CHINA the race to market - Chapter Five: Feeling the Stones as You Cross the River (Printable version)

TV sets (there are over 320 million sets installed),
for mobile operators (the mobile phone market in China is outgrowing the US or Japan), or
for internet firms (by 2005, China will have 300 million internet users, 100 million more than the US).

But the military, the police, the party or the Ministry of Information Industry - a giant composite ministry brought together in 1998 - have invested massively in telecommunications and data-processing to centralise control and better monitor the population.

As a result, the party-state’s monopoly on information has shrunk. The population is better informed than ever before. Chinese readers in 1978 had 930 magazine titles to chose from; by 1998, official statistics recorded 2,053 newspapers, 7,999 magazines and trade publications, and 7.24 billion copies of books representing 7,999 titles. The US government has introduced a plan to establish a computer network to help Chinese residents circumvent their government’s controls over use of the network, Reference [5] - by contrast, the Saudi government’s censureship is strongly supported by the US, an excellent example of US selectiveness in exporting its values.

The party is desperately battling to preserve its censureship powers through its administrative buro for internet propaganda, and laws are passed making it illegal to transmit materials which incite the overthrow of the government. But whatever it tries, the diverse sources of information oblige the party-state to remain credible with the public. Old style propaganda does not suffice; reliable news is a necessary resource for an ever more open society.

China and the Asian Developmental State

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The CCP is much attracted by the example of the Asian developmental state, modelled on the Leninist doctrine of Kuomintang Taiwan, or on the dominant party-state of Singapore. The developmental state has demonstrated ability to drag populations out of poverty in the space of a generation. Reference [6]. Central controls over society run through the hands of a governing élite, chosen through a rigorous process of selection. Leaders here are not servants of the electorate’s whims. Corruption is punished by disgrace, or worse. The legal systems provide justice, subject to political discretion.

Learning from the Asian development model is not so straitforward, though. Most importantly, by the turn of the millenium, the model is dated as Taiwan and South Korea have become market-democracies, and Singapore is too small for large China to imitate in detail. That leaves China’s leadership with an apparent option, either of consolidating a Chinese-style socialist market economy under the rule of law, or of incorporating the main elements of western-style political systems.

In fact, this dichtomy of monopoly state or western democracy to which the leadership oftens refers is specious. China is special by definition, as is every other people and state. There is nothing special therefore about being special. This is not the same as saying, with President Clinton, that the internet will bring democracy to China. Rather, China’s political system is bound to take shape through a prolonged learning process from the rest of the world. As a senior official told me in Beijing, the ideas inspiring him in the drive for China’s financial market reform are rooted in his reading of Paul Samuelson’s textbook, Economics, which the Ford Foundation provided for China’s economics students in the early 1980s. Uncle Sam’s reach is long and deep.

Why the trend to market-democracy

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Market-democracy as a governance form may have swept all competitors before it, but the reasons remain controversial. There are two types of explanation from an earnestly progressive view of history’s ways.

Modernisers see people mounting the staircase of history, from a lower to a higher form of existence.
Marxists see history driven by class struggles, resulting from technological progress.

Now the Chinese party-state is both a moderniser, and officially Marxist-Leninist-Maoist in inspiration. So it is a fit subject for a modernisation/Marxist analysis. This predicts a variety of possible destinations -

democracy,
fascism or
communism,

and a passage to modernity, contingent on relations between classes - peasantry, land owners, urban bourgeoisie. Reference [7]. Substitute land owners for party officials, and we have the foundation for a witch’s revolutionary brew; stir in economic growth as a sure-fire predictor of instability, Reference [8] add the erosion of traditional solidarities, throw in widening wealth gaps, sprinkle multiple sources of dissatisfaction and pepper with a layer of political decay. Reference [9] We are in the heartland of the determinist sudden-regime death-syndrome school of thinking.

Marx on the farm

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Consider how this story plays in China’s countryside. The arithmetic is straightforward: officially China’s population is 1.3 billion, including 800 million peasants who live in the countryside, in often Malthusian conditions of rising population, limited arable land, and diminishing returns. Reference [10]. As we have seen this population is expected to rise by 2015 to about 1.5 billion. In many provinces, land per farm worker is less than Bangladesh; and the quality of land under the plough is declining, due to land erosion, deteriorating organic content, and salinization of the soil. This provides China with its primary challenge: it has to feed 20% of the world’s population with 6% of the world’s arable land.

We have seen that market reforms attributed to Deng began as local initiatives in Anhui province. There were a number of reasons for reforms starting first in the rural areas: after Mao’s years, China’s peasantry was seething with discontent, bureaucratic resistance to change was weak, and China was failing to feed its growing population. The initial step was to free farm prices, and then to allow farmers to sell their surplus in the market. Next, rural communes - established in 1958 - were replaced by the household responsibility system, whereby farmers leased land (from the party-state) for a period of fifteen to fifty years in return for contracts to deliver supplies at fixed prices.

The result was a sharp rise in output and a return of China to food self-sufficiency.Yet farm output per worker by the mid-1990s was still $296, against $343 in India, $355 in sub-Saharan Africa and $745 in Indonesia. By 1998, the farm population of 370 million, representing just under 50% of the workforce, produced 18% of the gdp With labour productivity in farming under 1% of that in the US, there is enormous scope for a continued and rapid drop in the farm population.

Looking backwards, the farm workforce fell from 76% of the total in 1975 to just under 50% at the turn of the millenium, while the farm workforce rose slightly from 365 million to 370 million. (see Table 5.2 below) Furthermore, the traditional preference among peasant families for male rather than female children encouraged a cruel culling of female infants.

Table 5.2

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Employment + sector’s proportion of the national economy (%)

Industry	1985	1990	1995	1996	1997	2000
Primary
Employment	62.4	60.1	52.2	50.5	49.9	50.0
% of the national economy	28.4	27.1	20.5	20.4	18.7	15.9
Secondary
Employment	20.9	21.4	23.0	23.5	23.7	22.5
% of the national economy	43.1	41.6	48.8	49.5	49.2	50.9
Tertiary
Employment	16.7	18.5	24.8	26.0	26.4	27.5
% of the national economy	28.5	31.3	30.7	30.1	32.1	33.2

Source: China Statistical Yearbook, 2000

Where will all this population go?

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Perhaps, the one child policy, most effectively enforced in the cities, also played its part. Whatever the complex of causes, China at the turn of the millennium has a male:female ratio in the order of 1.35: 1. One prognosis suggests that so many randy males will only be too ready to turn to violence. The regime’s temptation would be to turn that violence outwards against foreign enemies. Reference [11].

The last quarter century witnessed, not a massive flood of population to the cities, but rather a regular stream and a natural increase in the number of urban dwellers, rising from 18 % of the total to 30%. Surplus rural labour was absorbed in township and village enterprises (TVEs). They provided the main engine driving China, in Barry Naughton’s terms, to grow the market out of the plan. Reference [12]. By the end of the period, two-thirds of rural output was accounted for by TVEs.

Rural labour productivity soared as human resources were used to more effect. This went with sharp rises in income and savings rates. Rural industrialisation also went with unprecedented pollution. TVEs, as often as not under management of party members, sprouted like mushrooms in China’s huge countryside, where infrastructure for water, energy, waste disposal or communications are bare to non-existant. For the party state, this suggests the need to concentrate the migrating rural population on medium-size townships where infrastructure is affordable.

Maintaining rural economic growth while keeping political control there is a crucial determinant in China’s future evolution. But problems have multiplied. Up to 175 million workers in the countryside cannot be absorbed in work on the farms or in the townships, and therefore have no option but to try their luck in the cities. Such a huge army of the unemployed is potentially a major source of trouble for the regime.

The regime has relaxed rural-to-urban migration, but this is likely to pull more people to the rich rural development areas along the coastline, where TVE’s account for 80% of rural incomes, compared to 8% in China’s far west. Central and western areas of the country is where 60% of the population live, often as not in crushing poverty. Add to that, rural enterprises devour scarce water resources, are major polluters, and often operate outside the formal economy.

Meanwhile, local officials have become more burdensome in their exactions on local populations, just as the government has cut back on subsidised housing, health, education and transport. This has resulted in violent outbursts, attacks on party officials, the burning of their homes and their assassination. Banditry has returned with a vengeance in many provinces of China. Reformers within the party argue that without the extension of direct elections, the party-state will lose control of the countryside.

Marx in the towns and cities

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China has seen an enormous rise in working age population, much like the rest of East Asia, and a sharp decline in births. This is due to improved health provision, as well as to the regime’s one child policy, introduced in the late 1970s to curb the population growth. As mortality rates have fallen, the average number of children per woman has fallen, despite a 95% marriage rate of Chinese women. This has created first a bulge of the young, now a bulge of the employed population for the period 1990-2025, and thereafter a bulge in the old.

Such a demographic structure holds a number of implications:

One is that at least 700 million people will have to be living off incomes earned outside of agriculture. If the peasantry were to shrink to the one third represented by the farm contribution to output at the turn of the millenium, up to 1.1 billion people would have to find jobs in the non-farm sectors. In other words, the party-state faces the task of creating an economy which supports between 400 to 700 million additional jobs within the next fifteen years.

Another is the financial implications of such a rapidly ageing population. Fortunately, the habits of abstinence required in the past to maintain a large family presently carry over to a working couple with one child. Small wonder that savings rates in China are 43% of national income—the world record. Those savings for old age, and ill health,will come in useful as a wealthier, urban Chinese population puts aside savings between now and 2025.

It is very important for China to raise the quality of its labour supply if it is to prepare well for the retirement bulge after 2025, when returns to capital will be falling in any event. Yet China's human capital is under-developed: While China has 22% of its population living on less than one dollar a day, compared to India’s 47%, the average for children in school is 5.6 years, the same as in India. China ranks no 119 in the world league for per capita spending on education.

The implications of China’s demographics are clear enough: only a dynamic, privately-owned market economy can hope to generate the jobs needed in China over the coming decades; China’s abundant savings will have to be channelled efficiently in order to raise the productivity of labour and capital to levels where the economy can readily carry the growth in pension and health costs of an ageing population; to ensure that wealth grows rapidly if not evenly, China’s potential in human capital must be developed.

Now one of the prime effects of Deng’s reforms in the 1990s has been the creation, in Marxist terms, of new classes in society. State functionaries represent the shock troops of China’s nomenklatura capitalism, a phenomenon well-known in former communist party-states moving out of the command economy. Over the past decade, the party cadres were the largest social group to establish businesses, alongside workers and peasants. They have also benefitted as insiders in the sale of party-state assets to financial institutions held by other party- state institutions.

Quasi-private entrepreneurs, with unclear claims to property, emerge from the TVEs, or the larger corporations to have listed since the early 1990s on the country’s major stock markets. Conversely, marketisation in China has stimulated the rapid growth of a private entrepreneurial class, whose members are clamouring to create their own associations and to participate in public policy. Jiang Zemin’s decision to open membership of the party to business people is thus part of a larger re-definition of policy to widen the party’s reach to embrace new social groups created in China’s on-going transformation (See Box 5.2 below).

Box 5.2

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Ziang Jemin’s 'Three Representatives' Theory

In February 2000, Jiang Zemin announced a new concept, san ge dai biao. The concept declares that the CCP represents “the most advanced mode of productive force, the most advanced culture, and the interests of the majority of the population”. What this theory indicates is the party’s efforts to open membership to new social forces and classes. Undoubtedly, this is a significant step to pluralism within the party structures.

Meanwhile, China’s workers stay entrapped in a Marxist-Leninist prison. Not for them the new freedoms open to China’s businessmen. The party-state retains the monopoly over worker representation, Reference [13] and has no intent of allowing an independent trade union movement to emerge, along the lines of Solidarity in Poland. Free trade unions also complicate management’s task within enterprises. Indeed, many companies in southern China depend on bonded labour, in that workers surrender their papers and pay a deposit on recruitment. They thereby become the captives of management.

They have no protection against arbitrary lay-offs, and no social net to ensure a minimum standard during illness, unemployment or old age. Hence, the party-state’s efforts to channel worker discontent against foreign devils, rather than against abuses in its own backyard. Working people are the sacrificial lambs of China’s present arrangements.

Here we have all the ingredients of our Marxist story:

class war in the countryside,
harsh conditions for the urban poor,
the creation of new social classes,
a well-entrenched ruling class.

Future direction of policy is clearly to promote the private sector across the whole economy in order

to absorb the new entrants to the labour markets,
the unemployed from failed firms, and the
underemployed from the countryside.

That in turn implies boosting the prestige of business people, and of granting them security in the enjoyment of their property. In turn, this stimulates civil society, prompts demands for the rule of law, fosters the need for a better-trained bureaucracy, and promotes the circulation of information. In addition, the spread of mobile phones and the internet facilitate communication among the discontented, and the means to discuss what to do about it.

Organisation of opponents is the point where the economics-drives-politics school of thinking runs into trouble. People do not rebel just because they are discontented. A prerequisite to rebellion is that rebel leaders mobilise the discontented into a collective, organised force able to take advantage of the political opportunities on offer.(See Box 5.3 below) In short, it is opposition élites that organise discontent rather than discontents that mobilise people. The economics-drives-politics argument thus transmutes into an observation of the primacy of politics.

Box 5.3

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Social discontent

Signs of social discontent in China include peasant demonstrations, laid-off workers joining criminal gangs, and Falun Gong sect members gathering to be arrested in Tianenmen Square. In June 1999, the official People's Daily newspaper, noted that some party members and officials who pursue personal gain have been deeply involved in worshipping Buddha and practicing astrology, divination, geomancy and physiognomy. Since Falun Gong was banned in July 1999, at least 93 adherents are believed to have died in police custody. Li Hongzhi is the sect’s guru, and lives in the US. But these disparate movements have a long way to go before they pose a major threat to the regime. Democracy advocates, Tibetan independence proponents, Islamic militants and disgruntled workers have little in common, other than dislike of the regime. Democracy advocates are often Han chauvinists, laid off workers can find little comfort in Falun Gong teaching about the ills of the world as stemming from homosexuality and rock n’ roll, and Islamic fundamentalists have little in common with Tibetan Buddhists. Not least, there is deep popular support in China for continuity, and this is strengthened by fear of chaos—only too vivid in the collective memory of the Chinese. The perception in Chinese public opinion is that there is no viable alternative to communist party rule.

From here on out, the Marxist story becomes more diluted. The reason is simple: opposition and incumbent élites interact in a political logic with its own dynamics. The essential point is that what matters is perceptions of both rulers and ruled about policy and performance. Reference [14] Governing élites may differ about appropriate policy, while significant sections of the population judge performance in the light of their beliefs about the legitimacy of the regime. They ask the governors: by what right do you rule".

Governors may reply that they govern by consent or by force, or some combination. Constitutional democracy enables governments to combine both over the long term: governments may enjoy popularity when the going is good, but when the going gets tough, electorates can vote them out of office for past errors. Disenfranchised peoples do not have that elementary right: if they wish to kick out the ruling incumbents they have three options: endure, rebel or negotiate. It’s time to look at China’s political transition.

Key characteristics of totalitarian regimes

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Let’s start at point zero on our transformation matrix in Chapter Four. In the jargon of political science, totalitarian regimes have four key characteristics:

a total absence of pluralism,
a unified, utopian ideology,
intensive mobilisation of the people,
and a leadership ruling in undefined limits and great unpredictability for all concerned.

Recruitment to the top leadership depends on success in party institutions. Applied to Mao’s China, the CCP state asserted a monopoly over political power, economic resources and the truth. Initially, the party took over the state by force or ruse, crushed all opposition, ruled in the name of the masses and mobilised public enthusiasm for its projects. It soon got round to abolishing private property, any sign of an independent judiciary, and the open market for goods and services. Businesses were expropriated, press freedoms quashed, and foreigners kicked out of the country as aliens.

This is the point where totalitarians of the world unite in their similarities. Concentration camps are opened, where inmates serve as forced labour, if lucky. Limitless power accrues to the leaders, who soon enough, having dispatched real or imaginary enemies earlier than their time to the next life, turn on each other. Eventually, one Leader emerges, who purges any remaining foes. With a terrified, ill-informed and easily manipulated public at their beck and call, the tyrant reigns supreme. The secret police - in the case of Mao’s rule, the role of the secret police was played by the PLA - fall directly under the leader’s command. (See Box 5.4 below)

Box 5.4

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Li Ji on Tyranny

According to the Li Ji, a Confucian classic, Confucius and his students were walking through the forest and came across a woman sitting near an open grave. She was weeping profusely. When one of the tudents asked her why she was crying, she replied First my father–in-law was killed by a tiger. Later the tigers ate my husband. Now they have eaten my son as well. Confucius asked her why she did not leave the forest. The women replied, At least there is no oppressive government here. Confucius turned to his students and said, Remember this: Oppressive government is more terrible than tigers.

Nothing lasts for ever here below, definitely not dictators. They age, and as they do so, they rail against the fate that has not granted them long enough life to implement their utopias. Once dead, their successors place some constraints on leadership. Consider Hitler’s brief 12 years in power, Stalin’s paranoia about alleged failures among his lieutenants, and Mao’s Cultural Revolution.

Andrew Nathan has aptly crowned him emperor of all tyrants: no other leader, Nathan writes, in history held as much power over so many people for so long as Mao Zedong, and none inflicted such a catastrophe on his nation.Reference [15] With such a ghastly record, the regime was no longer able to legitimise its rule by appeals to a vision of a communist utopia. Party leaders, many of them victims during the Cultural Revolution, were eager to ensure against unpredictable leadership concentrated in the hands on one man, while the masses had little no faith left in the regime.

Reflecting on Mao’s achievements in 1979, Chen Yun, inventor of the bird and cage analogy of economics, stated that

had Mao died in 1956, his achievements would have been immortal.

Had he died in 1966, he would still have been a great man.

But he died in 1976. Alas, what can one say?

Paraphrasing, we can consider that

had Deng died in 1976, his name would have been soon forgotten.
Had he passed away in 1988, he may have been celebrated as the man who sidelined the reds for the experts in the party-state, and put China on the express train to market-democracy.
But he died in 1997, with the experts in charge steering towards market democracy, China-style. That is, with the shadow of the Tiananmen massacre hanging over the future.

Mature post-totalitarian rule

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Political scientists call the first step away from the Great Dictator’s regime as early post-totalitarian rule. Mature post-totalitarian rule emerges as party members settle down to enjoy their privileges, with less fear of a knock at the door at dead of night. Party rule transforms into a vast political market for preference. The privileged few keep the people at arms length, but declare the constant war against them to be over. This is received with some relief, but not too much affection by the masses whose expectations begin to rise for better living standards, and less arbitrary treatment at the hands of officials. Hence, mature post-totalitarianism is little more than a temporary staging post on the way to more political pluralism.

This is where China is presently located on the transformation matrix in Chapter Four, still within the pre-transition period on the political axis, and on the market axis in the period labelled normalcy. In other words, the economic society so far achieved is conditioned by the party-state monopoly on power. Consolidation of a state under law means that consciousness of laws and rights must spread through society, and that the leadership must promote local elections, reform of the bureaucracy, or the development of a civil society.

Regime change is a more fundamental step: it means the leadership challenging the party’s monopoly through contested general elections, and the granting of universal suffrage. Once embarked on regime change, one destination would be a consolidated Chinese democracy, located up the vertical path labelled normalcy. But there could be many intermediate staging posts, as well as a disastrous relapse to the revolutionary conditions which engulfed China for nearly 200 years.

As I shall argue, China’s conservative communist party envisages making the country a state under law. That postpones China becoming a fully consolidated market-democracy. At issue is not if, but when the leadership takes the plunge.The regime’s preference is clear enough as to the when: later, rather than sooner. The chosen method is pragmatism.

Let us look at the five, key features of such a consolidated market democracy Reference [16]:

The existence of civil society, where organised groups are able to express their values and objectives autonomous of states. Such a civil society is packed with churches, clubs, associations, trade unions, cultural happenings, and homes for retired professional golf players.

The existence of political society, where the core institutions of a democracy such as political parties, election rules, parliamentary procedures, press freedom, and alternance in power of contesting teams for control over public powers have become deeply rooted in public practice.

The existence of the rule of law where the freedoms of citizens are ensured. The conditions for this are many: both civil and political society must flourish, there has to be public consensus over a constitution, a commitment to abide by the rules of the game, an independent judicary, and a strong legal culture.

The existence of an effective, and efficient bureuacracy, which is useable by government of any particular party colouring. That requires a sound tax base, firm financial control over expenditures at all levels of the state, a functioning bond and money market, and civil servants answerable to the courts.

The existence of economic society, by contrast to a market system or a command economy. In order to function, such a society requires a set of safeguards, and widespread acceptance of common norms, institutions and regulations. In fact, these have to be very strong indeed, because market imperfections are major sources of contention.

Contrasting the key features of a consolidated democracy with China as it is indicates what tasks lie ahead for such a reform to be implemented in full. Without any doubt, they are many, complex, and very difficult to achieve. The regime has to assure civil rights, dismantle its own political privileges, establish an independent court and judicial system, transform the bureaucracy, and build a market society.

That means ensuring property rights, and separating the party-state from business. It means putting distance between political arbitrariness, and markets subject to the rule of law. Let us look first at political reform, and then at developments in civil society, the law, bureaucratic reform, and markets. The simple conclusion is that the regime lives, but rules by different policies and methods.Reference [17]. China has experienced regime change short of redefining its key political norms.

Towards a Chinese civil society

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When Deng moved into power in 1978, he inherited a lawless polity, where the only institutions of mass participation under Mao had been deployed for mob rule. Reference [18]. If under Stalin, political defeat spelt death, Mao was that little bit more selective; his direct opponents such as Lin Biao or Liu Shaoqui met early deaths, while Deng was banned twice to the countryside.

One of Deng’s first actions was to announce, in February 1980, new rules on internal party politics designed to ensure some degree of personal security to the ruling élite. Future political losers were not liquidated. Hu Yaobang was forced out of the party leadership, but remained in the party and active in party politics. Zhao Ziyang - who openly stated his opposition to martial law and his willingness to negotiate with the the students in May-June 1989 - were placed under house arrest, and purged. Deng sought to avoid becoming another Mao, restricting himself to relatively modest official posts, and reaching decisions among senior party figures by consensus. Hence the tentative and inconsistent economic reform process.

Deng’s own succession passed smoothly, as have the preparations for the succession to Jiang Zemin. Deng also introduced mandatory retirement of party and government officials, thereby accelerating the change in the party élite from peasants to college educated technocrats. The threat of a takeover of the regime by the princelings - the fate of Ceausescu’s Romania or Kim il Sung’s Korea—was avoided by the simple device of having more names put up for election to the party congress than there were positions.

Deng’s constitutional reforms of 1982 sought to consolidate the greatly weakened state apparatus by reaffirming the Four Cardinal Principles, guided by Marxist-Leninist-Mao Zedong Thought:

party-state hegemony;
the leading role of the party;
a unitary state;
and the concentration of powers and democratic centralism in the party.

When the 1978-79 democracy wall became too free-wheeling, Deng rescinded some of the concessions the regime had made initially for citizens to indulge in the four bigs, including big debates, and big posters. Over time, though, much wider but undefined freedoms were granted to citizens than before, while the party-state shifted from mass to selective repression.(See Box 5.5 below)

Box 5.5

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China's religious policy

The Constitution provides for religious freedom, but religious activities are supervised closely. There are five officially recognized religions - Catholicism, Protestantism, Buddhism, Islam, and Taoism. Practitioners must register: a meeting place; regular attendants; a governing board; a minimum number of followers; a set of operating rules; and a legal source of income.According to official figures published in late 1997, there are over 180 million religious adherents and 3,000 religious organizations. Approximately, 8 percent of the population are Buddhist; 1.4 percent are Muslim; 0.4 to 0.8 percent belong to the unofficial Vatican-affiliated Catholic Church, an estimated 0.08 percent to 1.2 percent are registered Protestants; 2.4 to 6.5 percent worship in house churches that are independent of government control. China so far has refused to establish diplomatic relations with the Holy See, and there is no Vatican representative in China. Weekly services of the foreign Jewish community in Beijing have been held uninterrupted since 1995, and the foreign Jewish community in Shanghai began holding services in a local hotel in 1998. Approximately 3,000 Tibetans enter Nepal each year to escape conditions in Tibet, according to the U.N. High Commissioner for Refugees. According to some estimates, a large percentage of the population practice some form of traditional folk religion (worship of local gods, heroes, and ancestors). Source: The US State Department’s Annual Report on International Religious Freedom for 1999 http://www.uscirf.gov/

Media censureship eased up, and market reforms eroded party controls. In the countryside, the ending of Mao’s communes in the early 1980s dealt the party a deadly blow from which it has not recovered: party members there are ageing and often illiterate; they lack budgetary resources, and so resort to extracting fees from the peasants. Clashes have multiplied, such as the incident in Mao’s native province of Hunan, when peasants in January 1999 went on the rampage after one of their number committed suicide because he could not pay an arbitrary tax on the slaughter of pigs, which a local official had levied to coincide with the Chinese New Year. Thousands of angry peasant marched on party headquarters, overturned official cars and burned official homes. And that was only one of the anti-party riots in Hunan that year.

There have also been revolts by industrial workers, who have little adequate representation in state enterprises, much less in the TVEs and next to none in the burgeoning private sector. Partly to provide some institutional means to express opposition to party policy, Deng encouraged the National People’s Congress to challenge the party leadership, draw up its own bills, make amendments, and vote down appointments. In 1994, the NPC introduced a comprehensive labour code. A similar measure, aimed to bring dissent back towards the party’s institutions, was the extension of universal suffrage to village elections. But civil society has been growing much faster than the regime’s efforts to provide it with some institutional expression.

Laying the groundwork for a legal system

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Since 1982, too, the party-state has been developing a legal system. This is in effect a truly radical departure for a country where a fundamental maxim over the millenia has been government by men, and not by laws. Reference [19]. Marxist-Leninist-Maoist doctrine readily fitted with this tradition, as it placed law at the service of the dictatorship, just as law was supposedly at the beck and call of the bourgeoisie. With Deng’s opening of China to international business, a more developed legal system was required than provided by the party-state. Rule of law, rather than of public officials, ensures greater protection of property rights, the enforceability of contracts and freedom of citizens from arbitrary acts by others.

In effect, the rule of law requires the creation of a level playing field, the development of an independent judiciary, and the subordination of public officials themselves to the law. In effect, policy continues to take priority over the law, but there has been nonetheless a great leap forward in the definition of legal norms, involving the NPC’s passage of 327 laws, the State Council’s issue of 750 regulations, and about 6000 local laws and regulations emitted by provincial authorities. Reference [20]. China’s new laws borrow extensively from western traditions, concepts and procedures — a process that is bound to accelerate as China enters the WTO, and business and other relationships multiply.

Indeed, in March 1999, Jiang Zemin had the Constitution altered to incorporate private ownership and rule of law. Article 11 of the Constitution now places private business on an equal footing with the public sector: The non-public sector, including individual private businesses, is an important component of the socialist market economy. Reference [21]. Article 5 was amended to include the principle of governing the country according to the law.

These amendments, introduced at a crucial period in China’s negotiations with the US on WTO entry, demonstrated China’s commitment to a full market system based on the rule of law. They also meant, formally at least, that the law is above both party and state, and therefore constraining on officials rather than being an instrument at the service of officials to discipline citizens. The number of lawyers has risen sharply from 31,000 in 1988 to 150,000 by 2000, and their services are in high demand as Chinese citizens grow more accustomed to seek redress through the courts. But their numbers are woefully inadequate, while the courts often fail to enforce their own judgements. Though the growth of the legal system will benefit private business and foreign investors, it is unlikely to be able to make much difference to the life of workers and peasants.

Administrative reforms

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Deng also moved to restructure the institutions of the central state, but failed to create a lasting federal structure capable of durably absorbing routine centre-local tensions over taxation, personnel, local protectionism or banking. Indeed, as the incompatibilities between the old system and the market oriented reforms grew, China experienced an evolution out of Maoism to nomenklatura capitalism. What has been marketised, it is maintained, is not so much corporate assets as political power: up to a third of party and state officials are active business people, alongside their official jobs. Reference [22].

A sort of fusion has taken place whereby bureaucracies are linked through networks at all levels - state, province, region, city, towns and villages — to entrepreneurs and other non-party élites. Who co-opted whom is no easy question: has business co-opted the bureaucracy or has the bureaucracy, both party and state, co-opted business? Definitely, the fusion has hugely expanded the opportunities in the political marketplace for favours and money — in short, corruption has exploded. Hence, the urgent need to shrink the bureaucracy, and separate business from officialdom.

In April 1998, Premier Zhu Rongji, announced an administrative reform to cut the state bureaucracy by 4 million or by 50% within 3 years, reduce the number of ministries at the centre from 40 to 29, and separate ministries from their business enterprises. Autonomous business enterprises are one essential condition in the creation of an economic society. Another is forcing the PLA to abandon its business economic society and large swathes of business under military command are not compatible.

A political marketplace

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Economic reform and maintenance of the party-state’s monopoly are not readily compatible. It is not just that the party’s hold over labour markets, the countryside, and the media has weakened, as civil society has become more active. Rather China’s is an incomplete transition, where the command economy is increasingly dominated by a competitive market economy, yet the legal system is in embryonic state, and] political markets flourish. Because informal arrangements associated with the policy of marketisation have developed alongside formal structures, formal structures have eventually had to be brought into line with them.

This has sapped the resources of the party-state as they have flowed out into private hands, brought criminal gangs into insider positions, and entrenched vested interests in informal networks. The only way forward, as Joseph Stiglitz reminded his audience at Beijing University in July 1998, was the establishment of entirely new national institutions and programs Reference [23]. This meant, of course, going beyond the party-state’s modest efforts to allow for dissent, through village elections and a more combative NPC. But the leadership is reluctant to do so.

In the regime’s favour is the population’s fear of chaos, the fragmentation of the opposition, the co-optation of business élites, and the general ease with which communism and nationalism in China blend. Politically, the regime is the same, not having changed beyond recognition.

A post-totalitarian regime

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China’s present condition is one of mature post-totalitarian rule, which holds four key features:

Institutional pluralism within the party-state becomes more evident than it was when the dictator lived. Inter-ministeral battles, differences of opinion within the regime over policy, or centre-province tensions become better known. Oppositional groups outside of the regime try to create new forms of representation.

There is an ever widening gap between the official utopian ideology and reality. Party cadres grow less ideologically committed, and more criticism becomes audible from non-party members. The party-state comes to rely more on performance as a source of legitimacy.

Party institutions deployed in the past to mobilise enthusiasm atrophy. Membership generates boredom, and careerists take over. There is at best a minimum of associational life outside these organisations.

Leadership remains constrained in lose, ill-defined ways, but recruitment to senior positions still runs through party institutions. Bacause non-party-élites are non-existant, or very weakly organised, they cannot be readily co-opted. In general, post-totalitarian regimes experience a lack of flexibility in recruiting new talent. This is one area, and a significant one, where China is diverging quite significantly from the type: non-party elites have grown in a more pluralist China, and the party has gone out of its way to recruit them.

Except for this last, all the above characteristics apply in abundance to contemporary China. The first characteristic, institutional pluralism, is only too visible: take for instance, the sector of telecommunications, where - until the ministerial reforms of 1998 - the list of political players included state commissions, the Ministry of Post and Telecommunications, its provincial and local post and telecommunication administrations (PTAs), the Ministry of Electronics, the PLA, the Ministry of Radio, Film and Televion, the Ministry of Foreign Trade and Economic Co-operation, the Ministry of Railways, of Electrical Power, of Coal, of Water Resources, banks and aerospace organisations with quasi-ministerial status. Reference [24].

Then, central government has had the problem of reconciling the contrasting demands for more market, say in Guandong province, as against more state subsidies, in rust-belt areas such as Jilin province. Cross-regional alliances have been formed - between the Northeast, the Pearl River, the Lower Yangtzi - , weakening the centre. The lesson is that foreign powers and corporations should predicate policy towards China on a recognition of devolution, rather than on an assumption that the centre is the head of a unified superpower. Reference [25].

Even more notable are the signs of institutional pluralism in the regime’s coercive apparatus. Post Tiananmen debates within the regime have helped to develop a reasonably coherent strategy to suppress dissent. This includes measures to prevent link-ups between discontented groups;

more centralised control over police forces;
pre-emptive moves against independent labour unions, human rights monitors, underground religious movements, and ethnic separatists;
isolating the apolitical majority of the population from dissident ideas by offering them prosperity and more personal freedom, short of striking political poses in public; and
holding key security areas, such as the major cities, Tibet and Xinxiang province.

The problem has been in implementation: China’s security apparatus is relatively small, numbering about 1.2 million in all. This is one of the smallest professional police forces in Asia. Overall, the coercive system includes the Public Security and State organs, the People’s Armed Police, the courts and procurators, the prison and labour reform system, and the PLA. In addition, the system is highly decentralised, and therefore dependent on local party officials and tax sources.

It draws for active support on citizenship defence committees—committees whose members could be sympathetic to local protesters, are often ill-trained, and have to earn their livings in other occupations. Beijing’s orders frequently are lost, while nation-wide responses to common security threats are difficult to achieve. Mao’s inheritance of powerful local administrations may have had its advantages in allowing a variety of economic experiments, but it is far from ideal for a regime facing so many challenges as the CCP.

The party’s official ideology and the reality of China

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Then there is a gap, nay a gulf, between the party’s official ideology and the reality of China: China has taken the capitalist high road with a vengeance. Three quarters of Chinese workers are in private employment; small and medium-size state firms have been privatised by party managers at a franctic pace; corruption has exploded. Hence, Jiang Zemin’s adaptation of party policy as representing three forces essential for China’s development:

advanced productive forces;
advanced cultural forces; and
the fundamental interests of the largest number of citizens.

This redefinition of the party’s task as opening the regime to the new social forces at work in the country goes with the grain of what reformers and regime critics can agree to, and as long as it continues to do so the regime has a good chance of remaining legitimate among a majority of people. But the regime has to continue to provide a steady majority with reasons to be optimistic about their futures, and to improve its performance in key policy areas, such as inflation and minimising the gap between rich and poor.

This conditional popular support is nonetheless accompanied by a widespread sense of acute fear of the consequences of social chaos. Ninety-three per cent of respondents prefer to live in an orderly society than in a freer society that is prone to disruption. Reference [26]. In other words, many people in China - probably a very large majority — conclude that China needs an authoritarian regime for fast and stable economic growth. Reference [27].

That the party’s institutions, such as collective farms, state enterprises, or TVAs have shrunk, atrophied or morphed into private businesses is not in doubt. Clearly, the party no longer represents the interests of peasants and workers, but rather faces widespread apathy, and popular antipathy, in addition to a small but active dissident community.

Even more worrying for the party is the spread of social groups and movements, filling out the space left by the retreat of the party’s own organisations from civil society. Worse, the triads - China’s homegrown mafia - were discovered to have taken over the municipality of Shenyang, in the north-east, while an illiterate peasant pocketed enough money to buy the party, army, police and customs officials in Xiamen, the main port of the coastal province of Fujian.

Recruitment to senior positions still runs through party institutions: the party still holds to the Leninist principle that the communist party controls the cadres. Reference [28]. Following the official declaration to move China to a socialist market economy, new guidelines were defined for recruitment to leadership cadre position at the level of counties and upwards.

Between 1992 and 1998, 323,600 new cadres were appointed, out of a total leadership cadre of 508,000. Of these new cadres, 60% were younger than 45 years, and 80% had completed university education. In other words, the party-state holds nomenklatura power, and has used it forcefully to rejuvenate senior membership. The younger cadres are there to implement the economic policy reforms that are rapidly awakening China’s civil society.

Given such a contrast between the inherited features of the regime, and the social changes fostered by its own policies, it is hardly surprising that Jiang Zemin and his Politburo colleagues have experimented on political reforms. Reference [29]. They have dabbled with direct elections, but their heart is in creating a well-educated, Singapore-type elite under CCP supervision. At the 15th Party Congress in September 1997, Jiang Zemin pledged to “extend the scope of democracy at the grassroots level to make sure that people directly exercise their democratic rights”. Reference [30].

The Chinese leaders then observed with horror the introduction of western-style democracy in Indonesia. Soon, Jiang was telling party delegates that he did not favour elections above village level. His preference went to picking a whole new corps of young professionally qualified, reformist and (politically) trustworthy cadres. Reform of the cadre system is reported as being the only move in political liberalization to be expected for the rest of the decade. Reference [31].

Nonetheless, when Sichuan province went ahead under its own authority in November 1998 in Nanjing township, the elections were eventually reported in the national press in 2001. Beijing too gave approval for Guandong province to hold direct township elections. Both Presidents Clinton and Bush have spoken out in China, and in the presence of the Chinese leadership, in favour of religious freedoms and free elections. The signal is clear enough: the Chinese leadership is not opposed in principle so much as to the circumstances and conditions in which these freedoms are exercised in China.

Towards a consolidated democracy 'China Style'

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Where,then, are the detonators of regime change in China? In the case of authoritarian dictorships, when the leader dies, so does the regime. In China, the party-state lives. There therefore have to be other detonators of regime change: these may range from defeat in war, to military coups, failure to suppress organised opposition, or the formation within the regime of a powerful group ready to negotiate with an organised opposition.

None of these detonators have played in China. As we have seen in Chapter Two, the regime has been careful to avoid major military conflicts, especially after the bloody nose it received in its war against Vietnam in 1979. The armed forces are just another expression for the party-state, and remain under strong political control. The regime brooks no extra-regime opposition. In Taiwan, events took a different course in the 1990s, when a series of constitutional reforms led to the establishment of a mixed presidential-parliamentary system.

In Hong-Kong, over which China resumed sovereignty in June 1997, and despite a return to executive rule, the democratic reforms introduced by the UK had taken root. Talk of regime change was therefore in the air. But by December 1998, Jiang Zemin referred tentatively to something called China-style democracy. Reference [32]. What that implied is that the reformers in the regime would have to disprove the contention that the bottleneck to institutional transformation was political reform; they would have to demonstrate that the regime was capable of transforming itself into a legitimate manager of a China-style state under law. The regime has to show that it can hold the political fort, while all is flux round about.

Now in the pre-transition phase, Reference [33], the proximate condition for breakdown of the old order is that the incumbent power is unable to resolve a growing list of problems. In contemporary China, three key related problems are

the present trend to an open society,
freer labour markets and
partial representation.

They are not susceptible to quick fixes, and can be addressed only through further reforms. Sooner, rather than later, this involves reformers in a competitive rush to build up their power bases against their opponents in the regime. One way to do this is to woo China’s various opposition groups.

Eventually, China’s political system becomes democratised through the holding of general elections, the drawing up of a constitution, and the consolidation of the reforms which the country’s present rulers have initiated. For this to happen peacefully, a defining moment would come when the leadership would announce the introduction of new norms governing future political development. As I argue in the last chapter, there is every reason to believe that the body language of the regime indicates movement in that direction. For the moment, this is not practical politics. If it were, there would be two contending coalitions,

one initially led by hardliners in the regime against any change,
and softliners who argue the case for a dialogue with moderate opponents. Reference [34],

For the moment, China is a mature post-totalitarian regime, and the first concern of party members is to secure their positions, enjoy their wealth, avoid upsets, and place some unspecified limits on the leadership. Making life agreeable for fellow citizens, while wielding a big stick appears a reasonable formula.

The conclusion is paradoxical

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Viewed through political lenses, China’s near future looks particularly unclear. It is by no means clear that the monopoly party-state can introduce a rule of law. But measured in relation to an ideal state of consolidated democracy, the future is not entirely so. In fact, we know more about China’s future than we give ourselves credit for. Let’s ask ourselves the factors about China that we know to be in the pipeline, as it were, and then we can list the key uncertainties. The uncertainties lie in the imponderables,

such as the behaviour of randy Chinese males,
the possible emergence of Mao-type figures from the back of beyond,
the revolutionary material lying around in China for radical political leaders to exploit,
or the personal rivalries and failings of the political leadership.

The two - what is in the pipeline, and the imponderables - together are the central components of credible scenarios. Reference [35].

There is a lengthening list of things that are in China’s political pipeline.
We know the tasks confronting China if it is to become a consolidated democracy, and how far the regime is from that.
We know that the party’s ideology is a barrier, but not insurmountable.
We have evidence that widespread poverty, a mass peasantry, and a traditional political culture are not ideal materials to create a well-functioning constitutional democracy, even China-style.
We know that the Chinese people are scared stiff of a return to the tragedies of the previous two centuries.
We know that the party-state is only too well aware of the narrow way, and the many dangers, that lie ahead.
We know that our four elements of the world’s transformation—US pre-eminence, global markets, the Zeitgeist of market-democracy, and the internationalisation of production—bind China irreversibly into the global system.
We know that the regime wants to join the lead group of powers in the world, and that the necessary but not sufficient condition for membership is creating a state under the rule of law.
We know that the party’s prime legitimation of its hold on power is that it is the sole guide available to chart China’s road to prosperity.
We know that the party-state is not keen on experimenting with Utopias, and that it prefers to feel its way into an uncertain future.
We know that this has, and will continue to entail moving away from the command to the market economy, to deepening interdependence and away from autarky.
We know that this creates major tensions in the rural-urban balance to be struck by the regime.
We know therefore that while the political system changes little in appearance, a constant flow of legal and of economic policy measures are being implemented. Incrementally, we also know that these imply extensive changes in the political system.
We need no reminding that political leaders are liable to moral failings, and that this is something that China truly shares with the rest of the world.
We can only state as a probability the future timing or content of such measures, as each one is the outcome of political negotiations among the changing kaleidiscope of factions.
Not least, we can only guess at the time such reforms will take to implement before China becomes a consolidated democracy. But we know that the regime’s monopoly powers are shrinking fast, as the plural reality of China bursts into view, and that a frightened regime is therefore in danger of dithering between a policy of no rush or accelerated reform.

The present leadership deploys the future as a resource to locate problems too knotty to deal with now; the party’s shrinking political monopoly suggests that reforms should be speeded up. That is where the reformers efforts to supplement their domestic power base through alliances abroad come into the picture. The reformers main policy here is to join the WTO and import all the regulatory baggage to China from the developed world. Not surprisingly, serious differences have opened up between economic nationalists and economic liberals. Reference [36].

The first wish to protect domestic firms, guide foreign investment to fit national needs, and promote national ownership,
whereas the second seek to promote China as a platform for efficient production.

A central question for the regime’s future is whether policy can continue to be fashioned through mutual trade-offs between the two broad coalitions, or whether one coalition emerges victorious over the other. The very fact that the regime has to maintain such a balance indicates that China’s party state cannot keep to the status-quo. It has to continue to move towards laying the institutional foundations of a constitutional order, if it is to keep the refomers satisfied.

In short we know what we know, and we know what we don’t know about China’s future, which is decidedly an improvement over knowing nothing. In particular, we know that public opinion is the ghost at the party-state’s banquet, and that it would not be wise for the leadership to take the Chinese people’s acquiescence in their rule for granted. What we know above all is that the leading edge of reform is with regard to economic policy institutions, and that this is in effect transforming the Chinese polity. There is no turning back. WTO membership is the battering ram of the reformers to accelerate domestic changes.

References

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Chapter Five: References

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