The Understanding China Today series offers students and general readers the opportunity to thoroughly examine and better understand the key contemporary issues that continue to keep China in the news and sometimes at the center of global controversy. These issues include business, technology, politics, government, civil liberties, family life, and gender concerns, among others. Narrative chapters in each volume provide an introduction and brief history of the topic, followed by comprehensive discussions of the subject area as it pertains to China’s present and future. With each volume, specialists and scholars present a solid, up-to-date foundation for learning about contemporary China, written in an accessible, engaging manner. As the world moves into the second decade of the 21st century, China’s position on the global stage is more prominent than ever. The Understanding China Today series provides vital insight into this international powerhouse for new generations of students, and others, seeking to understand a complex, ever-changing nation with a future as fascinating as its past.
Business and Technology in China JING LUO
UNDERSTANDING CHINA TODAY
Copyright 2010 by Jing Luo All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher. Library of Congress Cataloging-in-Publication Data Luo, Jing. Business and technology in China / Jing Luo. p. cm.—(Understanding China today) Includes bibliographical references and index. ISBN 978-0-313-35732-9 (hard copy: alk. paper)—ISBN 978-0-313-35733-6 (ebook) 1. Business enterprises—China. 2. Technological innovations—Economic aspects—China. 3. China—Economic policy—21st century. I. Title. HD2910.L85 2010 338.0951—dc22 2010000947 ISBN: 978-0-313-35732-9 EISBN: 978-0-313-35733-6 14 13
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List of Figures and Tables
Chronology of Recent Events in the People’s Republic of China
Handling the Global Financial Crisis
The China Model and Sustainability
223 Photo essay follows page 84
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List of Figures and Tables
Figure 1.1: China’s GDP Growth 1978–2008
Table 1.1: The U.S.-China Business Council Top 15 U.S. exporters to China in 2008
Figure 1.2: Per Capita Annual Income (Yuan)
Table 1.2: Urban and Rural Incomes of Selected Regions
Table 2.1: Losses of Chinese Banks during the Global Financial Crisis
Table 2.2: Losses of Chinese Firms during the Global Financial Crisis
Figure 4.1: Technical School Graduates in 10,000s
Figure 4.2: Number of Students Abroad and Returned
Figure 4.3: Number of Postdoctoral Graduates (1985–2008)
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In roughly three decades, China has grown from a povertystricken country into the third-largest economy in the world. As we speak, China is making yet another leap: emerging from the global financial crisis, it is transforming from ‘‘world’s manufacturing center’’ into the world’s biggest buyer. But the best part of the story is not yet heard: China’s next target is to build an ‘‘innovative nation’’ with a knowledge-based and energy-efficient economy. Imagine that a blue sky will come back to the cities and that rural streams once again will be safe for women to wash clothes and children to swim. In fact, that is exactly what the world depends on for a better future. The question is what has fundamentally changed to make all this happen? An obvious answer is the adoption of the market mechanism in 1978. A less obvious but more profound answer is that Mao Zedong had created, unintentionally, through prolonged and ruthless class struggles, not only the reversing economic momentum, but also a mentality ready to reject ideological entanglement. Thus, the China phenomenon is a fruit of the conjugation of push and pull, of which the pushing force, or the internal force, was decisive. The result is overwhelming: once the ordinary Chinese were allowed to get
rich, their will cannot be thwarted and their creativity knows no limit. The new generation is free-thinking and pragmatic. In their mind, if the West appropriately learned technology and got strong as a result, so too can the Chinese; if democracy brings social harmony, the Chinese embrace it and gradually phase it in; if globalization is the way of modernity, the Chinese charge in that direction wholeheartedly. If, however, the West sinks into ‘‘subprime mortgage crisis’’ and the like, the Chinese are not willing to follow. The past 150 years of modern history have done much of the enlightenment, to a point at which the Chinese are just too cynical to let the ‘‘invisible hand’’ of market mechanism run loose. They carefully maintain the prosperity by shrinking the gap, building a safety net, developing domestic markets, and working toward justice, fairness, equality, rule of law, and so on, so that elements that may derail the economy are under control. In this, the Chinese Communist Party, the middle class, and people of all strata seem strongly bonded together. This is known as the ‘‘China Model.’’ Going forward China faces a strong headwind. Rising costs of labor, shortage of energy, shortage of natural resources, and government-monopoly-induced corruption are but a few of a long list of hurdles. Successfully managing the market mechanism may be the best of challenges. Ask a government official or a grassroots entrepreneur, and they will tell you that the market economy is such that if you try to regulate it, you may end up killing it; but if you fail to regulate it, it grows out of control. This book presents China’s challenges in six chapters: Growth, Handling the Global Financial Crisis, Growing Pains, Innovative Nation, Economic Reform, and The China Model and Sustainability. The book will present challenges and show how the country prepares itself to win. The book was written with classroom needs in mind. Chapters are structured to complement typical lectures on modern China. Special terminologies are explained; a bibliography with abundant online resources and a chronology are included. The book is also intended for the general public. Instead of
extensive theoretical discussions, the reader will find individuals’ stories and cases that are helpful for understanding the nature of events. I am indebted to the generous supporters surrounding me. Dr. Lu Bin, chair of the Department of Urban and Regional Planning at Peking University, and Professor Gong Liwei, architect and senior engineer at the Design and Research Institute at Tsinghua University, provided enormous help during my research in Beijing. Mr. Luo Qiang, of Golden Concord Non-Ferrous Metals Holdings Limited, was an important source of inspiration on industrial development in China. I am appreciative of Ms. Kaitlin Ciarmiello of ABC-CLIO for her careful editing work. Last but not least, I would like to thank Bloomsburg University where I work for its generous support of all academic work that I do.
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Chronology of Recent Events in the People’s Republic of China
The People’s Republic of China (PRC) is founded on October 1 in Beijing. The Nationalist government withdraws to Taiwan. Mao Zedong declares the ‘‘People’s Democratic Dictatorship.’’ Mao is appointed chair of the Central People’s Government; Zhou Enlai is named premier; and Zhu De becomes general commander of the People’s Liberation Army (PLA). The Sino-Soviet Treaty of Friendship, Alliance, and Mutual Assistance is signed in Moscow by Mao Zedong and Joseph Stalin. In June, Mao denounces American aggression in Korea. In October, the Army of the Chinese People’s Volunteers publicly enters Korea in support of North Korea. Also in this year, the Marriage Law is promulgated by the central Government. The Trade Union Law and the Agrarian Reform Law of the PRC are also passed. The Korean War progresses, with Chinese troops taking Seoul. Mao Zedong’s son, Mao Anying, is killed in
Korea. Domestically, the Agreement of the Central People’s Government and the Local Government of Tibet on Measures for the Liberation of Tibet is signed in Beijing; the agreement recognizes Tibet as part of China and grants the region autonomous status. The Three-Antis Campaign is launched in January, targeting corruption, waste, and bureaucratism. In February, the Five-Antis Campaign begins; focused on business operations, it is commonly viewed as the precursor to deprivatization campaigns. Deng Xiaoping becomes deputy premier. The armistice ending the Korean War is signed on July 27. The First Five-Year Plan (1953–1957) starts. Deng Xiaoping becomes finance minister. Zhou Enlai and Indian prime minister Jawaharlal Nehru sign a joint communique that becomes the first international declaration to include the PRC’s ‘‘Five Principles of Peaceful Coexistence.’’ The first National People’s Congress (NPC) convenes. Deng Xiaoping becomes deputy chair of the National Defense Council. Zhou Enlai attends the Asian-African Conference (Bandung Conference) in Bandung, Indonesia; the conference seeks to build a united front of Asian and African nations against colonialism and racism. Deng Xiaoping is elected to the Politburo. The Chinese Language Reform Committee releases the first batch of simplified Chinese characters for use in newspapers in Beijing and Tianjin. In April, Mao Zedong delivers his influential speech ‘‘On the 10 Major Relationships.’’ In September, the Eighth Party Congress elects Mao party chairman; Liu Shaoqi, Zhou Enlai, Zhu De, and Chen Yun are elected deputy chairmen; and Deng Xiaoping is elected as secretary general of the Chinese Communist Party (CCP). In May, Mao Zedong calls for greater artistic and academic
freedom with the slogan ‘‘let a hundred flowers bloom, and a hundred schools of thought contend.’’ Mao Zedong delivers his speech ‘‘On the Correct Handling of Contradictions among the People.’’ In June, the People’s Daily states that rightists are trying to overthrow the Communist Party and an Anti-Rightist Campaign is launched. In May, the Great Leap Forward is launched with the phrase ‘‘more, faster, better, and more economically soundly’’ as its general guiding principle. In August, at the Politburo’s Beidaihe Conference, the People’s Communes plan is endorsed; the plan results in the organization of 26,000 communes in less than two months. In March, the State Council appoints the Panchen Lama to chair the Preparatory Committee for the Tibetan Autonomous Region. Democratic reforms start in April in Tibet. In April, Liu Shaoqi replaces Mao Zedong as president of the PRC, with Song Qingling and Dong Biwu as deputies. During July and August, an extremely serious drought hits vast areas of China, affecting 30 percent of farm production. Rebellion erupts in Tibet. Lin Biao replaces Peng Dehuai as defense minister. In July, the Soviets notify China of their withdrawal of technological support. With the exception of Xinjiang and Tibet, serious famine occurs across China, causing tens of millions of deaths. Wu Han’s controversial play Hai Rui’s Dismissal is published in January. The 26th World Table Tennis Championships take place in Beijing, with the Chinese winning both the men’s and women’s singles titles. In October, Chinese troops launch major offensives on the Sino-Indian border. A cease-fire is declared in November. Mao Zedong steps up emphasis on class struggle.
In May, Mao Zedong launches the socialist education movement in rural areas. In January, Zhou Enlai launches an extensive tour of Africa. In August, the United States bombs North Vietnam. In October, China carries out its first nuclear test. In May, China carries out its second nuclear test. In June, the Wenhuibao newspaper denounces Wu Han’s drama Hai Rui’s Dismissal as an anti-Party poisonous weed, thereby signaling the coming of the Great Cultural Revolution. The Tibetan Autonomous Region is formally inaugurated in September. In May, the Politburo sets up the Cultural Revolution Group and calls for attacks on all representatives of the bourgeoisie who have infiltrated the party, government, army, and cultural world. In July, Mao Zedong swims in the Yangzi River at Wuhan, refuting the rumor that he is sick. In August, Mao Zedong, Lin Biao, and Zhou Enlai preside at a Cultural Revolution rally in Tiananmen Square at which Red Guards make their first appearance. The Guards subsequently begin destroying historical relics. Chairman Mao’s Quotations are first published in the form of the Little Red Book. Deng Xiaoping is ousted from his offices. In June, China tests its first hydrogen bomb. By December 25, 350 million copies of Mao’s Little Red Book have been distributed. The army takes control of government offices, schools, and factories. Millions of young people are sent to the countryside to receive reeducation from peasants. In March, Chinese and Soviet forces clash at Zhenbaodao Island in the Ussuri River. More clashes occur in the following months. In July, the United States lifts restrictions on travel to China, and in December, it lifts its partial trade embargo. Liu Shaoqi dies.
In April, China launches its first satellite. In April, the U.S. ping-pong team visits China and is followed by U.S. Secretary of State Henry Kissinger, who comes to Beijing in July. In October, China is admitted to the United Nations. In February, President Richard Nixon signs the joint Shanghai Communique in China, admitting that there is one China and that Taiwan is a part of it. In September, China purchases 10 Boeing 707 civilian jet airliners from the United States. Deng Xiaoping becomes vice premier in August. The United States and China announce their intention to establish liaison offices in each other’s capital. In April, Deng Xiaoping addresses the United Nations and denounces the world hegemony of the United States and the Soviet Union, the world’s ‘‘superpowers.’’ In January, Deng Xiaoping is elected deputy chairman of the Chinese Communist Party Central Committee (CCPCC). An earthquake hits the city of Tangshan, killing more than 250,000 people. Premier Zhou Enlai dies in January, and Mao Zedong dies in September at age 82. Mao’s death ends the Great Cultural Revolution. The radical group called the ‘‘Gang of Four,’’ led by Mao’s widow Jiang Qing, is arrested by Hua Guofeng, Mao’s handpicked successor. University admissions based on college entrance examinations start. Enrollment based on recommendations ends. Deng Xiaoping is politically rehabilitated. The ‘‘Deng era’’ begins. Deng Xiaoping steps into the spotlight as an important leader and begins to repair the devastation caused by Mao Zedong’s rule. Deng’s market-oriented reforms, embodied in the maxim ‘‘to
get rich is glorious,’’ spark over 20 years of exponential growth, lifting the masses out of poverty. In December, the Coca-Cola Company reaches an agreement with China to sell its soft drinks in the country and open up bottling plants. In the same month, the Third Plenum of the 11th Chinese Communist Party Central Committee (CCPCC) shifts the party’s focus to modernization, which is also seen as the onset of the economic reforms. In January, Deng Xiaoping visits the United States and resumes the Sino-American diplomatic relationship. From January to February, Chinese troops invade Vietnamese territory and destroy logistics facilities. In July, the Fifth National People’s Congress (NPC) announces the Criminal Law and the Organic Law of the Local People’s Congresses and Local People’s Governments. Special economic zones are opened, including Shenzhen, Zhuhai, Shantou, and Xiamen. In September, the party criticizes Mao Zedong’s Cultural Revolution as ill judged and calamitous. In October, political dissident Wei Jingsheng is sentenced to 15 years in prison. In February, the NPC Standing Committee declares regulations on issuance of academic degrees. In December, the People’s Daily declares that Mao Zedong made great mistakes during his last years and that his Great Cultural Revolution was a disaster. Deng Xiaoping is elected chairman of the Military Commission, and Hu Yaobang replaces Hua Guofeng as chairman of the Chinese Communist Party Central Committee (CCPCC). Both Zhao Ziyang and Hua Guofeng are appointed deputy chairmen. The trial of the Gang of Four is held. In September, British prime minister Margaret Thatcher arrives in Beijing to start discussions about the future of Hong Kong.
Selected Works of Deng Xiaoping is published in July. Sino-British talks over Hong Kong’s future begin. In October, the Third Plenum of the 12th Chinese Communist Party Central Committee (CCPCC) adopts a decision on reform of the economic structure, shifting the focus to urban enterprises. Measures are taken to strengthen the Tibetan economy. Fourteen coastal cities and the island of Hainan are opened to foreign investment. A Sino-British declaration on Hong Kong’s return is signed. In May, the Chinese Communist Party Central Committee (CCPCC) releases its Decision on the Reform of the Educational System. In September, Deng Xiaoping, during an interview with Mike Wallace of CBS for the television show 60 Minutes, endorses Mikhail Gorbachev’s reforms in the Soviet Union and indicates that China’s economic reforms are not in conflict with communism. In September, the Shanghai Stock Market reopens for the first time since 1949. The Bankruptcy Law is issued in December. In May and December, students in large cities stage demonstrations demanding more rapid reforms and more democracy. Faced with rising democratic pressures, the Chinese Communist Party (CCP) reiterates its determination to stick to the ‘‘Four Cardinal Principles.’’ Hu Yaobang resigns in January. Writer Liu Bingyan is expelled from the party. Zhao Ziyang is appointed general secretary of the CCP, replacing Hu Yaobang. Student unrest occurs in 22 Chinese cities. In November, Deng Xiaoping remains in control of the Central Military Commission. In December, Zhao Ziyang resigns as premier and is replaced by hard-liner Li Peng. In October, 2,000 Tibetan monks demonstrate in Lhasa in favor of Tibetan
independence; the demonstrations lead to clashes with Chinese authorities. China slides into economic chaos due to the rising inflation that peaks at more than 30 percent in the cities, ultimately setting the stage for future protests and prodemocracy demonstrations. Hainan is approved for provincial status. The first exposition of nude paintings opens in Beijing in December. On May 16, Deng Xiaoping and Mikhail Gorbachev meet and announce the normalization of Sino-Soviet relations. On June 4, followed by several weeks of students protesting in Tiananmen Square in Beijing, troops arrive with tanks, allegedly killing hundreds of protesters. The event once again isolates China on the world stage. On June 5, President George Bush suspends high-level relations with Beijing in protest against the massacre. On December 10, U.S. National Security Adviser Brent Scowcroft meets Deng Xiaoping in Beijing. Soon after, Deng plucks Jiang Zemin, who was relatively unknown, from Shanghai to be the new Communist Party chief. Jiang replaces Zhao Ziyang. In January, almost 500 students who participated in the demonstrations of the previous year are released from detention. In April, President Yang Shangkun promulgates the Basic Law of the Hong Kong Special Administrative Region (SAR) adopted by the Seventh National People’s Congress (NPC). The law is scheduled to take effect on July 1, 1997. Campaigns that aim at strengthening patriotism and discipline are launched at educational institutions. The first partial direct elections are held in Hong Kong. During his tour to Hainan and coastal cities, Deng Xiaoping reiterates his determination to continue
1994 1995 1996 1997
China’s economic reforms. Beijing establishes diplomatic relations with South Korea. Chinese president Jiang Zemin meets with U.S. president Bill Clinton in Seattle, Washington, during an informal meeting of APEC leaders. The Three Gorges Dam project starts. Hong Kong holds legislative elections. Dong Jianhua (Tung Cheehua) is selected chief executive of Hong Kong. Deng Xiaoping (1904–1997) dies at age 93. Deng’s successor, Jiang Zemin, visits Washington. The British formally hand Hong Kong back to China on July 1. The Asian Financial Crisis negatively affects many of China’s coastal businesses and causes severe deflation. The Chinese government maintains the yuan’s value. U.S. president Bill Clinton visits Beijing. NATO’s accidental bombing of the Chinese embassy in Belgrade, Yugoslavia, sparks a crisis in Sino-American relations. China and the United States reach an accord on the terms of China’s entry to the World Trade Organization (WTO). China recovers sovereignty over Macao. Chen Shuibian of the Democratic Progressive Party is elected president of Taiwan, while Li Denghui (Lee Teng-hui) of the Kuomintang Party (KMT) resigns. The 9th National People’s Congress (NPC) is held in Beijing in March; the Congress stresses anticorruption efforts and economic cool down. In an act of terrorism, hijacked civilian planes take down the World Trade Center in New York City on September 11. An Asian-Pacific Economic Cooperation (APEC) meeting held in Shanghai in October is attended by American president George W. Bush. Jiang Zemin pledges to support the American war on
terrorism. China joins the World Trade Organization (WTO) in December. China wins a bid to host the 2008 Olympic Games. The 16th Congress of the Chinese Communist Party (CCP) is held in November. The party completes a sweeping leadership reshuffle. Jiang Zemin and other older leaders allow for a younger generation to take control, headed by Hu Jintao and Wen Jiabao. Jiang Zemin remains chairman of the Central Military Commission. The SARS outbreak occurs in November, and attempts to cover up the spread of the SARS infection cause scandal. The Tenth National People’s Congress (NPC) is held in March. Hu Jintao and Wen Jiabao are elected president and premier, respectively, of the PRC. Jiang Zemin and Zhu Rongji step down. Hu Jintao quietly consolidates power while both he and Premier Wen Jiabao reveal populist agendas in their first year in office. Chen Shuibian is reelected president of Taiwan in March, taking advantage of the popularity generated by an unsuccessful attempt to assassinate him. The growing belief that the assassination attempt was contrived sparks suspicion of Chen Shuibian’s campaign strategy. In September, Jiang Zemin steps down from his last position as chairman of the Central Military Commission. In December, President Bush meets with Hu Jintao at the 12th APEC meeting. Both sides express a commitment to a stronger Sino–U.S. relationship. CCP stresses curbing corruption and strengthening education of morality and ethics. A Chinese exploration team reaches the highest peak of the South Pole. National People’s Congress passes the Anti-Secession Law. China starts floating the renminbi (RMB) based on market demand and in reference with major currencies.
Shenzhou 6, a manned spacecraft, is launched and returns successfully. The agricultural tax of 1958 is eliminated. The State Council makes a proposal to stress China’s innovative and competitive abilities in building a newstyle country. Protection of migrant workers’ rights is urged. The Three Gorges Dam is completed with a total length of 2,309 meters. The Qinghai-Tibetan Railway of 1,958 kilometers opens. Three volumes of Selected Works of Jiang Zemin are published. China hosts the Beijing Summit of the Forum on China-Africa Cooperation. National People’s Congress passes Property Rights Law, emphasizing investment in low-income housing. The State Council proposes a plan to expand the service sector and issues National Rural Minimum Living Standard Guarantee System. Chang-e 1, a lunar exploration satellite, is successfully launched. The Shanghai Stock Market Index rises from 3,000 early in the year to 6,124 on October 16. The State Council makes energy saving and emission reduction part of the evaluation package for businesses managers. The Labor Law is promulgated to require a clearly defined contractual period. Violent riots break out in Lhasa, Tibet. A 7.9 magnitude earthquake hits Wenchuan County, Sichuan Province, on May 12 killing 69,227 people. During August 8–24 and September 6–17, Beijing successfully hosts the 29th Summer Olympics and the Special Olympics. China ranks first in gold medals in both Olympics. The scandal of melaminetainted formula produced by Sanlu is revealed. Thousands of children are poisoned. China successfully conducts the flight of Shenzhou 7, a manned spacecraft. Shanghai Stock Market plummets to 1,600; the government cuts benchmark interest rate and one-year bank deposit rate. Lehman Brothers declares bankruptcy; the government deploys a stimulus package of
4 trillion RMB. The Chinese mainland and Taiwan start direct air and sea transport and postal services, ending a 59-year ban. The State Council announces a plan of reform in healthcare and medicine to provide basic healthcare to all rural and urban residents. Hu Jintao attends a financial summit in London and commits to joining efforts in combating the global financial crisis. The State Council urges preventive measures for H1N1 flu. The China, Russia, India, and Brazil Summit is held in Russia to outline cooperation between the countries. Serious ethnic riots break out in Urumqi, Xinjiang Autonomous Region, killing more than 180 people. Gross domestic product of the first six months grows by 7.1 percent, reflecting economic recovery. China reports 2009 GDP of 33.5 trillion RMB or 8.7 percent increase over the 2008 figure. Google threatens to pull out of China after accounts of political dissidents are hacked, reveals that hackers exploited a ‘‘back door’’ intended for government’s forensics research. Secretary of State Hilary Clinton gives speech on free Internet. U.S. makes $3.1 billion arms sale to Taiwan. President Obama meets Dalai Lama in the White House, triggering Beijing’s strong protest. In defiance, Google stops censoring web searches and news services in China and plans to redirect users to its services in Hong Kong.