Chinese way of representing 'advanced forces of production'
| By Geoffrey Howe, Special to Gulf News | 27-12-2003
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In the last 25 years China's gross domestic product, GDP, has increased sixfold and the lives of hundreds of millions have changed beyond all recognition for the better.
The speed, scope and quality of development - of infrastructure, housing and commercial construction alike - overwhelmingly dwarf anything in any other part of the globe. Whole new modern cities have been established, first in Hong Kong's neighbour, Shenzhen, and now in Shanghai's Pudong.
China's GDP - $1,210 billion at market prices in 2002 - is now larger than Canada and Italy, both long-standing members of the G7 group of industrialised countries. It far exceeds that of Russia, whose regular attendance under President Vladimir Putin's leadership has transformed the summit into the G8.
Last year President Hu Jintao became the first Chinese leader to attend. He accepted an invitation his predecessor Jiang Zemin refused. We may be confident that the event will now be known as the G9.
Global market growth
Change has been even more dramatic on the external front. In 2002 China's foreign trade amounted to $620 billion, making it the world's sixth largest trading nation. China is thus having an explosive impact on global commodities markets. In 1999, for example, it overtook America to become the world's largest user of steel - it was already the largest producer. Last year it again overtook the US as the world's largest user of copper.
The broader picture tells the same story. China's share of world merchandise exports has now risen above four per cent, while Japan's has fallen from 10 per cent in 1993 to less than seven in 2001. China has been increasing its market share.
While world trade has grown by only a quarter, China's exports have increased almost six times as much - by 145 per cent. This is, of course, of huge importance to its own economy. In 2002 China's exports were equivalent to a quarter of GDP - but they generated three-quarters of its growth.
The view from the other end of the telescope is rather different. Look at a few headlines from the financial press:
"Mexico manufacturers lose business to China"
"South Korea feels the chill in China's growing shadow"
"China begins to exert its influence on Latin America"
"China faces trade claim from US companies".
That last one is the most thought-provoking. It explains the recent mission to Beijing of US Treasury Secretary, John Snow, in search of a revaluation of the Chinese renminbi. That debate is not made any easier by the scale of China's trade surplus with the US - $103 billion in 2002 - which is seen by many as a portent of the threat to American jobs.
China, now a committed member of the World Trade Organisation, WTO, was the world's largest recipient of foreign direct investment in 2002 - $53 billion. Its trade surplus with the US in the same year exceeded that of Japan, at $103 billion - although China was barely in surplus with the world as a whole.
During a recent 17-month period, the central banks of China and Hong Kong purchased $96 billion of US government securities. All these figures illustrate wider trends and demonstrate beyond doubt the scale of Beijing's fast-growing role in the global economy.
Three important questions now emerge:
How confident can we be that this economic success will be sustained?
How far will the political structure be able to manage the process?
As a result, what part is China likely to be playing on the wider international stage?
Sustaining success
Certainly, there is no shortage of problems facing the economy. Probably the most challenging, certainly in social terms, is the seemingly unending unemployment crisis. Of a population of 1.3 billion, there are in the cities some 30 million without work, alongside a much larger number of displaced country dwellers floating from job to job. At least another 200 million remain on the land, with virtually no work.
It is small wonder that Beijing has postponed a new bankruptcy law for as long as six years - and restricted the rate of lay-offs in the old, unproductive state-owned enterprises. The government is supporting a large number of unprofitable activities.
Some 70 per cent of bank lending still goes to such enterprises. As a result, banks are carrying an enormous volume of non-performing loans - officially just over 20 per cent, though some put the figure at more than twice that.
But there are many positive signals to set alongside these daunting facts. Most encouraging is the extent to which the symptoms of inefficiency are acknowledged by government spokesmen, universities and think tanks - of which there are a growing number - as well as by the Central Party School, for many years a source of fresh thinking for the country's top leaders.
Even at a more official level, Minister Ma Kai, in charge of the National Development and Reform Commission, recently warned the National People's Congress against "repetitive construction" by public authorities, "mainly because of the lack of a system to hold the decision-makers accountable for their ill-advised plans, or squandering impulses."
Hence the sustained shift towards market-driven economic policy. Over the last decade the number of state-owned industrial businesses shrunk from over a 100,000 to less than half that. Private enterprises have trebled to almost 2.5 million.
More important still, this policy has now been entrenched in Communist Party dogma. This was the closing achievement of former President Jiang Zemin's 13-year term as party general secretary, using his rather tortuous ideological formula, the "Three Represents".
This notion, formally enshrined in the Communist Party's charter in November last year, stipulates that, in addition to representing Chinese people and culture, the party should also now incorporate - or "represent" - the "advanced forces of production" - Jiang's code for private business.
Political hazards
But what of the political hazards confronting this massively able and sometimes very emotional people?
China still retains a uniquely monolithic and authoritarian system of government. It is still a one-party state and officially an atheist nation. Followers of Falun Gong, a quasi-religious sect, are still sent to prison. This intolerance owes much to the traditional Chinese fear of "splittism", not least in Xinjiang and Tibet.
The perceived "threat" to the stability of the Chinese empire - still only in the sixth decade of unity after a century of upheaval - must be seen as the root cause of these disquieting attitudes.
Political reform is bound to be difficult, but not impossible. At the human level, the outstanding transformation of recent years is that the great majority of Chinese enjoy far greater freedom than at any time. They have the right to choose a job - if they can find one; to start a business; to buy their own home; even to sue the government. Both IKEA and B&Q are now cashing in.
At a more political level, an embryo democratisation process has been under way. Village leaders are directly elected in more than half of rural communities. There are experimental elections at township level too. This is taking place alongside significant liberalisations of criminal law and trial procedures, often along lines recommended by the human rights mission, which I led to China in 1992. Every year, six judges from the Supreme People's Court are trained in Britain.
These welcome changes provide some assurance that China's governors increasingly recognise the importance of the rule of law for a market economy and social stability.
But they still also think of the law as the appropriate instrument for maintaining, in the last resort, the over-riding authority of the Party. When senior Chinese judges speak of the need for the judiciary to enjoy complete and credible independence, it is independence of the Communist Party that is their ambition.
For the rule of law to be acceptable in any state, it requires not just the obedience but the assent and the allegiance of the people. And it is that "democratic deficit" which is still the missing link.
Hu and Wen
Since the installation of the dual leadership of President Hu and Premier Wen Jiabao at the Sixteenth Party Congress in late 2002, several important reform initiatives have been approved. Most notable are the restructuring of most of the central executive bodies and the revision of relationships with the state-owned media.
These steps have been accompanied by changes in the political process designed to emphasise "decision-making transparency, the public's right to know, official accountability and responsiveness to the needs of the Chinese people."
Meetings of the State Council, the Politburo and its Standing Committee are now routinely reported. Hu and Wen have made well-publicised visits to ordinary citizens in urban and poor areas, following a call from the Party Congress for "decision-makers to go deep among the people to know how they are faring."
More recently, however, there have been signs of an opposing current. The Propaganda Ministry is said to have instructed party organisations, universities and research institutes to halt reformist discussion and security personnel are said to have been harassing academics who ignored this "advice". The Mayor of Shenzhen, Yu Youjun, who earlier this year proclaimed far-reaching democratisation and reform of his city's government, has been reined back.
There remains a significant old guard whose deeply cautious instincts have conditioned them to argue this case - and there are some who suggest that Jiang is one of those now seeking to challenge the way in which his chosen heirs are interpreting their mission.
The reactionaries are not likely to prevail. That view appears to have been vindicated by Hu's powerful recent speech to the Politburo. He said that the Communist Party must undertake a "sweeping systemic project" to increase public participation in government and enforce the rule of law. He repeatedly emphasised the need for democracy. This is certainly Hu's boldest call for political change since becoming party general secretary.
One of the main forces behind the reform movement is the Central Party School, of which Hu had been president for years. The school's Dean, Zeng Qinghong, probably the most powerful member of the Politburo, who has long pressed for more efficient, less corrupt and more democratic government, has been Jiang's closest confidant since l985.
Common cause
In foreign policy there have been solid improvements in relations between China and the US. Most striking is the extent to which they have been making common cause against global terrorism and North Korean nuclear weapons development.
Beijing has allowed Washington to set up a Federal Bureau of Investigation office in its embassy and to inspect US-bound goods before they leave China. There is close co-operation in financial tracking and America has categorised East Turkestan independence fighters as terrorists.
Most important of all is the extent to which the two nations' leaders now have more frequent contact. This is fostering a widespread recognition of the need for China to play a more proactive, wider world role - not least working more closely with its neighbours, for example the Association of Southeast Asian Nations, Asean.
Foreign policy initiatives are springing from closer economic relations. The catalytic impact of China's accession to the WTO has been advancing discussion of a possible Asian Free Trade Area. The persistent obstacle to this is the sustained xenophobic antipathy between China and Japan. Anything resembling a Franco-German style reconciliation, which has been the driving force of the European Union, EU, still seems a very long way off.
Big power
But closer partnership, built on economic foundations with Asean members and on anti-terrorist cooperation with Russia and other central Asian states in the Shanghai Cooperation Organisation, is likely to significantly extend China's regional influence.
Even more interesting is the rapprochement between China and India, overcoming long mutual mistrust. Since China's then Premier Zhu Rongji visited India two years ago, trade between the two has more than doubled. Indians are now beginning to see China as a land of business opportunity. This is particularly so for India's information technology industry - perhaps the only sector where it is ahead of its faster-growing neighbour.
China and India emerged as effectively the joint leaders of the developing world in the recent Cancún conflict over the next WTO trade round. China has promised a more balanced policy towards the sub-continent, improving relations with India while playing down its friendship with its nuclear-armed enemy, Pakistan.
Probably most significant of all has been Beijing's decision to broker the six power talks about the North Korean nuclear problem. China found itself uniquely positioned because of its long-standing ties with North Korea and improving relationship with the US. The move certainly reflects a new sense of engagement with the world as China starts to act like a big power.
Pre-emptive consultation
All this is good news, but hazards remain - the most important of which is Taiwan. "If handled poorly," says Professor Yang Jiemian of the Shanghai Institute of International Affairs, "this could lead to confrontation and devastation for the entire Asia-Pacific region." Hence the fundamental importance of US-China relations.
Fortunately, President George Bush's administration has been able, while maintaining a credible commitment to assist Taiwan itself, to convince China in the last 12 months that it does not support Taiwan independence.
The worry springs from the early election in Taiwan. If the Chairman of the Nationalist Kuomintang Party, Lian Zhan, wins, then there is a chance of four years to consolidate the peace. If President Chen Shuibian is re-elected the outlook could be more hazardous.
But one Chinese foreign ministry planner, a proud Shanghainese, told me: "If we make a success of Shanghai, where half a million Taiwanese now live, then Taiwan will not want to be independent." We must hope that his optimism will be justified.
This has to be set in the broader context of the historic anxiety of Chinese policy-makers - their fear of American dominance, all the more lively since the collapse of the Soviet Union. This concern has certainly not been calmed by renewed American interest in a strategy of pre-emptive intervention.
Hence China's strongly reiterated belief in multilateralism, a strengthened UN and peaceful crisis resolution. This is one important reason for China's intense interest in establishing and maintaining common ground with the EU.
None of this can reduce the central importance of skillful, candid and mature management of the fundamental Sino-American relationship. Both countries share the goal of guaranteeing peace in the Asia-Pacific and avoiding the risk of conflict elsewhere.
Both may have something to learn from the Soviet-American experience. Even when the Cold War was at its height, conflict was avoided as a result of the closest, continuous and pre-emptive contact between the two. The ever-open hotline was the channel for preserving the peace.
There is, of course, no comparable risk of war across the Pacific today. On the contrary, the worldwide terrorist threat has brought the US and China much closer. The institutionalisation of this relationship is of crucial importance. Pre-emptive consultation, rather than pre-emptive intervention, needs to become the order of the day.
The last 25 years have transformed the China which emerged just half a century ago from decades of civil and international strife. The People's Republic has more than established itself as a stable and responsible member of the international community. Its political institutions, and the people's talent and energy, have delivered formidable economic success along with real improvements in the survival and daily life of the great majority.
Bankrupt
It is easy, of course, for outside critics to identify mistakes and misjudgments, to describe disasters and brutalities - and to explain, with the wisdom of hindsight, just how easily they should have been avoided.
China's opinion-formers and political leaders have recently been addressing some of the social and institutional problems thrown up by the economic upheaval. These include the need not just for economic market discipline, but for the wider discipline of the rule of law, for transparency, for accountability, for integrity - and for people to have some understanding of what they are expected to accept.
These are the themes which Hu has been addressing. But the resulting constitutional reforms will appear to fall well short of anything resembling traditional western democracy.
Judgments that such changes are inadequate, if not a complete sham, would be thoughtless and hard to justify. They fail to take account of the thinking behind such a cautious approach.
It has sometimes been said that China made all the mistakes of capitalism, before we invented it.
The same is arguably true about democracy - or so it was suggested to me in the Central Party School, by Zheng Bijian. China, he explained, has learned something of the hazards of instant, nationwide, direct democracy.
In the last century alone, it twice experienced failure:
First, in the Republic of China, from 1911 to the mid-1920s, there were 130 different parties in Beijing and an elected president. But it was a chaotic decade. It led to "warlordism", so for Chinese peoples the multi-party system is bankrupt.
Second, the Cultural Revolution decade, Mao Tse Tung's last. The different Red Guard groups were like parties. There was big debate, "big democracy", nationwide, and later Mao called it "civil war".
From this, Zheng explained, the leadership, the Chinese people, have concluded that the political road must come from practice among the people, not from competitive or multi-party politics.
It isn't easy to dismiss this pragmatic analysis, and the case can quickly be buttressed by pointing to experience in some former Soviet republics - not excluding Russia itself or Ukraine. The seriousness of Hu's commitment to real political change in the years ahead is impressive.
If this is indeed the path that he and his colleagues intend to follow, then we should wish them well. A series of political reforms should follow. These would enable the Chinese people and government increasingly to understand each other, to work together and above all to trust each other.
All this, and more, will be essential if they are to succeed in grappling with the problems of rapid economic change and enhance their nation's crucial contribution to world peace and prosperity.
Lord Howe is a former British Foreign Secretary, Chancellor of the Exchequer and Deputy Prime Minister. This is an edited version of his Icebreakers lecture at Chatham House.
© The World Today magazine syndication service,
published by the Royal Institute of International Affairs at Chatham House in London, UK.
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