The Australia-China Chamber of Commerce and Industry of New South Wales

Newsletter No. 16

10 March 2000

 

 

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CONTENTS

About the NPC

Reviving the Western Provinces

New Legislation Law

Fighting Corruption

Education

Sources of Information

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ACCCI ELECTRONIC NEWSLETTER NO. 16

This issue of the Chamber's E-Letter focuses on the National People's Congress (NPC) that opened on 5 March. Details of the legislation that emerges are normally made available after the final session. This year, however, media reports began to circulate prior to the opening session. We provide commentary on some of these reports.

 

 

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ABOUT THE NPC

The Congress consists of 2,900 delegates who are selected by the Party and meet in a relatively short annual session. The Standing Committee of the NPC is a permanent body within the NPC that convenes year-round. For a relatively long period, the NPC was regarded as a rubber stamp of the Standing Committee and of the Party's Politburo, and, to a large extent, still is. Mr Li Peng, Chairman of the NPC, announced at the 9 March session that "all items of legislation and supervisory work undertaken by the NPC completely and thoroughly follow the line and policies of the Party."

Nevertheless, beginning with the 8th NPC in March of 1997, the views of the delegates receive greater weight in the way the legislation is formed, and attention has been given to allowing certain laws to be drafted by the NPC (rather than solely by the Standing Committee).

Media reports indicate that ordinary Beijing people remain somewhat cynical of the NPC. The city is spruced up prior to each Congress, the delegates are accommodated in heavily guarded hotels, travel in special cars and buses and hold many of their meetings in closed session. Mark O'Neil reported in the South China Morning Post that several jokes have circulating. For example:

Why do NPC delegates have three hands? One is for clapping, one is for shaking hands and one is to vote to approve the Party's decisions.

For economic and political observers, however, the agenda of the NPC is of considerable importance in revealing priorities for the current year. A major responsibility of the NPC is to oversee the central government's budget and that generally reflects the "bottom line" of government intentions.

A wide range of issues is expected to be discussed both formally and informally. Four groups of legislators are to be established to oversee implementation of laws on the organisation of urban neighbourhood committees, land administration, township enterprises and the new Criminal Procedure Law.

Some implications of the major priorities are discussed briefly below.

 

 

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REVIVING THE WESTERN PROVINCES

Premier Zhu Rongji's plan to spend trillions of renminbi to boost inland economies is said to be a major focus of the two-week meeting of the NPC. Western provinces have been left behind in China's economic growth during the past several decades, as compared to the coastal provinces.

Under the program, new investment funds will be poured into improving infrastructure, such as highways, railways and other projects. The 10 areas chosen for the program include Yunnan, Xinjiang, Tibet, Sichuan, Shaanxi, Qinghai, Guizhou, Gansu, Ningxia and the Chongqing Municipality.

Approximately RMB 80 billion (US$9.6 billion) will be allocated this year to fund more than 175 projects. According to the official media, Beijing will also offer tax holidays and other preferential policies to lure foreign investment to inland areas. These will include a 50 per cent reduction in corporate tax rates (to a 15 per cent rate) for three years following the end of the initial tax holiday.

Chongqing and Xi'an have already announced plans for large infrastructure projects and are attempting to attract increased foreign investment, particularly in the higher-tech manufacturing and service activities. Chongqing has been a centre of interest for the Australian Government, mainly through AusAID work. The Chamber has focused heavily on Xi'an as one of the "key cities" in China. In view of these developments, and previously established contacts, the Chamber is preparing special reports on these two cities and we hope to make them available near the end of next month.

The development projects are to be financed partly through new issues of Treasury bonds, and much of these proceeds will be passed on to provincial and municipal governments through grants and subsidies. The allocation of funds is likely to be under the control of the State Development Planning Commission.

Central government supervision is believed to be needed in order to ensure that the funds are not wasted on unnecessary projects or "creamed" off by corrupt officials. It appears that greater emphasis is to be placed on longer-term planning, together with greater reliance upon feasibility studies and project management.

Will these initiatives lift the economic and social conditions for the western provinces? They will if attention is also given to social infrastructure (rather than limited to physical infrastructure such as transport and communications). Despite wage rates that are substantially lower in the western provinces, unit labour costs tend to be higher than in coastal provinces. This results from lower productivity per worker. That, in turn, can be traced to less efficient machinery and, perhaps more importantly, to poorer education and training. (Refer to a subsequent section on education).

President Jiang Zemin, joined a discussion group at the Congress this week and emphasised the importance of innovations in science and technology as a decisive factor for modernisation. On the strategy of developing west, he urged China's east and west to follow the principle of "complementing each other's advantages," by combining the former's advantages in technology, talent, management and information and the latter's advantages in natural resources and market potential. Although this is a desirable objective, it will need careful planning.

 

 

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THE NEW LEGISLATION LAW

China's legal system has been a puzzle to most Westerners, and it is most likely confusing to many Chinese. One would presume that laws governing law making are fundamental to all governments, but in China such laws emerged slowly after China's "open door" policy was initiated in 1979.

In 1982, the NPC expanded the powers granted to the judiciary, state prosecutors and various central government departments to interpret laws passed by the NPC. This obviously had practical motivations since the Standing Committee of the NPC preferred to concentrate on new legislation, rather than explain and implement the old legislation.

The NPC made two resolutions in 1984 and 1985 allowing the State Council to enact laws, especially those related to the economy. This was also motivated by expediency in adjusting to the rapid economic changes.

In addition, China's traditional legal system permitted local legislators to interpret their own laws so long as the same or similar laws had not been made by the NPC. It is this aspect of the system that created difficulties. If provincial or municipal governments passed enabling legislation before the NPC, then the coverage of such laws was more or less pre-empted from central authority.

Shenzhen's stock exchange is often quoted as an example. Apparently the central government preferred the first stock exchange to be located in Shanghai, but the legal machinery moved too slowly to prevent Shenzhen from making an early "score".

The Legislation Law is intended to codify the law-making powers of the various bodies and therefore provides the first step in a separation of legislative power that is generally available in most federal systems of government through a constitution.

However, as with many other areas of Sino-Western comparison, the new law has definite Chinese characteristics. It gives explicit recognition of the right of lower level government to enact laws that are not available nationally, but must alter any such laws to conform to those that are subsequently enacted as national laws.

The Legislation Law also specifies that the power to interpret laws is limited to the Supreme People's Court. If prosecutors disagree with the court's interpretation, they may take their disputes to the NPC for resolution. Foreign businesses therefore have greater assurance that the sometimes-questionable interpretations of administrators will be more limited in the future.

Some observers suggest that the new law does not go far enough to achieve the necessary separation of powers or to create checks and balances that are needed to make the separation effective. The Legislation Law is nevertheless an important step in that direction.

We commented in an earlier E-Letter that Western countries required several centuries after the signing of the Magna Carta before the legal system replaced duelling pistols, swords, and mantraps as a means for settling disputes. China is certain to achieve the result in less time.

 

 

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FIGHTING CORRUPTION

In an early session of the NPC, Premier Zhu Rongji highlighted public sector corruption, together with poor management and lax execution of laws and decrees, as major concerns. He expressed a new commitment by the leadership to hit at the ''tigers'', a reference to corrupt cadres with strong political connections.

Is corruption getting worse in China? It certainly appears so as a result of increased media coverage, particularly in relation to the recent smuggling scandal in Xiamen. Nearly 200 officials are said to be implicated, including the wife of Jia Qinglin who is one of the 22 members of the Party's Politburo and a close ally of President Jiang Zemin.

Information given to the NPC stated that nearly 39,000 corruption cases were investigated last year and more than 2,200 ranking officials were charged. . This represents an increase of over 9 per cent, compared to 1998.

A report to the NPC by Procurator-General Han Zhubin admitted that abuses by police and prosecutors, such as using torture to extort confessions, extorting favours from suspects, and nepotism, remain serious problems. Last year his department received 812,821 such complaints, of which 342,017 were related to prosecutors.

A similar report by Xiao Yang, President of the Supreme People's Court, indicated that the judiciary sentenced 15,748 government officials and business people last year on corruption charges. Mr Xiao said 540 court officials were fired last year, most of whom got their jobs through connections.

Earlier comments by Mr. Cao Siyuan, who is director of the Beijing Siyuan Merger and Bankruptcy Consultancy and a leading advocate of reform in Chinese society, are informative. The quotes are from an article in the South China Morning Post (see references at the end of the E-Letter):

The party and government have done a great deal of work in battling corruption," said Mr Cao. "Most of the offenders now are in jail for economic crimes, not counter-revolution as they used to be.

"But the methods used are out of date and cannot keep pace with the pace at which corruption is growing. As the saying goes, while you arrest a man for stealing cattle, another person is doing the same behind your back.

"Most of the cases arise from letters from the public. Of each 100 letters, 90 get lost, nine go from one department to another and usually end up in the hands of the person being accused, who then takes revenge on the person exposing him. Only one leads to a real investigation, which usually takes two to three years.

"What we need is the media to expose corruption. If they published such cases, the impact would be immediate. Of course, they must be subject to legal constraints and must do proper research before they go public. The accused person must have the right to sue for improper accusation.

"It is the newspapers themselves that must decide whether or not to publish. The case must not go first to the person or the department accused, as often happens now. Of course, they do nothing."

Assessing progress in fighting corruption is difficult, but the mere fact that it is a major item on the agenda for the NPC is an indication that higher-level cover-ups are likely to be difficult to arrange and to manage in the future.

 

 

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EDUCATION

Deficiencies in the education system in China recently became apparent after reports emerged that a 17-year-old school student bludgeoned his mother to death with a hammer after she banned him from playing football so he could concentrate on his studies.

The authorities announced early in 1998 that expenditure on education would be increased from 2.5 per cent of gross national product to 4 per cent. The slowing of the economy later that year altered these plans. Although the nature of the educational system in China needs to changed to meet the needs of a more rapidly developing society (rote learning of somewhat vague and insignificant facts continues to be emphasised), the major problem is the cost of education in China.

A brief statement in a recent article in Time is worth noting:

Already, some parents are losing faith in schooling as a way out of gruelling poverty. Rising middle and high school fees mean that even if poor students work hard, they still have little chance of continuing past sixth grade, after which tuition generally soars. A shortage in the number of university places also ensures that only 8.3 Chinese out of 10,000 possess college degrees, compared with levels of more than twice that in India. And with the implosion of the state sector, even university graduates aren't guaranteed jobs. Children who once dreamed of passing crucial middle-school exams now count on get-rich-quick schemes in boomtowns like Shenzhen. "There's a breakdown of the old Confucian order," says Maki Hayashikawa, education officer for UNESCO in Beijing. "People are starting to believe that education just doesn't pay off. What's the point of sending your child to primary school?"

Corruption and opportunism occur in this area as well. Also from the Time article:

When Beijing began to phase out central government education subsidies more than a decade ago, it turned fiscal responsibility over to local authorities. Many village headmen took this as an irresistible opportunity to line their own pockets and concocted a slew of school charges. Semi-private education watchdogs estimate that more than one-quarter of such fees are unwarranted, including everything from mandatory snacks and coloured chalk to abacuses that never actually materialise. The miscellaneous costs have forced millions of children from the classroom.

The Chamber is convinced that China's lagging educational commitment is likely to be a source of major difficulties in the near future. We hope to provide more information on this in future issues of the E-Letter.

 

 

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SOURCES OF INFORMATION

NPC

"NPC a Laughing Matter for Cynical Beijingers", South China Morning Post, 21 February, 2000.

"Beijing Cleans Up Its Act for NPC Delegates", South China Morning Post, 28 February, 2000.

"China's Parliament Opens Sunday With Looming Agenda", ChinaOnline, 3 March 2000.

"City Maps Out Road to West, China Daily Business Weekly, 5 March 2000.

"Xi'an Area Zeros In on Foreign Capital, China Daily Business Weekly, 5 March 2000.

"China To Focus on Western Development, Minister", ChinaOnline, 8 March 2000.

"Jiang Joins NPC's Group Discussion", China Daily, 8 March 2000

"West Warned Off Wasteful Projects, South China Morning Post, 9 March 2000.

"Party Leads, Congress Follows, Declares Li", South China Morning Post, 10 March 2000.

Legislative Law

"New Law on Legislation May Be an Ass, or Is It?" South China Morning Post, 10 March 2000.

Fighting Corruption

"A Maverick's Dreams For the Mainland", South China Morning Post, 25 February 2000.

"Zhu Attacks Bureaucracy", South China Morning Post, 6 March 2000.

"2,200 Senior Officials Charged Over Graft", South China Morning Post, 10 March 2000

"'Swift Justice' in Xiamen Case", South China Morning Post, 10 March 2000.

"Face Up to Political Reform", Viewpoint by Cao Siyuan in Asiaweek, 10 March 2000.

Education

"Education Overhaul Sought to Relieve Burden On Pupils", South China Morning Post, 10 March 2000.

"Lesson Unlearned", Time, 13 March 2000 (from Internet version released 10 March 2000).

 

Send comments about this E-Letter to: j.zerby@unsw.edu.au

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