China: World Bank Report Sets Stage for Taiwan-Style Development

When asked to comment on the leaking in September of a 200-page World Bank report on the Chinese economy, a member of the People's Republic of China delegation to the Bank replied furiously that the disclosure was the work of "a group of communists unfriendly to China."

The Chinese had reason to be upset since the report, China: Socialist Economic Development, provides a candid picture of how the world's most populous nation-long the proponent of self-reliant development-is being reintegrated into the capitalist world economy.

The main thrust of the World Bank report is the prescription of a policy of "export-led growth" for China: to gear its manufacturing toward Western markets. "Chinese industries must produce goods styled and designed for the world's bigger and more open markets," the report states. "To do this, Chinese manufacturers and designers need to be exposed to foreign manufacturing methods, product designs, tastes, styles and practical requirements." As part of this "exposure," the Bank recommends the entry of foreign firms.

China's cheap labor-with wage levels lower than Hong Kong's or South Korea's - allows the country to become a major manufacturing base, the report says. "The outlook is promising," claims the study, "given the abundance of skilled low-wage labor and the enormous potential for economies of scale."

But the report makes little mention of the problems such a strategy presents.

This strategy will entail a drastic reorientation of many sectors of Chinese industry away from serving domestic needs. It is sure to intensify competition among third world nations for Western markets that are already shrinking due to international stagflation and rising protectionism.

Brazil and South Korea, the two pioneers in export-led industrialization, have already seen key industries like garments and shoes dealt crippling blows by Western protectionism. Now trade barriers are beginning to slow down industrial growth among the latecomers, like the Philippines and Hong Kong.

To finance China's export-oriented growth, the World Bank recommends that the country borrow heavily from the West, a strategy that would increase China's debt from $3.4 billion in 1980 to as much as $79 billion in 1990 and $214 billion in 1995 (at 1990 dollars). This would place China in the top bracket of severely indebted countries like Brazil, Mexico, South Korea and the Philippines. Once it becomes so far in hock, China would be at the mercy of its international financial creditors.

A major contradiction runs through the report. On the one hand, the Bank concedes that China's socialist system, built around the principle o1 self--reliance, has successfully met the basic needs of the population. President of the World Bank, A.W. Clausen, praised the results of this strategy in a speech he gave on December 8. "The society's most remarkable achievement," Clausen said, "has undoubtedly been to meet far more of the basic needs of its low-income groups than has occurred in other poor countries."

On the other hand, the World Bank proposes shelving this strategy and replacing it with another-export-led growthwhich the Bank's own report admits "might tend to increase relative inequality" and is "a path that is not only new for China, but has been successfully trodden by few, if any, other countries."

Walden Bello is an associate of the Southeast Asia Resource Center and director of the Congress Task Force, a human rights lobby group in Washington. John Kelley, an editor of Counterspy magazine.