Prague, 2 June 1999 (RFE/RL) -- Ten years after the crushing of pro-democracy demonstrations in Beijing's Tiananmen Square, China still faces many unresolved political and economic issues.
The Communist Party retains is monopolistic hold on political life, with the pro-democracy movement largely stifled, its members jailed, silenced or scattered in exile.
But the central dilemma remains that to retain its hold on power in the long term, the party has to be seen as capable of delivering a rising living standard to China's 1.2 billion people. It can only do that through continuing its economic reform program, based on the open door policy towards the world. But at the same time, open doors unavoidably give access to fresh breezes, in political as well as economic terms.
The military crackdown on pro-democracy activists in Tiananmen in the early hours of June 4, 1989, in which hundreds of people died, spelled the end of the political liberalism espoused by then party leader Zhao Ziyang, who was ousted a few weeks later.
But the economic reforms lived on under Premier Li Peng, a hardliner who had taken a key role in ousting Zhao. It received extra impetus from the pragmatic paramount leader Deng Xiaoping, particularly from a tour he made to south China in 1992. In the course of his journey, he emphasized that socialism does not necessarily demand a centrally planned economy, and that China should build a market economy. Deng's pronouncements led to a burst of reforms around the country and growing international investor confidence that this direction would endure. But Deng and subsequent leaders never espoused political pluralism, seeing it as the road to chaos.
During the last two years, the Asian economic collapse has put new strains on China's reform process, particularly as the restructuring of enterprises and the privatization process has led to increased worker layoffs, producing violent reactions in some cases.
And analysts see the latest tensions in China's relations with the West as strengthening the hand of hardliners in the party, including Maoist factions who oppose both economic reform and the open-door policy. Relations with the West, particularly with the United States, have nose-dived since the accidental bombing by NATO of the Chinese embassy in Belgrade early last month, and the ill-feeling has been compounded by U.S. allegations last week that China had stolen U.S. nuclear secrets. Prominent Hong Kong-based analyst Willy Lam of the South China Morning Post says the leadership is now deeply divided over the way forward.
"The leadership is facing a dilemma because over the long-term they need the assistance of the United States and the Western countries to reform the economy. However, there are fears now that an excessively cozy relationship with the U.S. might jeopardize the nation's socialist values, so at this stage there is an intense debate going on within the leadership as to what directions should be taken."
London-based geo-political analyst Alisdair Campbell says he also believes Chinese leaders are undertaking a "very comprehensive reassessment" in foreign policy. He says the review is based on the broader impact of the Kosovo crisis, and the new strategic balance likely to develop in Asia because of closer defense cooperation between the United States and Japan.
Campbell, who is director of the China Task Force at the Royal Institute of International Affairs, says Beijing -- a veto-holding member of the United Nations' Security Council -- has been effectively excluded from playing a role in the Kosovo conflict because NATO has largely bypassed the UN:
"The Chinese feel somewhat aggrieved that there has been a lack of consultation in the international arena in recent months, and I think that a sense of isolation has to some extent been imposed on them."
Returning to the economic picture, despite years of strong economic growth sparked by Deng's opening to market forces, experts say China's present situation is difficult. Eckhard Schulte, chief analyst in Frankfurt with the Industrial Bank of Japan, describes China as the world's biggest "bubble" economy -- meaning that it is not sustainable in its present form.
"This country is definitely going through very tough times, because it seems there is a huge inefficiency in the banking sector, and a lot of excess credit growth in the real-estate sector, and I believe the official statistics are to a huge extent incorrect; to this extent, I think that China is probably the last country left in the world which has an overvalued currency."
Schulte says that paradoxically, devaluation would not help the economy, because China is carrying much debt denominated in U.S. dollars, and the cost of that debt would rise with devaluation. He sees unemployment -- always a danger to political stability -- as likely to rise, and increasing problems in coping with the backlog of China's environmental problems.
In addition, the revival visible in the South East Asian economies will be unlikely to give China much of a boost. That is because those economies are too small to stimulate China at a time when Japan, the region's leading economy, remains mired in stagnation.