BEIJING, China, Feb। 14
China is facing a serious situation where both the environment and the nation's resources are threatened by the behavior of the privileged classes. The first thing that needs to change is the 'yardstick' system by which one's value, status, authority and treatment are determined by administrative rank. This must be replaced by a civil society and a civil culture.
The deterioration of the environment is unlikely to change radically anytime soon. Since the implementation of its reform and opening policy China has never met international ecological indexes. According to the Environmental Sustainability Index published in Davos, Switzerland in 2005, China ranked 133 among 146 countries in the world.
The government has uncovered over 3,000 hydroelectric stations that failed to meet basic operational standards. Some privileged groups take advantage of the ignorance and backward circumstances of farmers and villagers to push through their pet projects. The majority of such projects are undertaken without a proper feasibility study and at the whim of the local officials. Some of them reject or even attack experts whose opinions contradict theirs. Many farmers have lost their rights to the land through these projects, receiving compensation worth just 5-10 percent of the value of the land the officials have misappropriated.
There are more than 5,000 government offices at different levels in Beijing. The number doubles if the offices of state-owned enterprises are included. The personnel working in these offices constitute China's privileged class. Serving their interests has reduced China to the position of the world's manual laborer.
Small enterprises cannot compete with the state-sponsored sector. The big state banks refuse them loans; smaller private banks that would be willing to serve them are prohibited. Facing the world's second highest business tax, lacking technology and the capital to invest in research and development, they are in no position to develop and expand. Therefore, China can only serve as the world's cheap production base.
The government has now launched a new village project aimed at upgrading rural life, but even this undertaking may be undermined by the pursuits of the privileged few. Originally, farmers and villagers should be the principal participants in this construction drive, but currently the rural areas exist in a financial vacuum. Large state banks are neither willing nor able to grant loans to them. As rural lands and dwellings are still under collective ownership -- in other words, monopolized by the state -- they can't be mortgaged and the land cannot be used for purposes other than that under which it is contracted. Therefore, the new rural construction is reduced to "performance engineering" projects, aimed at showcasing the achievements of the local government. Those displaced from the land cannot start businesses in the villages, so they migrate to the cities to work as coolies and manual laborers.
The pursuit of privileges and the monopolization of industry are like a debilitating disease for China. The power of the nation is departmentalized, the power of the departments is self-interested and self-interest is institutionalized. Lobbying by influential people has caused the deletion of key clauses from a planned anti-monopoly act.
Doing away with privileges and monopolies is the primary task of the Hu Jintao-Wen Jiabao government. The Chinese people have pinned their hopes on this. To begin resolving these endemic problems, the State Council should immediately take the following steps:
Monopolies such as China National Petroleum Corporation, China National Petrochemical Corporation, the State Grid Corporation of China, and China Telecommunications should be broken up. An anti-monopoly act that conforms to international standards should be drafted and exclusive monopolies either prohibited or subjected to a high monopoly tax.
The criteria for resources tax should be raised. The nation's resources tax is less than one thirtieth of that in the United States, Germany and France. This is extremely disadvantageous for the effective use of resources and the construction of a conservation-conscious society.
The stipulation that allows state monopolies not to hand over their after-tax profits to the state should be rescinded, and these profits channeled to the national budget and used for the public benefit. China must immediately stop the practice of offering huge incentives to foreign investors and wresting opportunities out of the hands of domestic companies.
State-owned monopolies should be required to set up investment funds according to their profit margin, with the balance of profits to be contributed to the national budget.
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(Hu Xingdou is professor of economics and China issues at the Beijing Institute of Technology. Professor Hu is also deputy director of the Institute of International Business Management at Beijing University's College of Resources. This article is exerpted and edited from the Chinese; the original may be found at www.ncn.org. ©2007 by Hu Xingdou.)
Translated by Taylor Poon; Edited by Kathleen Hwang
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