonious society without a big gap in wealth cannot guarantee an average annual growth rate of 9 percent. China has an ambitious goal of being democratized and becoming an ideal civilized socialist country by 2050. According to the road map that leads up to this goal, China’s GDP will double its current $1.1 trillion by 2010, when the 11th five-year plan ends. According to the long-term plan, it will double again by 2020 and it will be around the same as the GDP of the United States by 2040.
Do they really want to choose the policy of distributing wealth equally? The new term “a pre-arranged economy” does not indicate this. The planned economy of China was executed by a huge organization in the center as was the Soviet Union’s in the past. However, “plan” is an old idea that does not fit in the 21st century. It appears that China has reached the conclusion that it would not be possible to reach the goal of catching up with the United States by 2040 and become a democratized and civilized socialist country by 2050, if it sticks to the economic policy that is defined by the word plan. It seems that China has decided to use the new term “pre-arranged economy” to get rid of the image of planning. The authoritative interpretation of the Chinese press is that a pre-arranged economy is a loose type of planned economy.
There has been a fierce debate among the Chinese leadership and specialists on the way to solve the imbalanced development of the country’s economy over the past few years. The fact, that the Gini coefficient, an index showing the gap in income distribution, went past the warning line of 0.40 and went up to crisis line of 0.47 last year seems to have stimulated a psychological crisis among Chinese leaders.
In the competition between China and the United States over who leads in Northeast Asia, to be exact hegemony, it is a must for China to maintain continuous and rapid economic development. If the economy is big, then its political status will be secured. A policy to make all 1.3 billion people of the country live prosperously will only result in making everyone poor. China cannot win in the competition against the United States. This is probably the reason why they have come up with a compromise plan of making a pre-arranged economy the essence of new economic policy, while changing the policy goal from selective wealth distribution for a limited number of people to equal wealth distribution for the majority.
The attention of the advanced countries on the future of the Chinese economy is focused on how long it will sustain its present high growth rate without political reform. This long-term view is on the span of life of an economy that flourishes under the monopolistic rule of the Communist Party, like a flower blossoming on an iron skeleton. There is also the view that when the fifth generation Chinese, who were born in the age of reform and opening to the outside world, comes to power, economic development without political reform will reveal its limits. However, we have to watch how the delicate economic policy adjustments of China will affect the Korean economy.
The trade volume between South Korea and China has exceeded the $100 billion mark this year, and Korea’s investment in China is over $29 billion (according to Chinese statistics). These figures show how much South Korea and China depend on each other economically. We need to carefully watch how the delicate change from selective wealth distribution to equal wealth distribution and from a planned economy to a pre-arranged economy will be reflected on the long march of Chinese economic growth leading up to 2050.

* The writer is an adviser and senior columnist of the JoongAng Ilbo.


by Kim Young-hie


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