The ideological debate in China

Pallavi Aiyar

FOR THE first time in over a decade, both the Chinese intelligentsia and political establishment are embroiled in an intense ideological debate about socialism and capitalism, which for long seemed to be buried by consecutive years of rocketing economic growth. Substantial inequalities, vanishing provisions for education and health care, and rampant corruption have combined to create disenchantment across sections of Chinese society, giving resonance to the voices of critics of China's economic reform, who represent a resurgent "New Left."

The strength of these socialist-leaning thinkers was evident when during the country's annual meeting of its parliament, the National People's Congress (NPC) in March, critiques by them forced the Government to delay the approval of a draft law intended to protect property rights. The critics charged that the new law gave too much weight to the protection of private property. The most widely cited opposition came from a jurisprudence professor at Beijing University, Gong Xiantian, who has been campaigning against the draft law for the last year or so, charging that it offered equal protection to a "rich man's car and a beggar man's stick." The fact that the law does not state that socialist property is "inviolable" has also come in for particular criticism.

The proposed law had taken eight years to prepare and was intended to codify the protection of private property that was enshrined in the constitution two years ago. Its rejection is just one symptom of the deeper underlying debate about the future direction of China's economic policies.

In the span of 25 years, China has gone from being one of the world's most equal, albeit poor societies, to becoming the fourth largest economy in the world with considerable rich-poor imbalances. China's gini index — a commonly used statistical measure of inequality where 0 represents perfect equality and 100 perfect inequality — figure of 44.7 is worse even than India's 32.5, according to the UNDP's 2005 Human Development Report.

Property that used to be taken away from the rich for redistribution to the poor is today routinely taken away from farmers and given to real estate developers. According to the Ministry of Public Security, in 2005 there were a total of 87,000 mass protests across the country, expressing public anger against official corruption, illegal land seizures, and unpaid wages and pensions. The number of such protests has seen a significant increase over the last decade.

China's New Left thinkers have used this background to give force to their criticisms. "Our primary aim is to deconstruct the illusion of neo-liberalism in China," says Wang Hui, a leading leftist intellectual and Professor of Humanities at Beijing's Qinghua University. Worker's rights, rural reform, health and education, and re-orientation of the government's SOE (state-owned enterprise) reform process are the primary foci of the New Left agenda. It is their belief that the current direction of economic liberalisation in China has led to a nexus between party bigwigs and business interests who have plundered the nation's assets under the cover of privatisation. "Today we are no longer an isolated group of intellectuals. We have become a broad-based movement with real support from the people which gives us clout," says Professor Wang.

Indeed, both the rhetoric and policies of China's current leadership duo, Hu Jintao and Wen Jiabao, appear to mesh to an extent with those of the New Left. The leadership has thus made tackling income inequalities between China's rich urban and poor rural areas the centrepiece of its new five-year plan. Since taking office in 2003, Mr. Hu has also tried to establish his left-oriented credentials by extolling Marxism and encouraging research to make the country's official socialist ideology more relevant to the current era. Moreover, he has tried to distance himself from his predecessor Jiang Zemin, who invited private businessmen to join the Communist Party, negotiated China's accession to the WTO, and stepped up the privatisation of SOEs.

In the 1990s, first under Deng Xiaoping, who called economic development "hard truth," and later Jiang Zemin, ideological discussion about the direction of change was sublimated. During that time, China laid off over 20 million workers from SOEs in a huge wave of closures, mergers and privatisations that halved their number since the mid-1990s.

It is only after Mr. Hu came to power that leftist opposition to China's reforms has increased. Now, leading proponents of the New Left including Liu Guoguang, a former vice-director of the Chinese Academy of Social Sciences, and Hong Kong-based economist Lang Xianping, charge that privatisation of SOEs through management buyouts are nothing but asset stripping. As with the property law, the New Left's criticisms seem to have had an influence on the decision to suspend the practice of management buyouts, taken in 2005. Whether or not China's resurgent ideological debate will derail the country's economic growth is another subject for debate. On the one hand, in a speech to the NPC in March, Mr. Hu declared that China must "unshakably persist with economic reforms."

However, some scholars are worried. "My concern is that the pre-eminence given to the income gap issue these days might hijack the reform agenda, which remains incomplete," says Professor Feng Lu of Beijing University's China Centre for Economic Research. He cites a Chinese adage: "If you want to walk a 100 kilometres and have completed 90 of these, you still have 50 per cent of the distance to go." "The last 10 per cent in many ways is the hardest," says Professor Feng citing unfinished business on the reform agenda from SOE privatisation in key sectors to financial sector reform. He shares New Left concerns regarding the need to improve education and health care services but where he differs is in his belief that simply injecting large amounts of cash from the Centre will not solve the problem.

China's Government has recently announced that it will spend a total of 339.7 billion yuan (about $42.4 billion) in rural areas in a bid to ensure a more equitable distribution of the fruits of the country's economic successes and create what has been called "the new socialist countryside." "There is a belief that the crisis in health care and education comes from their having been left to market forces. But this is nonsense. Both remain more or less monopolies of the government and what we really need is an expanded role for the market in these areas," Professor Feng says.

China's economic boom shows scant signs of slowing down. Mr. Hu recently announced that China's GDP grew by 10.2 per cent in the first quarter of this year. Financial sector reform is proceeding, if slowly. Many local governments are predicting double-digit growth in their own five-year plans. But the time when reform could proceed apace without opposition seems to have passed. China today is witnessing an ideological debate that many had dismissed as no longer relevant. It has instead proved to be not only relevant but potentially the key to deciding the shape of the country's future.***

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China's Internal Crisis

Stephen Glain

It is a measure of how all-consuming the Bush Administration's quest to transform the Middle East is that this week's visit by Chinese President Hu Jintao will be denied the spotlight it deserves. While Afghanistan smolders, Iraq burns and Iran shuffles into America's cross-hairs, only a handful of constituencies understand or seem to care that Washington's relationship with Beijing is vulnerable to manipulation by the Pentagon.

The Defense Department has met its long-term enemy, and it is China [see Michael T. Klare, "Revving Up the China Threat"]. The Pentagon's latest budget, together with its Quadrennial Defense Report released in February, heralded the Yellow Peril in support of every manner of cold war-era weaponry, from the Virginia class nuclear submarine to the F-22 Raptor fighter jet. Even Defense Secretary Donald Rumsfeld has tried to limit, or even kill, some of these programs. And while thoughtful parties in Beijing may understand that these outdated systems are nothing more than job mills for key legislative districts, it gives hawks in China leverage to push for their own arms buildup.

The Pentagon's vision of China as a dangerous hegemon diminishes the farther one gets from the Beltway Biosphere. In the Middle East and Africa, the Chinese model for economic development--autocracy that mutes political freedoms in exchange for commercial expression--is embraced far more eagerly than Bush's prodemocracy crusade. In Asia, US allies like the Philippines, South Korea and even Australia are aligning themselves closer to Beijing, or at least hedging their bets. Only Japan has remained in lockstep with Washington--boosting its own military budget, adjusting its laws to allow the US forces it hosts greater autonomy and whipping its population generally into a Sinophobic frenzy that sits just fine with hawks in Washington.

But nowhere does the image of China as the Next Big Threat jar with reality more than in China itself, where economic, social and environmental upheaval has turned the country into a caldron. For now at least, the Chinese regime is a greater threat to its own population, unmoored and angry, than it is to the United States or even its neighbors. Popular unrest is now a common feature of China's political landscape, with more than 74,000 reported cases of unrest in 2005, according to an official count. The same economy that has grown by nearly 10 percent a year for the past twenty-five years has also become a perilous source of discontent.

Take the December riots in the southern Chinese city of Dongshan, when riot police fired on villagers as they protested the seizure of their land to make room for a power plant. Some twenty people were killed, according to witnesses, in the first such lethal show of force since the Tiananmen Square massacre in 1989. The clash in Dongshan was only the latest in a running nationwide feud between local authorities and angry Chinese uprooted or marginalized by the country's unbridled economic expansion. Just last week, violent protest erupted in Bo Mei, a village in southern Guangdong province, when authorities tried to destroy unauthorized water dikes. Some two dozen people were wounded in clashes with riot police.

While the Bush Administration inflames the Muslim world, Beijing confronts its own fires ignited by an increasingly cutthroat and corrupt economy. National income has risen dramatically since China adopted free-market reforms in the late 1970s, but so has income disparity. The country is straining under an urbanization drive that in the past two decades has eliminated some 135 million rural jobs and has turned much of China's cities into ghettos for uneducated migrant workers. A number of credit cooperatives have failed, taking the meager savings of itinerant laborers down with them. Privatization of state-owned companies and appropriation of farmland for mushrooming urban communities have been exploited into asset grabs by colluding apparatchiks.

The northeastern Rust Belt province of Liaoning, the foundry of Chinese Communism, is now its epicenter of unrest. According to official police figures, one in twelve major demonstrations in China last year occurred in Liaoning, the consequence of a privatization program that left in its wake an angry legion of pink-slipped engineers, line managers and office clerks.

"Liaoning has by far the highest number of protests in China," says Murray Scot Tanner, a senior China analyst at the Rand Corporation. "And we've actually seen an increase over the last couple of years."

Pretty much everyone of working age in Shenyang, Liaoning's capital, is a cashiered government employee, and many have been denied their pensions. They earn the equivalent of about $2,000 a year, well above the national average of $1,300 but absent the health coverage and other benefits they enjoyed working for the state.

Li Zi Zhong lost his job at the Shenyang City Metal Works after it was privatized in 1998. "It used to be you had guaranteed employment, but no longer," says the 54-year-old Li, who gets by with the help of his daughter, who earns about 700 yuan ($87.50) a month selling art and calligraphy from a tiny stall in Shenyang. "The lower class is suffering due to these free-market changes."

The transfer of Liaoning's state-owned companies and utilities to private parties produced some of China's worst graft on record, with huge factories sold to political cronies for a few yuan. Among the companies liquidated in the past five years was the Shenyang Molding Company, where Cheng Youzhi worked as an engineer for thirty-two years. In 2001 the company was declared bankrupt, relieved of its superfluous workforce and sold to its old director for 1 quai, or about 8 cents.

"The new owners are now rich," says Cheng, who would speak only under a pseudonym for fear of retaliation from municipal authorities. "All the employees were sent home, and then they sold the company, bit by bit. There were demonstrations, but the government would not relent."

Cheng is lucky, however. His pension, though meager, is better than the token buyouts offered to many of his former co-workers. Liu Lianyu lost her job at the Dong City Construction Corporation in 2000 and was given a lump-sum payment of several thousand yuan. She and her husband now sell chickens in one of Shenyang's produce markets, and together they earn about 1,000 yuan a month. That's slightly above the national average, she says, though barely enough for two people to live on in a country where inflation has soared even as government services and benefits have deteriorated--or are denied altogether.

"The pressure and stress is felt everywhere," says Liu.

Around the corner from the market is a curbside scrum of itinerant craftsmen who advertise their services with signs dangling from the frames of their Flying Pigeon bicycles--carpenters, plumbers, housemaids, all for hire by the hour or the day. They are part of the wave of migrant workers who have evacuated China's impoverished villages to find work in its booming cities.

Jiang Xiuyan is a 35-year-old interior decorator from the town of Chaoyang in Western Liaoning. She has been working this curb for several years now, and on a good month she and her husband can make as much as 2,000 yuan.

"Business is not bad," she says. "We can earn an income well above the average, so long as the economy continues to grow."

But what if the economy slows down? Liu looks quizzically.

"I haven't thought about it."***

Stephen Glain, a correspondent for Newsweek International, is the author of Mullahs, Merchants, and Militants: The Economic Collapse of the Arab World (Thomas Dunne/St. Martin's). From 1991 to 2001 he covered Asia and the Middle East for the Wall Street Journal.

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Hu's 'State Visit'

Peter Kwong

The White House has downgraded Chinese President Hu Jintao's upcoming "state visit" to Washington to a simple "official visit," according to spokesman Scott McClellan. Hu will have lunch with President Bush rather than a formal dinner, the distinguishing feature of a state visit. Chinese officials, however, continue to insist the trip is a "state visit.'' The dispute indicates the White House's low expectations for the event and is the latest in a series of public spats between the two countries.

The American side felt slighted when China announced the purchase of 150 Airbus planes from European competitors only a couple of weeks after placing an order for seventy Boeing jets during Bush's last visit to Beijing. The Administration is also unhappy with China's reaction to the State Department's 2005 Country Reports on Human Rights Practices; the official Chinese statement declares that a government responsible for the Abu Ghraib prison abuses has no business disparaging others.

For its part, China is fuming over the Administration's continued efforts at "containment," the latest of which are far-reaching economic and military agreements with India aimed at countering Chinese influence in the region. Ironically, this is pushing some governments interested in trade with China to the other side. As one example, Australian Foreign Minister Alexander Downer distanced himself from Secretary of State Condoleezza Rice just before Rice's arrival in Sydney to attend a strategic alliance conference with her Japanese and Australian counterparts, stating publicly that his country does not "support [the American] policy of containment of China...[which] would be a very big mistake."

The question is how far the US-China relationship can deteriorate without grave consequences for the United States. Economic ties between the two countries could not be closer, with a quarter of America's consumer goods made in China. To relieve the US trade deficit, primarily the result of imports, China is recycling its export earnings by purchasing US Treasury bonds. This has the effect of holding down US interest rates, maintaining American consumer spending and sustaining the mammoth US budget deficit--in effect, helping to finance the war in Iraq.

American big business does not want such a deterioration in relations; China is, after all, its leading global "profit center." Tapping into China's huge market has long been the dream of every American businessman. Big businesses prefer to ignore China's human rights violations; typical is Google, which has launched a version of its site that strips out information not approved by Chinese authorities in order to operate there. Big business is also weary of Congressional "protectionist" threats to impose tariffs on Chinese imports unless China allows its currency to grow in value against the dollar. This protectionist game can cut both ways. After all, it is the Americans who have been lecturing the rest of the world about the virtues of free trade. Since joining the WTO, China has allowed considerably expanded foreign ownership of Chinese assets, but when a Chinese company tried to acquire UNOCAL, Congress cried foul in the name of a threat to US security. According to this logic, American multinationals have been violating the security of every nation on earth.

The deterioration of US-China relations could also have serious consequences for China, beset with internal contradictions. The benefits of prosperity have not reached rural areas, where three-quarters of China's 1.3 billion people reside. Millions are forced to leave their impoverished villages to find jobs as degraded laborers in urban centers. As the gap between the rich and poor widens, official corruption continues and the state uses ever harsher means to suppress dissent and organizing of any type, a simmering popular resentment is breaking out in a record number of riots and other manifestations of unrest.

Is destabilizing the Chinese Communist regime by humiliating its leaders and pursuing containment policies one of the goals of the Bush Administration's global "Democracy Project"? Elsewhere, the project is failing miserably: The attempt to democratize Iraq has ushered in a pro-Iranian, religious, Shiite-dominated government, and the attempt to do the same in Palestine has facilitated a Hamas victory.

If China becomes unstable, American big business won't sit still. The Bush Administration will be forced to intervene to protect investments by supporting the Chinese status quo, and America could again find itself propping up a dictatorial government. Ultimately, it is not the smartest move for the Administration to pull the red carpet from under Hu, when it is so mired in Iraq and desperately needs the Chinese to assist in constraining Iran and North Korea, the other two members of the "axis of evil."***

Peter Kwong, a professor of Asian American studies at Hunter College, is co-author of Chinese America: The Untold Story of America's Oldest New Community.

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