Chongqing: Socialism in One City - Nation

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by Robert Dreyfuss

I'm writing today from Chongqing, a vast city in central China that is China's gateway to its western regions. By some accounts, Chongqing is the largest city in the world, a muncipality of 32 million people, but that, I've learned, is misleading, since that number includes the population of a handful of satellite cities and a rural population of 20 million. A few years ago, however, China carved Chongqing and its 32 million people out of Szechuan province and made it a municipality of its own, and today the Chongqing is a pilot project for the most important thing happening in China, and perhaps the world: the urbanization of as many as half a billion people from rural farms and villages into newly constructed cities. "Chongqinq," says Wen Tianping, the city's spokesman, "is a microcosm of China itself."

The scale of the enterprise is staggering. In Chongqing, each year for the indefinite future, the plan is to move 500,000 people from rural to urban life. That means that Chongqinq must plan, ready, and construct the equivalent of a city the size of Atlanta, Georgia, every year, providing jobs, roads, housing, infrastructure, schools, hospitals and more. It's a project that has been going on in China for the past 20 years, during which 200 million people have already been urbanized, and over the next generation another 200 to 300 million people will follow in their footsteps.

"We have plans, timetables, goals," says Qian Lee, the director of Chongqing's comprehensive business promotion project. "You can't have a plan for everything. But we don't make plans to be abandoned. We make plans to be accomplished. You do it scientifically, as we always say in China."

And the thing is, in China, plans work.

In Chongqinq, the population itself has been steady for many years, but the entire municipality is shifting from rural to urban. The city center houses 5-6 million people, satellite cities of up to 1 million or more are popping up around it, and urban townships ot 200,000 to 500,000 are springing up like mushrooms around those. "We've planned six regional centers of 1 million each," says Qian Lee. As people leave the farms and villages, some of the land is converted to industrial use, and some it is combined into more efficient, industrialized farming. "Chongqinq will become what we call a ‘dragon's head' economic engine for the upper Yangtze River region, and the model for balanced, urban-rural areas."

As an inland center, Chongqing was a bit less vulnerable to the economic downturn that followed the financial crisis of 2008. That's because unlike the cities of southern China and Shanghai, for instance, Chongqinq is less dependent on exports of manufactured goods to Europe and the United States. So when the U.S. financial collapse spread around the world, and the economy cratered, the drop in demand for Chinese-made goods didn't impact Chongqing as strongly as other parts of China. Even so, 12 percent of Chongqinq's economy is export-related, so when the crisis hit unemployment in Chongqing – and across China – spiked.

China launched a stimulus of its own, whose size is pretty much unknown. According to Stephen Green of Standard and Chartered Bank, who I met in Shanghai, China's domestic stimulus likely dwarfed the American version. Officially, he says, it was as least $600 billion, but it may have been as much as $3.5 trillion, especially if you count the provincial-level stimulus provided by cities and provinces such as Chongqinq.

"When the financial crisis hit us, a lot of factories closed," says Wen Tianping. Chongqing launched its Warm Winter stimulus plan, spending vast sums, including credit programs to allow many of the 3.5 million unemployed workers to start their own businesses, providing loans and credit guarantees to small business, launching start-up industrial parks, providing direct subsidies to 1,500 businesses, and, of course, using China's ace-in-the-hole: the fact that it is still a communist country with a huge panoply of SOEs (state owned enterprises) that control all of the most important sectors of the economy. The SOE's, says Wen, "were instructed by the government not to cut jobs." Now, not only has Chongqinq recovered fully, but it is currently experiencing a 13 percent growth rate.

In the United States, there is a widely shared perception that China has abandoned socialism and that it has become a Wild West-style, capitalist free-for-all. That's wrong. True, US multinationals, among others, are sidling up cheek by jowl to invest and build factories in China, both for export and to supply China's 1.3 billion consumers. (More than a hundred US Fortune 500 companies operate in Chongqinq already, including Hewlett-Packard, whose laptop assembly plant here will produce 10 million computers a year, Chongqing officials say.) But the fact remains that in China, all of the key industries are government-owned: banks, energy, oil, transport, telecommunications (including China's huge cell phone company, which will soon have its 500 millionth subscriber). China's banking system – which includes four or five giant national banks, 17 mid-sized commercial banks, and about 140 city commercial banks – sailed serenely through the worldwide crisis of 2008-2009. Virtually none of it was exposed to the bad debt and high-flying securities speculation bubble that collapsed AIG, Lehman, and countless other players.

From what I've seen so far, there's no likelihood in the near future that China intends to privatize its core industries. And it's centralized planning system is humming along.