CHINA / Foreign Media on China

Pendulum swings the party's way
By Philip Bowring (IHT)
Updated: 2006-09-26 10:28

http://www.iht.com/articles/2006/09/25/opinion/edbowring.php

It is hard for liberals and democrats to accept, but there seems to an
inevitability about the reassertion in China of the political supremacy
of the Communist Party and the administrative dominance of the central
authorities. Prosperity and a growing property-owning middle class does
not lead directly to demands to broaden the political base, but to
demands to preserve existing achievements through emphasis on stability
over speed.

It is almost 15 years since Deng Xiaoping, with his Southern Tour,
restarted the economic liberalization. But amazing economic progress has,
unsurprisingly, not been matched by institutional change.

The notion of property rights is still uncertain. Party, state and
commercial functions are still interwoven. The legal system has only
partly been detached from the political structure.

Under these circumstances, it may be true that assertion of the
authoritarian tendencies at the heart of all Communist parties and all
Chinese bureaucracies is necessary to address the most serious problems
now confronting China - because the problems, taken one by one, can be
seen as mirror images of China's successes.

The devastation already caused by pollution, let alone that still to
come, is partly the result of the very growth that was seen as an end in
itself as well as a means of diverting popular aspirations from political
to economic goals. Many of the worst aspects of pollution, however, stem
not from growth per se but from the greed of local officials, whether
profiting from polluting factories or claiming credit for creating
industries regardless of collateral damage.

There has been a high environmental price for decentralization and for
the ability of those with political power to use it to enrich themselves.
Given the weakness of both the legal structure and the market to address
these issues, a reassertion of central authoritarianism will be needed -
in the same way as the centralizing Tokugawa era saved Japan from
environmental disaster by imposing massive wood-use controls and a
reforestation drive that survives to this day.

One can already see signs that Beijing views tough central action as a
reaffirmation of the party's national leadership role. The environment
may yet overtake Taiwan as a focus of national aspirations.

What applies to pollution also applies to water resources, which are
being depleted at an alarming rate, particularly in northern China.
Realistic water pricing could address this, but even an authoritarian
party would balk at driving tens of millions of farmers out of business
and into the cities. Instead it will use central authority to build huge,
economically inefficient and environmentally dubious schemes to divert
water to the north. More logically, it may also use its power to focus
urbanization on central and southern regions where water if more
plentiful. Either way, the water crisis will enhance central power - or
undermine the whole economy.

Another major problem is income distribution. There are limits in almost
every society to how far this can go without creating political unrest.

In China, the natural tendency of any developing economy to increased
income gaps is made more sensitive by the extent of official corruption
stemming from partial reform of enterprise ownership. But the party's
response will probably be to slow rather than speed up market-based
reform.

There are many grounds for income redistribution through the tax system -
for state enterprises to pay more dividends and the rich regions more
taxes to fund central payments to improve the abysmal standards of
health, education and social welfare in poor regions and rural areas
generally. At the least, the center and the party have to be seen to be
doing more to redress the imbalances.

It is very likely that more than a decade of rapid growth based heavily
on exports and foreign investment will soon come to an end. Years of
growing US trade deficits and easy money internationally are set to be
reversed before long. Meanwhile, China will meet resistance to aggressive
exporting. Given the control that the state has over the major state
enterprises and almost all the banking system, a shift away from
external-led growth will place more pressure on the government to
generate growth. This will probably take the form of more spending on
social goals and infrastructure in the center and west and less
investment in goods-producing industries. It will be accompanied by
tighter central bank control of credit.

In short, the pendulum is starting to swing back after years of
exhilarating economic and social liberalization whose fervor owed much to
reaction against the memory of the Cultural Revolution. This swing will
be far less severe but it will not be comfortable, particularly for those
who had come to assume that the energy-releasing reforms of the past 15
years would continue for the next decade or more.

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