The two big events of modern times, and which will probably
preoccupy the world for at least the first half of the coming century,
are the oil wars -- the first one now taking place in Iraq -- and the
growth of China as a mighty nation. There are also some -- such as Niall
Ferguson, the eminent English historian -- who say that a third big
event of modern times could be the collapse of America as a world power,
joining the former Soviet Union in the junkroom of history.
There is something to be said for the above opinion, given the
intellectual paucity of the present American president and vice-president
and the showbiz nature of their electoral system, but I think it is most
unlikely. Instead, the growing intermingling of American and Chinese
business interests, and the rapid strides being made by China in the
matter of geostationary satellites and the soon-to-be-realised ability to
rain down laser-directed missiles with great precision onto almost any
point of the earth -- just as America can do already -- means that the
best interests of both nations will be served by uniting as the first
dumbell-shaped nation or, more exactly, the first transnational
nation.
As our own dear Margaret Thatcher once said: There Is No Other
Alternative -- TINA. America and China will each be so economically
powerful and too mutually dangerous for both countries not to come to an
understanding even though, at present, squabbles still break out quite
frequently. And then there's oil. While the modern world is so dependent
on oil, and while there is no obvious alternative energy technology in
sight that will be large enough to sustain even the present economic
turnover, then there will simply be not enough oil and natural gas in the
world to satisfy any other large nations in addition to America and
China.
How all this will play out in the immediate future is in the lap of the
gods. There are too many flutterings of butterfly's wings which could
swing mighty events one way or another and obscure matters for short
periods, but the overall strategy of both major parties which will
determine the main direction will be the way they approach the matter of
declining oil resources. America's way of going about matters at the
present time is obvious; China is far more hesitant -- as, of course,
befits a country with nowhere near the military strength of America at
the present time. But, in its own cautious way, it is certainly just as
active as America in planning its future oil supplies. It has had
off-and-on negotiations with Saudi Arabia (with the largest resources in
the world) for years, it already has a contract with Saddam Hussein --
which will no doubt be reactivated in due course when a legitimate
government ensues -- for the development of oilfields in northern Iraq
(the second largest resources) and is at present seeking to outbid Japan
for the oil and gas resources of Siberia (the third largest
resources).
The following two articles are going into my database because they
describe what the present economic and political situation is in China
much better than I can do in brief form.
Keith Hudson
<<<<
THE WORLD MUST LEARN TO LIVE WITH A WIDE-AWAKE CHINA
Martin Wolf
Let China sleep, for when she wakes, she will shake the
world.
Until recently, the world happily ignored Napoleon's warning. But
China is now shaking the world. The US was the first continental,
capitalist, economy. The European Union is trying to become a second.
Potentially, China dwarfs them both. Already, it is a big, and
controversial, presence in the global economy. Its impact is certain to
increase still further. Fear is an inevitable response to this growing
upheaval. But how far is it justified? And what is the best
response?
China's trade performance has, indeed, been astonishing. Between 1980 and
2002, China's share in global exports and imports rose from 1.2 per cent
and 1.1 per cent, to 5.2 and 4.2 per cent, respectively. From 1993 to
2002, the volume of China's exports of goods rose at an annual rate of
17.3 per cent. If current trends were sustained (which is unlikely),
China's exports would surpass those of the US by about 2010. Over the 12
months to May 2003, Chinese exports of $366bn (£219bn) were the world's
fourth largest, after those of the US, Germany and Japan. Its imports, at
$323bn, were the sixth largest, but will soon be bigger than those of
Japan, the UK and France.
This growth recalls that of Japan. But China's expansion is different, in
at least two respects. First, China's economy is far more open: its ratio
of trade to gross domestic product, at market prices, was 44 per cent in
2001, while Japan's was only 18 per cent. Second, China's exports are far
more dependent on inward direct investment: in 2000, according to the
United Nations' World Investment Report, half China's exports came from
foreign affiliates. China will be a bigger force in the world economy
than Japan, not only because its potential is far larger but also because
it will be far more deeply integrated within it.
To assess the impact of China's trade, one must start with its
comparative advantage and trade policies. The former rests on almost
limitless supplies of cheap labour. The latter have become remarkably
liberal. In 1992, average statutory tariffs on manufactures were 46.5 per
cent. After accession to the World Trade Organisation, this will be down
to 6.9 per cent. For primary products, the decline is from 22.3 to 3.6
per cent. China also reduced the coverage of non-tariff barriers from
32.5 per cent of imports to 21.6 per cent between 1996 and 2001.*
This liberalisation further increases the competitiveness of China's
exports, because a tax on imports is also a tax on exports.
Between 1979 and 2001, China's terms of trade -- the ratio of the prices
of its exports to those of its imports -- fell by 30 per cent.** As
China's growth drives down the relative price of her exports, countries
that compete in third markets suffer declining profitability and market
shares. But net importers of China's exports and net exporters of her
imports benefit. In general, commodity exporters and exporters of
sophisticated goods and services gain, while other labour-abundant
countries lose.
An analysis of the impact on Latin America by Goldman Sachs (The Sweet
and Sour Effects of China in Latin America, November 7 2003), notes
that Mexico is a loser, while Argentina, Brazil and Chile -- all big
commodity exporters -- are gainers. Last year, for example, China
overtook Mexico as a supplier of manufactures to the US market. China's
wages were still about a quarter of Mexico's in 2002, even though they
have been soaring. Mexico's productivity is not rising fast enough to
offset this Chinese advantage. As Mexico loses market share, it also
risks losing inward foreign direct investment. This explains, in part,
why inward FDI fell from $25bn in 2001 (admittedly, a very high level) to
$14bn in 2002. In all, argues Goldman Sachs, the impact of China on
Mexico's balance of payments amounts to 4 per cent of gross domestic
product, which could increase further.
What has been bad for Mexico has been good for Argentina, Brazil and
Chile, which have enjoyed rising trade surpluses with China. Goldman
Sachs estimates the positive impact on Argentina and Brazil at 0.75 per
cent of their combined 2003 GDPs. Gains come to other commodity
exporters, as well. Among them are Australia and New Zealand and the oil
exporters, which now possess a voracious market in the decades
ahead.
Gains are even available to countries that would seem vulnerable to
direct Chinese competition. The reason is the vertical integration of
Chinese production. In 1998, just under a quarter of. the value of
Chinese exports contained direct and indirect imports. Not surprisingly,
such production is particularly relevant to China's neighbours. Another
World Bank study notes, for example, that between 1985 and 2001, exports
from other east Asian emerging market economies to China grew from $5.9bn
to $83.5bn. In 2001, 15 per cent of east Asia's exports to China
consisted of parts of office machines and telecommunications equipment
and electronic microcircuits, all of which were for assembly and
re-export.***
How should other countries respond to the Chinese shock?
"Calmly" is the best advice.
One reason is economic: the most adversely affected countries can do
little about China's rise, while those that can do something also benefit
most from it. Unless Mexico can persuade its trading partners to increase
their protectionist barriers against China, on a discriminatory basis, it
can do nothing to remedy the averse impact. But net importers from China
are gainers. Imposing protection is to inflict losses upon
themselves.
But the bigger reason for calm comes from history. If China is permitted
to thrive as a dynamic exporter of cheap manufactures, its people will
obtain the prosperity they want. If China is thwarted by protectionist
barriers, its people will be correspondingly frustrated and
dangerous.
The challenges of accommodating a wide-awake China will be huge. But they
can -- and must -- be risen to.
* Elena lanchovina and Will Martin, Economic Impacts of China's
Accession to the WTO, World Bank, December 11 2002;
** Will Martin and Vlad Manole, China's Emergence as the Workshop of
the World, World Bank, 15 September 2003;
*** Francis Ng and Alexander Yeats, Major Trade Trends in East
Asia, World Bank Policy Research Working Paper 3084, June
2003.
Financial Times -- 5 November 2003
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Financial Times -- 12 November 2003
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<<<<
GATE-CRASHING THE PARTY
A year after Hu Jintao took over as Communist Party leader, there are
faint glimmers of reform. But there have been too many false dawns
before
In the spacious fitness centre of a luxury residential compound in
Beijing, the head of the landlords' committee, Shu Kexin, explains why he
is now engaged in a bid to get elected to his district's virtually
powerless legislature. "I'm not interested in the elections. What I
want is to use these elections to show people that they have the right
[to stand], that they can do this without being sent to prison or getting
in trouble," says Mr Shu, who is also a specialist in public policy
at one of the city's top universities.
Every five years, urban Chinese go through the ritual of voting for
candidates selected by the Communist Party and about whom they are told
next to nothing to fill seats in the district congresses. These form the
bottom rung of a multilayered parliamentary system and are the only level
at which the party allows even the pretence of public participation in
the choice of delegates. In early December it will be the capital's turn.
But this time Mr Shu, and several other Beijingers, are determined to
break with tradition and get their names on the ballot sheets without the
party's prior endorsement.
Remarkably, Mr Shu's campaign has been given favourable coverage in
official newspapers. Even the party's most authoritative mouthpiece, the
People's Daily, said in August that allowing more people to
recommend themselves as candidates would make local congresses
"livelier". Could it be that China's sweeping change of
leadership in the past year, including the appointment of a new party
chief, president and prime minister, has also broken taboos against
political reform?
The party knows the dangers. In 1980, newly appointed reformist leaders
also allowed independent candidates to stand in local congress elections.
In Beijing's university district this caused an upsurge of heated
political campaigning among students. Candidates seized the opportunity
to attack party rule and call for far-reaching democratic change. The
reformists then got cold feet and barred winners with radical views from
taking up their seats.
For the past 23 years officials in Beijing have preferred caution.
Although China's election law says that anyone can nominate himself as a
candidate with the support of ten voters, until now no one in the capital
has been able to do so. Elsewhere there have been several cases,
including the election of an independent candidate in the central
province of Hubei in 1998, Yao Lira. But local officials have often
contrived to frustrate aspirants.
Now the mood is changing. The official media paid particular attention in
May to elections in the go-getting southern city of Shenzhen, where
candidates put up campaign posters (usually forbidden in China) and an
independent won a seat.
But, despite this encouragement, Mr Shu is still struggling. Election
officials have told him, questionably, that his ten nominators must
belong to his neighbourhood's election committee. But they have not told
him who is on this committee or how to contact its leader. He says that
security agents have quizzed his acquaintances. Officials, ever
suspicious of any non-party organisation, especially one with a political
hue, have refused to recognise the campaign team whose formation he
declared in July.
Beijing in 2003 is a long way from recapturing the excited electoral
atmosphere of 1980. The red banners that flap in the chill breeze calling
on citizens to "develop socialist democracy" through the
upcoming elections do little to inspire a population made cynical by
decades of such propaganda. Campuses are quiet, even though a few
university students are among those who now hope to stand independently
in next month's polls.
But since Hu Jintao took over from Jiang Zemin as party chief a year ago
this week, and as president in March, many intellectuals have expressed
hopes that the party may end its foot-dragging on political reform,
though few dare openly to call for a multi-party system. Such hopes have
been raised not by any policy pronouncements, but by the relatively
open-minded image that Mr Hu and Wen Jiabao, who succeeded Zhu Rongji as
prime minister, have tried to project. Their tardy but ultimately
resolute handling of the SARS respiratory-infection crisis earlier this
year, especially the sacking of Beijing's mayor and the minister of
health for failing to respond more effectively, heightened expectations
of a new style of governance.
The kind of reforms that mainstream intellectuals want to see pale in
comparison with the radical views expressed on campuses in 1980 or on the
streets during the Tiananmen protests of 1989. In China today, thanks to
rapid economic growth in at least the main urban areas, the significant
loosening of the party's grip over personal and intellectual life, and
the negative (in Chinese eyes) lessons of much of eastern Europe and the
former Soviet Union, there is little obvious appetite for any dramatic
move towards full democracy.
For all that, many Chinese outside and inside the party recognise that
inflexibility, secretiveness and lack of oversight in the political
system have become dangerous liabilities. These deficiencies have left
the party riddled with corruption and arthritic in its response to the
many crises that rapid social and economic change, as well as a
fast-evolving international security environment, inevitably
spawn.
Corruption and the abuse of power are widely seen as threats to the
wealth of a fast-growing middle class. "Now that I've earned a
certain amount of money, money has lost its importance. My interest now
is how to supervise the people who say that they work for me," says
Mr Shu, who owns several apartments.
Hu's disappointing start
Will Mr Hu have the courage to deliver more change? He has won praise
for dispensing with some of the frippery and privilege of the past. He
scrapped the time- wasting ceremonies for top leaders when they embark on
or return from foreign trips. He cancelled this summer's annual conclave
of top leaders at the beach resort of Beidaihe. He ordered the media to
stop filling up airtime and newspaper columns with reports of
inconsequential leadership activities (this last injunction has been
implemented only patchily).
But it was Mr Jiang who laid the groundwork for more thoroughgoing change
in his farewell report as party chief a year ago. All the talk since then
of political reform, including the need for greater democracy within the
party and expanded participation in political affairs, stems not from any
new thinking by Mr Hu, but from the guidelines set out in Mr Jiang's
valedictory speech.
Mr Hu himself has equivocated. Many Chinese intellectuals expected new
measures of political change -- particularly democratic reform within the
party -- to be unveiled in his speech on July ist marking the official
anniversary of the party's founding. But Mr Hu failed even to mention the
issue. Given the questions raised by the SARS epidemic (and aired even in
some official newspapers) about the need for better government, this
omission was startling. Expectations were again dashed in mid-October
when the party's 356-member Central Committee held its first meeting
since the leadership changes. A communique mentioned in passing the need
for political reform to be carried out in an "active and stable
manner", but said nothing about what this should involve.
The only institutional change sponsored by Mr Hu has been a new
requirement that the Politburo present a report on its work to the
Central Committee once a year. The official media have praised this as a
step towards greater scrutiny of the Politburo's intensely secretive
operations. In the past few months the press has been allowed to issue
brief reports on at least some Politburo meetings after their conclusion
-- the first time since the 1980s that ordinary Chinese have been
regularly informed of their occurrence. And, unusually, the dates of last
month's Central Committee meeting were announced in advance. But these
are petty adjustments.
September saw reports of a new party directive banning public discussion
of political reform or of constitutional change. The issue had been a hot
topic among intellectuals ever since it was revealed, earlier this year,
that moves were afoot to revise the constitution at the annual session of
the legislature next March. The likelihood is that both Mr Hu and Mrjiang
were starting to feel nervous about the upsurge of open calls for more
far-reaching change than the party was prepared to discuss.
Among the most outspoken advocates of reform has been Cao Siyuan, an
economist who runs a bankruptcy consultancy in Beijing. Mr Cao organised
a conference in June in the eastern city of Qingdao to discuss revisions
to the constitution. These would, among other things, enshrine the
principle of open government and do away with the constitution's
preamble, which specifies that China shall be ruled by the Communist
Party as a "people's democratic dictatorship". Some 40
academics as well as serving and retired officials took part. Mr Cao
points out that this was the first time he had organised such a forum
since shortly before the 1989 unrest.
China's new leaders must have felt uncomfortable with the comparison. Mr
Cao says that since late July plain-clothes police have followed him
everywhere and, he suspects, tapped his phones. Talks he had arranged to
give at various meetings have been mysteriously cancelled. "You
could say these police tactics are [the leadership's] response" to
the Qingdao forum, he says. The authorities have also stepped up their
efforts to stem the spread of politically sensitive views on the
internet. Since the beginning of October, about ten people have been
arrested, tried or sentenced to jail terms because of articles they have
posted on websites.
Political reform in China has always moved in fits and starts. In 1998,
Mr Jiang permitted a brief period of openness -- even to the extent of
tolerating, for a while, an opposition party that was set up that year.
By the end of the year, though, most of the group's known members were
arrested, and remain in prison today.
If Mr Hu is to succeed in bringing greater democracy to the party's inner
workings, he too will want to be sure that no one will take this as a
green light to start questioning the party's right to rule. Just as Mr
Jiang cracked down ruthlessly on organised dissent, and yet tolerated and
even encouraged limited experiments with political reform (such as direct
elections of township governors in a few places), Mr Hu is likely to do
the same.
So far, at least, the possibility of independent candidates in local
elections has not produced obvious challenges to the party. Since the law
already in principle allows independents to stand, Mr Hu can relax
controls and see what happens without making any big changes, safe in the
knowledge that ways can always be found of limiting the number of
contenders (and how they campaign) in future polls.
There is little evidence that a conservative Mr Jiang is restraining Mr
Hu from carrying out bolder reforms. Mr Hu's chief adviser on political
reform is Vice-President Zeng Qinghong, a close ally of Mr Jiang's. Yet
Mr Zeng is no conservative. He has encouraged quite a lot of debate,
albeit mostly behind closed doors among party theorists, about ways to
make the party more democratic and expand the use of elections to select
lower-level leaders. Mr Zeng is also in charge of Hong Kong affairs, in
which capacity he presumably gave his blessing to the territory's
decision to shelve a proposed anti-subversion law that had set off large
protests.
But, despite all the energetic thinking under way in the party, the
Chinese are likely to be, as they have so often been before, disappointed
by the results. Next year's revision of the constitution will focus
mainly on giving greater protection to private property rights and
enshrining Mr Jiang's contribution to Marxist-Leninist philosophy, a
theory called the "Three Represents", in the constitution's
preamble. Further expanding grassroots democracy is not on the
agenda.
Few Chinese could say what the Three Represents are, even though slogans
calling on people to uphold them are displayed on billboards and daubed
on walls across the country. Many of those who do know what the slogan
means (that the party must represent China's advanced productive forces,
its advanced culture and the interests of the overwhelming majority of
the people) find the notion soporific.
Yet, buried in this morass of verbosity, is an idea that would have
profoundly shocked both Marx and Mao. Mr Jiang's idea was that the bosses
of private enterprises -- once repudiated by Mr Jiang himself as
exploiters of labour -- could now be recruited as party members (the
party had many private-enterprise leaders in its ranks already, but most
had joined before going into business).
After Mr Jiang launched the Three Represents in 2000, party hardliners
argued that the doctrine would turn the party into something akin to
social-democratic parties in Europe, socialist in ideology but open to
everyone and without any claim to an exclusive right to rule. Maybe
frustrated democrats in China should take heart from this. History may
one day remember Mr Jiang's Three Represents as a turning point in the
party's evolution along the lines of Taiwan's Kuomintang, a once-Leninist
party that decided democracy was not so bad after all.
If Mr Hu eventually plucks up the courage to begin changing the way his
party rules, he will need to make bigger changes to the constitution than
he or Mr Jiang has ever openly suggested. Mr Jiang can be credited with
having encouraged direct elections to village councils and, more
recently, urban neighbourhood committees.
But these bodies are not part of the government proper. If current
experiments with direct elections for township heads, who belong to the
lowest tier of government, are ever to be promoted nationally, the
constitution will need to be revised.
The pressure for change is growing. Township leaders are often the
targets of sometimes violent demonstrations by angry farmers who object
to the exorbitant fees levied by township governments to sustain their
bloated bureaucracies and maintain basic services such as health care and
education. A growing number of local officials believe that elections
might help to ease the tension.
In August, Pingba township in the south-western municipality of Chongqing
took matters into its own hands and tried to carry out direct elections
without approval from above. The day before the vote, the township party
leader who had tried to organise the ballot was placed under house arrest
and the elections were cancelled. "Local cadres really want to have
reform. They cannot wait for orders from the upper levels," says Li
Fan, a political scientist in Beijing who helped Pingba's leaders shape
their plan.
Some shrewd Chinese argue that allowing more direct elections would be an
excellent way of expressing the Three Represents, for without clear-cut
public backing China's leaders can hardly be said to represent the
people. But little evidence has yet emerged that Mr Hu, or indeed the
author of the theory, is enough of a risk-taker to push the new theory
that far.
The Economist --15 November 2003
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