Privatization in China

I ran across a very interesting news report on Xinhua the other day. Highlights:

The widening income gap was the most serious social problem in China in 2004, according to a recent survey conducted by the Party School of the Communist Party of China (CPC) Central Committee. The survey also found that reform of the income distribution system in 2005 is the top concern of the respondents, including officials at the provincial level, Xinhua Telegraph Daily reported Friday.

So far it looks like something that could appear in the New York Times. But then we get this:

An Qiyuan, another CPPCC member, said that the income gap between different social sectors is also wide. Those working in some monopolized industries, such as power, water and gas supply units, telecommunications, air and railway transportation, enjoy much higher salaries than those working in other industries. The income gap between those poorly-paid and highly-paid industries increased by 4.25 times last year, against 3.98 times in 2003 and 2.62 times in 2000.

There is a cry for breaking the monopoly of these industries to narrow the income gap.

If they are printing it in the state news agencies, you can bet that some powerful people are in favor of breaking up the monopolies. It is rather ironic that Communist China seems more willing to embrace free markets (slowly and carefully, to be sure) than some Western countries I could name.

The other thing is that if you read the full article, you'll note that China is increasingly worried about the tensions between the urban and rural populations. This may well be the impetus for possible revolution; but it would not necessarily be a pro-capitalist revolution, as most rural areas have had many of the hardships of a free market, and few of the benefits.

But breaking the monopolies seems a promising move. It will help correct wage distortions and possibly ease the accompanying tensions; aside from that, I'd bet dollars to dimes that the monopolies in question are state-owned. Any reduction in state control over essential services is a good thing in my book.

China continues to be "a conundrum wrapped up in an enigma," as they say. Every time we get a troubling signal, like saber-rattling over Taiwan, we get a conciliatory signal soon after, like the NorKo's returning to negotiations. And behind everything is the increasingly developed, capitalist economy. Very confusing, all told; but not boring at least...