Now that Deng Xiaoping, the architect of China's astounding economic advancement, is about to exit the scene, it is worth asking whether the era of post-Deng politics has already begun. At 92, Deng is long past active leadership and healthy participation in decision-making. The corruption charges brought against some of his favorite cronies and the efforts of Jiang Zemin, general secretary of the Chinese Communist Party since 1989, to put his own stamp on policy show Deng's waning influence. But the Chinese system of powerful, trusted personal secretaries means that Deng's office carries on even when the master is asleep. So long as he has a pulse, Deng is more an institution than a man, and a certain public awe shapes the political environment.
Succession has four aspects: who will be the top leader, which generation seizes the reins of power, how the government will be structured, and which direction policies will take. Who will get the top job is largely unpredictable, but whoever he is, he cannot possibly achieve the stature of Mao Zedong or Deng Xiaoping. This is a structural change, not just a comment on available leaders. World War II produced Roosevelt, Truman, Eisenhower, Churchill, and de Gaulle. Similarly, only the stresses of the revolution could produce leaders of Mao's or Deng's stature. The governance of China after Deng will be spread among many leaders, and their policies will depend more on broad support and the consensus of elites than individual predilection.
The standing and ideological bent of the new generation of leaders is much more ambiguous than those of the 'immortals,' the octogenarians who prove more mortal every month. The so-called third generation of Jiang, Premier Li Peng, and Vice Premier Zhu Rongji is largely made up of Soviet-style electrical engineers. But in many institutions, the more technocratic, market-oriented, politically relaxed, Western-oriented fourth generation of leaders whose members are now in their forties is grabbing power. The faster economic development progresses and the calmer China's relations with the outside world, the less the old ideological and nationalistic slogans will support the traditional third generation and the faster the center of gravity will shift toward the more liberal fourth.
China's totalitarianism has receded into what some call normal Asian authoritarianism. People can wear what they like, share opinions with their neighbors, choose their careers, change jobs, hear conflicting opinions from their national leaders, vote in competitive local but not national elections, move around the country with limited hindrance, start their own businesses, and in general do pretty much anything other than directly challenge the authority of the government. China after Deng will continue to move in the right direction. The United States should above all avoid hindering its evolution.
Twenty years ago the United States was asking what would become of South Korea after Park Chung Hee. Virtually everyone feared a return to the chaos and ideological polarization that had preceded him. Despite frightening struggles for the top position, however, the direction of Park's economic and foreign policies was never challenged. The same was true of Taiwan after Chiang Kai-shek, Singapore after Lee Kuan Yew, and Thailand after Prem Tinsulanonda. The reasons for the continuity in Korea were straightforward: the people had been on the borderline of starvation for generations, their leaders had suffered humiliation, and they had tried many policies but none seemed to work. Under Park they found a magic combination--development-oriented authoritarian politics and an export-led market economy--and gradually the fear of starvation, the forebodings of war, and the humiliation evaporated. Any leader who wanted to return to the days of Syngman Rhee, Chang Myon, or the Yi dynasty, or to experiment with some new radical variant, would have been repudiated by the leadership and most of the population.
Except for colonial Hong Kong, the great takeoffs of Asian nations have seen reforms tethered at first to a great leader but later continued by consensus. In all cases that consensus led to a gradual relaxation of autocratic rule. The pattern has been very different in most African and Latin American countries, as well as India and the Philippines, where the successes have not been sufficient to create fundamental consensus. But in China, as in other Asian countries, the consensus on the importance of economic development will eventually lead to more political progress.
THE MARKET CONSENSUS
There is a broad consensus in China about which policies were crucial to the rise of the people from hunger and the nation from humiliation. At the core is the overwhelming priority given to economic development and, its corollary, the gradual move toward a market economy. Among the 50 most prominent leaders, no voice argues that the state should retake farms, close off the economy from the world, or, like the Soviet Union, subsidize all state enterprises until the country goes bankrupt. All tendencies are toward market prices, development of capital markets, increased competition, an open economy, and reorganization of state enterprises. As in Taiwan years ago, the remaining ideologues (such as Propaganda Department head Deng Liqun) have been shunted into noisy impotence in the propaganda ministries.
There is of course conflict over important details. Conservatives like Li Peng advocate reform, but at a measured pace, because they worry about social stability and inflation. Liberals in the mold of former Premier Hu Yaobang want to move forward briskly, with less concern about inflation and social tremors. The range of opinion may be wider than the gap between Margaret Thatcher and former Labour leader Neil Kinnock but is much narrower than the spectrum in South Korea or Singapore in 1965.
Because it is subordinate to economic policy, foreign policy is also a matter of consensus. Deng wanted to focus attention and resources on the economy, so he was determined to have relatively friendly relations with Japan, the United States, Russia, noncommunist Southeast Asian countries, South Korea, Taiwan, Vietnam, and India. He also stopped supporting ideological insurgencies around the world and drastically cut the share of GNP going to the military, to about three percent today from ten percent in 1979.
Policy toward Hong Kong is also a function of the priority China gives to economics. Despite its conspicuous hatred of colonialism, since the founding of the People's Republic in 1949 the leadership has maintained a policy of protecting and nurturing Hong Kong's open institutions. At any time since 1949 China could have seized Hong Kong almost instantly, and for the last generation it could have gained control simply by turning off the water and waiting a few days. But an economically dynamic Hong Kong is useful. The shift from 'politics in command' (one of Mao's favorite slogans) to a pride of place for economics has enhanced the importance of this early consensus on Hong Kong and led the leadership to consider why the colony is successful and what will keep it useful. Much of China's conflict with Britain derives from fears that Britain will change Hong Kong and destroy its economic dynamism. Beijing's policy toward Hong Kong is to preserve its structure so as to maintain its dynamism. Indeed, the first sentence of the Basic Law, the constitution China has written for Hong Kong, forbids socialism.
The consensus on preserving Hong Kong's system for economic purposes parallels an equally important consensus on the need for full Chinese sovereignty when the colony changes hands in 1997. Because of China's capitulation to British drug pushers in the Opium War a century and a half ago, one of the great humiliations of Chinese history, no leader could allow Britain once again unilaterally to dictate the governance of any part of China, as British Governor Christopher Patten has attempted. As Chinese sovereignty approaches, Hong Kong feels anxiety but also enthusiasm. Growth is rising, inflation declining. Emigration has fallen from 60,000 a year to 48,000, while immigration continues at far higher rates. In November foreign business confidence hit the highest levels in the history of the poll. Construction is omnipresent. The stock market has been one of the world's most bullish. Both China and Britain have forsaken ideology in favor of management. Serious bumps are coming, most notably from U.S. congressional inclination to back Patten, but the early mood for the transfer of sovereignty is confident.
The consensus extends to development-oriented authoritarianism. All current Chinese leaders believe the nation needs a one-party system to constrain dissent while they impose difficult and painful reforms that will affect interest groups like the state enterprises that control vast resources and provide livelihoods for hundreds of millions. Here too they differ on details. Some cling to Marxist ideology, although most of the leaders under 50 reject Marxism privately, believing they should follow in Park's development-oriented authoritarian footsteps. As in Taiwan and South Korea, they are gradually permitting social controls to attenuate. The media report a range of views rather than just the party line. Individuals' political speech is relatively free, short of calling for the organized overthrow of the leadership. People change jobs and move around much more freely. Citizens can sue the state. A majority can choose local officials through more or less competitive elections. Though one-party rule will remain, these are not token changes.
Since the end of the Cold War, most of the Chinese have accepted, as South Koreans and Taiwanese did until the mid-1980s, the view that economic priorities are the right ones and political liberalization should be slow. Unless the leadership ceases to deliver better living standards, the consensus is likely to persist until a generation or two from now when most can take food, shelter, and the health of their children for granted. Then, as in South Korea and Taiwan, political aspirations will change.
THE SOVIET EXAMPLE CANNOT HOLD
One of the most prevalent Western concerns about China, promoted notably by China scholar Gerald Segal, is that the country may disintegrate when Deng departs, with obvious implications for its economic and political progress. The former Soviet Union was a large communist empire and it disintegrated, proponents say, so perhaps China will too. News reports about conflicts between the provinces and the center are also more frequent, particularly reports about tension between dynamic coastal states and the stagnant interior.
The analogy between China and the former Soviet Union, however, does not hold. China was first unified some 2,200 years ago and has had numerous periods of authoritarian stability lasting 300 years or more, whereas the Soviet Union was a relatively late innovation. Rapid economic growth is pulling China together, as it has Indonesia and Thailand, whereas a collapsing economy tore the Soviet Union apart. Indonesia has far more cultural and political diversity and other challenges to unity than China but has pulled itself together through economic success. And whereas the former Soviet Union was less than half Russian, China is 94 percent Han Chinese. People in Guangdong squawk about taxes and bureaucrats in Beijing, but they are still patriotic Chinese, whereas Ukrainians did not feel Soviet and are not Russian.
The thesis that tensions between a dynamic coast and a stagnant interior will tear China apart falls before the economic evidence. Many interior provinces are poorer and growing more slowly than the fastest-growing coastal provinces, but growth is rapid throughout the country. For instance, Sichuan, with over 100 million people, is one of the slower-growing provinces, but its per capita income jumped by 50 percent in only 6 years. Such rapid growth in incomes, unheard of in the West, generates support for the central government.ffi
Provincial assertiveness does not imply national disintegration. After the terrible overcentralization under Mao, some decentralization was necessary. Market reforms by definition reduce the central government's control over some decisions, such as the composition of exports. Segal and others predict national disintegration, noting that the state controls less than half the economy, owns less than a quarter, and provides a shrinking amount of investment.Û These figures are dramatic evidence not of regime failure but of the central government's success in moving rationally toward a market economy.
Originally provinces like Guangdong were instructed to test reforms, while neighboring provinces like Hunan were not and resisted following suit. Peasants stood at the Hunan-Guangdong border to block the shipment of raw materials to Guangdong. But soon they began to discern the spectacular benefits of reform and demand the same opportunities. This voluntary ideological shift has far-reaching and unifying consequences for the country, and the subsequent phasing out of special privileges for coastal provinces does no damage.
The center's ability to raise revenue and control the money supply was potentially jeopardized. Once the individual provinces controlled more resources than are available to most Third World central governments, the center's ability to control its own apparatus could have been put in doubt. Corruption and ideological disillusionment threatened to sever the strings Beijing manipulated to manage local affairs.
On some of these risks the evidence is largely in. The consensus in late 1993 among the central government and provinces on the division of tax revenues was tantamount to a corporation reaching a consensus on the outlines of a budget after a reorganization. The ability of the central bank to control the money supply through three successive cycles of inflation indicates that the national government retains control of that crucial lever. And the proven power of the central government to reassign provincial civilians and officials, together with the absence of any sign of military disloyalty to the regime, shows that those vital instruments of power remain intact.
Two serious risks remain: the government's declining ability to deliver resources, particularly to rural areas, through a chain of command eroded by endemic corruption, and the party's ability to remain vital at the local level in an era of corruption, ideological disillusionment, and loss of party control over jobs. Before reform began in 1979, China had a well-deserved reputation as substantially free of corruption. Now corruption is pervasive, and the speed with which it has spread is frightening. Party and government officials are frequently implicated, and in many places the military and police are prime culprits.
In response, Jiang has launched far-reaching anticorruption campaigns, not just in Beijing but also in Shenzhen, Guangdong, and Guizhou. The pattern under Deng of catching the goldfish and ignoring the whales ended in 1995 with the indictment of Politburo member Chen Xitong. It remains to be seen how long such government initiatives will be sustained and whether they will attack all corruption or will just be used to purge political opponents.
While corruption is pervasive, the top leaders are not in it for the money. They want power, prestige, and distinguished roles in the history books. The great Asian economic takeoffs--in South Korea, Taiwan, Hong Kong until the mid-1970s--have typically suffered from corruption, but the top leaders (Park, former Taiwan President Chiang Ching-kuo, Hong Kong's governors, Lee Kuan Yew) cared mainly about building their countries. So far, China's top leaders (Mao, Deng, Jiang, Zhu) clearly fit in that category. Furthermore, the thrust of Chinese policy, unlike that of Ferdinand Marcos' Philippines, has been to enhance rather than curtail competition. China used to have one airline; now it has over 30. Sectors like telecommunications and consumer goods have been opened much faster to foreign competition and involvement than in the other Asian miracle countries, including Japan and South Korea. All this could change, but for now China's pervasive corruption is not incapacitating.
In an effort to revitalize the center's administrative capacity, China has introduced competitive elections at the local level. Almost unnoticed in the West, Chinese villagers have acquired the ability to hold 4.2 million local officials accountable, and in many areas they are ferociously voting people out of sinecures.Ü To the extent these efforts succeed, they will create demand for competitive elections at higher levels. Eventually these will link up with the demands of Qiao Shi, chairman of the National People's Congress, that the congress be recognized as the ultimate source of authority. Thus dictatorial leaders have set in motion forces that over decades will create changes today's leaders would find unthinkable. The experience of the Kuomintang in Taiwan, originally a Leninist party like China's Communist Party, shows that such pressures can be accommodated and made compatible with exceptional economic growth. But it takes great wisdom to accept the need for accommodation and pace it properly. Such pacing is much more difficult given the enormous complexity of a country of 1.2 billion people like China, compared with Taiwan's 20 million.
In addition to the regions' disintegration, the Soviet analogy portrays China's economy in crisis, beset by rampant inflation and outmoded state enterprises. A list of recent major developments in China creates a strikingly different pattern. At the end of 1993, the leadership reached agreement on the greatest wave of economic reform since the Deng Xiaoping era began in 1978, and it launched those reforms within months. Reform unified and strengthened the currency, improved the tax system to produce more revenue, strengthened the central bank's regulatory authority while decreeing a large number of other banking reforms, and introduced a wide-ranging set of laws enhancing corporate, civil, and property rights. This wave of reform has produced measurable positive results. Since early 1994 the unified currency has strengthened despite high domestic inflation. That inflation initially worsened but has declined sharply to 14.8 percent annually, while economic growth remains among the world's highest, at 10.2 percent. Foreign exchange reserves have risen from $21 billion to over $70 billion. The 1995 grain harvest of 460 million tons set an all-time record. The lives of virtually all social groups have improved.
While state enterprises remain a chronic problem--indeed, the biggest obstacle to the next phase of economic reform--progress has been made. Certain industries like airlines, manufacturing, and retail distribution are improving efficiency under the whip of greater competition and tougher regulation. Large numbers of state enterprises have been effectively turned over to foreigners through joint ventures. Many inefficient enterprises have been folded into more efficient ones. Flying to Shanghai on China Eastern Airlines is comfortable. Eating or shopping at one of the rejuvenated restaurants or department stores can be a pleasure. Shanghai Auto now turns out well-constructed Volkswagens. The work forces of many state enterprises are earning most of their income moonlighting in the private sector. But the biggest, most inefficient, monopolistic enterprises have become worse rather than better. Shutting them down, Chinese leaders believe, would provoke riots. Mitigating the unrest would require an expensive safety net.
Overall, China is proceeding on a much more open model than Japan and South Korea a generation ago. Foreign direct investment in China was $34 billion in 1994 and $38 billion in 1995--more in one year than Brazil has received since World War II--which testifies to greater openness. China, for example, takes Motorola's pager system as its national standard, while Japan tailors regulations to keep Motorola out. China keeps construction costs down by letting Bechtel compete, while Japan still accepts the inefficiencies of its protected oligopolies. Avon's tens of thousands of Chinese Avon ladies would never have been tolerated in Japan or Korea. So attractive is the investment climate that substantial domestic capital disguises itself as foreign.
Chinese society is a gigantic enterprise that has been evolving from a rigid hierarchy with all authority concentrated in one man, all positions awarded on the basis of party loyalty, and incentives based entirely on bureaucratic promotion to a system with greater delegation of authority, greater regard for expertise, incentives based predominantly on the market, and, at the lower levels, political authority based more on popular support. The changes in management structure are a work in progress, but many decisive goalposts have already been passed. Devolution of broad areas of economic authority to the provinces and the market has created a fundamentally new system. Assignment of broad taxation and regulatory authority to the provinces broke the chokehold of the central bureaucracy over the economy and created a diverse, competitive, creative approach to economic management. Only one person in five now works for the state. Due to its tremendous scale, the managerial reorganization's outcome is much less clear than the area of economic ideology. But unless outside interference stimulates a clampdown, overall success should continue.
THE THREATS TO CONSENSUS
in the past year, growing tensions between Beijing and Washington have undermined the broad priority China's leaders have granted economics over foreign policy. Jiang began 1995 by attempting to differentiate himself from his competitors through anticorruption campaigns, improved relations with the United States centered on an invitation to President Clinton to visit Beijing, requests for a reciprocal invitation to Washington, and better relations with Taiwan, starting with a statesmanlike eight-point policy declaration.
Washington quickly kicked out two of the three legs of Jiang's platform by encouraging Taiwan's international campaign for upgraded diplomatic status and welcoming Taiwanese President Lee Teng-hui to Cornell University after the State Department promised not to do so. Calls for containing China, support for Taiwan's reentry into the United Nations, proposals to send an ambassador to Tibet, a special Senate reception for Madame Chiang Kai-shek, harsh criticism of continuing human rights abuses, and proposals to invite Taiwan's president to address Congress emanated from that body. Feeling that the most powerful nation in history was threatening its sovereignty and convinced that Washington was deaf to normal diplomacy, China responded with angry nationalist rhetoric, military exercises, and missiles fired near Taiwan. These were symbolic steps, reminiscent of President Jimmy Carter's sailing aircraft carriers along the Persian Gulf in an impotent effort to spook Iran. China does not have the military capability to invade Taiwan, but because China sounded thuggish, most Westerners assumed an invasion was a real possibility.
Throughout the crisis, Beijing officials traveled the country warning that no one should threaten Taiwan's mainland investments. No one did. Beijing assumed everybody knew the noise would stop after Beijing had made its point and the economic lovefest with Taiwan would continue, but Americans did not understand. They began to view China as dangerously aggressive, which was just as inaccurate as China's view that the United States was trying to dismantle it. Because of these misperceptions, the world stands at the brink of an utterly gratuitous second cold war, much more dangerous than the first because China's rejuvenation has so far avoided the flaws that doomed the Soviet Union from within.
China's consensus covers most of the things that would be important to a foreign corporation planning to build a factory or a foreign minister managing diplomatic relations, but vast areas are still not set and are even more sensitive. The most obvious is who should get which leadership jobs. As the events after Park's death demonstrated, policy consensus does not preclude lurid power struggles. Deng has attempted to forestall infighting by giving Jiang more hats than Mao Zedong. In addition to being president of the country, Jiang is head of the Communist Party and the military. Giving three jobs of that stature to a single individual is not a sign of confidence. Rather, it is a fortress against an expected assault. If and when power struggles surface, the consensus means that they will not engender war, famine, or nationalization of private foreign investment, but they could certainly frighten stock markets in China, Hong Kong, and Taiwan.
A second dispute concerns the violent suppression of demonstrations in Tiananmen Square on June 4, 1989. The leadership, including Jiang, has insisted that in the absence of crowd control specialists and sophisticated technology, putting a prompt end to the incident by firing on the students was both necessary and morally right. But entire generations of educated elites in the party and, especially, the army disagree. Many army leaders were appalled at the idea of firing on students and to restore their honor they want an acknowledgment that they were forced to obey misguided civilian politicians. The regime will eventually have to face these demands. In 1947 Chiang Kai-shek forcibly put down a Taiwanese demonstration at a cost of 18 times more deaths than Tiananmen Square, and his party could not lay the issue to rest for five decades, until last year, when the government apologized and paid the victims compensation. Likewise, South Korea is just coming to terms with the 1980 suppression of student protests at Kwangju, which was also more violent than Tiananmen Square.
As in Taiwan and Korea, this issue may be deferred. Public anger focuses on Li Peng and the Beijing municipal government, the most outspoken supporters of the military action, even though they were not the decision-makers. However, Li Peng is scheduled to step down in 1997, and the Beijing city government, formerly under Mayor Chen Xitong, is being purged for corruption. Today's top Chinese leaders are from Shanghai, where the 1989 demonstrations were handled wisely, without casualties. These developments probably make it possible to defer the issue until it can be addressed without initiating a clash with sitting leaders.
A far more fundamental disagreement is whether the party should continue to use the National People's Congress as a rubber stamp, the traditional practice, or begin to enforce congressional regulations and policies. The congress has gradually begun to assert itself. It forced Li Peng to make changes in his annual work report and threatened to veto the Three Gorges megadam project and even Li Peng's 1989 declaration of martial law during the Tiananmen Square incident. Under the guidance of Chairman Qiao Shi, a member of the Standing Committee of the Politburo with deep roots in the security forces and a broader vision of the future than some of his colleagues, the congressional leadership has been outspoken in its demands for a leadership role. Jiang and Li Peng are too traditional to consider the change, but noteworthy progress has already occurred. The reformation of the Taiwan legislature shows that a Leninist structure can evolve toward greater popular accountability. In all probability the change in the Chinese legislature will be inexorable but so gradual that for some time Western journalists will not notice it.
The debate over the role of the legislature is part of the broader pressure in China to enhance the role of law. Business, both foreign and domestic, is pushing for a less arbitrary system of regulation. The shift would involve a major change in the Confucian tradition, which is moralistic rather than legalistic. The Confucian ideal has always been moral arbitration in a manner Westerners associate with the biblical King Solomon. By the standards of that tradition, the Chinese business arbitration system does not work badly, but a mismatch arises when the issue is, say, a Microsoft bid to take over Intuit. King Solomon can rule either way; highly codified Western law is much more predictable.
The national upheavals since 1949 have convinced even many senior leaders of the Communist Party that what they call the 'emperor system' is too arbitrary. 'We've had Emperor Mao and Emperor Deng,' one party elder told me. 'They've done some good things and some bad things, but they've kept our country and our families in upheaval. We need a government with a division of labor based on law.' While these Chinese leaders' desire for law is based primarily on a desire for order, as opposed to human rights, rejection of arbitrary rule is the historical foundation for rights as they are understood in the West. Now that some citizens are suing the government, and occasionally winning, the pressure to curtail arbitrary rule is becoming a tide--not a tidal wave by any means, but a gradual flow that is engulfing whole areas of patronage and party dictatorship. Dissident Wei Jingsheng can testify that this trend has a long way to go, as Kim Dae Jung could have testified in South Korea 20 years ago. But so far things are changing at least as fast in China as they did in Taiwan and South Korea.
In economics, a sharp dispute over the importance of ownership remains. The more old-fashioned socialists cling to the beliefs that state ownership of large enterprises is necessary if they are to be managed in the interests of society and that most state-owned enterprises can be made efficient without being sold. Others argue that the state ought to be little more than a regulator. This debate is not terribly different from those that have taken place in the West; the center of the British Labour Party 30 years ago was not far from the effective left of the Chinese Communist Party today. Such disputes tend to be resolved everywhere outside Eastern Europe (Western Europe took the gradualist, Chinese way) by putting both governments and economies on the slippery slope of pragmatic experimentation, which invariably leads to more competition, private ownership, and private management. But the process takes time.
The experiences of South Korea and particularly Taiwan show that so long as the leadership continually adapts incrementally, social pressures can be channeled in ways that strengthen the political base of the regime. However, if a regime tries to push back the tides, they can build in power and overwhelm the regime. That is the lesson from the demise of the Soviet Union. The Chinese leadership has bitterly denounced 'peaceful evolution' but has in fact evolved peacefully at rates that have revolutionized the society in only 17 years.
THE REMAINING OBSTACLES
While political and economic reforms are not tearing the country apart, they are causing social strains. At the local level, there is tremendous resentment of the small number of people who have become rich. This has caused dramatic increases in crime and occasional riots. So long as rapid income growth reaches most groups, local resentment will remain local. If overall progress stopped or corruption and inefficiency rendered the central government incapable of delivering services to the farmers, then China would be back in a pre-1949 situation where local discontents coalesced into a revolutionary movement.
Human rights abuses remain severe, large numbers of dissidents remain in jail, and an era when the government will tolerate an organized challenge is nowhere in sight. If China continues to develop rapidly, courageous dissidents will someday usher in the future. But they will not be the wave that comes immediately after Deng. If the Communist Party proceeds in its economic reform and political adaptability, it could well be in power just as long as the only other Leninist system in the region that has held local elections--the Kuomintang Party, which still rules in Taiwan.