Present at the Stagnation

Pei concludes that if China remains on its present course, it "risks getting trapped in a 'partial reform' equilibrium." The concept of a partial reform equilibrium is imprecise: When is reform anything but partial? And if there is an equilibrium, then what is the problem? But the phrase accurately conveys Pei's concern that reform has stalled -- a worry shared by some people in China. The same feeling was pervasive in China in 1987-88, and it helped trigger the nationwide student and worker demonstrations of 1989. According to Pei, the sense of progress that was key to the regime's legitimacy in the 1990s has disappeared.

THEY HAVE A PLAN

Pei's energetically argued thesis provides a useful corrective for those who see only construction cranes and cargo containers when they look at China. But it requires scrutiny on two levels.

First, Pei provides only weak evidence to support his contention that China should be headed toward democracy and full marketization (which Pei defines as little or no state control of prices, few or no state monopolies, and little or no government intervention in bank lending). Deng rejected Western-style democracy, saying he wanted only political reforms that would enhance administrative efficiency. Pei acknowledges Deng's stance but seems to put more stock in the proceedings of a study group that Zhao Ziyang convened in 1986 and 1987, when he was the CCP's general secretary, to explore the options for political reform. The study group (whose proceedings were revealed when one of Zhao's secretaries came to the West and wrote a book about them) considered some radical ideas that might truly have democratized China if they had been implemented. Yet the political reform proposals that Zhao presented to the 13th Party Congress in 1987 were modest. Shortly thereafter, the 1989 Tiananmen Square crisis and the fall of the Soviet Union drove home the message to the party's leaders that they should keep a firm grip on power. (Zhao was no longer among them, having been purged after Tiananmen.) There is no evidence that anyone in the Politburo under Jiang Zemin or Hu Jintao ever favored reforms that would make it possible for people outside the party to challenge its power. Accordingly, the reforms that Pei sees as "stillborn" were probably never intended to lead to anything more than the administrative streamlining and controlled consultative processes that are in place today.

Similarly, China's economy has not achieved full marketization because that was never part of the CCP's plan. Rather, economic reformers such as former Premier Zhu Rongji and current Premier Wen Jiabao intended to produce a leaner and more competitive -- and thus stronger -- state sector by exposing a select group of SOEs to the discipline of international and domestic market forces under the watchful eye of a sophisticated and professional regulatory bureaucracy. The prices of key commodities and factors of production (such as energy, rail transport, and, as Pei points out, labor, real estate, and credit) remain under the state's control. It is true that tens of thousands of weak state enterprises have closed or gone private since the beginning of the Deng era, but the state has selected about one thousand of the strongest and most strategically placed SOEs to receive as much state help as they need to succeed, not only domestically but in some cases globally. And although some banks have allowed foreign companies to buy minority stakes, they remain state-owned and continue to support both the state-subsidized "pillar" SOEs and state-prioritized infrastructure projects.

In short, the regime never intended to let globalization wash away either its political or its economic power. Pei may believe that Beijing's plans are irrelevant because they fly in the face of Western theories about the inevitability of marketization and democratization. But proving that an authoritarian regime can prosper through modernization is exactly what is at stake in the Chinese experiment, which is why dictatorships from Kazakhstan to Iran are keenly watching its progress. Pei's thesis of a "trapped transition" implies a teleology that the Chinese leadership does not accept -- and that needs to be defended rather than assumed.

The second problem with Pei's thesis is that although his facts are correct, they do not amount to a balanced picture of China's condition. Any purely negative account of China overlooks a lot of things that China is getting right. For example, the government has announced the abolition of both the household registration system, which blocked job-seeking peasants from enjoying full resident status in cities, and the "custody and repatriation" procedure, under which the police randomly swept up and abused peasants and others who were living in cities illegally. It ended the grain tax, which contributed to the widening income gap between the countryside and urban areas. It is trying to shift more of the impetus for economic growth from export sectors to domestic consumer demand, partly by shifting more income to farmers and partly by improving the social safety net. In addition, Wen recently announced plans to provide free education nationwide through the ninth grade, improve health care in rural areas, and strengthen the protection of rural residents' property rights.