The Scientific Development Concept in China
The Scientific Development Concept, or Scientific Development Perspective, is the current official guiding socio-economic philosophy of the Communist Party Of China. It was ratified into the CPC’s constitution in October 2007 under the leadership of President Hu Jintao. Key ideas include:
- A post-ideological vision of technocratic scientific government driven by pragmatism, analysis, experimentation and empirical validation.
- De-politicised, low public profile, collective, expert decision making. Efficient corruption free policy.
- A coordinated and interventionist approach to policymaking as opposed to laissez-faire.
- Policy targeting wide social gains in utility, not just economic growth – eg also addressing inequality and environmental damage.
- Maintenance of broad popular support for government based primarily on performance not democratic participation.
- Active participation in government and transparency at the elite academic level.
- A more passive role for the masses including a much greater emphasis on paternal guidance compared to modern Western Democracy. Increasing press freedoms and policy making participation at the popular level as society develops.
- Compared to Western Democracy, a greater focus on China’a evolution, on contentment in the future rather than the present.
One recent author, writing about China, Jeffrey N. Wasserstrom, argues that it is more helpful to think in terms of Aldous Huxley’s Brave New World than George Orwell’s 1984 – “Orwell emphasises the role of fear in keeping people in line, while Huxley pays more attention to how needs and desires are created, manipulated and satisfied”. Yet this statement sounds too cynical, this article will reveal the Scientific Development Concept to be a genuinely idealistic vision of paternalistic government.
China is implementing a new tax, a land tax. That’s highly significant because it’s the world’s first national scale implementation of the best tax, the fairest tax, the least bad tax. Once again, China is learning from out mistakes and re-writing the book; this time on how to tax fairly and sustainably. Here’s a good article that explains China’s land tax and gives some links to great sources of information on land taxes for further reading:
China Shifts to Land Tax
China Attacks the USA on All Fronts.
Try to see it from the hegemon’s point of view: While Russia confronts the USA head-on, China is attacking on almost every other front, simultaneously. China’s attacks look like neutral, ‘commonsense’ or ‘competitive’ moves. All nice and friendly:
- Like Shanghai’s new gold exchange. Shanghai forbids naked shorting; all sales are for physical delivery. Perfectly sensible, right? Well, it drives a wedge between the price of ‘paper’ (naked short) gold on US’ Comex and physical gold. This thwarts the world’s biggest paper gold shorter, the US Treasury, which has been using trillions in naked shorts to rig the market since the US failed to deliver gold that Germany had lodged with it for safe keeping.
- China’s offering Turkey financing and IP with their antimissile defense system. Turkey will be half out of NATO if it goes through with the deal – as it is threatening to do. Turkey is NATO’s Eastern wing.
- Then there’s the renminbi, which is internationalizing 10 times faster than anyone predicted. China’s controlling the world’s desire to diversify their reserves by bulking up on renminbi.
- If the past 50 years are a guide, the next financial crisis is due within 36 months.
You’ve got to feel sympathy for the hegemon, don’t you? I certainly do. My income is entirely tied to the $US. Maybe it’s time we thought of cooperating with the Chinese government, instead of treating it as an enemy. Maybe it’s too late.
Peter Bottelier and Uri Dadush despatch most of the criticism about China’s currency in an International Herald article. They identify several media myths:
China’s growth has depended primarily on exports. Exports are important to China, but domestic demand is the overwhelming growth-driver. As China’s imports grew almost as fast as exports during the decade preceding the crisis, net-exports accounted for only about 1 percentage point of China’s 9.5 percent average annual growth rate.
China did not contribute enough to global demand during the crisis. As a result of China’s aggressive and successful stimulus program, domestic demand expanded 12.3 percent in 2009 (it contracted 2.6 percent in the USA). As a result, China’s current account surplus and the U.S. deficit declined sharply. China did more than any other country to pull the world out of the recession.
China’s consumption is not growing fast enough. Private consumption grew by an average of about 7.5 percent per year over the 10 years prior to the crisis, faster than in any other large economy, though investment and gross domestic product grew even faster, causing the consumption/G.D.P. ratio to fall to an unusually low level. In 2009 China’s consumption grew faster than G.D.P. for the first time in many years.
Revaluation of the renminbi will help the United States. The immediate effect of renminbi appreciation will be to raise prices for U.S. consumers. A 25 percent revaluation of the renminbi, which some economists have said is needed, would – if not offset by a reduction in China’s prices – add $75 billion to the U.S. import bill. And since the United States imports three times as much from China as it exports there, higher U.S. exports to China would not nearly offset the welfare loss to U.S. consumers from higher Chinese prices. Read more….
Andy Xie adds this:
The third interpretation [of the failure of the US financial stimulus to restore employment] is that it’s China’s fault. Yes, China’s exports to the U.S. rose sharply during its stimulus-inspired pickup, i.e., the stimulus partly went to China. But, whose fault is it?
Apple makes all the iPhones in China, because it costs under US$ 20 each, even after the massive wage increase for Chinese workers. Apple’s gross margins are 30 times the processing cost that goes to China. Maybe Apple is an extreme example. But, the fact is that China’s exports to the US are American goods that retail for 3-4 times of the factory-gate prices. American companies want to make the goods in China to satisfy the stimulus-inspired demand.
People like Geithner would argue that China should raise the currency to force American companies to move production back to the U.S. I suppose that that is how the whole yuan appreciation idea may work. But, at what exchange rate would the American companies want to do it? American wages are ten times China’s. Should China increase its currency value ten times?
Of course, the American pundits wouldn’t put it that way. They would talk about China’s trade or current account surplus and the rising forex reserves, the prima facie evidence of currency manipulation. I don’t want to deny that the rising forex reserves are a problem that China must tackle with. But, it is a separate issue from the US economy. The solution isn’t yuan appreciation either.
Everybody knows China has a massive savings rate of around half of its GDP. It’s a simple equation that the current account surplus is equal to savings minus investment. If the current account surplus is a problem, it is either insufficient investment or excessive frugality. China’s investment is over 40 percent of GDP. Even casual observers would find China’s investment too much. Are Chinese people too frugal? The household income is probably under 40 percent of GDP. How could they be the source of the gigantic savings? Read more…
Prof. Hans-Werner Sinn asks: =&0=&=&1=& =&1=& The undervaluation of the renminbi, is currently 45%, has persisted for many years. So why is the US suddenly acting so aggressively? Why didn’t America take action much earlier?
The reason lies in capital movements. The US accepted the lower valuation of the renminbi as long as China returned the dollars that it earned from bilateral merchandise trade by financing America’s budget deficit.
Now that the Chinese prefer to invest that money in raw materials in Africa and elsewhere, they have aroused the full ire of American policymakers.
China’s shift has been dramatic. In 2008 and 2009, the Chinese purchased US government bonds at a rate of $17 billion a month.
But China reversed course in November 2009. During the first seven months of 2010, China not only refrained from buying any more US government paper, but even began to sell its holdings. Each month, China sold a net sum of about $7 billion in US government bonds.
That nerves are now on end in America is perfectly understandable.
The Economist, in an article on November 6, 2010, points out that the Renminbi points out that the recent 24% rise in the value of the dollar combined with a 21% increase in wages–and a continuation of both trends–“suggests that American manufacturing should have less to fear from Chinese competition than it did 5 years ago.
If you ever wondered why the US ‘pivoted’ to Asia, it’s for the same reason as it attempted to destabilize Russia: to defend the dollar. Both countries have announced their intention to de-dollarize the world and, from this snippet and the article from which it’s taken, you can see how quickly and comprehensively they’re moving:
Last month, Beijing inaugurated the Asian Infrastructure Investment Bank (AIIB), a direct challenger to the Asian Development Bank, which is based in Manila and sponsored mainly by the US and Japan. Neither country was invited to join the AIIB. Nor was India. China’s finance minister Lou Jiwei notes that Beijing’s own China Development Bank already ‘is far bigger than the ADB and World Bank combined’. AIIB is touted as a multilateral ‘Asian-led’ agency. But much, if not most, of the funding will be Chinese. As one researcher said: ‘Now China has the ability to show the real money’.