Thu, Aug 23, 2001 - Page 8 News List

Business, beware of Chinese unrest

By Nat Bellocchi 白樂崎

As rationale for their support of China's WTO entry, many of the world's governments have not only emphasized the potential for expanded commerce, but also the chance to encourage China to become a responsible member of the international system.

The potential benefits of success in both directions have been repeated often, and loudly, by governments and business interests, with only an occasional warning -- mostly by out-of-government academics and think tanks -- that such expectations may not be met.

Now that China's entry into the WTO is imminent, there has been a noticeable increase in the number of articles warning of the potential downside of China's participation. In a few days a new book, The Coming Collapse of China, will be available in bookstores, and given its impressive marketing buildup, will inevitably add to the public discourse on China's future.

However, there continues to be a steady stream of news items, articles and TV coverage extolling China's commercial opportunities. The old phrase "Greater China," which is supposed to include China, Hong Kong and Taiwan, is again being used increasingly, especially by financial companies expanding their services in China. By extension, pundits are already speculating that Taiwan will follow the path of Hong Kong, and presume it will be a favorable trend, even for Taiwan.

The thrust of all this is that China's economy is still growing and its domestic market expanding, while other countries in Asia are experiencing an economic slowdown.

There is no question that China is changing. The urban areas on the coast are becoming a sizeable market. Foreigners are attracted by not only low labor costs, but also the significant government concessions being given to entice their investment. When one considers only the commercial potential for business, China is indeed very attractive.

The key word, however, is "potential." There is an interesting article in the current issue of Foreign Affairs (written by George Gilboy and Eric Heginbotham) on China's near future. The principal point the authors try to make is that the US should avoid having an adversarial relationship with China.

They maintain that China's immediate future will be perilous, and that political change is inevitable. If the US mishandles its relationship with China, it could cause the direction of change to be counter to US interests.

What makes the article interesting to me is how the scenario of near-term unrest painted in the article contrasts with the basis for the present "China fever" felt in the business communities of the US, Taiwan and elsewhere.

The authors posit that the present direction of China's leadership is unsustainable. Economic reform cannot, even in the near term, out-pace political reform, as it is now doing, without eventually causing chaos. The candidates to succeed the present leadership in Beijing are now jockeying for position, but they will have little choice but to continue economic reform as the only means of making China a world power.

The article argues that they will have equally few alternatives but to further loosen the political system. The new group, however, will face the same dilemma the present leadership has been experiencing -- how to do this without losing power.

"They are as likely to throw China into domestic turmoil as they are to create a stable partial democracy."

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