economic situation. Indeed, after these measures were instituted, China’s
trade deficit decreased (Hansell D2) and the stock markets’ volume attained
record highs (”Stocks Surge” D2). To be sure, Chinese investors remain
somewhat wary about the stock market and, ironically enough, more control
of the stock markets appears to be necessary (Shenon “A Nail-Biting” D1).
But, in discussing Chinese attempts to control inflation, Philip J. Suttle,
head of emerging markets research at the investment firm of J.P. Morgan,
has predicted that “[i]t looks as though the Chinese are going to have the
soft landing they are aiming for” (quoted in Hansell D2).
China’s interest in stock markets is no longer restricted to
within its own boundaries. This month, Shandong Huaneng Power Development
Company, “the first mainland Chinese company to have its primary listing on
the New York Stock Exchange” (”China Stock” D5), began trading shares. The
stock should be an attractive one to investors: Chinese electrical “demand
… is expected to grow by a whopping 17 million kilowatts a year until the
turn of the century” (Zuckerman D6). Moreover, China stands to gain from
the issue’s sales. “The company plans to use the $311 million dollars it
received from the offering to retire $83 million in loans from … Chinese
state entities. It also plans to expand its overall generating capacity”
(Zuckerman D6). Nor does this signify the only Chinese attempt of raising
capital from foreign sources on foreign soil. “Three more power companies
are expected to be listed in New York and Hong Kong in the coming months”
(Zuckerman D6).
Given the apparent strength of the Chinese economy as shown by
huge public works projects, extensive foreign investments, participation in
the world economy, and a generally higher standard of living by the
populace, it would appear that China is now ready to join the world as a
modern capitalistic and democratic society. However, this is not quite the
case. The CCP retains vestiges of those characteristics of insularity and
intransigence as discussed by Nathan. Because of its human rights record,
the country’s economic growth is being impeded. That is, the politics of
China, which have always been allied with its economics, are now
restricting international growth.
The United States, especially, has been concerned with China’s
treatment of political dissidents. In May, President Clinton decided to
end linking China’s trade status with the United States with its record on
human rights. The president has been criticized for this because of
situations like the following: trials for “‘counterrevolutionary
activities’ [including] … plans to use a remote-controlled airplane to
drop pro-democracy leaflets over … Tienenmen Square” (”China cracks” A13)
have recently begun for fifteen dissidents and labor organizers who were
involved in the Tienenmen Square protests. These trials have “been delayed
twice, first to avoid negative international reaction just before the
decision last September on China’s failed bid to host the 2000 Olympics and
then this spring to avoid influencing Clinton’s trade decision” (”China
cracks” A13). In addition, China has instituted “new laws effective in
June [which] give sweeping powers to China’s State Security Bureau to clamp
down on dissidents” (”China cracks” A13). China is fully aware of United
States’ concerns about its human rights record. Given the fact that the
United States has made it clear to China that that record will be allied
with trade status, China’s timing of such restrictive activities has caused
United States legislators and administrators to question China’s sincerity
in its desire to have a favored trade status with the United States.
Indeed, just in the past few days, it took a
last-minute lobbying campaign by President Clinton
and his Cabinet [to head off a] potentially
embarrassing vote by the House of Representatives to
restrict trade with China as a way to punish Beijing
for reported human rights violations.
(Bradsher A7)
But China’s problems in joining the community of the world
market have more to do than with its political ethos and practices. China
appears not to understand or to be able to follow through on fundamental
modern economic practices. For example, the United States has recently
complained that “China has not complied with international rules on access
to its markets and protection of copyrights and patents” (Gargan 14). Such
non-compliance could make it difficult for China to become a founding
member of the
World Trade Organization, the successor to the
General Agreement on Tariffs and Trade and the body
that is intended to promote global free trade by
lowering tariffs and other barriers, [which] will
be formally constituted on January 1, 1994.
(Gargan 14)
The specific nature of the United States’ complaint has to do with China’s
pirating of musical compact disks, video laser disks and computer software.
In fact, it is estimated that such pirating costs American companies a
billion dollars a year. This phenomenon seems to have to do with the
Chinese psychology as described by Nathan. In his 1981 essay he noted that
China did not wish to become a “technological client of the west. The
preferred solution is to buy one item and copy it” (Nathan 52). Clearly,
this is not the way trade works today. It is the United States’ position
that China must adhere to the rules of trade before it can be included in a
trade organization. Needless to say, exclusion from WTO would be
disastrous for any country, but particularly for an emerging market such as
China.
Even on a day to day basis, China’s economic leaders seem
unable to understand how some aspects of a market economy work. In
discussing the status of the Shanghai Stock Market, for example, one stock
dealer referred to it as “crazy” (”Stocks Surge” D2). Moreover, American
analysts have been amazed to discover in the Shanghai market “the lack of
regulation and the poor disclosure requirements. Some companies have been
listed for two or three years and have not issued an annual report”
(Hansell D2). It is no wonder that Chinese investors become anxious about
their investments.
The issuance of shares in the Shandong Huaneng Power
Development Company also demonstrates the lack of expertise on the part of
the Chinese in the modern world market. In fact, according to one Hong
Kong investment analyst, “‘[t]he company wasn’t really a company. It was
just a bunch of discrete plants that they tied a bow around and wrote a
prospectus on’” (Zuckerman D6). The prospectus guaranteed a fifteen
percent annual return on investments. In fact, the return will no doubt be
less than that because of prevailing currency exchange rates and debt that
the company will have to assume.
To be sure, the problems of the Shandong Huaneng Power
Development Company and the Shanghai Stock Exchange may demonstrate only
the problems of an immature economy. Nevertheless, if China wishes to
become a viable member of the world economic community, such shortcomings
will have to be eliminated quickly.
These apparent problems may also be the result of an economic
system that is run by the state. Certainly, one thing that the CCP has
attempted to do is create a market economy while retaining a state
controlled system. This structure may be possible but it does have its
critics. Steven N.S. Cheung, in an essay written in 1989, argued for the
“creation of private property by mandate” (31), feeling that privatization
in China would lead to necessary additional investment in the society’s
infrastructure and the establishment of a “judicial system that is based
firmly on the principle of equality before the law” (Cheung 32). Echoing
Cheung’s sentiments, James Dorn saw problems in the areas of Chinese
banking and finance. In this arrangement, Dorn argued, “the state controls
the bulk of investment resources. The lack of a private capital market has
handicapped economic development in China and hampered rational investment
decisionmaking” (43). In order to become a modern economic state Dorn
argued for the necessity of circumventing “China’s ruling elite who oppose
the dismantling of state monopolies and who benefit from price fixing and
nonprice rationing” (51). Xu Zhiming also saw the necessity for a
revamping of the Chinese system: “We must throw off the traditional system
completely” (249) in order for economic reform to thrive.
Communist Party members, of course, articulate a different
position. In a recent interview that appeared in the Beijing Review, Feng
Bing, Deputy Secretary General of the State Commission for Restructuring
the Economic System, spoke to the issue of economic reform in China. It is
striking that Feng spoke of the benefits that the populace has received as
a result of the economic reform now occurring in China. That is, his
comments appeared to demonstrate the beneficence, or the moral force, of
the Chinese Communist Party vis-a-vis economic reform. He noted that such
reform involves the essence of socialism: “to liberate and develop
productive forces; to eradicate exploitation; to remove polarization; and
… to attain the goal of common prosperity” (”Official” 12). Thus, CCP
leaders still appear to see their roles as representatives of a moral
force. CCP members and leaders wish economic reform not to be judged on
just its practical merits, but also as an effect of the moral force of the
leadership. Economic reform, then, becomes nothing less than a moral
crusade and it is thus easy to see why, for example, China “has staked its
national prestige on becoming a founding member of the World Trade
Organization” (Gargan 14).
Will China succeed in taking its place among the nations of the
world market? Will the CCP succeed in retaining its political power given
the drastic changes in the societal makeup of China that are occurring due
to the changing economic realities? I would suggest that the chances are
better for the former than for the latter. Once the Chinese attain more
sophistication relative to international and national markets, institute a
more manageable banking system, and make a good faith effort to insure
acceptable human rights, the country may well become “the richest economy
in the world within the next 25 years” (Gilder 372). However, whether or
not these conditions can occur without a weakening of the state controlled
system is problematic. The most impressive and far-reaching display of
moral force by the CCP may well have to be a voluntary reduction of its
power over the people. Paradoxically, by weakening itself politically, the
party may demonstrate its true moral force by liberating, politically and
economically, one billion Chinese citizens.