Why Care About China?

Imagine how different our world would have been had God chosen a Chinese couple, instead of Adam and Eve, as the first Man and Woman he created in Paradise: They would have eaten the evil snake instead of the forbidden apple – and we would not be speaking today of Original Sin!

I heard this joke a few weeks ago and I thought it aptly shows that, for good or for ill, China is important in our lives nowadays. Directly or indirectly, whatever happens in China will impact our lives. When China catches cold, we sneeze.

Three recent events illustrate this point: The Summer Olympics…I’m sure many of you turned insomniacs for several days last month, staying up late to catch the spectacular ceremonies and games on live TV.

And I’m sure you’ve been closely following the milk scandal in China and its worrisome repercussions overseas. It’s bad news and China will need to deftly deal with this public health and public relations crisis if it wishes to recoup its now tarnished reputation and re-instill confidence among consumers.

And then another uplifting news the past few days: China’s yet another space launch – this time featuring China’s first space walk.

China boasts of thousands of years of continuous recorded history, but it is a nation of constant change. When I look at China now, I see a very different country to the one I lived and studied in in the 1970s.

Thirty-plus years ago, the “Four Great Things” (si da jian) of consumer desire included a bicycle, a watch, a sewing machine, and a radio. Today’s si da jian include two Ms and two As: a Mercedes Benz, a Motorola flip phone, an Apple MacBook, and an apartment.

China under Mao and China now are as different as night and day. Although still a communist country, its market reforms over the past 30 years have produced tremendous growth and change. It may be that at no other time in China’s history have the Chinese people had it quite so good.

China now depends heavily on international trade, with exports and imports accounting for about 40 percent of GDP. China has joined the WTO. It is one of the world’s top recipients of foreign investment. Foreign joint venture companies produce about 40 percent of the nation’s exports. Building on their success with consumers at home, Chinese manufacturers are expanding overseas. Hai’er Group, for example, makes refrigerators in a plant in South Carolina.

China’s insatiable appetite is making waves the world over.

China is already the world’s top consumer of steel and copper and the world’s number two oil user, importing one third of its oil consumption. In 2007 China became the biggest producer of gold, overtaking South Africa which kept the top spot for 100 years. That same year, China also became the biggest consumer of gold jewelry. China has surpassed the United States as the biggest Internet population in the world, with 240 million on line.

China’s foreign exchange reserve is now the largest in the world, topping $1.4 trillion.

Still, development is uneven. There are still pockets of poverty. Per capita income is only around $1,300, and consumption is only 42 percent of GDP.

That’s because some 700 million of China’s 1.3 billion people still live in the countryside. Of those, at least 80 million, maybe more, live with less than one dollar a day. Still, all things considered, China gets much-deserved credit for eradicating poverty in many regions.

So how did China do it? China’s unprecedented economic boom came about because of loosening controls: Devolution of power from central localities. Influx of foreign investment and trade. Boom of private and collective enterprises. Better information flow through the media, trade and tourism. Unlimited supply of cheap labor from farms.

There’s no doubt that many Chinese have benefited from reform and opening up. Quite often, however, some of these changes have been painful. China’s economic explosion has produced many unintended consequences: income gaps, regionalism, rampant corruption, rising criminality, social instability.

The Chinese leadership is confronted by the daunting tasks that Deng Xiaoping left behind. The state-owned enterprises, the SOEs, are typically inefficient and unprofitable, draining enormous resources, and yet privatization does not offer an easy fix. SOEs employ over 100-million workers who rely on their jobs for cradle-to-grave life support. Beijing has been pushing these SOEs to swim or sink. They have thrown many of employees out of work.

Regionalism remains a big challenge since economic power has slipped beyond the center in Beijing to leaders and entrepreneurs in the provinces, where “heaven is high and the emperor is far away.” Consequently, the central government’s revenue base in recent years has declined relative to the GDP.

Another price is a serious breakdown of social order. Many Chinese are feeling less safe these days because crime is on the rise, caused in large part by a widening wealth gap.

The Ministry of Public Security last month admitted that cases of “disrupting public order” had reached 87,000 in 2005, up 6.6 percent from the previous year.

Cinese premier Wen Jiabao has described the fight against graft and corruption as a matter of “life or death” for the communist party because it threatens its legitimacy. The government has enacted regulations and launched campaigns to curb it. Despite government pledges to crack down on the problem, it remains endemic. More and more, erring senior officials have been prosecuted and jailed, even executed, to send a warning. Ironically, however, whistleblowers often face criticism rather than praise.

In the past 20 years, according to a government report, more than 4,000 corrupt Chinese officials have absconded overseas with at least $600-million worth of public funds. That makes China the fourth-worst country in the world for capital flight.

China’s economic boom has seriously degraded the environment. About 70 percent of China’s water resources are polluted. Air quality is poor. Pollution-causing accidents are common-place, including the benzene spill which polluted the Songhua River in northeastern China.

The income gap between China’s rich and poor has been widening. China’s richest 10 percent had an average of $1,075 in annual disposable income. That’s nearly 12 times greater than the $91 held by the poorest 10 percent.

So you can imagine all these centrifugal forces pulling China in different directions. Beijing leaders need to hold the country together, but that has become difficult because they have lost a few key tools of statescraft.

There is no more modern-day emperor, a strongman, like Chairman Mao or Deng Xiaoping.

And there is no longer a dominant ideology.

The Communist Party, some 70 million strong, still rules the nation, but many Chinese view communist ideology as irrelevant in their daily lives.

Deng Xiapoing encouraged the Chinese “to get rich” and many are rapaciously doing so, all too often at the expense of the integrity of the society, the state and the ecology.

To many Chinese, money-making has become a mantra. Gone, it seems, are the years when “Serve the people” was the over-riding goal. Many are spiritually adrift. China is dying of chronic moral decay, and yet the leadership has no effective answer to fill the spiritual void. How else can you explain why unscrupulous producers of milk products would spike them with melamine – it’s unfettered greed, profits at all costs, lack of ethics, as Chinese premier Wen Jiabao put it. It’s lack of corporate social responsibility.

With widespread egotism, social malaise and lawlessness, China could one day implode. To avoid that, the leadership needs to institutionalize a set of norms and values that could govern the people’s diverse and often clashing socio-economic activities.

All these domestic pressures drive the Chinese leaders to seemingly contradictory policies and behavior. They seek to radically revamp the SOEs and streamline the bloated bureaucracy but, when faced with the prospects of massive unemployment and social unrest, they pull back.

They pledge to further open China’s market to foreign investors, but when faced with a backlash from the conservative sectors at home, they resort to nationalist posturing or protectionism.

They encourage the press to expose abuses and scandals to curb corruption, but when the media perform its duty to criticize and expose corruption at the top, they tell them to back off.

If China is confronted with so many problems, will it implode? Perhaps it could – you never say never here – but not necessarily. A combination of many factors could explain why.

Chinese people are generally resilient, resourceful and patient. There is a popularly shared aversion to luan or chaos especially among those who suffered badly during the political campaigns like the Cultural Revolution. Meantime, many Chinese have turned apolitical, preoccupied with day-to-day concerns like making money and improving quality of life than with any grand political agenda.

You may have seen some people waving towels along Beijing’s streets. They are either migrants or laid off workers offering to wash cars for about one or two dollars. Some shine shoes or pick up discarded plastic bottles to tide through difficult times.

The media is still under the government’s effective control and the government is cleverly using them and other tools of statescraft to manage people’s expectations. Instead of feeling totally desperate, many people, even some of the laid off workers, seem to think that, if they could only muddle through a bit longer, there is hope thatthings could turn for the better.

The army and police seem to support the government’s goals, even though they no longer play crucial roles in the top policy making bodies. They have largely become professional institutions with high stakes in maintaining social order and cohesion.

The top echelon in Beijing remains relatively united perhaps because they realize that they are in this together – either they stick together or they fight and hang separately.

China’s growth sustainable? China has chalked up extraordinary growth rates and has significantly improved the quality of life of many Chinese. But keeping up such growth could lead to shortages of water, arable land, energy and food supplies. It could worsen the already acute environmental problems. China will need a lot of capital to maintain fast growth rate while solving these problems.

Can China push forward with more fundamental reforms? Beijing’s incremental approach to economic reform has produced impressive results, but the hardest, prickliest issues, including the revamp of the state enterprises and the insolvent banking system, have not been completely addressed.

Can China maintain stability while conducting systemic political reform? In recent years, China has evolved toward a freer society, a leaner, more competent bureaucracy and a more effective, albeit imperfect, legal system. And yet, political restructuring has lagged behind economic reform. Can China’s existing top-down system manage the political contradictions that are bound to grow as the economic churn leads to more bankruptcies and unemployment? Or must China move to a more open, pluralistic political order?

Can China conduct political reform without destabilizing the society? Will loosening of political controls necessarily engender dissent and trigger unrest? Or does the government possess enough legitimacy and self-confidence to successfully implement a blueprint of political reform?

Can China coax Taiwan into peaceful reunification? If not, will it be forced into a military confrontation with the United States?

Can China maintain its “Chineseness” in the face of globalization and inter dependence?

If China succeeds in reaching its ambitious goals, will it be a threat or an opportunity to other economies – or both? If China stumbles, what will be the consequences for Asia and the rest of the world?

Can China make the transition from the closed, isolated and repressive state of the 1970s to a fully open, politically stable and broadly engaged modern nation?

I think it can, but it will take a long and tortuous process. When we interviewed President Jiang Zemin for Time magazine in 1997, he told us that China can only tread slowly and carefully because “there is no ready-made encyclopedia that China can simply read and follow.” He has a point. I believe that China will plod along, sometimes in spurts but often in steady incremental steps, sometimes with an apparent vision and sometimes simply muddling through along a largely uncharted course.

After years of chaos and isolation, of perpetual political campaigns, China is now locked into the global community through diplomacy, tourism, trade and yes, through the mass media and the Internet. After years of stagnation, China now is bursting with explosive energy – experiencing what economists call The Churn, or creative destruction – as it rapidly moves forward.

For China’s sake, and for our own sake, we should wish for China’s success. For surely, we don’t want China to catch cold.

The author has lived and worked in China for over 30 years and is currently CNN’s Beijing bureau chief. This article is based on a lecture he delivered at a forum on RP-China relations sponsored by the Philippine Association for Chinese Studies (PACS) on Sept. 27.