Obstacles to China’s Development Are Too Often Neglected

By William Pfaff

PARIS - The announcement that China will sell off its state industries, made last Friday at the 15^th Communist Party Congress in Beijing, invites misunderstanding about China’s economic liberalization.

The announcement has also fueled discussion of what some contend is China’s irresistible ascent to regional and even global power, challenging America’s present standing as dominant military power and political influence in the Western Pacific.

At the party congress, following what appears to have been considerable controversy within the leadership, President Jiang Zemin said that some 10,000 of the 13,000 medium- and large-sized enterprises owned by the state will be sold. Sold to whom was not explained.

President Jiang indicated that they would not be privatized but would go into «public ownership», a conception yet to be clarified.

It would seem to suggest that shares will be created in these enterprises to be bought by other public or semi-public bodies, or possibly by the managers of the enterprises - although the latter raises the danger of the same kind of managerial confiscation of public assets that gave Russia its robber-baron capitalism. This cannot have escaped the attention of China’s leaders.

It is possible to suspect that this devolution of state ownership is in fact a maneuver to shift responsibility from the state and party to more elusive and ambitious targets when reform of these inefficient and money-losing causes hundreds of thousands of job losses. More than two-thirds of these firms are in deficit, and the aggressive losses increased by nearly 50 percent last year.

The government appears to want takeovers, fusions and bankruptcy to sort this out, so as eventually to produce a small number of industrial-banking-marketing conglomerates on the model of the big Japanese and Korean trading and manufacturing groups.

Could such a change give China the industrial dynamism of Japan and the other capitalist Asian economies (notwithstanding their current problems)? The obstacles to China’s development are too often neglected.

An important, indeed devastating, critique of the forecasts that say China is becoming a superpower was written last year by a Hudson Institute analyst, Robert Dujarric. Some of his arguments are worth noting here.

It was the impact and influence of the West that destroyed Manchu China. Today «there is no way for China to modernize itself without increasing its economic and social intercourse with the capitalist world.»

A decaying Communist Party faces an eventual succession crisis internally, and the collapse of its legitimacy externally. The party is corrupt. So is the bureaucratic system. This is uncorrectable so long as government legitimacy is unrestored and no mediating civil society and civil ethic exists.

China’s lack of law and accountability is a crippling obstacle.

Sustained foreign investment and further development depend on reliable and impartial legal systems.

The problem of who owns what remains unanswered, and nothing in current projects for reforming the economy will give an answer that the Chinese public and foreign investors are likely to find satisfactory.

The present scale of economy is usually vastly overestimated because inappropriate purchasing power comparisons are made. Actual GNP is probably less than $1 trillion, as against Japan’s nearly $5 trillion. China’s GNP per capita is $780 compared to $380,000 for Japan.

There is no effective tax system (only 11 percent of GDP is currently raised in taxes) and there will be no such system so long as a private sector does not formally exist.

The country is militarily weak. Its army functions as an internal political control institution. It has neither the sophisticated management and command systems nor the technological capacities of the Japanese or Taiwanese military, and China’s civil society cannot supply them.

There is more to be said, of course. The Chinese are an enormously talented people with a rich and formidable history. But their situation today is much more difficult than is generally understood abroad. (International Herald Tribune, September 18, 1997)

(Abridged)

Q u e s t i o n s :

1. What is the theme of the editorial?

2. What is the structure of the story?

3. Which part contains explicit opinions?

4. Which part contains supporting facts?

5. How can you define the writer’s attitude towards the problem?

6. What is the tone of the editorial (friendly, serious, distant, angry, cheerful, bitter, warm etc.)?

7. Name stylistic devices used in the story.

8. Find and analyze the rhetorical question.

9. Is the writer’s diction (choice of words) different from what you can see in the news stories?

Assignment 13.

Read the following readers’ letters from the editorial page paying attention to the ways of expressing their attitudes to the discussed issues.