To intimate that China has less than a glorious future as an international trading power is a solecism these days. So bullish is everyone about China that even erstwhile skeptics such as The Economist relay Beijing's official economic data as if it bore some resemblance to reality. Disbelief is suspended.
At the risk, therefore, of being labelled contrarian, let us rain on China's parade. Half the economy of China is in the loss-making state sector, a vast bottomless money pit that takes resources and capital that could be far better used elsewhere to turn out huge volumes of goods that hardly anybody wants. The country's banks are bankrupt. And of the companies listed in the Shanghai and Shenzhen stock markets -- markets which are notorious for their ramping by the government -- barely a handful look able to survive the international competition that WTO entry will bring.
What China has to look forward to is seeing large swathes of its economy taken over by foreign companies, the utter collapse of its state-owned sector with a huge increase in unemployment and the worsening of an already dire situation in the agricultural sector, all of which adds up to a ticking bomb of social unrest. That nobody at the moment talks openly of China's possible collapse is a tribute only to the shortsightedness of fashionable punditry; in 1996 few people talked about the impending collapse of Indonesia.
For Taiwan, more dangerous times are about to begin. The government has been saying that the WTO will provide a forum in which cross-strait issues such as direct links can be discussed. This is, of course, baloney for consumption in Washington, Tokyo and Brussels. Taiwan wants to look conciliatory and rid itself of its "troublemaker" tag. China has, however, repeatedly said that it has no intention of discussing cross-strait affairs, which it considers to be a domestic issue, within the WTO -- Zhu Rongji (朱鎔基) reiterated this point only two days ago while in Indonesia. Any idea that the cross-strait stalemate is to be broken by both sides' accession to the WTO is fanciful.
What is serious, however, is the risk of chaos and disintegration that WTO entry will bring to China over the next, say, five years. Good, one might think. The sooner Taiwanese no longer think of China as the end of a rainbow where they will find their crock of gold, the better. But there are great dangers as well. WTO entry is likely to erode the grudging compact between China's rulers and its people, where the regime is tolerated as long as living standards rise. In the long term, because of the greater international competition, living standards will rise and China will become more prosperous. But before that happens huge social dislocation and a great widening of the gap between the haves and the burgeoning have-nots will occur. With its social contract in tatters how will the Communists cling on to power? The convention among unpopular dictatorships is of course to wrap themselves in the flag and start a little foreign adventure. Chanting patriotic slogans is surprisingly effective at drowning out the noise of rumbling stomachs -- for a while.
Should Taiwan be worried? No, but caution would not be amiss. What it should be particularly wary of is that as China's economic situation worsens, Beijing is likely to become more aggressive and provocative, all of which is bait Taiwan should take care not to rise to, nor should it be so intimidated that it rushes to seek political compromise with a regime that might be failing fast. In crisis, we are told, lies opportunity. But beware that in regard to China's WTO entry, this maxim might just be stood on its head.
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