Wed, Mar 13, 2002 - Page 8 News List

China's looming WTO revolution

By Tony Saich

China is now an active member of the world economic and political community. Many Chinese now enjoy relative affluence and greater personal freedom, even as other Chinese citizens are racked by the travails of modernization.

Some commentators expect that China's entry into the WTO will accelerate these trends and may even precipitate fundamental political change. Although momentum will be slower than many are hoping for, the changes exacted by WTO membership will be profound because China's future will be determined more than ever by factors beyond Bei-jing's control.

Moreover, WTO membership will not only prevent backsliding but will raise fundamental questions about national sovereignty, as well as powerful debates about the amount of foreign engagement China is willing to tolerate.

The impact will profoundly affect social and political life. Although some analysts produced doomsday scenarios about unrest from rising unemployment and inequality, liberal intellectuals in China welcome membership as a catalyst for greater rule-bound and democratic political order. In reality, entry will push forward trends set in motion well before China joined the WTO. The demise of the old economic order will be has-tened while private enterprise and new sectors will become ever more privileged.

In the social realm, WTO entry will force the restructuring of the labor force into extremes of wealth and poverty. As part of this process, the concentration of foreign direct investment (FDI) along the coast will continue to exacerbate regional inequalities.

In 1998, Guangdong Province alone received 26.5 percent of FDI into China, while the entire west of China received 3 percent. As a result, those living in Shanghai enjoy a real income twice that of the northwest and 60 percent higher than the southwest. Stark differences in the levels of education, resource endowment and labor skills mean that, with WTO entry, the already privileged coastal areas will continue to advance faster than inland areas.

Increased economic competition will add to unemployment in the state-owned sector, with job creation in the private sector failing to make up the shortfall. The real unemployment rate in the northeast, for example, is already over 10 percent and this region will feel the strongest impact of agricultural restructuring.

While much of China will gain from agricultural diversification, areas such as the northeast that are overly dependent on grain production will suffer because, under the WTO, China will import much cheaper and better quality grain, causing rural incomes to decline even further. Migration to the cities will be the only choice for many peasants.

It is no surprise, then, that rural and urban unrest is mounting. China's leadership must address this rising tide of disaffection when calculating the pace with which to move ahead with WTO compliance. The Chinese Communist Party must decide how to accommodate the social forces that will benefit from further globalization while disentangling itself from its traditional power base, the state-owned sector.

To deal with the increasing social cleavages resulting from WTO membership, China will have to develop a competitive political marketplace parallel to the economic one. Doubtless such changes will be difficult for the party to accept.

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