|Yang Guang: "Both China and Turkey are Visionary Countries with Long-Term Interests|
Thursday, 9 June 2011
By Arzu Turgut, USAK Center for Eurasian Studies
Arzu Turgut conducted an interview with the Director and Senior Research Fellow of the Institute of West-Asian and African Studies, Chinese Academy of Social Sciences, Yang Guang on the transformation of China, China's economic development, its relations with Turkey, and the recent developments in the Middle East.
Arzu Turgut: Chinese students have recently begun to travel abroad to receive undergraduate and graduate education in Western countries such as Australia, Canada and the United States. Some went to the neighboring or closer countries such as Japan and South Korea for the same reason. Apart from those who receive a qualified education in abroad, there is also a generation that has never been to outside China. These two groups of people start to work for the same company or institution when the former returns to China for work. In Chinese daily life, do these two different groups have experience any cultural conflicts and uneasiness emanating from the gap between their educational and cultural levels?
Yang Guang: I think this is the only question on this list that I cannot answer in a specific way because I have never worked in a company. Generally speaking, China is very exposed to foreign cultures especially since late 1970s when China started the opening up and reform policy. An increasing number of foreigners came to China including business people and others. On the other hand, the young generation in China learns Western or foreign cultures during their childhood. This is a generation which has grown up in a not totally Chinese atmosphere as they could watch, for instance, Disney on TV when they were very young. For example, in the university, especially in the department of economics studies and the MBA programs, a lot of courses are taught in English. They use English textbooks for education. Generally speaking, I do not think there is any major problem or conflict in any companies where Chinese work together with those educated abroad, at least for young people.
Arzu Turgut: With the rapid growth of Chinese economy, an economically advantageous well-off class has appeared within the society. On the other hand, there are still many Chinese people living under the level of poverty. Are there any problems between these two segments of society in terms of their socio-economic differences? Does Chinese government have any policies to prevent the unequal distribution of wealth in the society?
Yang Guang: Social disparities are becoming an increasingly visible problem for China because more than 30 years ago, when we started the reform, everybody was poor by international standard but quite equal. With the rapid development over thirty years, social and economic disparity has gradually emerged. In China, we complain about this problem from time to time. So the government has taken a number of policies to cope with this new challenge. For example, the government in recent years has increased the basis of income tax since if the base was too low, the poor people would have to pay this tax. The increase of income tax consists of exempting this tax in favor of the poor and low income people.
Another major approach that the government has adopted to reduce social disparities and income gap is to establish a social security system which will cover whole country and different social groups, not only the citizens but also the farmers. Of course, this is a system of basic social security including such things as pension and medical insurance. If you are rich, you can buy or join the programs of commercial security system. But the important thing is that by doing so, the poor people would enjoy the basic coverage of modern social security for the first time. This is something new, especially in the countryside. This policy is a huge task for the government if we look at the big size of Chinese population of 1.4 billion. It is a huge task requiring a lot of money. However, this is what China cannot avoid doing now, because the problem of social disparities is becoming more and more visible nowadays. All these approaches among others are quite significant to deal with the social disparities emerged in Chinese society.
Arzu Turgut: What kind of policies does Chinese government pursue in order to decrease the differences of regional development among the coastal and inner parts of China?
Yang Guang: The income disparities in China exist not only between rich and poor people. There is also a regional gap of social disparity in the country especially between the coastal areas and the north-west part of China. You probably have heard that the central government has seriously put forward the "scientific development concept" , which is a fundamental concept of development guiding sustainable development in China. The core of this concept underlines the coordination of development, including the ones between the coastal and remote areas. In the framework of this concept, there are a lot of approaches that have been adopted in recent years.
Firstly, the central government has increased "the transfer of payment." This is the money that the central government transfers to the local government as a kind of subsidy. At the local level in poor areas, the local government cannot be self-sufficient for the budget and depends on the transfers from the central government. In order to cope with this kind of disparity, the central government transfers more money to the local government, although, this is not the ultimate solution for the poverty alleviation in the remote areas.
The second important approach is to build and improve infrastructures in the remote areas especially in north-west part. A lot of people in China believe that if you want to be rich or better off, you have to build the road first. This is rather a consensus in China. That is why the government spends a lot of money and heavily invests in construction of infrastructures. The Chinese government invests not only on roads, but also on rail roads, the telecommunication system and electricity etc. These investments are made by the government and provide the poor people with a better environment for self-development.
The third measure is, at the policy level, the government encourages business people located in Eastern areas to invest in the north-west. There are different programs and initiatives. The central government has relaxed the procedure of foreign investment in the North-West. The local governments in the poor areas enjoy a special favor. Normally, if the foreign investment exceeds a certain amount, the local governments need the approval of central government. And if there is a huge project, they need the government's final approval. However for the local governments in the poor areas in the North-West, they enjoy more flexibility and they are more autonomous. So they are authorized to approve a higher amount of foreign investment compared with the local government in coastal areas. All these approaches are adopted following the national strategy that we call as "the strategy of massive development of the West." This is a national strategy that was approved by the Congress in 1990s and is still going on.
In brief, we have the concept of "the scientific development" as the guiding idea and "the strategy of massive development of the West" as the strategy. Then, in line with this strategy, we have taken different approaches. These are all well-planned and making progress.
Arzu Turgut: Since 2008, the direct flights and investments have started to be seen more frequently between Taiwan and the mainland China as compared to the past. What do you think about this process? Does it seem promising for the future relations between China and Taiwan?
Yang Guang: The impact would be very positive because I think the ultimate goal for the future is the unification of these two parts of China. I do not know when, but sooner or later that would happen. In the mainland of China, the government and the people very sincerely and seriously believe that people living in mainland and Taiwan are of the same origin. It is a sad story if the two parties were separated at the end of the civil war in 1940s. In the mainland, people are expecting the ultimate unification. The wishes and the expectations of Chinese people are very sincere. I believe that this is an expectation of all Chinese people. Therefore, the central government of China is trying to promote this process by building closer ties between these two parts of China.
The business investment is a very important tie because both sides have their respective advantages in this economic relation. In mainland, there is a big and growing market while in Taiwan there are some technological advantages in some specific industries. For instance, many spare parts of computers are made in Taiwan. At the same time a large number of Taiwanese business people have invested in the mainland.
Taiwanese farmers are facing problems of selling their products as the market in Taiwan is quite limited. Therefore the central government of China, in mainland, has done a favor to Taiwanese farmers allowing import of Taiwanese fruits as duty-free. This is a quite substantial help for Taiwanese farmers.
Obviously, the closer economic ties are mutually beneficial. So I believe that they will continue in the future and direct flight is definitively very helpful in facilitating economic and cultural exchanges.
Arzu Turgut: G-20, of which China is also a member alongside with Turkey, has increasingly started to dominate the world economy and politics. What kind of a vision does China have in terms of political and economic aspects of G-20 both today and in the future?
Yang Guang: The emergence of G-20 is a very positive progress in international relations because this represents the improvement of South-North cooperation. G-20 is a group involving not only developed countries but also members of developing countries like China and Turkey. It means that now we have a better platform for dialog concerning the major challenges that is facing the global economy. For instance, the financial system needs to be reformed because the world has suffered from financial crises in recent years in different degrees. In other words, the financial crisis demonstrates that we have to do something together about it. We probably don't know exactly how to do, but we need to discuss as this is the major challenge for the world economies. Climate change is also a big challenge. Energy and security issues are also important problems. All these problems can be discussed at this platform.
The developed countries in the North use to dictate the rule of the games. Now we have a platform where developing countries and developed countries can sit together and discuss the challenges to world security on a more equal footing. This is a very positive development for the world economic order. However, for the time being at least, it is difficult for G-20 to play any political role for the conflict resolution and peace. The G-20 remains a rather economic platform.
Arzu Turgut: What is your opinion about the increasing relations and interactions between China and Turkey in the recent years?
Yang Guang: We were very happy last year to learn that bilateral relations between China and Turkey were upgraded to strategic partnership. I think it shows that both sides have attached much greater importance to bilateral relations. Both China and Turkey are developing countries. If you are a developing country, your task of imminent importance is to continue to develop your economy and at the same time to create a enabling environment. A better enabling environment is important for both countries, because I know that both China and Turkey are countries with a vision based on long-term interests. Turkey has a vision to be one of the top-ten economies when it celebrates its 100th establishment anniversary in 2023. This is a big ambition and a very admirable vision.
Compared with Turkish one, Chinese vision is more modest. We try to be a medium rank developed economy by the mid of this century, in 2050, because our GDP per capita is still relatively low: 3,000 U.S. dollar, which is almost the half of Turkey's GDP per capita. As the countries having visions, we have to work and concentrate our efforts to make this vision come true. So, on the basis of this fundamental interest, there are many areas where China and Turkey can cooperate at the international and bilateral levels.
At the international level, as we talked before, we are both the members of G-20 group so we can play a greater role in improving international economic order and environment. At the bilateral level, both China and Turkey have respective advantages and the rooms of cooperation for trade and investment. For trade, I know there are a lot of complaints about the trade deficit on Turkish side. But we have to notice that when people complain, they only focus on balance of trade of goods. However, in the field trade of services, Turkey is the country with great potentials, for instance in tourism.
Probably you cannot imagine how many Chinese are going abroad as tourists in the recent years. For instance, every year around four hundred thousand Chinese visit Dubai. Dubai is a very small country, but Chinese go there as tourists and do a lot of shopping since it is a duty-free country. And every year, of course before the turmoil, more than one hundred thousand Chinese traveled as tourists in Egypt. However, to my best knowledge, Turkey is yet to be very successful in attracting Chinese tourists despite of its huge potential of tourism. Chinese tourists do not know Turkish tourist resources very well. In order to attract the attention of more Chinese tourists, promotion is very important.
The foreign currency balance can be realized at the current account level and at the capital account level. If you suffer from deficit in trade and you attract more direct investments in U.S. dollar, your balance of payment would be rebalanced. Therefore, Turkey could also make more effort in attracting direct investment. I am sure that Turkish markets are attractive for Chinese investors. This is not because of the cost of labor which might be more expensive compared with China, but because of the customs union that you have established with the EU.
The industrial products made in Turkey with the 40 percent locally added values, can be exported to EU market free of import duty. Chinese manufacture sector has some good technologies and if investing in Turkey, they may also enjoy better access to European market. The Chinese investors would be happy to do so. Turkish investors are also welcome to invest in China because China created the free trade zone with ASEAN in 2010. By investing in China, Turkish investors can benefit not only from Chinese market but also from the ASEAN market.
We can develop our knowledge of development and reform because both China and Turkey have succeeded in economic development by implementing reforms. We started almost at the same time. Turkey started economic adjustment in 1980 and China started reform and opening up in 1979. The way of adjustment and reform were also similar because we all have made a transition from the centrally planning economy to a market oriented economy. Successful reform and development in Turkey and China have proved that it is possible to make a new breakthrough for development economics using the freshest experiences. This is also a very significant area where we can cooperate.
It is important to encourage dialog and exchange among think-tanks and scholars. By conducting joint research and publications, we can jointly contribute to the resurgence of development economics, which I believe to be also a contribution to economic development for the rest of the developing world. A lot of countries are still living in very poor conditions and are looking for fresh experiences of development. We can not offer any model to copy, but we can share experiences based on our joint research. In my opinion, this might constitute an intellectual dimension of our strategic partnership.
Arzu Turgut: What do you think about the project of East Asian Economic Community which is planned to be formed within ASEAN to bolster economic cooperation among the members? How do you see the possibility of a future Chinese membership to ASEAN or East Asian Economic Community?
Yang Guang: Let's say, the lowest form of integration is the creation of free-trade zone. That is what we achieved last year with ASEAN countries. Then, a higher level of integration is the customs union like what Turkey has achieved with EU. Economic community represents rather the very high level of integration. So with ASEAN countries, now we are still at the lowest level of integration, but we all benefit from it. I think if it goes well, both sides would be interested in upgrading the form of integration. But it is not what is going to happen now, it may take time.
Arzu Turgut: What is the Chinese policy/stance towards the changes in power in the Middle East, namely the so-called "Arab Spring"?
Yang Guang: I personally believe that, the incidents in Arab countries were totally unexpected. Nobody had predicted this turmoil. The causes of this turmoil were rather complicated and vary according to countries. Generally speaking, it is because of two kinds of reasons. One is what we call as the index of suffering which is composed with two key factors. First is unemployment rate and second is inflation rate. In countries like Egypt and Tunisia, this index is relatively high. For other countries, the causes might be different as it is more related to religious problems and tribal problems. The problem might have accumulated for a long time and now it is an eruption. The turmoil is a sad story for Arab countries because now, no one can predict the near future of these countries. There are a lot of uncertainties, and the economies of these countries are suffering a lot. This time the economic slowdown does not directly result from the impact of financial crisis but from the internal turmoil. It will take a long time to for these countries to recover. Besides, this turmoil has further divide the Arab world.
Arab countries are friendly countries with China in the history and in the contemporary period. Therefore, we would like to see the end of turmoil as soon as possible. Besides, in the case of Libya, I am quite surprised to see the sudden change of the joint forces from protecting civilians to regime change. It seems that they would not stop until Kaddafi gives up the power. However, this is not what the Resolution 1973 stipulates. I think all parties concerned need to return to the principals of the UN Security Council Resolution and seek resolutions through dialogue.