CHINA

Documents & Texts from America.gov

02 February 2006
High Social Costs Accompany China's "Economic Miracle"

By Jane Morse
Washington File Staff Writer

Washington -- China may have become one of the economic powerhouses of the world, but it faces serious internal challenges that threaten its continued success, says James Keith, senior adviser at the State Department's Bureau of East Asian and Pacific Affairs.

Keith spoke February 2 before the U.S.-China Economic and Security Review Commission (USCC), established by Congress to investigate and report to Congress each year on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China (PRC).

China is now the world's fourth largest economy, surpassing France and Britain, with a gross domestic product of $2.24 trillion. Even so, China remains a poor country, Keith said. With a population of 1.3 billion people, per capita income is about $1,700. The U.S. per capita income, in contrast, was an estimated $40,100 in 2004.

"China may be a richer society," Keith said, "but those riches are not evenly distributed, especially with more than 200 million people living below the poverty line, defined by the World Bank as a dollar a day. The incomes of urban dwellers are four times those of people in the countryside, where 800 million of China's 1.3 billion people live."

But with more than 20 million people entering the job market each year, creating jobs will continue to be a problem, he said.

"The people of China are increasingly aware of their personal and legal rights, and are willing to assert them, but are often unable to secure protection from the very courts and legal institutions to which they are appealing," Keith said. "Laws are on the books, but they are not effectively enforced. It is no surprise discontent is rising, and sometimes expressed in disturbing ways."

Public protests -- some of them violent -- have risen sharply to about 87,000 in 2005, he said. According to Keith, uncompensated land seizures, arbitrary and illegal taxes and the failure to pay workers their wages are some of the reasons for public discontent.

There is no adequate social safety net for about 80 percent of the Chinese people. To protect themselves, Chinese save a full quarter of their gross domestic product (GDP). But China's capital markets still are forming, Keith noted, and it is difficult for these savings to be put to productive use as domestic investment. "It also limits domestic personal consumption, leaving China overly reliant on exports and foreign direct investment for growth," he said.

Greater economic success has bred increased corruption, Keith said. "China's economic 'miracle'" is unfolding at a high cost, not just in terms of environmental degradation and public health, but also in terms of an erosion of social and ethical values," he said.

Keith said the United States is working with China to help the country build a society governed by the rule of law, respectful of international human rights standards and tolerant of people of faith.

"In addition to our diplomatic efforts to promote human rights and religious freedom," he said, "we also underwrite programs through the Department of State's Rule of Law program -- currently funded at nearly $23 million by Congress -- to support legal reform, encourage public participation, and help strengthen civil society in China."

The U.S. Department of Labor is conducting programs in China on labor law, he said, and the U.S. Federal Mediation Service has visited China several times to discuss ways in which disputes can be resolved without recourse to the judicial process.

Keith emphasized that the Bush administration is striving to build "a strong, respectful, cooperative relationship with China."

"We want to see China become a prosperous nation and a responsible member of the international community. We are prepared to work with China to achieve that important end and meet the challenges that confront it in ways consistent with America's core values and interests," he said.

See also The United States and China and Rule of Law.

The text of Keith's statement is available on the State Department Web site.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

back to top ^