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Cuba's Economic Reforms in A Chinese Perspective
(This is the paper presented to the Wilton Park Conference on Cuba, October 2002.)
Despite the geographical distance and different population size, Cuba and China have at least two things in common: They are socialist countries and both are on the road of economic reforms. While Cuba began to reform its economy in the early 1990s, China started its reforms and opening-door as early as in 1978. (In December 1978 the Third Plenary Session of the 11th Central Committee of Communist Party of China, CPC, was held in Beijing). Compared with Cuba, China has made greater progress in stimulating economic development, raising people’s living standards and upgrading comprehensive national strength. From 1978 to 2000, for instance, China’s average annual growth rate was 9. 5%, and for some of the years it stood at 15%. At the same time, inflation rate was often kept below 10% with the exception of only a few years at over 15%. As a matter of fact, few economies in the world have achieved such remarkably high growth rate without high inflation. It took China 9 years (from 1978 to 1987) to double its average per capita income. But it was 58 years for the United Kingdom (from 1780 to 1838), 47 years for the United States (from 1839 – 1886), 34 years for Japan (from 1885 – 1919) and 11 years for South Korea (from 1966- 1977) to do the same. Then, from 1987 to 1996, China doubled its average per capita income again in 9 years. No wonder foreign leaders, including President Fidel Castro, admire China’s economic miracle. During his first visit to China in November 1995, Castro was deeply impressed by the progress China had made. On the ancient Great Wall, he highly praised the glorious Chinese history; and in the rapidly developing Shenzhen Special Economic Zone, he “saw the hope of China”. It was reported that Castro wanted his country to learn from the Chinese way of reforms. Other Cuban leading officials who have visited China also wish to model on China.2 Part I of this paper will try to summarize what Cuba has achieved on the path of reforms. In the second part I shall try to offer a few points of comparison in the light of China’s experience for Cuba. I. An Overview of Cuba’s Economic Reforms
The disintegration of the Soviet Union and break-up of the trade relations within CMEA induced hardest difficulties for the Cuban economy. Between 1991 and 1994, the Cuban GDP declined by 35%, imports dropped by 75%, oil imports fell by half, and people’s caloric intake was reduced from roughly 2800 to 1735 per day. Faced with this harsh situation, Cuba decided to “defend socialism” by reforming the economy. Cuba’s economic reforms in the past decade can be summarized in the following areas: 1) Decentralization in the agricultural sector Cuba first experimented with market-oriented agricultural reforms in 1980 when a free market for small farmers was established. In this market, small landholders or cooperatives made up of private farmers were allowed to sell their surplus produce directly to the public. This measure led to increased agricultural production, but concerns about profiteering led to re-regulation in 1982, and the markets were closed in 1986. In September 1993 the National Assembly of People’s Power (the country’s highest legislative body) approved the breaking up of large state farms into cooperatives. To give farm workers an incentive to increase efficiency in production, the cooperatives were given user rights to the land they cultivated. Cooperative members have their own bank accounts and elect their own management. It was estimated that approximately two-thirds of state-owned agricultural land was redistributed to newly created cooperatives, the so-called Unidades Básicas de Producción Cooperativa (UBPC, or basic units of cooperative production). This measure, together with others, led to a remarkable reduction in the amount of land directly controlled by the Cuban Government. U.N.’s Economic Commission for Latin America and the Caribbean (ECLAC) reported that from 1980 to 1997, the share of cultivated land directly under control of the state declined from 78% to 24 %, while the share of land in cooperatives increased from 10% to 57 % and the share of privately held land increased from 12% to 19% during the same period. In addition, economic incentives have been introduced in the agricultural sector. For instance, producers were permitted, after delivering their contracted amounts to the state, to sell their surplus production on the free markets. This type of market was created in September 1994 to allow this surplus production to reach consumers at prices not regulated by the Government. In 1999 new agricultural markets were created that reportedly allow even greater use of market-determined pricing. It is reported that the farmers markets handle 25 to 30 percent of the farm products available to Cuban customers. They have been playing an important role in increasing the supply, diversity, and availability of food in Cuba. 3 In the early 1990s black-market activity expanded significantly in Cuba. Cubans who received hard currency (mostly U.S. dollars) from relatives abroad converted dollars for pesos in the black market.4 The black market for foreign exchange contributed to the growth of excess liquidity in the Cuban economy, and drove up domestic prices. In order to control the growth of the black market, the authority declared in 1993 that possession and use of foreign currency within Cuba would be decriminalized and shortly afterward the dollar stores were opened to all Cubans.5 This helped to create an escape valve for inflationary pressure, while facilitating the flow of foreign remittances to support domestic demand. In 1994, the convertible peso was introduced, with a value set at par with the U.S. dollar and with full hard-currency backing. In 1995, two more policies were implemented. On the one hand, the exchange of formerly non-convertible pesos for foreign currency at a market rate was legalized through official foreign-exchange bureaus. On the other, Cubans were authorized to open bank accounts denominated in foreign currencies. 6 3) Authorization of self-employment Before 1990 a limited amount of self-employment remained, with reportedly 29,000 registered self-employed workers in Cuba. In the early 1990s, because of the loss of Soviet economic assistance, the economy sank into hardship and unemployment rose greatly. In September 1993, in order to legitimize the booming black market for services and handicrafts, and to ease unemployment, the Government specified more than 100 jobs that could be performed by the self-employed in trade, craft, and services sectors.7 This measure, as the Government hoped, would reduce the size of the public sector, cut government spending, and reduce the Government’s role in meeting domestic demand for certain goods and services. A new central bank, the Banco Central de Cuba, was established in 1997 to operate with modern central banking functions. In addition, several steps were taken to modernize the banking system. For instance, the domestic banking system was computerized, a clearing system established, and automatic teller machines (ATMs) installed throughout the country. In the same year, the Tax System law (Law Number 73) also came into force. Beginning in 1996, self-employed individuals were required to pay income tax. Among those new taxes and new user charges, the Government imposed, beginning in 1994, nominal charges for certain previously free government-provided services such as school meals and vitamin supplements, as well as levies on previously untaxed consumer goods such as tobacco and alcoholic beverages. Real estate rental property was legalized in 1997, creating a new source of tax revenue. Despite the economic hardships, the government has never reduced the high priority assigned to basic social spending. Health spending remained almost constant in peso terms, education spending declined marginally, and social security payments increased between 1989 and 1998. Cuba's trade with those formerly socialist countries declined from 80% at the end of the 1980s to 12 percent by 1994. This sharp fall forced the Cuban Government to seek alternative world market. Cuba's participation is restricted to trade and economic organizations not subject to a U.S. veto. Thus, Cuba is excluded from the OAS, the Inter-American Development Bank, and the negotiations on the Free Trade Area of the Americas. However, Cuba was a founding member of the Association of Caribbean States, and joined the Latin American Integration Association (LAIA) in 1999. Cuba was granted observer status at meetings between the European Union (EU) and the African, Caribbean, and Pacific (ACP) countries pursuant to negotiations for a new preferential trade arrangement (the Cotonou Convention) to replace the Lome Convention. Cuba has sought increased participation in Latin American regional trading groups such as the Caribbean Community (CARICOM) and the Southern Common Market (Mercosur). Cuban tariffs are subject to WTO disciplines. Following tariff reductions in 1997, Cuba's simple average general tariff was 16.9 percent ad valorem (down from 51.5 percent in 1990) with a maximum rate of 40 percent, versus an average MFN tariff of 10.7 percent (down from 17 percent in 1990) with a maximum rate of 30 percent. As a member of LAIA, Cuba affords preferential tariff rates (below MFN rates) to certain less-developed Latin American members. Cuba also offers preferential tariff rates to certain developing countries pursuant to the Global System of Trade Preferences (GSTP). Cuba benefits from reduced duties under the Generalized System of Preferences from the EU, Australia, Bulgaria, Canada, the Czech Republic, Hungary, Japan, New Zealand, Norway, Poland, and Switzerland. The Constitutional approved in July 1992 ended the Cuban Government's monopoly on imports, and now hundreds of state-owned but decentralized firms (with the designation "S.A." after their names) are licensed to import. Foreign private interests are gaining an increasing role in export activities, which were traditionally carried out exclusively by government-owned enterprises. 6) Attracting more foreign investment In order to draw external capital, the Government liberalized certain restraints on its investment practices. For instance, amendments to the Cuban Constitution in 1992 eliminated important restrictions on foreign investment, permitting property ownership by mixed enterprises and the transfer of state property to joint ventures with foreign capital. The most significant step to attract foreign investment was taken in September 1995 when new foreign investment regulations, in the name of Decree law 77, were passed by the National Assembly. The law established certain guarantees against expropriation of assets and allowed, among other things, foreign firms to transfer profits abroad more freely. Foreign investment was allowed in all sectors of the Cuban economy except education, health care, and defense, but the authorities have the right to select investment projects and foreign partners. According to Decree Law 77, projects must meet one or more of the following criteria: provide capital for the Cuban economy; transfer technology to Cuba; open new markets for Cuban goods and services; or contribute to the development of the Cuban tourism sector. Decree Law 77 provides for three different forms of investment, all of which involve some form of partnership or cooperation with a Cuban government entity, including the establishment of joint ventures. Decree Law 77 prohibits foreign-owned businesses in Cuba from directly hiring or paying Cuban workers. Instead, they must hire Cuban labor and pay salaries through a Cuban government employment agency. But certain exceptions exist with respect to hiring certain technical and managerial personnel. In 1996 Decree Law 80 came into being. It provides added protection for foreign investors. Foreign investors are permitted to negotiate additional investment protections or provisions in bilateral accords with the Cuban Government, including protection against unreasonable expropriation. 7) Establishing free trade zone (FTZ) In 1996, Decree Law 165, authorizing the establishment of FTZs, was published, and Cuba's first FTZ was opened in 1997.9 Operations located in FTZs may be 100-percent foreign owned. A Canadian business guide describes Cuban FTZs as “among the most liberal in Latin America”. Like other FTZs in the world, Cuba’ FTZs offer certain tariff and tax concessions as well as more favorable investment conditions. No duties are paid on imports into or exports out of FTZs. Industrial plants in FTZs are exempt from income and labor taxes for 12 years, followed by a 50-percent exemption for another 5 years; service and commercial operations are exempt from income and labor taxes for 3 years and 5 years, respectively. Companies in FTZs are authorized to provide incentives in the form of food, clothing transportation, and up to 10 percent of monetary compensation in hard currency. 8) Restructuring the economic structure In order to diversify the economic structure, the Government has made great efforts to develop tourism and other non-traditional industries. Results are encouraging. Since 1994, tourism has replaced sugar exports as Cuba's leading source of hard-currency earnings. Gross revenue from tourism in 1998 was $1.8 billion, versus $600 million from sugar. Cuba’s economic reforms have witnessed important progress. The economy has already stabilized and economic growth resumed by the mid-1990s, even surpassing the growth rate of Latin America as a whole for a few years since then. Cuba's fiscal deficit declined from 30.4 percent of GDP in 1993 to 2.2 percent of GDP in 1998 and 1999. The official unemployment rate also declined from nearly 8 percent in 1995 to 6 percent in 1999. Exports increased from $2 billion in 1993 to $4.5 billion in 1999, and imports grew from $2.3 billion to $5 billion during the same period. II. What Can Cuba Learn from China? Although Cuba’s initial conditions of reforms were much different from China’s, the nature of the two reform processes should be the same. Therefore, Cuba can learn some lessons and experience from China. The following points might be relevent in this regard: 1. Reforms should be based on solid theoretical foundation. As Secretary-General Jiang Zemin said in his report delivered at the 15th National Congress of CPC on September 12, 1997, the Party attaches great importance to the guiding role of theory. He said, since the Chinese people found Marxism-Leninism, the Chinese revolution has taken on an entirely new look. The integration of Marxism-Leninism with China's reality has experienced two historic leaps, resulting in two great theories, Mao Zedong Thought and Deng Xiaoping Theory. Deng Xiaoping Theory is a continuation and development of Mao Zedong Thought. It guides China in successfully accomplishing their socialist modernization in the process of reform and opening to the outside world. It integrates Marxism with the realities of present-day China. In other words, Deng Xiaoping Theory is Marxism of present-day China, representing a new stage of development of Marxism in China. Deng Xiaoping Theory deals with two fundamental questions: what socialism is and how to build it. Its essence is to build socialism with Chinese characteristics. This theory has been gradually formed and developed under the historical conditions in which peace and development have become the main themes of the times. By reviewing the historical experience of successes and setbacks of socialism in China and other socialist countries, this theory serves China's reform, opening up and modernization drive. It embraces philosophy, political economy and scientific socialism and covers a wide range of issues in such fields as the economy, politics, science and technology, education, culture, ethnic affairs, military, foreign policies, the united front and Party building. It is Deng Xiaoping Theory that has been guiding China’s reform process. In China, soon after the June 4 incident of 1989, some leftists were increasingly opposed to the nation’s reform process. In early 1991, concerned with the possibility of retreat on the path of reforms, Deng Xiaoping, who was then celebrating the traditional Spring Festival in Shanghai, said to the Shanghai municipal leadership, “Do not believe that planning belongs to socialism and market belongs to capitalism. Both are instruments. Market can also serve socialism.” He called upon the city officials to be “more liberal, braver and swifter” in pushing forward the reform process. It seems that Cuba’s reforms are not based on any clear and well-defined theory, although Cuban leader Fidel Castro and other senior Cuban officials have repeatedly said that Cuba’s reforms should be carried out within the principles of socialism. They have expressed their wishes to utilize some forms of the market mechanism, but insist that Cuba will not walk towards market economy. From their perspectives, socialism and market economy are not compatible. 2. Tortoise or hare: Choosing the right speed of reforms In discussing the speed of economic reforms, people tend to use such words as “gradual” or “shock therapy”. Indeed, for a reform process to be considered as a shock, it must be swift and comprehensive. According to the Inter-American Development bank, in the case of trade reforms, a shock reform is defined as one that cuts average tariff levels by at least 50% in a two-year period, provided that the level goes below 20% and that during the same period the bulk of nontariff restrictions on imports has been removed. With regard to tax reforms, a shock reform is the one that modifies the entire tax system in terms of neutrality, legal rationality and horizontal equity in a relatively short period of time. In the area of financial reform, a shock reform is defined as one that in no more than two years frees the interest rates that were subject to controls, cuts credit mechanisms by at least half, and introduces substantial reforms in one or several of the following areas: privatization of financial institutions, independence of the central bank, and modernization of the capital market or of banking regulation and supervision systems.10 Economists at ECLAC have their own definitions. They identify a set of “aggressive ” reformers versus others who were more “cautious” on the basis of speed and scope of the reforms. According to Barbara Stallings and Wilson Peres, the “aggressive” reformers undertook many reforms in a relatively short period of time, while the “cautious” reformers implemented reforms more gradually.11 Despite these definitions, however, the specific criteria for defining the reform process as being “gradual” or “shock”, are still controversial in practice. While many transition economies in the former Soviet bloc are seen as “aggressive” reformers practicing “shock therapy”, China is considered as a “gradual” and “cautious” reformer. As Deng Xiaoping aptly put it, China carried out its reforms like “crossing the river by feeling the stones in the water”. Indeed, because of the following reasons, it is easy to understand why China should wage a cautious and gradual reform process. First of all, as a huge country with more than 1.2 billion people, China should maintain social stability as one of the priorities. Second, when it stared the reform process, China could hardly acquire any readily available lessons and experience from other transition economies. So it has to learn by doing. Apparently, Cuba has chosen the gradual approach. This choice is proved to be reasonable and correct. Cuba’s reforms were launched under economic difficulties and harsh conditions, i.e., decades of U.S. blockade and abrupt disappearance of aids from the Soviet bloc. (Remember that, compared with China, Cuba’s initial conditions of reforms were much worse.) If Cuba had followed the style of “shock therapy” as Russia and some other Easter European countries have done, the situation could have gone uncontrolled. However, as some Chinese scholars have pointed out, the Cuban leadership should be more liberal and more brave in such areas as ownership restructuring and opening to the outside world. 3. “Let some people get rich first”, but benefits of reforms should be equally distributed. Before the 1980s income distribution in China was remarkably equal, or even egalitarian. The Gini coefficient for the urban-rural inequality was only 0. 16. A well-known expression known as “iron rice bowl” or “big pot rice” vividly depicted the mentality of the people at that time, meaning that everyone ate the same share of rice from the “big pot” or “big bowl”.12 Deng Xiaoping was wise enough to proclaim that “To get rich is glorious”. He also said, “Let some people get rich first”. Indeed, as many Chinese, including scholars, fully understand, if some people had not been allowed to get rich first, or egalitarianism had still dominated the society, China would not have been able reduce poverty so progressively. However, it is interesting to note that income inequalities have been emerging at a swift speed, which has aroused great concern among the leaders, economists and the common people. Second, while income inequalities within either the urban or the rural areas have become worsened, it is even more conspicuous within the latter. According to a sample survey conducted by the economists from the Institute of Economics at the Chinese Academy of Social Sciences, the Gini Coefficient rose from 0.338 in 1988 to 0.416 in 1995. Statistics based on rural family income compiled by the National Bureau of Statistics also indicated that the Gini Coefficient has not exhibited improvements since 1995. Third, the whole picture of unequal income distribution for the nation is alarming. By 1999, the richest 20% of households accounted for 48.5% of total national income, whereas the poorest 20% had a share of only 7.1%. Their ratio was almost 7:1. At the same time, the richest 20% of the urban households possessed 55.4% of the total financial assets in the hands of all the urban residents, while the poorest 20% had only 1.5%. Their ratio was 37:1.13 In its 2001 Human Development Report, the World Bank put China’s Gini Coefficient at 0.403 in 1998. According to many Chinese economists’ calculation, China’s Gini coefficient stood at 0. 45. Judged by international standard, a country with Gini coefficient higher than 0. 45 would be considered as being greatly unequal. The fact that economic reforms tend to generate worse income distribution has been proved in Mexico, Brazil, Argentina and other Latin American countries that have been marching on the reform paths. Indeed, economic reforms and opening to the outside world tend to create opportunities for people to get rich. But the privileged group tend to acquire more opportunities than the others. For Cuba, it seems that it is also necessary to “let some people get rich first”. China’s experience has proved that this policy will effectively stimulate people’s initiative to work and therefore to speed up the economy. Cuba has been favorably considered as a good example of relatively equal income distribution. Despite its good reputation, however, Cuba should be well-prepared for the likelihood of emerging inequalities when reforms are to be deepened. It was reported that Castro admitted that the legalization of the use of the dollar in Cuba from the mid-1990s onwards had created social inequalities, but he said his government was working to eliminate these by helping the poorest members of society.14 Indeed, for both Cuba and China, the tough question is how to deal with the relationship between the following two aspects, i.e., letting some people get rich first on the one hand, and distributing the benefits of reform to everyone on the other. 4. Improving the ownership structure is the key to successful reforms. In China it is stipulated that the public sector includes not only the state- and collectively-owned sectors, but also the state- and collectively-owned elements in the mixed ownership. By dominant position for public ownership, it means that public assets dominate in total assets of the society and the state-owned sector controls the life-blood of the national economy so that it plays a leading role in economic development. Another point to bear in mind is that dominance is defined for the country as a whole. In other words, there may be differences in some regions and industries. If the dominance of the public ownership is maintained, its smaller or reduced percentage in the economy will not affect the socialist nature of the nation. While the collectively-owned sector is an important component of the public sector of the economy, the joint stock system is increasingly seen as a form of capital organization of modern enterprises, which can be used both under capitalism and under socialism. In his report to the 15th National Congress of CPC in 1997, Jiang Zemin said, “We cannot say in general terms that the joint stock system is public or private, for the key point is who holds the controlling share. If the state holds the controlling share, it obviously shows the characteristics of public ownership, which is favorable to expanding the area of control by public capital and enhancing the dominant role of public ownership.” In the past two decades the non-public sector has increased ostensibly and it is increasingly recognized as an important component of the socialist market economy (see table 1). In some places, particularly in the eastern part of China, the non-public sector has become the most important engine for the development of local economy.
1978 1999
5. Reforming the state-owned enterprises is essential for the establishment of a socialist market economy. As mentioned earlier, Cuba and China are socialist countries and the state-owned enterprises (SOEs) should play an important role in the economy. However, before reforms were initiated, the SOEs could not raise their efficiency, and some of them had long been money-losers, incurring a heavy fiscal burden on the state budget. Many countries in Latin American and Eastern Europe have privatized the majority of their SOEs. In some extreme cases, almost all the SOEs have been sold to private investors. Results of privatization have been mixed. In China, the Party and the Government have recognized that well-executed reform of the SOEs is of vital importance to building a socialist market economy and consolidating the socialist system, and the best way to reform them is to establish a modern corporate system. Great efforts have been made to corporatize large and medium-sized state-owned enterprises according to the four requirements, i.e., clearly established ownership, well defined power and responsibility, separation of enterprises from administration, and scientific management. In September 1997 the CPC Central Committee set out the objective of reforming the SOEs and “lifting them out of difficulties” in three years. By the end of 2000, this goal was basically realized. This goal was achieved through a wide range of measures such as encouraging merging, standardizing bankruptcy procedures, downsizing workers and staff and creating a favorable external environment.16 By World Bank standards, most of Cuba’s industrial plants are considered “large”. Their production cannot be considered as efficient, mainly due to the lack of modern equipment, input and innovation as well as poor management. Many Chinese scholars agree that it is better for Cuba to integrate the reforms of the SOEs as an integral part of the whole reform process, and lagging behind would produce negative impact upon reforms in other areas. In addition to raising efficiency by adopting a modern corporate system, Cuba might need to make greater use of the private and foreign capital and even close down some of the big “money-losers”. It is encouraging to see that as early as in 1998 the Council of State of Cuba passed the Decree Law 187, stipulating detailed measures to reform its SOEs. Its principles include: 1) Enterprises have to achieve self-financing within the approved social objective. 2) Incentives for the workers are the heart of the business system. 3) Profits, after payment of taxes, are distributed by the appropriate body. One part is set aside for enterprises’ reserves. 4) Appropriate differentials are to be created to encourage the qualified and responsible workers. 5) Labor and wages policies are to be closely linked.17 According to the Chinese experience, Cuba should get well prepared to tackle the problem of rising unemployment as SOEs reforms tend to turn a large number of workers out of their post. If re-employment opportunities and social security benefits could not be provided to them, social stability might be in danger. 6. Corruption is detrimental to reforms. Corruption simply means the use of public office to pursue private gain in ways that violate laws and other formal rules. Corruption is not the inevitable side-effect of economic reforms. However, countries making the transition to a market economy often experience an increase in corruption along with growing economic wealth. This is because reforms tend to create opportunities that make it easy for some people to engage in corruption activities. This has been proved not only in Latin America, but also in places like Russia and the East European countries. Unfortunately, China is also suffering from corruption, which has aroused public anger and generated economic costs. The idea that corruption can facilitate economic development is wrong. A well-known Chinese economist by the name of Hu Angang categorized corruption activities in China into four types: 1) illegal exemption of taxes and tariffs; 2) underground economic activities like smuggling, drug trafficking and so on; 3) embezzling public funds; and 4) rent-seeking, mostly in the form of market monopoly. According to his calculation, these major types of corruption activities incurred a cost of 987. 5 - 1257 billion yuan (or $120 - 153 billion ) for China each year. This amount is equal to 13.2 – 16. 8% of the nation’s total GDP. It is believed that this rough estimation was quite conservative as corruption is hard to be found and no clear information is readily available for calculation. Hu Angang’s estimation might be controversial, but ordinary people would not be surprised to learn the recent two cases of corruption. When investigators searched two country houses belonging to the northern city of Shenyang's mayor, they found $6 million worth of gold bars hidden in the walls, 150 Rolex watches and many other valuable things sent to him as gifts. In the southern city of Xiameng, records show that “smuggling king” Lai Changxing and his gang smuggled 53 billion yuan (about $6.6 billion) worth of goods in three years, evading 30 billion yuan (about $3.7 billion) of customs duty. Lai and his followers tried all available means to bribe local Party and governmental officials, who in return provided protection for them. As many commentaries put it, corruption and smuggling are two malignant tumors growing together, and the only way to wipe out smuggling is to eliminate corruption. Those Chinese who have visited Cuba are surprised to see that Cuban officials at different levels do not enjoy much more privileges than the common people. It is true that there are much less corruption scandals reported in Cuba. When reforms proceed further and further, however, we believe tuat the Party, the government and the people in Cuba need to be highly vigilant against the possible occurrence of more corruption. Fortunately, according to the Economist Intelligence Unit, an aspect of the broad campaign of self-criticism and ideological strengthening that began to emerge at the start of 2001was the focus on “economic crime, social indiscipline and corruption ”. In China, the Party and the government never take a lenient attitude towards the corrupted officials. So many high-level corrupted officials have been punished. It is increasingly recognized that, on the one hand, the best way to wipe out corruption is to create a system that can effectively restrict officials’ power, and the public and the media should play an important role to supervise them. On the other hand, the officials should build what the media suggest an “ideological Great Wall” to resist decadent ideas, greed and self-indulgence. 7. “When the window is opened, a screen is needed to keep the misquotes and flies out of the house”. In China, the Party has long been promoting socialist culture with Chinese characteristics. As Jiang Zemin said at the 15th National Congress of CPC, “ In building socialism with Chinese characteristics, we must redouble our efforts to raise the ideological and ethical standards and scientific and educational levels of the whole nation and provide a powerful ideological driving force and strong intellectual support for economic development and all-round social progress. We must nurture citizens one generation after another who have high ideals, moral integrity, a good education and a strong sense of discipline, meeting the requirements of the socialist modernization drive. This is a long-term arduous task in our cultural advancement.” He also said, “ Following the principle of keeping our own culture as the base and making use of that of others, we should conduct various exchanges with other countries, drawing on their strong points while introducing our own achievements to the world. We must resolutely resist the corrosion of decadent ideas and cultures.” For any country in the world, when the door is opened, foreign influence, positive and negative alike, will come in and traditional cultures and values will be faced with great challenges. This is also true for China. Since the reform process stated more than two decades ago, China’s traditional cultures and values seem to be on the defense. Illegal drugs, prostitution and crimes are spreading, and many people’s social morality is degrading. This does not mean China should keep a blind eye to any foreign cultures. Rather, “when the window is opened, a screen is needed to keep the mosquitoes and flies out of the house”, as Deng Xiaoping once urged. With the reform process proceeding forward, Cuba would be increasingly faced with a similar task of “keeping the mosquitoes and flies out of the house” Particularly, U.S. government sponsored radio and television broadcasting to Cuba (Radio and TV Marti), begun in 1985 and 1990 respectively. So Cuba would confront additional threat. III. Conclusions As Deng Xiaoping put it, “Do not believe that planning belongs to socialism and market belongs to capitalism. Both are instruments. Market can also serve socialism.” In order to speed up socialist constructions, China and Cuba need to implement economic reforms, and it is encouraging to see that both nations have achieved remarkable results. Globalization is proceeding more swiftly than ever. Both China and Cuba must take an active attitude towards this tendency. As President Castro said, “Globalization is an inevitable process. It would be pointless to oppose a law of history.”18 But globalization poses both opportunities and challenges to socialism. As long as Cuba and China can stick to the policy of reforms and opening to the outside, socialist constructions will achieve great progress in the new century.
2 Vice-President of the Council of State and Minister of the Revolutionary Armed Forces (FAR), Army General Raul Castro, visited China in 1997. Secretary of the State Council, Carlos Lage, visited China three times, in 1992, 1993 and 1999; Jose R. Machado Ventura, member of the Political Bureau and Vice-President of the Council of State, visited China in 1999. Minister Ricardo Cabrizas has been to China several times heading the Cuban delegation to the Sessions of the Inter-governmental Joint Commission. 3 In addition to the farmers markets, artisans markets were also authorized in the fall of 1994, allowing the free sale of a wide range of consumer products through a network of artisan markets. 4 Foreign currency could only be spent in so-called dollar stores that were open primarily to diplomats and foreign visitors, but off limits to ordinary Cuban citizens. 5 The Government legalized dollar-denominated remittances under its 1994 monetary reform program. 6 As some commentators pointed out, peso convertibility has accelerated the expansion of a dual economy - one that uses pesos and one that uses dollars. The traditional, peso-based component of the Cuban economy, including sugar and most agricultural production, education, and health services, remains under central government planning. The convertible peso is credited with spurring the mid-1990s growth in Cuba's dollar-based economy, including tourism and export-oriented agriculture such as citrus production. Apparently, widespread use of dollars and other foreign exchange means that Cuban monetary authorities have less ability to control the country's money supply. 7 By 1998, there were reportedly more than 160,000 self-employed Cubans. 8 The sharpest cuts occurred in state-owned enterprises, defense spending, and government investment. 9 For the time being three zones have been set up, with almost three hundred companies operating in them. 10 Inter-American Development Bank, Economic and Social Progress in Latin America: 1996 Report, p. 83. 11 Barbara Stallings and Wilson Peres, Growth, Employment, and Equity: The Impact of the Economic Reforms in Latin America and the Caribbean, Brookings Institution Press, 2000, p. 47. 12 Rice has been China's staple food for thousands of years, 13 Ru Xin et al (eds.), China’s Social Situations in 2001: Analysis and Prospects, China Social Sciences Documentation Press, 2001, p.14. 14 Reuters news, Havana, Nov 14, 2000,. 15 It is reported that Castro once said, “Privatization became a dogma of faith in Latin America ... except in our little country which has not carried out any kind of privatization.” (Reuters news, Havana, Nov 14, 2000.) 16 To create a favorable external environment for SOEs reforms, the government adopted an active fiscal policy and a prudent monetary policy; expanded domestic demands; raised tax rebate for export; cracked down smuggling activities and tax fraud; rectified market order; and reduced arbitrary collection of charges and indiscriminate fines from the SOEs. 17 Granma International, August 30, 1998, p. 11. 18 Granma International, August 30, 1998, p. 5. |
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