| “IF YOU think,” says a high
administration official in Washington, DC, “what will be
required for economic success in the globalisation that is exploding around
us—technically dynamic, information-rich, highly entrepreneurial—then the
winners in that environment will be those able to provide at least the following...”
He counts on his fingers. “Free access to global information and markets. Protection
of physical and intellectual property. People able to speak and associate freely. A
government that has sufficient legitimacy to feel comfortable joining the global economy.
An educated population. And a rules-based polity...This is a set of qualities that does
not conform to a highly authoritarian system.” That, put simply, is the case for
political change in China. In the
past few years, two uncertainties about China have cleared themselves up. The first is
that China’s central government has committed itself wholeheartedly, irrevocably and
(to all but the dimmest apparatchiks) unambiguously to creating a market economy at home,
tied to the world at large. This is not because China’s septuagenarian leaders, all
former central planners, have become born-again liberals (although a surprising number of
liberals are moving up through the ranks). Rather, the remnant Maoists have long been
banished to the wings, from where they shout ineffectually from time to time. Meanwhile,
the remaining dominant factions—whether their leaders are gung-ho reformers, cautious
conservatives or nationalists who see economic success as the basis of future power
projection—all agree on one thing: the Communist Party is history unless it can
deliver growth. And for each of the past seven years now, China’s stellar economic
growth has been slowing, risking unmanageable dissatisfaction amongst the people.
So Zhu Rongji, the prime minister, by
temperament and training an engineer, not a free-marketeer, and popular neither with his
peers in the Politburo nor with minions, has had his reforming way all the same. New
sources of growth, he insists, have to be found by drastically (and painfully) shrinking
the state. The 15th Communist Party Congress in the autumn of 1997 was a watershed. It
marked the start of this new phase with the suggestion that tens of thousands of small and
medium-sized state enterprises would be cast loose upon private waters, to float or sink.
In the spring of 1999, guarantees that acknowledged the private sector for the first time
were written into the state constitution.
The first two decades of reform have in
essence been catch-up growth, gains that came from disbanding the agricultural communes
and from allowing capital and particularly labour to be poured into low-end manufacturing
and processing, a lot of it for export. The government did not really have to do anything
to foster such growth, other than to keep out of the way. Double-digit growth rates were
the norm, and fast growth created new jobs for workers made redundant by inefficient
state-owned enterprises, migrants from the countryside to urban areas, and young people
looking for their first job.
Now those high growth rates are gone,
possibly for good. Growth is not only lower these days, but its “labour
intensity”, according to Yukon Huang, head of the World Bank’s mission in China,
has also slowed. What growth China is achieving is creating fewer jobs.
“We have run out of easy things to
reform,” explains a senior Chinese official. Laying the foundations for the next
phase of growth will be very much harder. The productivity of the land—and remember
that two-thirds of China’s 1.3 billion people still live in the countryside—has
almost reached its natural limits, given China’s severe shortage of water. Higher
productivity in agriculture will come at the price of even more people leaving the land
for urban areas—perhaps 8m-10m a year, for whom jobs will need to be found. Another
6m jobs need to be created in the cities just to allow for the modest natural increase in
the urban population each year. Then there are the 4m-7m a year being thrown out of work
by shrinking state-owned enterprises. That is a minimum of 18m urban jobs that the economy
must create every year for the next few years. But from where? The woes of China’s
industrial sector are well known, and the service sector has been so stunted by the
country’s socialist legacy that it is only half the size expected for a country at
that stage of development.
The possibility is there for a prolonged
industrial slump and a restive population. For China’s leaders, that prospect tilts
the balance of risk and reward in favour of serious structural change and market
reforms—short-term pain that should, touch wood, lay the foundations for long-term
growth and, they think, for the party’s long-term survival. Hence the radical
commitment to a private sector that breaks free from a predatory state, to cleaning up the
state sector over the next few years, and to membership of the World Trade Organisation.
After years of procrastination, China has at
last shown itself to be serious about doing what is necessary to join the WTO.
After NATO’s bombing of the Chinese embassy in Belgrade last
summer, relations with the United States deteriorated sharply, and Zhu Rongji’s
future was in doubt. Despite these tensions, China signed a trade deal with the United
States in November to pave the way for WTO accession, possibly
later this year. Membership will prove as momentous a step as Deng Xiaoping’s
“opening to the world” in late 1978.
This helps resolve a second uncertainty,
which is whether China can bring about a smooth and successful change to an open economy
under a political system that remains highly authoritarian, indeed Leninist. The answer,
as the American official suggests, is that it cannot. This survey will argue that in the
next three to five years, China’s closer integration with the world economic order
will increase the pressure on it to become much more open, liberal and receptive. That, in
turn, will force profound changes on both its political system and its society.
Until now, China’s Communist leaders
have been able to scorn predictions of political change, and to repress demands for it.
They have two decades of growing prosperity to point to, certainly the swiftest, most
extensive rise out of poverty any nation has seen. All the same, says a senior official in
the Chinese government (one of the liberals), “Given globalisation, in all its
meanings, the mainland Chinese are no longer satisfied to look back at the change in the
past 20 years. They want to be like Chinese in Hong Kong or the US,
or they want to be like Japan...Politicians are not given much time these days.” Not
even authoritarian ones like China’s, with strong powers of coercion—although
admittedly these are not as strong as they were.
Lazy editorial writers in the liberal
West assume that a free-market economy can be introduced, as one exasperated Chinese
economist puts it, with the wave of a central planner’s wand. And democracy, too, he
might have added. This is not to say that free markets and accountable government in China
are out of the question. Cultural impediments to them are not as serious as political
ones. The country’s vast size, its poverty, and its legacy of a command economy
surely need to be taken into account in guessing how swiftly and how smoothly free markets
and democracy can be introduced—and how the interests of the central government and
the varied periphery can be reconciled.
China’s sheer size requires an
active effort to comprehend. The country’s 1.3 billion people make up one-fifth of
the world’s population, but they live on only one-fifteenth of the world’s land.
In fact, because a large part of China is inaccessible and inhospitable, the density in
the main population centres is much higher than those figures suggest. Two-thirds of
mainland Chinese live in the fertile eastern fifth of the country.
Mao Zedong once said that China was like
“another United Nations”. At present it has 31 provinces, if you include the
four municipalities with province-level status and the five “autonomous
regions”, which (especially in the case of Xinjiang and Tibet) are anything but
autonomous. In addition, there are the two “special administrative regions”,
Hong Kong and Macau. Thanks to their closely policed territorial borders with the
“motherland”, they really are special and autonomous.
Think, for a moment, of the provinces as if
they were separate countries. By land area, the biggest is Xinjiang, three times the size
of Spain, although with less than half of Spain’s population. China’s largest
city, Shanghai, has five times the population of Singapore. The most populous province,
inland Sichuan, has over 110m people, about as many as Japan. Guangdong, Hubei, Anhui,
Hunan, Hebei, Jiangsu, Shandong and Henan each have between 59m and 93m people, that is,
populations very roughly the size of Egypt, France or Mexico. The Guangxi Autonomous
Region, with 46m people, is more populous than Poland, yet how many people would be able
to pinpoint it unhesitatingly on a map? And this paragraph has mentioned fewer than half
of China’s provinces.
Or look at China’s GDP
per head. The national average (excluding Hong Kong and Macau) was $735 at 1998 prices,
which makes China somewhat poorer than Indonesia. That average, though, conceals great
regional inequalities. The poorest province, Guizhou, has a GDP per
head of $280, on a par with Bangladesh or Yemen. Sichuan, with a figure of $525, is level
with Pakistan. Meanwhile, Shanghai’s residents, at $3,400, are up there with Turkey
or South Africa. Now bring in Hong Kong, which at $22,990 has a higher per-head income
than Britain, its former master. The dozing commuter on the Star Ferry is likely to be 90
times wealthier than the vegetable-seller in Guizhou.
Regional inequalities, then, are a
serious matter, and Beijing’s leadership is at last beginning to wake up to them.
Equally serious is the wealth gap between city and countryside. In cities, 90% of
households have washing machines and colour televisions. On farms, the most widely owned
consumer durable, found in 70% of all households, is the sewing machine. Least remarked
upon, but equally serious, are huge differences in wealth within the same locality, along
with dire cases of poverty, even on the “prosperous” eastern seaboard.
Bearing in mind China’s sheer
scale, variety and relative poverty, it is hard to see how a monolithic leadership in
Beijing can prevail in the longer term, now that the Chinese people are no longer in
thrall to Maoism. (And remember that even under Mao Zedong, during the Cultural
Revolution, anarchy rather than central rule held sway for ten years.) Indeed, far from
being monolithic, China’s political system, both in the regions and at the centre, is
one of sharp elbows and centrifugal forces. Yet at the same time China has refused to
break up into a warring mess of baronries, as many western experts had predicted.
Until now, the centre—that is, perhaps
no more than 200 unelected, often elderly, men—have by and large kept control of the
reform process and of the country as a whole. In simple terms, they have done so by
devolving responsibility for economic growth to the local level, whilst enforcing party
discipline by keeping control of the hiring and firing of local and provincial officials.
Crucially, they have attempted to recentralise the collection of tax revenues and, more
successfully, the rationing of credit to the state sector. With implications that have
gone largely uncommented on in the West, a de-facto federal system may evolve in China
that could possibly form the template for future political and institutional change. It
could even help solve what is currently the biggest threat to the region’s security:
the question of Taiwan.
Predicting that political change will come
is the easy bit; predicting how it will come about is harder. And the outcome will not
necessarily be happy. Integration with the world economic order will also mean more
opportunities for friction, aggravating the sores of China’s formerly centralised
economy. The opportunities for corruption that will arise from state assets being stripped
by officials and managers of state enterprises are also a cause for pessimism.
China’s history is full of shimmering
metaphors, parallels and examples that usually help to throw light on current events. But
this time, history offers no guide to what happens next.
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