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Capitalism, Chinese-style

The oddest thing on the television screen was not the image of Chinese President Jiang Zemin standing in front of a twenty-foot high golden hammer and sickle embroidered on a blood-red backdrop curtain extolling the virtues of private industry. Indeed, that was odd. But even stranger was the fact that one could watch the speech at all -- an official of the People's Republic of China detailing his political and economic policies for the world, live on CNN. The Chinese government is not particularly known for its transparency, or for caring enough about its world image to strive to look reasonable on television.

But this is a different China, one which, under Jiang's lead, appears to be serious in an ambitious and risky plan to privatize nearly all of its 125,000 horrendously inefficient state-run enterprises, and engage the world in freer trade. At the recent Communist Party Congress, the 15th such meeting held since Mao Zedong founded the Chinese Communist Party in 1921, President Jiang declared that although China would continue to "oppose bourgeois liberalization," the nation would move toward "a modern form of public ownership . . . both under capitalism and under socialism."

If Jiang couldn't bring himself to say the word "privatize," China's real economic movers and shakers, who are policy planners weighed down not with Communist ideology but with economic studies published by Western universities, are spreading the word with great vigor. At this week's Asia-Europe Economic Ministers' Meeting held in Tokyo, Chinese Minister for Foreign Trade Wu Yi advocated Chinese accession into the World Trade Organization (WTO), and pledged that China would "obey the rules of world trade." In the case of the WTO, these rules include strict codes on labor laws and other measures to which China has objected in the past. One assistant to the foreign minister, who has been the lead negotiator in China's WTO accession process for seven years, declared repeatedly in closed sessions that China wishes to join the global economic community. He argued for more transparency, not only of trade information, but also in the actual process of creating trade policy. This is not Nixon's China.

The rest of the world welcomes China's new declarations of openness, but not without some reservations. Sir Leon Brittan, Vice President of the European Commission, stated that even though there was still "quite a lot to be done," China should be admitted to the trade group "as soon as possible." But this attitude is dependent upon China's willingness to play by the WTO's strict rules on political and economic freedoms, and further willingness to allow WTO countries to verify their claims of good behavior. Sir Leon said that, although many nations would welcome Chinese accession, "it only makes sense if China agrees to certain measures."

The content of those "certain measures" are the crux of the accession negotiations, and are likely to have serious repercussions for global trade. As the rules of the WTO stand now, China would have little to gain from joining because in order to meet the current WTO objectives, drastic political and economic change would be necessary. It may even be that not even the privatization of all of China's businesses would be enough. But the gigantic market represented by China's 1.2 billion people is an enticement so powerful that many nations are willing to do business with China even under terms dictated by China that are somewhat less favorable for other nations. China is hoping to take advantage of its muscle, and create as many special exceptions and exemptions as it can for its own membership, while pushing to stretch out WTO timetables and benchmarks to allow themselves as much time as possible to make the necessary reforms.

The new, sudden vigor of Chinese-style capitalism could only occur after the death of Deng Xiaoping. Deng, himself a reformer, was repeatedly exiled by Mao Tse-tung during his reign for his "bourgeois tendencies," and allowed to return to Beijing only after reaffirming his faith in communism. After Mao's death, Deng ousted the more like-minded Hua Guofeng, the man Mao tapped as his successor, and was able to move forward with reform. But in the end, he was still married to the old Communist ideals, and he supported the state-run enterprises, allowing them to thrive in all their inefficiency, for fear of the social unrest that would be caused by putting so many people out of work. Deng believed the 1989 Tianamen Square demonstrations were a result of too many people getting too much freedom too quickly and, although he was able to set China on the path to reform, he was always cautious to dole out reform in only small doses.

Jiang was appointed party head in 1989 after the Chinese army crushed the Tianamen protests, partially due to his hard-line stance against the demonstrators. In the process, Jiang ousted Zhao Ziyang, the then-leader of the Communist Party and his most powerful rival, accusing him of being "too supportive of the student demonstrators." Jiang's power play proved successful when he gained support from party leaders for the chairmanship. Particularly noteworthy is Jiang's new supporting cast. Premiere Li Peng, whose term will expire next spring, is known as a pro-business reformer, and Vice Prime Minister Zhu Rongji (Li's probably successor) is noted for his sensible macroeconomic policies which brought an end to high Chinese inflation rates. Zhu has been chosen to head the reform of the state enterprises, and already his measures have brought widespread amazement from economic analysts in China and abroad. As one Beijing political analyst told Time Magazine, "He's putting the bankrupt state sector on the block even at the risk of social instability."

Jiang, however, has dealt with social instability in the past. In sharp contrast to the Tianamen incident, Jiang brought a peaceful end to similar protests in Shanghai when he was governor there. But as evidenced by the Tianamen incident, he is able to take a take a harder line when the situation calls for it. Unlike his predecessors, Jiang has no military experience, but he is now the head of the Central Military Commission, and as shown in the missile tests in the Taiwan Straits last year, is unafraid to take his military might out for a spin. The world breathed a collective sigh of relief when Jiang announced at the Party Congress that China was cutting the troops levels of its million-man army in half. They seem to forget that when the United States cut its bloated troop levels in the late 1980s and moved toward a leaner and more high-tech military, the readiness, effectiveness, and efficiency of the U.S. Armed Forces improved tremendously. Jiang Zemin has the same kind of change in mind.

But Jiang is not going to use his increasingly powerful military force as a first option. He, and the many new relatively younger Politburo members and governors, are pro-business, pro-capitalism and pro-reform. They are steel-tough but razor-sharp, and know all too well that war disrupts trade. As much as China would like to re-integrate Taiwan, or settle border disputes with India, Russia, Mongolia and Tibet, none of these issues is worth the grief they would cause in trade and trade negotiations. Furthermore, Jiang has cannily maneuvered the military into his court. Potential internal rival and military leader General Liu Huaqing has been quietly dismissed from power, and many of the top military leaders have been ushered into retirement, consolidating power into the hands of the reformers. The military will still be used, to maintain the dual threat of economic and military might that China wields in order to get what it wants, but China will not take by brute force what it can acquire through legal trade, which the world views with far more favor.

And the world, which talks of containment when discussing the Chinese military, talks readily of engagement on economic issues. Wealthy Asian neighbors such as Japan, Korea, and the ASEAN bloc are being wooed by promises of open trade and less aggressive relationships. The United States, despite repeated protests of some congressmen on China's human rights policies, will not sacrifice the gigantic Chinese market on behalf of a few political prisoners, and the Clinton administration has formally separated human rights and trade policy. And at the recent Asia-Europe conference, the European Commission went out of its way to encourage China in its reforms, salivating at the possible windfall.

In a speech to delegates at the opening of the Party Congress, Jiang announced that the true goal of China is, of course, still socialism. But since China is yet in the "primary stage of socialism," it would, in true Marxist style, have to become rich through pursuing capitalism before socialism could be achieved. For political reasons, the message itself may have been mixed, as Jiang called for "an affluent, democratic and civilized socialist country." However, behind the flowery promises of reform and the bureaucratic double-talk combining lip service for socialism and the pursuit of capitalism, the real goals of the new China are clear, and China's actions are speaking louder than its even its new, truly revolutionary words.

After all, Li Peng sent his son to study at an institution that is hardly a bastion of socialist thought -- the University of Pennsylvania's Wharton School of Business.

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