GLOBALIZATION AND DIALOGUE OF
CIVILIZATIONS: THE ROLE OF CHINA
Professor Marco Antonio Rodrigues Dias
-Representantive of the United Nations University
(www.unu.edu) in UNESCO
-President of ORUS –International Observatoire
of Universities Reforms (www.orus-int.org)
“To review history is to know better what
the future holds in store” – Confuncius
International Conference on “Excellence with or without a soul: the cultivating of mindful university graduates” – GUNI-AP- Hangzhou – China- 2 and 3th December 2007
Three years ago, I was in China for the GUNI-AP Symposium on Quality Assurance and Mutual Recognition of Qualifications in Higher Education, held between 20 and 21 September 2004, in Hangzhou. On the last day, during an informal conversation with some Chinese friends at lunch time, someone asked my opinion on the possibility that the conflict between China and United States could become out of control due to the discussions - serious in those days - on the future of Taiwan.
I cannot absolutely say that I was right, but what I said was that the conflict over Taiwan was serious, having lasted several decades, and it was a sensitive matter in China. But it became a kind of theatre, in which personalities from all sides use violent words and organize movements that can, apparently, provoke a military war. However, at the end of the day, everything comes back to the point of departure. No war occurs or will occur.
This discussion took place in September 2004. One year later, on 3 September 2005, the British journal, The Economist, noted that “tensions in Taiwan have cooled since last December’s legislative elections there (in Taiwan) and Mr. Bush will reassure Mr. Hu that America (US) still has a “one China” policy.
More serious than Taiwan, I added, could be the results of an imbalance in trade movements and the United States deficit. The United States spends more than it produces. The colossal United States deficit is financed by the Chinese, Europeans, Japanese and some developing countries that insist on buying American treasury bonds. But, if one day, the Chinese and Japanese should together decide to stop, and at the same time suddenly ask the United States to pay for all these bonds, the economy of the United States would go bankrupt, and this could provoke an international financial crisis worst than the one in 1929.
Since then, I have become more curious and have tried to follow more accurately what is happening in the world concerning these subjects. First of all - and I will come back to this question - I realize that it is extremely difficult for Western observers to understand exactly what is happening in Asia, particularly in China. But in the case of Taiwan, I do not think I was wrong. Since 2005, the international press reported with some surprise that by investing 100 billion dollars, the island (Taiwan) became the leading investor in mainland China. Some analysts started to say that Taiwan would now have no economic alternative other than integration with mainland China. It seems also that more than one million people from Taiwan moved to the continent to do business. Who, therefore, can be interested in making war? The Economist stated in its issue of 3rd-9th September 2005, that “war between China and America (United States) is neither imminent nor likely. In fact - and this applies not only to people living in Taiwan - who in the world can today ignore China? Who could be interested today to make war against China? In fact, it seems clear that a military war will not take place, but an economic war, or at least serious battles, are not unlikely.
More than that, it now seems clear that the future of China will condition the future of the world. What happens now in this country has an impact all over the world. But what is really happening in China, in the world process of globalization and, in a more specific way, in the organization and definition of policies for education in general and for higher education in particular? Is it possible to have an objective view if the analysis is based exclusively on Western documents and on principles taken directly from Greek philosophers, scholars and modern Western philosophers? And what should be the role of higher education institutions, particularly those from China and the whole Asia, in the configuration of a new world? Will it be a world of peace, of tolerance, of understanding between individuals and nations or we will face exclusively a change in global leadership?
When one looks at China, the first reaction is to feel that the figures are really impressive. Everybody knows that China has a population of around 1.4 billion people.
In the eighties, one of the smallest and very poor countries in Africa sent an official delegation to China. A member of this delegation told me that when the Prime Minister of China was informed that the population of this African country was, at this time, around three hundred thousand people, he said, with great humour: “I want to know the number of inhabitants, not the size of your delegation”…This story, I can ensure you, is true!
In 2003, the number of rural migrant workers reached 114 million. In 2001, the rate of urbanization was 37 per cent. It is expected to reach 50 percent in 2030 and 70 percent in 2050. With 310.000 millionaire couples in 2006 (compared to 260,000 in 2005), the Popular Republic of China now exceeds the figures for Italy and France, which have, respectively, 270,000 and 265,000, according to Le Monde (19.10.2007). China is now the biggest importing country of cement (55% of world production), coal (40%), steel (25%), nickel (25%), and aluminum (14%). In 2006, it was the leading importer of oil. Experts consider that at present one third of the world’s economic increase is due to Chinese growth.
And the end is not in sight. According to several observers, the GNP has progressed by 11.9% since the beginning of this year (2007). Investments in “fixed capital” rose by 25.9% and inflation during the first six months was maintained at 3.2%. And all this despite actions to slow down the economy, in particular, with two increases in interest rates, five increases in the obligatory reserves of the banks, and fiscal reforms to reduce the level of exports.
Western people, journalists, economists and intellectuals, all have difficulty in understanding China. Frequently, one reads in these countries that the Chinese economy will explode. According to Western patterns and to analysts from international financing organizations, no country can control its inflation, push its growth and achieve balance in its trade, at the same time. But at least for the moment, China has succeeded. This year, in 2007, the economy will increase by more than 12%, the inflation is low – between 3 and 4%- and the last year when the country had a deficit in its trade balance was in 1993. Now, in 2007, the Chinese economy is considered to be the third in the world, surpassing Germany. During the last ten years, China multiplied its exports by ten. During the 17th Congress of the Communist Party, the President Hu Jintao announced the goal of multiplying by four the GNP between now and 2020.
In Europe recently, some governments and analysts were worried and even shocked by the information that the Chinese authorities set up in September 2007 a special public investment fund and allocated to it the amount of 300 billion dollars. This allows China to make investments in all major Stock Exchanges in the world. One French newspaper calculated that with this amount, China could easily buy Microsoft, EDF, the Société Générale, BNP Paribas, the Crédit Agricole and AXA together. In Germany, the elaboration of a new law has been announced, which will make it more difficult for foreigners (i.e., the Chinese…) to buy German companies.
The result of all this is that although a military war will not take place, an economic war is not unlikely.
Finally, on 24 November 2007, The Economist announced that its annual compilation of predictions for 2008 was available on line. “One confident prediction, informs this British journal, is that China will be breaking all sorts of records. It will contribute most to global growth, overtake Germany to become the world’s biggest exporter and win the most gold medals at the summer Olympics in Beijing”.
A NEW WORLD FINANCIAL SYSTEM
In the Economy and Finances section of its issue dated 13 June 2007, the French newspaper Le Monde, writes: “The European Union loses patience regarding the Chinese trade surplus” (L’Union européenne perd patience face à l’excédent commercial chinois). In this article, the French journalist Philippe Ricard reports that the deficit of 27 European countries with China could reach 170 billions Euros in 2007, after 128 billion in 2006, implying an increase of more than 30% in one year. In the face of these figures, the European Commissioner in Brussels, Peter Mandelson informed the Chinese Trade Minister, Bo Xilai, that this situation is “unacceptable and “cannot last”. He foresees a greater deficit and requested China to eliminate restrictions to European companies and take steps to reduce the Chinese trade surplus that, according to estimates he presents, could reach 225 billion Euros (300 billion US dollars) in 2007. In addition, the European (British) Commissioner asked for measures to protect intellectual property and abolish limits imposed on foreign participation in the capital of banks and other financial establishments.
This explains why the Western press attacks China every day, blaming it for the difficulties European economies are facing nowadays. This is also particularly true in the United States where each week politicians and journalists show signs of anxiety about Chinese currency reserves that were estimated at 410 billion in 2004 and in 2007 have already risen to the amount of 1,320 billion US dollars. In 2007, the trade surplus of China will reach more than 220 billion dollars, while the deficit of the United States will be around 750 billions, according to recent estimates. When Chinese experts or politicians consider this reality, they think that Sino phobia now rivals the preoccupation over terrorism in the United States. This recalls – even if not to the same extent - the anti-Nippon phobia at the beginning of the nineties when Japanese corporations announced the purchase of Columbia and the Rockfeller Center.
But not everything is the same. There are differences. First, all figures are now much higher in the case of the Chinese than the Japanese or Korean in the sixties. Furthermore, the Japanese and South Koreans were accused of imitating, of making copies of Western products. The anecdote that circulated in the sixties is well known about a visitor to Japan seeing a fine bottle of Japanese red Bordeaux wine, on which was written warnings about imitations… The Chinese accept imported products, such as French wines, but unlike what happens in other regions such as Latin America, they impose joint-ventures. “You have the technology”, they seem to say, “but we have the market. We help you sell your products but you must transfer the technology, the knowledge, and later even the property”. They did that in the case of wine. Today, in China, one can drink good red wine produced jointly by the Chinese and French. And the same applies to industrial equipment. Recently, Airbus planes started to be produced in China. It is the first time this has happened outside Europe.
The fact is that, according to several analysts (see, for example, Global Europe Anticipation Bulletin – GEAB - no. 18):
The financial aspect of the current crisis originates from the fact that, in the last two decades, the US economy specialized in the production of debts mostly (household, corporate and public ones), knowing that an increasing share of this collective debt was sold to foreign investors who are beginning to realize that they might never see some part of their loans back (thanks to which the ‘American way of life’ financed itself in the past few years). The most prudent, or rather the most sagacious, are even beginning to wonder if they will be paid back at all. The comparison with the ‘Russian loans’ is not a mere trait of humour. It is in fact quite reasonable: indeed, if today they did not have the possibility to print their own money in order to honour their payments, the US could simply be defaulting given that their collective debt exceeds 400 per cent of their GDP”.
The enfeebled dollar - lately at about $1.50 to the Euro - would be weaker still without enormous purchases by central banks in emerging economies. The situation is becoming difficult, but the United States and other G7 countries estimate that the Chinese economy is in such a strong position strong because the Yuan is under valuated in a proportion of 20% to 30%. And this explains the interest of United States in keeping the Euro, and even less known currencies such as the Brazilian Real, stronger than the normal and also the pressures against China to devaluate its currency. The present status of currency values clearly helps to finance United States deficits and contributes to increasing US exportations.
For many political scientists who work with economic indicators, poor and emerging countries have become the bankers of richest countries, particularly the United States. The Chinese reserves (1,400 billion dollars or 955 million Euros), plus the petrodollars of OPEP countries and the anticipated settlement from Brazil and Argentina, make it clear that these countries are now financing the industrialized world. From the ethical point of view, many analysts consider that this is shocking.
But if China, OPEP countries and emerging economies really decide to abandon the dollar and use another currency – the Euro for example - as their reserve currency, if big economies decide not to buy Unites States treasury bonds any more, if the United States continues to spend money on consumption and stupid but costly wars, the US economy may explode and an international economic crisis will be inevitable.
Of course, until recently this could be considered as unrealistic futurism, but the accelerated events of the last weeks show that this is already a reality. One does not need to be a bright economist to understand that these countries, particularly China, could be more and more interested in keeping stronger currencies or in buying stocks of powerful United States companies. Chinese reserves are the equivalent to the Stock Exchange value of the three biggest United States companies: Exxon, General Electric and Microsoft.
Anticipating what the Chinese reaction could be to the weakness of the US dollar and the consequent reduction in value of its reserves, the Western press started to announce sometime ago that China plans to diversify its foreign exchange reserves. At the beginning of November 2007, it was announced that Chinese investors had reduced their holdings of U.S. treasury bonds by 5 percent. If this is true, it means that they want to get more of the nation’s reserves to invest to improve returns. And at the end of the same month (on 24 November 2007), The Economist published an editorial saying that “the Middle East’s oil exporters should end their currency’s peg to the dollar”.
“We will favour stronger currencies over weaker ones, and will readjust accordingly’, Cheng Siwei, Vice-Chairman of China’s National People’s Congress told a conference in Beijing. The dollar is losing its status as the world currency”, Xu Jian, a central bank Vice-Director, declared at the same meeting.
Some analysts see this evolution as positive for the world economy. This could provoke a reduction in the trade deficit of the United States. But at what cost for the economy of emerging or European countries?
Observers note that the weak dollar is boosting exports but, as The Economist calculates, at only 12% of the GDP, exports are too small to make up for a weakening of consumer spending, which accounts for 70%.
There is no doubt that we are facing a situation which is different from all the economic crises the world has faced in the past, including the 1929 crisis. According to The Economist in a survey of March 2001, 95% of American economists predicted there would not be a recession, even though one had already started.
At present, Japan is still the main holder of United States treasury bonds (585 billion dollars), but these figures are being reduced. China has 400 billion, but its share has recently reduced by 2.2%. And the initial question persists: Is it possible to allow this global disorder to continue indefinitely?
The analysis of The Economist on these facts is not optimistic:
China and others are putting a smaller share of increases in reserves into the American currency. And Asian and Middle Eastern countries with currencies linked to the dollar are facing rising inflation, but falling American interest rates make it harder to tighten their own monetary policy. They may have to let their currencies rise against the sickly greenback, meaning they will need to buy fewer dollars. More important, as international investors wake up to the relative weakening of America's economic power, they will surely question why they hold the bulk of their wealth in dollars. The dollar's decline already amounts to the biggest default in history, having wiped far more off the value of foreigners' assets than any emerging market has ever done. ….The bad news for America is that this, in turn, may mean that the world also has less need of the dollar.
The only- conclusion one can make from this disorder is that the present world’s monetary financial system, inherited from Bretton Woods after the Second World War, is coming to an end. But, what will be the basis for a new system?
A NEW REALITY
According to El Pais, from Madrid (6 June 2004), the Prime Minister of China, Wen Jiabao was prudent when saying that in spite of economic increases in China, the country needs 50 years more to become an average developed country.
In spite of the cautious position of the Prime Minister, no one knows, for example, what will happen in the world if China and other countries located in South-East Asia confirm their decision to create a free trade region in 2010, which will be the most densely populated in the world, that is to say, a population of 1.8 billion persons. What will be economic implications for these countries and for the rest of the world? At present, without this agreement, the trade exchanges between these countries already represent around 80 billion dollars per year, and the annual increase is estimated at 28% (Pomonti, Jean-Claude - 2 December 2004). What will happen when these links are strengthened and barriers disappear?
Many elements of a new reality are visible everywhere. Until recently, when traveling between Europe and Latin America, hardly any Chinese passengers were seen on the airplanes. Now, each flight transports a growing number of Chinese carrying their brief cases, who are obviously. In Argentina, the Chinese presence is visible through control of supermarkets in Buenos Aires and other cities, but particularly because China buys from Argentina 75% of its cereal production and around 30% of its vegetable oil, particularly soy bean oil. Soybean cultivation, which represented 6 millions hectare in 1995, reached 16 million in 2007. Argentina is a rich agricultural country, and although I do not think there is the risk of a monoculture, soybeans are now a key factor in Argentina’s economy. If one day, China should decide to stop its purchases, Argentina risks facing serious trouble.
The same could happen in the case of Australia, and this is incredible. According to Sylvie Kauffmann (20.11.2007), 40% of the iron imported by China comes from Australia, which also sells other products, including meat (beef and kangaroo, …). Australian products exported to China multiplied by three at the beginning of the year 2000, and since 2005 China has surpassed United States as the second Australian export market, Japan still being the first one. In general terms, China became the first trade partner of Australia, a fact that Australia cannot and does not ignore, as demonstrated by the debates during the recent legislative elections in the country.
In February 2007, President Hu Jintao visited 8 African countries. In less than five years, China became the third trade partner of Africa, and it is in Africa that China looks for most of the oil it needs for its economic increase. The trade between China and Africa represented in 2006 more than 50 billions dollars a year against around 10 billions six years ago.
A few days ago, President Sarkozy of France paid an official visit to China with a group of 40 company directors. This was an occasion for the French authorities and journalists to point out that about 850 French companies employ approximately 250,000 people in China. The business made by these groups was estimated at 20 billion Euro in 2006. The annual increase of business for these companies increases by 20 to 25% per year. A similar situation is occurring in practically all European countries. The trade between 27 European countries and China rose by 150% between 2000 and 2006. In 2000, China held the fourth position as a trading partner of Europa. It is now in second place, surpassed only, for the moment, by the United States (United States, 444 billion euros and China 255 billion euros). On the opposite way, Europe now is the first trade partner of China (according to 2006 figures, 216 billions euros against 209 to USA and 165 to Japan).
It should also be noted that bilateral trade between United States and China has grown from $2.5 billion in 1979 to $262.7 billion, and it is expected to exceed $300 billion this year (2007). In the past 10 years, the value of US exports to China has almost tripled.
Observing these facts, it is easy to understand the statement that one third of the world’s economic growth has been provoked by Chinese expansion.
REACTION TO PROBLEMS AND PROTESTS
China has become the main actor in the evolution of economies in the world. In addition, China is changing and is changing very fast.
Of course, such a large number of changes introduced so rapidly in a country with a population of this size, cannot be accomplished without encountering problems. In 1998, the Minister of Education of China at that time, Chen Zhili, was one of the key speakers at the World Conference on Higher Education (UNESCO, Paris) and she made a very interesting remark that fits with the analysis we are trying to make today. “The goal of China’s reforms is to realize modernization in a country with 1.2 billion people, being a Herculean task rarely seen in human history. One can well imagine how numerous and complicated are the problems and issues to be tackled. Obviously, the solution of these problems and issues depends to a large degree on the intellectual resources possessed by the higher education institutions and on the highly qualified professionals imbued with innovative spirit to be trained by HEIs”.
What is surprising in today’s China is that the authorities do not hide the existence of problems. They even recognize that in 2004, there were more than 74,000 protest demonstrations all over the country, with the participation of at least 3.7 million citizens (International Herald Tribune – 15/16 July 2006). Last August, it was the Chinese Security Minister, Zhou Yongkan, who confirmed this information. Chinese officials say the number of demonstrations rose to 87,000 in 2005.
The British journal, The Economist, devoted the cover page of its issue of 13-19 October 2007 to the rural problem in China (“China Beware - The leaders meet, the cities grow, the peasants are left behind”). According to this journal, “Hu Jintao, the party’s boss and China’s President, rightly picks out two big problems: the widening gap between China’s mostly urban rich and its mostly rural poor, and the party’s lack of ‘internal democracy’ –comrade-speak for accountability and the courage to question and debate”…
Out of 1.3 billion people, 130 million survive on less than one dollar a day (compared to 377 million in 1990). However, even the former President of the World Bank, James Wolfensohn, acknowledged that China enabled 420 million people leave poverty. This means more than twice the population of a country such as Brazil.
It is useful to add that in many rural areas, it is a well known fact that people feel nostalgic for the old system of “barefoot doctors”. This system was adopted in several countries. I remember an experience in Luiziânia, a satellite city of Brasilia, where this system was applied in rural areas by the local authorities with the University of Brasilia in the seventies, with excellent results.
But here again, if a problem exists, it is examined, and solutions have to be found. Since 2003, a new medical insurance system, involving for the first time a financial commitment by the central government, has been set up in at least 80% of rural areas to replace the long discarded barefoot-doctors scheme. At the same time, rural children have begun to enjoy free education during their nine years of compulsory schooling, even though many still have to pay for their textbooks.
CONDITIONS OF WORK
Existing problems in China are also related to the conditions of work. Articles are frequently published on bad conditions, low salaries and even the existence, as in other countries in parts of Africa or in Amazonia in Brazil, of modern slaves.
The problem exists and once again, it is not concealed. For example, in June 2007, policemen liberated 570 slave workers, including 41 children in brickyards in Shanxi. One hundred and sixty individuals were jailed. Trials were held, and -in spite of restrictions capital punishment provokes everywhere and personally I have strong reservations - it should be noted that one man was condemned to capital punishment because he killed a slave who happened to be mentally disabled.
In the weekly issue of The New York Times, published as an appendix to Le Monde on 15 September 2007, Keith Bradshser refers to the evolution of working conditions in China. For decades, he asserts, many economists felt that China had a nearly bottomless supply of workers. This has changed. “Three or four years ago”, said Zhong Yi, Deputy General Manager of a leather-jacket manufacturer in Hangzhou in east-central China, 800 to 1,100 Yuans a month ($105 to $145) was considered to be a “good salary”. Now, he says, “1,500 is the bottom”. Today, according to official sources, the New York Times reports that there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s. In fact, salaries are low compared with European Union workers’ salaries, but this can change. Another element causing the reduction of available workers is that “the number of workers in the 20 to 24 year-old range is already shrinking as more of them go to universities instead of entering the work force after high school, and the International Labor Organization projects that workers in this age group will edge slowly downwards through at least 2020”.
In the United States, and even in many European countries, workers feel anxious about their future. American families, already saddled with enormous debts, are trying to make it in an environment in which employment is becoming increasingly contingent and subject to worldwide competition. Health insurance, unaffordable for millions, is a huge problem. And guaranteed pensions are going the way of typewriter ribbons and carbon paper (The New York Times - Le Monde - 15.9.2007).
The world has changed and as a result, the world of work is also changing drastically. I read somewhere that with the progress of science, children born during the 21st century will easily reach the age of 120 years and will change jobs at least five times, occupation three times and partners at least three or four times… In entrepreneurial field and in the domain of professional organization, traditional structures broke into small pieces and, as a result, employment, even in countries such as Japan where a lifetime permanence in the same job is strongly inbred in the collective mentality, employment has become less stable and changes in positions and between enterprises are now much more frequent.