Thursday, October 8, 2009

No More Excuses for Growing Rich-Poor Gap in China

By John Lee - Der Spiegel

Blaming Mao's chaotic years for the slow pace of reform is wearing thin as the vast majority of Chinese remain poor while their leaders grow more powerful.

It has been 60 years since Mao Zedong told his people on Oct. 1, 1949, that "the Chinese people have stood up" and declared the founding of the People's Republic of China. Anniversaries are usually arbitrary passing points in time carrying little true significance, but this one isn't. Leaders from Deng Xiaoping onward have been telling the world that China is assiduously laying the groundwork for political reform and eventually democracy-but only after it recovers from the chaos and destruction of the Mao years. Yet with China now in the midst of a weeklong holiday to celebrate the anniversary, the reform period since Deng Xiaoping took power will be nearing the completion of its 30th year -- exactly half the age of modern China. The reform period will have exceeded Mao Zedong's 27 years of terrible rule. In reality, China's leaders have been deliberately moving further away from any fundamental reform, and using the excuse of Mao is wearing thin.

China watchers generally caution against agitating for democracy in China on both diplomatic and practical grounds. To be sure, doing so would enrage Beijing and make any constructive bilateral relationship difficult. On practical grounds, there is no guarantee that under current conditions, one-person-one-vote would bring greater freedom and prosperity rather than more chaos and even a reversion to socialism.
But this in no way absolves Beijing from blame. For even though democracy may not suit China right now, the country desperately needs the building of institutions that would both immeasurably improve the lives of its citizens and most likely deliver a sound platform for fundamental political reform and, eventually, democracy.

First things first: Why does the building of institutions that might lead to democracy matter in China? Because in one important respect, authoritarian China is failing: While the Chinese state is rich and the Chinese Communist Party (CCP) powerful, civil society is weak and the vast majority of people remain poor. The health, wealth, and well-being of Beijing and the Party are not the same as that of its people. Since the 1990s, what is good for the Chinese state is no longer automatically good for the vast majority of its people.

Growing Power of Communist Party

How then do we establish the best possible conditions that will eventually lead to greater political reforms that benefit the Chinese people? We need a strong civil society where there is rule of law. Courts need to be independent and officials need to be accountable. Private property needs to be protected, individual enterprise needs to be given a chance to succeed, basic human rights must be enforced, and the government needs to be restrained. This is the meaning of just and decent rule for the Chinese people. These are the foundations for a just society that are sorely lacking in modern-day China.

China has grown sixteenfold since reforms began. But in the absence of effective institutions that restrain the discretionary powers of CCP officials and render them accountable for their actions, it is the state and the CCP that grows stronger rather than the Chinese people and civil society.

Many problems in modern China begin with the increased role of the Chinese Communist Party in Chinese economy and society. Tellingly, the number of officials before and after the Tiananmen protests has more than doubled, from 20 million to 45 million. Since the early 1990s, the CCP has retaken control of the economy. State-controlled enterprises receive more than three-quarters of the country's entire capital each year, reversing the situation prior to 1989.

The private sector, on the other hand, is denied both formal capital (bank loans) and access to the most lucrative markets, which are reserved for the state-controlled sector. Only about 50 of the 1,400 listed companies on the Shanghai and Shenzhen stock exchanges are genuinely private. Fewer than 50 of the 1,000 richest people in China are not linked to the Party. This state-corporatist model favors a relatively small number of well-placed insiders.

Rise in Corruption

Meanwhile, a billion people remain "outsiders" in the corporate-state system and are largely missing out on the fruits of gross domestic product growth. In fact, 400 million people have seen their net incomes decline during the past decade. Absolute poverty has doubled since 2000.

This extensive role of the CCP has coincided with a rise in systemic corruption. Courts at all levels are still explicitly under the control of Party organs. According to studies by the Chinese Academy of Social Sciences, stealing from the public purse by officials amounts to about 2 percent of GDP each year, and it is rising. According to a 2005 CASS report, more than 40 million households have had their lands illegally seized by corrupt and unaccountable officials since the early 1990s.

Levels of dissatisfaction-especially with local authorities-are so bad that there were 90,000 instances of mass unrest in 2006, according to official figures, rising from a few thousand in the mid-1990s. To appease unhappy citizens, Beijing has instituted a system of "petitions" whereby aggrieved citizens can appeal to a higher authority against their local officials. A good idea, perhaps, except for the fact that of every 10,000 petitions lodged, only three are heard.

Democracy under these circumstances is unlikely to produce a better result for the vast majority of China's people. China first needs institutions. But the CCP knows that if strong institutions are built, it will lose its privileged place in Chinese society and economy. And if so, eventually it will likely lose political power.

In remembering 60 years of modern Chinese history, the chaos of the Mao Zedong years can no longer be blamed every time the issue of stalled reforms and institutional building is brought up. The Chinese state is strong, but its people are weak. It is time that the state and Party allow the Chinese people to truly stand up.

John Lee is a foreign policy fellow at the Center for Independent Studies in Sydney, Australia, and a visiting fellow at the Hudson Institute in Washington, D.C. He is the author of Will China Fail? (CIS, 2009).