Where is China Going?

Much ink has been spilled of late about China's new fourth-generation leaders. Rather than rehashing what has been said before, I thought that today I'd step back a bit to assess the broader canvas of China's ongoing political development: Where has China got to? Where is China going? How will it get there? And what are the major bumps along the road?

First, let me dissociate myself from both the Cassandras and the Pollyannas of the China-watching community. I don't believe China is on the verge of collapse; nor do I think Nirvana is close at hand.

China is like the proverbial “magic mirror.” You can look into it and see exactly what you want -- or expect -- to see. Those of you who cover the China beat know better than others just what I mean.

First the good news. China is a dynamic country with vast human and material resource potential; it's markets are thriving; and its middle class is self-confident and growing. Over the past quarter-century, economic growth has been phenomenal. I needn't tell this group about the “miracle” of economic development in coastal regions such as Beijing, Shanghai, Shenzhen or Guangzhou.

Equally important, the interior provinces are now beginning to experience significant development. Last summer I revisited China's Western regions for the first time in two decades. Everywhere I went – from Lanzhou, Xining, and Urumqi to Chengdu, Chongqing, and the upper reaches of the Yangtze River, infrastructure development was well underway: modern roads and highways, airports and railways; high-rise offices and apartment houses replacing traditional urban structures; modern hotels and restaurants springing up; cellphones, satellite dishes and fiber-optic cables everywhere in evidence.

Much of this development has been stimulated and promoted by a central government that has shifted from a development strategy of tight, narrow micro-economic management to broad macro-economic regulation. In the process, powerful developmental forces have been unleashed, most of them local in nature. By giving local governments a major stake in promoting economic development through fiscal and administrative decentralization and the downward assignment of residual property rights over profits from state-owned enterprises, the long-dormant genii of Chinese entrepreneurship has been released from its captive, bureaucratic-socialist jar.

That's the good news. Now for the bad news: The newly-unbound genii has got, it seems, an insidious, evil twin: the geni coefficient. Over the past 20 years of reform, income differentials in China have risen from among the lowest in the world to among the highest. Everyone in this room knows the main outlines of this story, viz., the growing income gap between town and countryside, coast and interior, manufacturing and raw material sectors. Today, incomes in Shanghai are, on average, eight to ten times higher than incomes in Guizhou.

At the same time, marketization of the economy and the downward transfer of residual property rights have multiplied both the rewards of and the opportunities for bribery, graft, and other forms of corrupt behavior – much of it committed by officials charged with managing state assets and resources. With more and bigger unproductive rents available for extraction by self-serving cadres at every level, and with more and bigger local governmental revenue streams moving off-budget to avoid higherj-level taxation or expropriation, the temptation to engage in corrupt behavior has seemingly become ubiquitous and irresistible.

And all this is complicated by the chronic underperformance of state-owned enterprises (SOEs) and the state banking system. China's banks are awash in unperforming loans, currently estimated at over $500 billion, or 43% of GNP. With thousands of money-losing SOEs forced to close their doors or merge with more profitable firms in recent years, urban unemployment currently affects 35-40 million Chinese workers -- approximately 10 percent of the toal -- most of whom have no reliable social safety net.

In sum, the Chinese economic picture is a very mixed one.

Turning from economic indicators to social indicators of China's developmental health, we find a similarly mixed picture. The good news is that the deepening of China's market reforms has produced a thriving consumer culture. The options and alternatives available to ordinary citizens in their daily lives have multiplied greatly, and currently include choices over housing, employment, education, and – increasingly – information.

As the party-state has receded from micro-managing every aspect of people's lives, personal freedom and autonomy have grown apace. Personal space has been augmented, and the pursuit of individual and group interests has greatly expanded. The mass media are more lively than ever before, while civic associations, business groups and professional societies have begun to flourish. All this is good news indeed.

But the rise of a new urban culture of active, informed, socially empowered citizens has not been matched by significantly enhanced political rights and freedoms. Despite recent, largely cosmetic attempts to “keep abreast of the times” (a key theme at last month's 16th CCP National Congress), the Chinese Communist Party – and in particular its executive arm, the Politburo and its Standing Committee – remains an exclusive, closed, insecure, and change-resistant ruling clique.

This lack of citizen empowerment has been underscored by the increasing incidence of labor disturbances in recent years – with an estimated 30,000 “events” occurring in 2001 alone. More and more, disgruntled workers are making their unhappiness felt, as are rural farmers who have grown weary of excessive fiscal exactions by predatory township governments. All this has served to underscore the absence of effective institutional mechanisms for articulating public opinion and governmental response.

To be sure, limited political innovations have been attempted from time to time, including village elections and the “cha'er” system of nominating more candidates than the number of offices to be filled. But even these quasi-democratic initiatives have been carefully controlled from above; and nowhere has anything resembling genuine political pluralism been permitted to take root. This, it seems to me, is the single most telling, and potentially tragic, failing of the current regime.

Charles Lindblom once remarked that Leninist systems were particularly adept at forcing change in society “from above”; that is, they had muscular, coercive “thumbs” that could exert highly concentrated pressure on society. By the same token, however, Leninist systems had weakly-developed  “fingers” for sensing societal feedback and for responding to dispersed environmental stimuli. By contrast, Lindblom observed, market democracies had rather weak thumbs (i.e., they could not generate much coercive power from above), but they had very sensitive, well-developed fingers to accurately register societal feedback, rendering them better able to adapt  to environmental vicissitudes.

As the mass mobilization phase of the Chinese revolution recedes farther into the past, there is an exponential increase in the need for sensitivity in the system's socio-political receptors. It is not enough to have a marketized economy that responds to a myriad of dispersed economic signals. There must also be a socio-political marketplace that accurately registers – and responds to – increasingly complex, pluralistic societal signals. And this is all the more important as China begins to confront the twin evils of a looming HIV/AIDS epidemic and rampant environmental degradation.

Chinese society has become more and more complex, diverse, differentiated, specialized, and dynamic. Yet its dominant political institutions remain painfully simplistic, ossified and anachronistic, dominated at the top by a small handful of self-selected techno-oligarchs who are accountable to no-one but themselves and their cronies.

Jiang Zemin's “three represents” were added to the CCP constitution last month in an effort to broaden the party's dwindling popular appeal by ending its doctrinally-embedded exclusion of “new bourgeois” elements from among the business and middle classes. This is an important first step in “opening up” the Chinese political system. But it is only a first step, and a rather small one at that. For while the “three represents” may help to increase socio-economic diversity within the party, it will do little to empower ordinary citizens vis-à-vis the party. For it neither creates representative – and hence politically accountable – institutions of governance; nor promotes greater transparency in policy making and administration.

What, then, is needed? What is to be done?

Although there is much to be said for Western-style democratization, the burden of modern Chinese history and culture, together with the lingering, twin traumas of the Cultural Revolution and the Tiananmen debacle, weigh heavily against expectations of an early, wholesale democratic breakthrough. Politics is (or should be) the art of the possible, or at least the plausible. What, then, is possible under China's present circumstances?

At this stage, what is most urgently needed is a shift in the direction of “soft authoritarianism.” Such an evolutionary shift was beginning to take shape in the late 1980s, under the guidance of pro-reform party leader Zhao Ziyang. But it was stopped in its tracks in the wake of the Tiananmen crackdown, when Zhao was purged for “splitting the party.” Thereafter, fear of endemic instability and chaos, reinforced by the sudden, startling disintegration of the Soviet Union, prevented China's third-generation leaders, under Jiang Zemin and Li Peng, from renewing Zhao's program for augmented political pluralism in China.

I would conjecture that China's newly-empowered fourth generation leaders are not so tightly wedded to the past as their predecessors. They are pragmatic problem-solvers, not rigid bureaucrats; none are ideologues; none bear responsibility for the brutal Tiananmen crackdown of June 4, 1989. This means that they may not be rigidly averse to “reversing the verdict” on that event, thereby restoring Zhao Ziyang's good name and unfreezing the reforms that bear his imprimatur.

Given the relative improbability of a radical democratic breakthrough from above – which would inevitably threaten the very foundations of Communist Party rule in China -- we might  reasonably expect China's new leaders to begin once again to experiment with more inclusive, hybrid forms of soft-authoritarian governance. This would presumably involve relaxing present restrictions on unofficial religious and social organizations; enlarging the scope of political and intellectual tolerance; legitimizing the existence of pluralistic political interests; and strengthening  the autonomy and efficacy of the mass media, organs of public opinion, and existing “consultative” bodies such as the National People's Congress, the Chinese People's Political Consultative Conference, and the PRC's eight existing “democratic parties” – relics of  traditional CCP “united front” policies often disparaged by critics as “flowerpots” because of their tight control and supervision by the CCP.

This is precisely the direction in which Zhao Ziyang was moving before his 1989 purge and the post-Tiananmen backlash put an end, for more than a decade, to all talk of meaningful political reform.  The time may now be ripe to revive this reform agenda. Though the soft-authoritarian measures mentioned above are not wholly or sufficiently democratic – i.e., they do not involve multi-party electoral competition at all levels of the system – they nonetheless constitute a vital political opening, baby steps on the path of China's smooth and safe transition to political modernity.

The biggest barrier to such innovation, of course, is the formidable force of  inertia. Short of a severe, large-scale systemic crisis, might not China's leaders simply opt for the “path of least resistance”, preferring to “muddle through” with minimal structural change, as did their third-generation predecessors?

While “muddling through” is arguably the default mode of politically-challenged elites everywhere, Chinese leaders may no longer have this luxury. Given a deepening of the socio-economic stresses confronting them – unemployment, income polarization, corruption, HIV/AIDS, environmental degradation, and so on – time may not be on their side. Although the country's extraordinary record of aggregate economic growth since the Tiananmen debacle -- averaging over 8% per year for the past 13 years -- has enabled the country to weather the transitional shocks and displacements of marketization without undergoing serious, systemic political upheaval, the good times may not last. China is not recession-proof, and the PRC's entry into the WTO has exposed the country far more than ever before to the vicissitudes of global economic forces.

Could China's leaders muddle thru a bit longer? Yes, probably. After all, they have confounded outside observers and defied predictions of crisis many times before. So long as the economy keeps growing rapidly, they may be able to delay further the introduction of necessary reforms. But this makes the regime hostage to economic forces that increasingly lie beyond its control.

Far better, I would argue, to pro-actively initiate reforms while the economy is robust, rather than waiting until the system is in crisis and regime collapse becomes a real (rather than merely a hypothetical) possibility. The need for sensitive socio-political “fingers” has never been greater in China. The Leninist “thumb” needs to relax its grip – while it still can.

Richard Baum, Professor of Political Science, is Director of the UCLA Center for Chinese, and interim Director of the UCLA Asia Institute