Recently, Hu Jintao, holding the top position of the party, military and state leadership, declared that the building of a socialist society of harmony is one of the primary tasks of the Chinese Communist Party in initiating the socialist cause with Chinese characteristics. He said, the society should be one where there is democracy, justice, honesty, friendship, dynamism, order, tranquility, and harmony with nature.

Wen Jiabao, the Premier, also stressed that building a socialist society of harmony is a key mission in the Government’s Work Report.

These statements come at a time when China has experienced over two decades of capitalist market economy. The State Council, on February 24, issued a document “On encouraging and supporting individually or privately run businesses in the non-public sector”. The People’s Daily reported that privately run enterprises now constitute about 40% of the nation’s industrial added value and income from sales, and over 60% of the nation’s commodity sales and retail sales. Together with foreign capital, the non-public sector now constitutes over half of China’s GDP, and the majority of jobs for urban and non-agricultural sectors.

These figures unequivocally tell us that in China, the capitalist market economic forces are predominant. The Government’s Work Report declared that China would “implement its promises in its accession to the WTO, continue to lower customs tariffs, enlarge opened areas… and fully let go the right over foreign trade.” The pillars supporting a non-capitalist state have been eroded.

Wen Jiabao’s Report acceded to underlying problems and contradictions: the agricultural base is weak, peasants’ increase in income is difficult, strain of energy is acute, and pressure for inflation is high. At the same time, social tensions have aggravated, and the situation in the rural is particularly serious. The pressures from unemployment, irrational economic structure, and low level of skills are all bothering the government and society. Corruption, bureaucratism, inefficiency, extravagance are listed.

If the Government Report is vague about these problems, social surveys give the details. The Social Sciences Academy’s “Analyses and Projections of the Social Situation” 2004-2005 listed the following seven problems: 1. About 40 million peasants are landless; 2. Income discrepancy is such that in a survey of 50,000 urban households in the first half of 2004, the 10% highest income group had a dispensable income of RMB 13,322 yuan, whereas the lowest 10% income group had only 1,397 yuan to dispense with; 3. Every year, 24 million people enter the labour market, but new jobs are only 9 million a year; 4. Poverty alleviation remains a daunting task, and the level of absolute poverty in the countryside is per capita annual income of 625 yuan, which is lower than the United Nations level of about 900 yuan; 5. Anti-corruption can rely only on political systemic reform, yet the forces against corruption are too weak in China; 6. Sustainable development is seriously constrained by resources, energy and environment; 7. Despite the rapid economic growth in the last two years, the degree of contentment with life among the low income groups is going down.

After China’s accession to the WTO, due to the influx of cheap agricultural products, peasants’ livelihood has gone for the worse. According to the latest World Bank Report, in these three years, average income of peasant households has gone down by almost 1%, and that of some peasant households in stark poverty has gone down by 6%.

The government has acknowledged the severity of the rural problems, and has promulgated a series of measures to alleviate the situation. For example, tariffs on agricultural products are lifted, and the state’s investment into agriculture this year is 70 billion yuan.

However, with the rampant corruption and graft, often, the state’s poverty alleviation relief funds do not reach the beneficiaries. A newspaper report said that in a village in Jilin Province, each peasant household was supposed to receive 5,000 yuan from the state’s 100,000 yuan relief funds, yet due to corruption, each peasant household got only 50 yuan. (Apple Daily, 23 March 2005, quoting East Asia Economic and Trade News.)

The large number of officials and cadres is a heavy burden on the ordinary folk. Cadres at the level of the county or below number 13.16 million, which means 26 ordinary people support one cadre. The total number of government-paid cadres is 45.72 million, and expenses over travel, reception and overseas training and visits used up, respectively, 300 billion, 200 billion and 250 billion yuan. (Ming Pao, 7 March 2005) It is also estimated that the debt of all village and township governments in China totaled 1 trillion yuan. The figures of the Agricultural Ministry show that up to the end of 2004, rural population was about 930 million, and rural debt was equivalent to 1,075 yuan for each peasant, which was about 40% of their annual income.

With rising social discontent, the government has gone for further political repression. Government control over the internet has stepped up, but this can hardly suppress the people’s voices demanding justice and political reform.