I am far from a China basher, at times I have been labeled a Sinophile, that is not really accurate either.  I believe the rebirth of China as a world power will be be a defining event of this new century.  I only hope that it will be, as the CCP refer to it, “a peaceful rise”.  I think this is critical to the stability of the international system.  There are some preconditions to this.  The Taiwanese issue must not escalate, and better yet, it should be resolved.  China must remain peaceful and not allow nationalism (often used as a tool by the government to create national cohesion) does not lead it to conflict with its neighbors.  America must accept China’s economic and political power, as well as respect its strategic interest in Asia.  America must not try to isolate and contain China (although it can be argued that the Bush administration is currently attempting to do just that).

Typically  in the Western media three stories about China are told,  “economic mircle”, the human rights abuser, the military threat.  We rarely here about the social/political climate inside the country as it relates to the economic development that has been taking place for over 25 years.  China has grew at a fast clip by any standard, but what are the results for the average Chinese person.  What things does China still need to face domestically in order to maintain their astonishing rate of growth?  That is some of what this article discusses.  I also like it because it is written by a Chinese person.  I tend to give more credance to their opinion as there interpretation of what is happening (due to lower cultural distance) is, in my opinion, often closer to what is really happening.

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The Dark Side of China’s Rise

Foreign Policy, March/April 2006  

China’s economic boom has dazzled investors and captivated the world. But beyond the new high-rises and churning factories lie rampant corruption, vast waste, and an elite with little interest in making things better. Forget political reform. China’s future will be decay, not democracy.

The only thing rising faster than China is the hype about China. In January, the People’s Republic’s gross domestic product (GDP) exceeded that of Britain and France, making China the world’s fourth-largest economy. In December, it was announced that China replaced the United States as the world’s largest exporter of technology goods. Many experts predict that the Chinese economy will be second only to the United States by 2020, and possibly surpass it by 2050.

Western investors hail China’s strong economic fundamentals—notably a high savings rate, huge labor pool, and powerful work ethic—and willingly gloss over its imperfections. Businesspeople talk about China’s being simultaneously the world’s greatest manufacturer and its greatest market. Private equity firms are scouring the Middle Kingdom for acquisitions. Chinese Internet companies are fetching dot-com-era prices on the NASDAQ. Some of the world’s leading financial institutions, including Bank of America, Citibank, and HSBC, have bet billions on the country’s financial future by acquiring minority stakes in China’s state-controlled banks, even though many of them are technically insolvent. Not to be left out, every global automobile giant has built or is planning new facilities in China, despite a flooded market and plunging profit margins.

And why shouldn’t they believe the hype? The record of China’s growth over the past two decades has proved pessimists wrong and optimists not optimistic enough. But before we all start learning Chinese and marveling at the accomplishments of the Chinese Communist Party, we might want to pause for a moment. Upon close examination, China’s record loses some of its luster. China’s economic performance since 1979, for example, is actually less impressive than that of its East Asian neighbors, such as Japan, South Korea, and Taiwan, during comparable periods of growth. Its banking system, which costs Beijing about 30 percent of annual GDP in bailouts, is saddled with nonperforming loans and is probably the most fragile in Asia. The comparison with India is especially striking. In six major industrial sectors (ranging from autos to telecom), from 1999 to 2003, Indian companies delivered rates of return on investment that were 80 to 200 percent higher than their Chinese counterparts. The often breathless conventional wisdom on China’s economic reform overlooks major flaws that render many predictions about China’s trajectory misleading, if not downright hazardous.

Behind the glowing headlines are fundamental frailties rooted in the Chinese neo-Leninist state. Unlike Maoism, neo-Leninism blends one-party rule and state control of key sectors of the economy with partial market reforms and an end to self-imposed isolation from the world economy. The Maoist state preached egalitarianism and relied on the loyalty of workers and peasants. The neo-Leninist state practices elitism, draws its support from technocrats, the military, and the police, and co-opts new social elites (professionals and private entrepreneurs) and foreign capital—all vilified under Maoism. Neo-Leninism has rendered the ruling Chinese Communist Party more resilient but has also generated self-destructive forces.

To most Western observers, China’s economic success obscures the predatory characteristics of its neo-Leninist state. But Beijing’s brand of authoritarian politics is spawning a dangerous mix of crony capitalism, rampant corruption, and widening inequality. Dreams that the country’s economic liberalization will someday lead to political reform remain distant. Indeed, if current trends continue, China’s political system is more likely to experience decay than democracy. It’s true that China’s recent economic achievements have given the party a new vibrancy. Yet the very policies that the party adopted to generate high economic growth are compounding the political and social ills that threaten its long-term survival.

For More:

http://www.carnegieendowment.org/publications/index.cfm?fa=print&id=18110

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