By Charlie Hore
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China: the growth of global industrial power

This article is over 12 years, 7 months old
China didn’t just face a political crisis in 1989 – it was an economic one too. The Chinese economy grew massively throughout the 1980s, but increasingly it grew out of the control of China’s leaders.
Issue 2154

China didn’t just face a political crisis in 1989 – it was an economic one too. The Chinese economy grew massively throughout the 1980s, but increasingly it grew out of the control of China’s leaders.

By the autumn of 1988 inflation had risen to levels not seen since 1949 and many of the new jobs created in the 1980s were disappearing.

The government’s attempts to solve this by controlling prices only made matters worse.

That’s why workers were so important to the movement in 1989. The post-Mao leadership had promised them a better life, but then taken away much of what they had gained during the early 1980s.

The workers’ organisations that sprang up in China’s major cities emphasised inflation and job security alongside the wider issues of official corruption and democracy.

The crackdown after 4 June made the economic crisis even worse – the Chinese economy actually shrank for a year and then stagnated.

When the economy did begin to recover in the early 1990s it was largely due to two external factors that China’s rulers were well placed to cash in on. One was specific to China, the other of wider economic significance.

The first was Hong Kong capitalists moving their operations into China proper in advance of the territory’s reunification in 1997.

By the mid-1990s, Hong Kong capitalists employed more people in southern China than in Hong Kong itself.

The second factor was an aspect of what people were beginning to call “globalisation”. Big Western companies were increasingly shutting their factories and outsourcing production to smaller and much cheaper sweatshops across the Global South.

Parts of China were ideally placed to profit from this. Much of the dynamic growth in the 1980s had come from small rural factories producing components, shoes and clothing. They could easily turn to producing for the world market.

They were concentrated in the coastal areas from Shanghai down to Hong Kong – which changed out of all recognition.

China’s economy grew by over 10 percent a year throughout the 1990s as such factories became the major source for first consumer goods and then for business electronics imported by the US and Western Europe.

China now produces most of the world’s DVD players and photocopiers.

China’s workers have paid a heavy price for this. The new industries undermined the profitability of state-owned factories and, from the mid-1990s onwards, there were wholesale closures.

Some 45 million workers lost their jobs. Unemployment reached 50 or even 60 percent in some cities.


Meanwhile in the new industrial areas 14-hour days and six-day weeks became standard in the factories producing for export. Physical and sexual abuse were widespread, and most workers experienced being paid late or not at all.

The West’s demand for cheap imports ensured that the economy continued to expand even through the Asian currency crisis of 1997 and the collapse of the dot-com boom in 2000 and 2001. By 2003, China was attracting more foreign capital than any other country.

But the runaway growth of the export industries has massively distorted China’s overall economy. As its economy can’t produce the raw materials and components the exporting industries need, China’s imports have grown almost as fast. It is a net importer.

China’s continued growth has come to depend almost entirely on exports to the US, and even a slight decrease could have major consequences.

The exporting industries also rely on a constant supply of fresh labour from the countryside.

Peasants can make far more money in the sweatshops than in the villages, however bad the conditions, and employers had come to believe there was an unlimited supply of new workers.

But as early as 2006 fewer migrants were coming to the new factories. Province after province was forced to increase their minimum wages to attract them, but the government’s attempts to boost food production by paying peasants better cut across this.

Then the credit crunch hit. Exports to the US have been falling since 2007, but last year they dropped massively.

No one knows the exact figure, but it’s likely that some 20 million migrant workers have lost their jobs in the new industrial areas and had to go back to their home villages.

The government is trying to stave off a full-blown recession with a massive increase in public spending, but it is too early to know whether that is going to work.

China’s huge expansion since 1989 has transformed the country into a world economic power, but one heavily dependent on the health of the world economy.

If China is now a much richer society, it is also much more unequal. For most workers and peasants, economic insecurity and instability are growing.

Twenty years after Tiananmen Square, the underlying conditions that produced the biggest explosion of working class rage in the country since 1927 have not fundamentally changed.


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