User:Gerthstudent/Getihu

Getihu (meaning self-employed in Chinese) are small private enterprises that were created with the new economic reforms led by Deng Xiaoping in 1978. In the 1970s and 1980s the Chinese government was under heavy pressure to solve the issue with unemployment that was occurring in China mainly with the urban youth. Many of the urban youth had returned from the countryside after the cultural revolution had ended thus ending their mission of being the “educated urban youth” in rural areas. At this point the government, under new leadership, decided to pass policies that labeled a new business category or single industrial and commercial proprietor as Getihu. Originally the government policy declared that Getihu were only able to hire 5 or less employees, however towards the later half of the 1980s, new policies ,like the Tentative Stipulation of Private Enterprises, issued that Getihu were able to have 8 or less employees before becoming an enterprise. Getihu grew very quickly and became 10 percent of the total national non-agricultural labour force. At first the getihu primarily benefited rural areas because they were able to get goods into these areas that normally state businesses had avoided. Although these items were more expensive in these areas, rural getihu was able to expand upon these areas. By 1988 there were an estimated amount of 500 thousand getihu that were able to be considered private enterprises. This paved the way for many small businesses and enterprises to get starting up and become critical parts of the economy. Some counties in China relied on state government jobs or farming as the main source of income for families, but with the new ability to enterprise, many were able to switch career paths and earn more financially compared to their previous state jobs. Getihu became such a popular outlet that some counties were completely reliant on this as their source of income. Xinjin composed 90 percent of its total tax revenue from the private sector or getihu in 1988. The problem that getihu possessed was the amount of risk and liability they took on by being a sole proprietorship or partnership. They had unlimited liability which meant that their income overlapped their personal income tax therefore they were only taxed once. Getihu did benefit by this since they are only taxed once in comparison to sole ownerships and partnerships who are taxed double. Getihu and private entrepreneurs also faced difficulty financially with getting loans from banks since banks often required mortgages as security for loans. Getihu and private entrepreneurs thus went to friends, relatives, partners, and other families to help finance their businesses. Until 1997 Getihu were frowned upon for bringing social evils and disorder into China. Much of this discrimination and harsh view came from the result of westernization that had come onto China. When China had ended its period of isolationism and integrated itself into the market economy, western culture and ideas came with that as well. Much of the western culture and ideas threatened traditional Chinese culture with pornography, prostitution, smuggling, and profiteering which went against socialist beliefs. In 1997 the Central Committee for the Chinese Communist Party (CCP) announced that they needed to end the discrimination that occurred on all enterprises and create equal opportunities. Because of this announcement, views on the private sector were less hard and helped private entrepreneurs and getihu obtain loans from state-owned banks and credit unions. The government also continued to further encourage lending from commercial banks to small and medium firms by granting permission for these firms to invest in public substructures.      

Background

After Mao Zedong had passed away in 1976, China experienced a transition of power from a central planning system to a market based economy. During this transition of power, Deng Xiaoping led a series of reforms within the communist party through policies that were economically driven. The Chinese government’s primary focus Post-Mao era (after 1976) was on growth and development. Under the leadership of Mao, the public sector of business was not able to employ enough citizens nor efficiently supply the diverse demands of the people. As a part of the new reform, the government leaders decided to once again permit small private plots for farming and small-scale private enterprises. This allowed for an entrepreneurial economy to emerge through forms of commune and brigade enterprises, Township and Village enterprises (TVE), and getihu. Getihu was the third generation of entrepreneurial waves that formed in the late 1980’s after TVEs had been replaced. Getihu (meaning self-employed in Chinese) are private businesses that are registered at the Chinese Industry and Commerce Office in the enterprise category with no more than five employees. If an individual business owned more than five employees than it was considered a private enterprise. Private enterprises were considered for profit organizations with more than 8 hired employees. Getihu grew fast and gained momentum in 1988 when their numbers reached 23.1 million, or 10% of the national total non- agricultural labour force. According to survey results, from 1978 to 1988 more than 0.2 percent of farmer households hired more than 8 people to work for them. Thus by 1988 there were over 500,000 individual businesses in China that could also be classified as private enterprises. As far as entrepreneurs were classified, there were three legal categories: cadres, getihu, and shangren. Of the three categories of small private enterprises, getihu were regarded as “petty” because of the capitalistic approach they took for small businesses. This went against traditional Chinese culture since citizens were used to a socialist market approach. Getihu could be envied for their money and admired for their energy and street smarts, but regardless of their financial status, they were not respected. It wasn’t until Deng Xiaoping’s South Touring Talk, that leaders and people began to be more accepting of the new “socialist market economy”. This gave Chinese more comfort in accepting a new economic market approach that coincided with their traditional socialist beliefs of having a planned economy being used as an instrument for socialism. This encouraged many people of the Chinese party to leave their state jobs and venture out and become businessmen as well as many other citizens. However, there were still policies that favored private firms over getihu such as the fee collected by the local Bureau of Industry and Commerce Management (BICM) for management. The fee was lifted from private firms however it was still in place for getihu. The BICMs rely heavily on the taxes collected from getihu because it contributes 5 percent of their earnings towards the local budgets of the BICM. Originally this was decided because of the backgrounds that differentiated getihu from private firms, however backgrounds are no longer in place to differentiate getihu from private firms. In reality there is no economic difference between getihu and private firms since they face unlimited liability.

Effects

China was able to develop a state-manipulated market economy that generated huge economic growth through its efforts in privatization as well as opening to foreign investment and foreign trade. For the first time, Chinese government policies encouraged the movement of foreign capital into China as well as the expansion of investment in the domestic sector. With private enterprises and small businesses beginning to flourish all across the country, by 2000 there were 20 million workers for private enterprises and 311 million workers for individual businesses. Private and small private enterprises became one of the most influential factors for the economic growth in China since 1978. The private sector was able to flourish after this new period of reform because central and local governments created the conditions and policies necessary for development. This encouraged business owners to work hard in order to combat their own financial risk as well as to manage their operations efficiently. Because of this, the private sector became more innovative and operated at higher levels of efficiency than that of the public sector.

Consequently, with this flourishing economic growth, matters ensued such as environmental degradation, social inequalities, and capitalistic social structures. Nonetheless, this new form of market capitalism, or neoliberalism, challenged many of the traditional forms of state sovereignty such as labour divisions, social relations, welfare provisions, and traditional ways of life.

Economic Growth

After Deng Xiaoping had taken leadership of the People’s Republic of China (PRC) in 1978, the political party decided to embrace economic reforms. The PRC decided to embrace these economic reforms in order to amass wealth and upgrade its technological capacities so as to be better able to manage internal dissent, to better defend itself against external aggression, and to project its power outwards onto its immediate geopolitical sphere of interest in a rapidly developing East and Southeast Asia. Prior to privatization, the output of the private sector was negligible as far as the Chinese national economy was concerned. However, starting from 1985, the private sector went from 2 percent of the national industrial output to 34.3 percent in 1997. National industrial employment had already been at 2 percent and grew to 18 percent in 1997. From 1996 to 1999, in the public sector, the number of employees declined more than 28.6 percent compared with the employment level in 1995, but at the same time, employment in the private sector had grown more than 129.03 percent. The overall increase for private enterprises was more than 117.11 percent. From 1991 to 2000 the average annual growth rates of private firms, private sector employment and industrial output were 32.21 percent, 28.82 percent, and 53.59 percent. The increase in output from the private sector almost meant the decline of the public sector. While the private and public sectors inversely grew, GDP continued achieving new record growth rates. For example, from 1991 to 1999 the public sector had gone from contributing 79.64 percent of the national industrial output to 9.11 percent. Altogether, as the private sector began expanding, the national economy began growing as well, namely because of quick growth and efficiency of private firms.

Environmental Degradation

As many as 70 million farmers have lost their land because of real estate development, buying the land (for a fraction of its actual value) and developing urban uses. With a neoliberal market economy, this requires urbanization which also requires bold land reforms.Therefore, the government tries to incentivize farmers to sell their land to cadres for money and make them move into urban areas. The government had used a policy called “ecological migration” in order to displace farmers from their lands. The government has also spent billions of dollars in order to erect large cities across the country that sit empty waiting for people to move into these areas. These large empty cities, also known as ghost cities, used many resources to construct, especially cement. Cement production is one of the largest main sources of CO2 emissions in China and world-wide. Currently, cement production is accounting for 11% of China’s overall emissions, most of which is used for urban development such as constructing apartment buildings, shopping malls, airports, and roads. Cities are getting erected almost overnight in order to accommodate the 4-5 hundred million people who live in inadequate living conditions. Not only is this having a negative impact on the environment but it is also putting people at risk by living in these areas because of the lack of regulation standards for these buildings' safety. There have been many collapsed buildings that have killed or injured many. Even schools have collapsed and killed many children as a result.

After the entry of China into the World Trade Organization(WTO) in 2001, CO2 emissions moved at an accelerated growth rate of 9 percent each year compared to its previous rates of 2-4 percent. While China’s carbon emissions continued to increase, other countries in the WTO such as the US, Germany, and Japan decreased correspondingly. This is because more developed countries have more strict environmental regulations that make it difficult and expensive for them to manufacture goods in their own country. So developed countries establish factories in developing countries such as China, because it allows them to produce goods with less regulations and cheaper labor. Therefore, China became an open door for foreign investors to pour their money into China seeking revenues from the money they would save by developing products here. It seems that after China joined the WTO, China sacrificed the environment in order to achieve such economic growth in the global market economy.

China has also contributed to worsening climate issues through its demand for wildlife and wild plants. In traditional Chinese culture, it’s believed that rare wildlife can be consumed in order to treat medical illnesses like cancer, asthma, heart disease, etc. The new market economy gave citizens more disposable incomes so that they could have money to afford then rare goods which in turn put a higher demand for wildlife, especially rare ones. In 1989 China enacted the Wild Life Protection Law which banned the consumption of internationally protected animals. However, this law was difficult to enforce so it didn’t do much to protect rare species from getting hunted down. Not only were these animals used for medical or traditional purposes, but rare animals that were consumed were also symbolized with an individual’s social status. For example, shark fin soup is considered to be a rare delicacy in the Chinese culture. Thus the demand for shark fins have heavily increased which had huge repercussions on the shark population. In the last 50 years the shark population has decreased by 70%. Other countries have aided in China’s demand for these wild animals such as Latin America and Africa because of the generous amount people are willing to pay for rare wildlife. Not only have sharks been affected with this new disposable income that privatization has created but also bears, tigers, rhinos, and many more species have entered the endangered or near extinction category.

China’s large population size takes another massive toll on the climate. China’s population is over one billion people which is four times larger than the US population. China thus requires far more resources to sustain a population of this size, especially a population that is living at higher living standards compared to many other countries. China consumes more grain, coal, and more than two times as much steel and meat than the US. As a result, China has been tarnishing the lands with infertile soil by over farming it to the point where there lays only sand for its top soil. China has also had a drastic change in its transportation system. Prior to economic reforms, most citizens relied on bicycles for transportation, however with the market integration many have adopted cars as their main source for transportation. China currently has the most amount of cars alone in its country equaling 1.1. billion vehicles in comparison to the US’s amount of only 225 million vehicles. This has contributed to the massive air pollution in China leading to 1.2 million premature deaths. This has also put a huge demand for cement production in order to adequately provide enough roads for all of China’s cities. China also does not spare any resources, China has been known to continue to build even if there is no demand of people in those areas for roads or building.

Recently however there have been initiatives for China to incorporate “green technology” in order to combat the issues of the climate crisis by purchasing the most electric vehicles than any other country and are expecting to peak their carbon emissions by 2030. China has also been switching from many natural resources over to renewable energy namely through their transportation system. China has also been incorporating solar energy, wind power, and hydropower as alternative energy to burning fossil fuels. China has also recently incorporated developing low carbon emission cities to combat pollution. About 60 percent of China’s population lives in cities and this urbanization has been a main reason why CO2 emissions have increased since the privatization of the market economy. These cities contribute to 85 percent of China’s CO2 emissions and citizens emit 1.4 times more emissions than rural residents. In acknowledgement of this data, China has decided to combat this by creating energy saving cities called Pilot cities. Pilot cities are required to develop low carbon development plans as well as enforce greenhouse gas emission targets. Currently there are more than 400 pilot cities and this has resulted in a fall of 19.4 percent of carbon emissions in these cities. According to research, even with all of China’s recent efforts to switch to renewable energy and peak CO2 emissions by 2030, data shows that it's likely that these efforts will not keep the earth from warming 2 degrees celsius. It is predicted that if the earth warms 2 degrees celsius then this will have catastrophic effects on the environment that will be irreversible such as sea levels rising and extreme weather events.

Social Inequalities

With the adoption of privatization and open market practices, there have been drastic inequalities in income. Before this, most of China had citizens living at low levels of living standards, but with the new ability for citizens to have more control over their finances through business, many have been able to succeed financially. Consequently, the gap between the rich and poor grew wider as citizens in urban areas tended to be more financially well off in comparison to those in rural areas. The private sector flourished in urban areas because there were more people and access to markets in those areas. As business began opening up, many more people were given opportunities for jobs outside of the public sector. From data shown in the National Bureau of Statistics of PRC, wages for workers and staff began to rise in comparison to those in the public sector. Private businesses were able to pay their employees higher wages as their profits began to increase. This incentivized many citizens to leave the public sector and begin working for small private businesses or private enterprises. The efficiency and innovation of the private sector created investments from foreign enterprises which continued to promote private over public sectors. However, many of the businesses for the private sector were located in urban areas and few were in rural locations aside from Town Village Enterprises (TVEs). So urban workers were earning far higher wages than rural workers because they had access to more capital than that of farmers of land owners. So therefore, the most notable of the social inequalities that occurred were that between the urban and rural citizens. Most rural citizens found themselves migrating towards cities and coasts to factories that would supply them with opportunities for work. 60 Percent of those who were born between the 1980s and 1990s as migrant workers ended up moving away from their rural homes into cities and became the first generation of non-agricultural workers. Thus this great migration of rural workers into cities helped fuel the urbanization that was occurring as a means for work and higher wages. Most migrants however, that entered these cities were destitute. They found themselves not having much as far as finances are concerned, and they were denied basic necessities such as healthcare, schooling, and social security. Often many of the rural citizens that moved into urban areas were also treated with less standards than urban citizens because they typically had less money and education.

Moreover, with the creation of private enterprises, this also created social inequalities between men and women. In the Chinese culture, like many other cultures, men were regarded highly because of their ability to care for the family name as well as being given the responsibility to take care of the family financially (which included their parents in old age). After the One Child Policy had been enacted in 1979, couples were only permitted to have one child or else they would face heavy fines (which affected poorer people more than it did wealthier ones). As a result, families wanted to have boys rather than girls in order to carry on the family name and earn higher wages. Technologies, such as ultrasound, were then used to find out if the pregnant women were having boys or girls and then decide to abort the child or not based on the gender of the child. These technologies eventually had to be banned in order to prevent abortion of so many babies. However, these events were still able to cause an imbalance in the population of males to females with 120 males to 100 females or 144 males to 100 females. The increase in ratio from male to females thus created a demand for women for single men looking to marry. This led to a black market for women to be sold to young men looking to marry and have a child to carry on the family name. This also created another black market for Chinese baby girls being sold internationally. The price for Chinese baby girls was cheaper to buy for international families, especially those in the US, so the demand for these children went up. This increased the amount of kidnapping that took place in China and even became common that parents had to monitor their children when they went out as to not leave them alone in public spaces. Kidnappers earned enough wages of $36 to $60 for each child to risk the penalties of a three year jail sentence is worth the risk of getting caught. Not only did baby girls have to worry, but also boys since they were viewed as very valuable. From 1980 to 1999 police had reported that there were more than 10,000 children that were stolen and sold for adoption, however those estimates are likely low.

Capitalistic Social Structures

During these new economic times, there emerged for the first time in China a middle class. Under Mao’s leadership there were either elites or peasant farmers for social class. As economic reforms created new job opportunities for many, citizens had the ability to experience capitalistic social structures as well as class mobility. This was unusual for a socialist country to have, however, Deng Xiaoping told the people of China that there could be a socialist market economy that had a similar correlation with a capitalistic market economy. This gave the middle class new purchasing powers to follow their own ambitions instead of being stuck in one class. China had gone from accounting of purchasing only 1 percent of global luxury goods in the reform era to the world’s 3 largest buyer of global luxury goods in the early 2000s. Because of the rising demand for luxury goods, luxury brands starting setting up shops all over China’s cities to meet to new demand for these goods. The emergence of hundreds of new millionaires were able to create a new culture of social class through the luxury items such as bags, jewels, watches, clothes, and cars. These items became social statuses for anyone to obtain especially for the young and middle aged people. China was also able to start embracing luxury activating such as golfing, skiing, and even formula one racing. These items became another form of social status that many felt pressured to obtain in order to fit into society. The result of the economic reforms created a new class culture that China had not seen before, this gave them many amenities that they would have not been able to have obtained if it were not for privatization of businesses and global market opportunities. The problem that occurred from this though was that the distribution of wealth among China has been very unequal throughout this entire process. China has a Gini coefficient of 0.46 which puts it as more unequal than Latin American and African countries. It's true that there were hundreds of new millionaires that were able to come from the growth in GDP, however, since China’s population is so vast, there were hundreds of millions that did not get to experience this economic growth that many urban residents experienced. Getihu became one the the first primary groups to emerge as the newly rich classes from the economic reforms. Getihu were viewed harshly because under the Mao Era, traditional Chinese culture believed in remaining in a frugal lifestyle that did not live beyond their means of consuming nor wasting goods.

Enterprises

Cadres - Cadres were correlated with getihu as far as entrepreneurs however they differed from getihu because they were judged according to the delivery of socialist welfare promises to their workers. So personal wealth was condemned as a sign of corruption and a symbol of success. Often as cadres had luxurious items such as wrist watches this could correlate with corruption and bourgeois social connotations. Cadres were also labeled to be working in the state sector whereas getihu were labeled as working outside the state sector; Neither sector of getihu or cadres were labeled as good business people.

Chengbao cadres who became de jure and de facto entrepreneurs in charge of privatized state firms or spinoffs. In other words, these were top level cadres that were given full legal responsibility of a firm (or complete liability) as well as complete autonomous power over the firm.

Urban Collective Enterprises - (UCEs) one of the main registered forms of red hat firms

Township and Village Enterprises - (TVEs) were created out of the assets held by the communes, and these became centres of entrepreneurialism, flexible labour practices, and open market competition.

State Owned enterprises - (SOEs) This sector was the leading sector of the economy in the late 1970’s prior to privatization of the market economy. This sector was owned by the state and helped to maintain control over the economy.

Red hat - These took the form of TVEs, SOEs and UCEs that were closely monitored and controlled by the state. The term was slowly removed from the correlation with entrepreneurial firms and gave enterprises more freedom.  

Noteworthy

World Trade Organization (WTO) 2001 - China officially joined the WTO on December 12,2001. In order to join this global trade agreement, China had to agree upon international market laws that differed from their own market laws. This allowed the private sector of Chinese market to thrive by having access to sell to foreign markets and use their comparative advantage of abundant labor to produce relatively cheap products. This also posed greater challenges for smaller firms with less funds and technology to compete with global competitors. China promised that by joining the WTO it would create a more transparent market economy that will create fair and competitive conditions in the market.

Tentative Stipulations on the Registration ofIndividual and Private Enterprises - Also referenced as the TSRIPE, was a document issued in 1988 that governs the registration of getihu and private firms of sole ownership and partnership. This document defined what a private firm was and labeled the amount of workers that an owner could hire before becoming an enterprise.