China must end its economic apartheid

South Africa's staggering economic growth under its apartheid regime bears an eerie similarity to the China of today. If China is to succeed, it must draw some lessons from South Africa's experience.

While the world mourns the passing of Nelson Mandela, one of China’s most influential liberal thinkers Qin Xiao is drawing lessons for his own country from South Africa’s experience.

Some in China regard the African republic as a dismal failure. The country is still mired in poverty, inequality and disease nearly two decades after the first all-race election in 1994 that ended the apartheid regime.

The government’s cheer squad argues that the failures by South Africa and some Eastern European countries to successfully transition from authoritarian states to prosperous democracies are examples of why China should not go down the same path.

Qin, one of China's most influential liberal thinkers and a professor at Tsinghua University (alma mater of the current president Xi Jinping), draws a different lesson from the South African experience.

Interestingly, he compares the current Chinese economic miracle to the rapid economic development in South Africa under the racist apartheid regime. South Africa experienced rapid economic development in the 1960s and 70s, with the economy doubling every seven years. Dubbed the ‘factory of Africa’, it was the first and only country to industrialise on the continent.

Qin says that South Africa and China share two striking similarities during their periods of rapid economic development.

The first similarity is that both economies have relied on an export-dependent model of development. Due to lack of domestic demand from poor black South Africans and Chinese peasants, both countries rely on exports as a key driver of development. As a result, both countries have enjoyed persistent current account surpluses. Between 1965 and 1982, South Africa’s surplus export earnings grew on average 15.2 per cent per year. 

The country also managed to attract a large inflow of foreign capital on the back of what Qin describes as “a low human rights globalised model of development”, whereby foreign multinationals take advantage of cheap labour with limited rights in developing countries.

Foreign multinationals earned handsome rewards from their investment. For example, American investment in South Africa yielded an 18 per cent return in 1979 compared to 14 per cent elsewhere. General Motors' subsidiary is China is just about the only highly profitable division in the loss-making global empire.

The second similarity is an obsession with infrastructure development. The white minority government was able to ignore the rights of black South Africans and compulsorily acquired their lands without compensation to build roads. In 1980, the country boasted the third-largest road network after the US and Germany.

This sounds awfully similar to what is taking place in China, where peasants’ land is forcibly acquired without compensation and protests are crushed with brute force. Consequently, China can boast a modern infrastructure that even outshines many developed countries.

Most controversially, Qin compares China’s rural and urban divide with that of the apartheid system in South Africa. China’s household registration system, which is known as Hukou, divides its citizens into rural and urban residents.

Urban citizens enjoy vastly superior rights in education, social welfare, health care and property rights than their country cousins. It is one of most divisive social issues plaguing the country. Beijing only started talking about giving limited property rights to farmers a few months ago.

Qin argues China’s discriminatory household registration system operates pretty much like the apartheid system, which provides an ample supply of cheap labour and land for accelerated economic development.

South African white minorities and Chinese urban residents reap a disproportionate share of the economic benefits. Though black South Africans and Chinese peasants also benefit from the rapid development, the wealth disparity is getting wider and wider.

In this regard, Qin says China’s situation is much worse than the wealth disparity in South Africa even during the darkest days of the apartheid regime, both in absolute and relative terms. 

The most crucial lesson for Qin is to see the limits of the South African model of development under the apartheid regime, which is eerily similarly to China’s at the moment. Though it enabled rapid development, it is not capable of resolving destabilising social divisions.

South Africa became democratic only after the unsustainable economic and social systems imploded, with international pressure also playing an important catalytic role. China’s hitherto successful economic model is also under enormous strain at the moment, not dissimilar to South Africa in the 1980s.

Qin warns emphatically that if China does not want to go down the South African path, it must reform while the economy is still sound and it can’t afford to start the process when the system implodes like South Africa.

“If China reforms while the economic miracle is still happening, we can avoid the situation South Africa is experiencing today. However, if China is forced to become democratic like Indonesia in 1997 when the economic miracle disappeared into thin air, we are no longer talking about a South African dilemma but a Russia dilemma in 1914,” wrote Qin in his new book about South Africa lesson for China.

Follow Peter Cai on Twitter: @peteryuancai

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