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China: The Next Momentous Step -- Away From Communism?

Prague, 4 September 1997 (RFE/RL) -- China is reaching the end of the 20th century as a highly successful contradiction in terms: namely, a Marxist state which is one of the economic power-houses of the world.

Already the third biggest economy after the United States and Japan, China with its 1,200 million people is set to become Number One in economic size sometime early in the new century.

The course of China's development towards this goal is to be set out by the 15th Communist Party Congress opening in Beijing in little over a week. That congress is expected to bring a momentous further opening of the country to free market forces, while at the same time confirming China's Stalinist-style political path under the banner of the Communist Party.

So the contradiction will live on, at least for now. Not that alternatives will be debated: if past congresses are a guide, the big decisions have already been taken by the leaders during their August holidays by the sea at Beidaihe. The congress, with its 2,000 delegates in the Great Hall of the People, will merely approve those decisions.

Economics apart, there will be questions of leadership. Jiang Zemin, the colourless but skillful party general secretary and state president, is expected to remain in those offices. Zhu Rhongji, who has worked effectively as head of economic planning, could become prime minister. Outgoing premier Li Peng, who has to step down under the constitution, is expected to gain another post which keeps his power intact. Older comrades hesitant to back further reform will probably go.

This will be the first party congress without the guiding hand of paramount leader Deng Xiaoping, the architect of market reform. But his spirit will permeate the event, in that the congress appears likely to unveil major new intiatives to restructure and modernise the decrepit state industry sector.

Some in the West say the changes will be so sweeping that China will cease to be communist in everything but name. But that could well exaggerate the position. A little over a month ago, the Guangming Daily reported that Jiang Zemin himself was saying the state should retain the controlling hand over key economic sectors -- foreign trade, finance, many consumer products, food, transport and energy. It's unlikely that such detailed information would be allowed to reach the press as a "trial balloon" unless it closely reflects Jiang's thinking.

Jiang reportedly said, however, that the state must withdraw step by step from other, increasingly competitive industries, and he drew a fine line between the still-unacceptable concept of privatisation and what he called non-public ownership, which he supported. Those two ideas would seem to have the same purpose, namely that enterprises should be allowed to live or die according to their successful adaptation to the market. In other words, what Jiang is saying is that much of the state sector industries, particularly the less successful sections, which are the big barrier to further real modernisation, must fend for themselves. He is quoted as saying a major breakthrough is needed to move China out of what he called socialism's primary stage.

But the party must try to achieve this without massive unemployment and social disruption -- that's what makes the task exceedingly difficult.

What China has achieved under Deng's reforms in the last 20 years is remarkable enough. Though still a poor country, with per capita income at about $620 per year, the sustained economic growth rate is some 10 percent a year. Exports in the first half of last year reached almost $81 billion, well exceeding imports in the same period of $63 billion, and foreign investment is running into the scores of thousands of millions of dollars. Well-made but inexpensive Chinese products have established a huge presence on the world market, in some cases a dominating presence.

There are many problems, not least the disparity in wealth between those benefiting most from reforms, mainly along the coastal belt, and those in the interior. There's also environmental degradation, corruption and the inflexible and antiquated leadership structure.

Much Western interest focuses on how long China can continue liberalising its economy while maintaining its strict and oppressive political system.

So far, these contradictory forces have not split the country apart, and if the wealth continues to spread they may continue to coexist for some time. An executive of the Hong-Kong branch of the Nikko investment house, Dong Koon Hung, told RFE/RL this week that many Chinese will remain communist in name, but their behaviour will be identical with that of capitalists -- because of the cash benefits involved.

Dong Koon Hung also said that the Chinese have the basis of the technology to move into bigger manufacturing areas, such as automobiles and aircraft, but that they still lack the expertise for efficient production. When they acquire such expertise, and couple it with their super-low labour costs, they will spread their penetration of world markets to ever-wider sectors. Then the rest of the economic world will have much to fear from the Chinese Dragon, whether it styles itself capitalist or communist.