Jun 11, 2007

China in Focus, Number 15 - Success Story or House of Cards: Seeing China with "Chinese Characteristics"

"When I walked in the park today, I heard criticism of the government that would have brought death sentences in Mao Zedong's time. But nothing like this can be broadcast or published in the media. Nothing like this can be said in an organized meeting... The change you see and hear is the flowers, and the leaves. But there is no change in the root. That [root] is the party's control over everything, including control over the market. Money is to the leaders today what revolution was to Mao -- a tool to control the people. The unchanged root is the one-party dictatorship." Bao Tong, senior Chinese reform advocate, remarks to Washington Post's Jim Hoagland, Beijing, June 2007

Greenspan's Warning, Paulson's Optimism

Speaking before an international financial conference in Madrid, Alan Greenspan, senior statesman of Western markets, warned of an impending Chinese stock market crash, reported the May 24, 2007 London Telegraph. Greenspan stated that the recent 90 percent rise in the values of Beijing stock shares was, "clearly unsustainable. There is going to be a dramatic contraction at some point." In Beijing, the Chinese government raised interest rates reluctantly in a series of emergency moves to bring an overheated economy under control. Meanwhile, in Washington, U.S. Treasury Secretary Henry Paulson described his 2-day economic meeting with Chinese Vice-Premier Wu Yi in an upbeat manner, even though Yi openly rejected U.S. criticism of its undervalued currency. The Congressional Research Service recently found that economists estimate that China's currency, the yuan, is undervalued by as much as 54%. As a result, with a massive $200 billion annual trade surplus with the U.S., China now holds more than $1.2 trillion in foreign-exchange reserves, compared with U.S. reserves of about $69 billion. Yet, while China's coastal cities continue their meteoric rise, the majority of China's population who live in the countryside are surviving in pre-modern conditions.

In the cities, the Party worries that there are tremors beneath the futuristic landscape of new skyscrapers and the enthusiasm expressed by Western corporate investors. In early June 2007, a panic struck China's emerging urban middle class as their life savings suddenly shrunk when the government imposed new taxes on the corruption-riddled Shanghai stock exchange. The June 9 Washington Post reports that some shocked investors called the government's "stamp tax" on stock trades "planned murder." Other investors talked about "storming Tiananmen Square." The tremor was caused by an overheated stock market whose composite index has grown by 300 percent since 2005. The Chinese stocks markets, closed off to foreigners except for select institutional groups, with potentially disastrous consequences for US pension funds. Investment is dominated by in inexperienced private Chinese citizens, who often make chaotic decisions based on rumor or superstition [numerology] that have driven up shares of state-owned companies that are actually losing money. State-control and manipulation of the stock markets are not true investment markets, states Yi Xianrong, a researcher at the Chinese Academy of Social Sciences, "but rather markets led by the government."

Contradiction in Military Affairs

The massive surplus in monetary reserves has fueled a massive military modernization program, where actual annual spending is estimated to be up to $125 billion, three times the officially cited figure. Contradictory assessments and estimations of Beijing's intentions are also apparent in the US military's assessments of China's unprecedented naval, air and ballistic missile buildup. The Pentagon's annual report on China's military capabilities released publicly on May 25, 2007, expressed concern that Beijing's new capabilities. Developments include longer range strategic missiles, attack submarines and aircraft -- enable China to launch attacks far from its borders. The open seas and space have become potential battlefields between U.S. and Chinese forces. Some high level U.S. officials, however, refuse to consider the Chinese military to be a threat. In mid-May while visiting Beijing, America's Commander in the Pacific, Admiral Timothy Keating, stated that he believed Chinese leaders are "intrigued" by the idea of having aircraft carriers. He added, "If they choose to develop [an aircraft carrier program] we would help them to the degree that they seek and the degree that we're capable, in developing their programs."

Chinese Society in Transition

China watchers in the West appear polarized between the optimistic and the pragmatic assessments of China's role on the world stage. They reflect fundamental contradictions that exist in Chinese society today. Both schools of thought have been hindered by a tendency to analyze China's evolution through the values and symbols of the analysts own cultures. The manner in which these complex issues are dealt with in China, by the Chinese people themselves, will determine whether the Middle Kingdom ultimately has a constructive or destructive role in the shaping of the 21st Century.

Contradictions with Chinese Characteristics

The most accurate assessment of China today may be observed in the struggle between reformers in the Communist Party who warn of looming instability beyond the glittering pre-Olympic skylines of showcased cities such as Beijing and Shanghai. A significant factor in the increasingly complex dialogue between China and the West is influenced by the unbalanced relationship between the privileged minority associated with the Communist Party and the vast majority of the Chinese population. Of 1.2 billion people, only .05% are Party members. Most ordinary citizens struggle to survive in a rapidly changing environment, without coherent civil society and basic human rights. Although there are many laws on record, few are enforced.

With international markets showing signs of potential instability, China's banks, stock markets and social stability show signs of previously hidden vulnerabilities. The results of an economic "correction" could destabilize not only China but the entire international financial system. Such events could also result in an effort by China's ruling elite to unite a fragmented population against external enemies who are perceived as "containing" China's growth. James Mann, author of "The China Fantasy," warns, "We need to get beyond the arid framework of seeing every policy dispute involving China as a choice between 'engagement' and 'isolation.' Any serious policy must be based on China as it is, and not on our mistaken assumption that prosperity and liberty go hand in hand."

A key factor to international peace in 21st Century is the growing aspiration for human dignity by the vast majority of China's people. Most ordinary citizens reside outside of urban areas and are largely exploited by the country's political elite. These masses are patriotic, but as in previous periods of Chinese history, willing to stand up against state abuses of power in their pursuit of life's basic necessities. Will the West choose to stand in support of the dignity and basic rights of China's people, or reinforce a non-democratic mandate of the ruling elite?

Fault Lines in China's "Economic Miracle"

According to the World Bank, although China has $1 trillion in foreign currency reserves, that is more than offset by $1.6 trillion in pension obligations to its aging citizens. This deficit is just the "tip of the ice berg" of the actual state of China's real economy. Although most attention is focused on aging populations in Japan and Europe, China's one-child policy has set off a ticking time bomb that has left the largest population in the world without a social safety net. According to the September 18, 2006 Wall Street Journal, today there are three workers in diminishing state owned enterprises supporting each retiree; by 2010 this "dependency ratio" will jump to two workers per each retiree; and the World Bank warns by 2020 it will reach a catastrophic 1-to1 ratio.

Making matters more difficult, according to Chinese government reports, billions of dollars earmarked for China's elderly and poorest families have been misappropriated or outright stolen by corrupt Party officials. Although outsiders continue to extol China's economic development, there are serious repercussions of its uneven development that have yet to be felt.

Internal Migrants and Undocumented Laborers

According to the highest level of the Chinese government, China's unemployed, especially in vast rural areas where state owned enterprises have been closed and farming remains at subsistence level, has already reached crisis proportion. At present, more than 150 million undocumented workers have migrated to China's cities in search of opportunities, according to a report by the Council on Foreign Relations. That number is estimated to double to 300 million by 2015, according to Amnesty International. In an effort to reduce burdens on overcrowded cities, police have been especially forceful with this population. Amnesty International claims they are often, "exploited by police, landlords, employers and local officials... they labor under some of the worst conditions and experience some of the worst abuses in the work places."

In addition, in 2006, Human Rights Watch reported that in preparation for the Olympic games, tens of thousands of migrant workers' children in the Beijing area have been denied access to education, and have been forcefully removed by police from unofficial elementary schools operated by migrant communities.

A report, "Undue Influence," issued by the non- governmental Global Labor Strategies and cited in the May 21, 2007 Epoch Times, accuses multi-national corporations from both the United States and the European Union of pressuring local Chinese officials to resist labor reforms. The reasons cited by Global Labor Strategies are to suppress improvements in wages and working conditions. "On one side," the report states, "are US-based and other global corporations who have been aggressively lobbying to limit new rights for Chinese workers. On the other side are pro-worker rights forces in China, backed by pro-worker, labor, human rights and political forces in the United States and around the world."

Rising Popular and Spontaneous Civic Movements

During the past few years, China's Interior Ministry which controls local law enforcement has reported an average of at least 10,000 annual incidents of public demonstrations and unrest throughout the country. Many of these incidents involve civil insurrection and heavy handed actions by police and other state security forces. In some instances, this has led to physical confrontation between protestors of all ages and security forces. The causes of these incidents are heavily influenced by the expropriation of land and property by local officials and their cronies who sell the land to developers. The original owners are forcefully evicted and left destitute without fair compensation.

On March 23, 2007, the New York Times focused on the resistance of a woman in Chongqing who launched a determined campaign to save her home from developers. It became a nationally recognized issue when Chinese bloggers picked up the story and spread it around the country. Even though in the end, the woman could not prevent her home from being demolished, she is symbolic of the increasing willingness of Chinese citizens to confront authorities through legal challenges or public protest.

In other incidents, rural and urban populations have stood up against the government on health and environmental issues. On June 2, 2007, the London Times reported that in the southern city of Xiamen, residents sent nearly one million text messages via their cell phones to convey live coverage of a spontaneous protest that swelled to crowds numbering thousands who tried to stop government plans to build a toxic chemical plant in the center of the city.

Standing With the Chinese People

The Chinese Communist Party's most astute dissident, Bao Tong, 74, played a leading role with former Prime Minister Zhao Ziyang in drafting China's sweeping economic reforms in the 1980s. Both men both were purged and persecuted by the party for being "soft" on the student protestors following the government's brutal suppression of the 1989 Tiananmen Square democracy movement. When Washington Post columnist Jim Hoagland, who covered the events in Tiananmen 18 years ago, recently asked Mr. Bao if the students and workers of 1989 failed, he courageously responded, "They should have protested, and they did. The party failed. The party violated the constitution and its own charter. It became a Communist Party without communism, without any concern for the people. I feel proud of those who protested. I feel ashamed of the leadership."

The Chinese people's hopes and aspirations for better lives is, in principle, an internal matter. Attempts to directly intervene by the West will jeopardize the reformers as "traitors" or "traitorous pawns of the West." And there will be movements that will take shape within Chinese traditional culture and lore that may be incomprehensible to Western cultural norms and biases. However, their basic and fundamental appeal is universal. In many instances their grievances are under the jurisdiction of international human rights provisions and laws, some even signed by the Chinese government or that may be statutory within China's written laws, decrees and Constitution. Western corporations should choose to support democracy and respect for human dignity over exploitation of vulnerable laborers and blinding greed. Support for the struggle of China's reformers and desperate masses for equality and basic human dignity not only will affect China's internal conditions, but have a dramatic impact on international relations.
Jim Hoagland's Sunday, June 10, 2007 Washington Post column,
Fading Echoes in Tiananmen Square:

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