Chinese solution to a puzzle

January 31, 1997

AS A VISITOR to Britain looking at the press, radio and television, one soon notices that China's amazing transformation is hardly reported. Few people are conscious of the huge success of over one billion Chinese in moving out of communism into a form of market economy and society. As a working scheme, if not as a set of theories, there is not a great deal left of traditional communism.

Over the past ten years, conventional communism has largely diminished, with the possible exception of North Korea and Cuba and a handful of incorrigibles in the West. Old party members have recaptured or held on to power only under other names.

Yet, while Russia languishes, China thrives, with its giant economy increasing by 10 per cent a year. In Russia the erosion of the certainties of communism has left a vacuum of political organisation, for the salient political organisation in Russia for almost 80 years was the Communist party of the Soviet Union. Its removal has unexpectedly contributed to the serious economic and political difficulties experienced in Russia, such as unpaid armies, rotting infrastructure and a sense of hopelessness. Russia is looking anarchy in the face.

The contrast with China could not be more marked. No one in China has pronounced communism dead or has even hinted that such is the case. The Chinese Communist party is still in charge. Political controls remain all-pervasive. The Communist party survived the upheavals of Tiananmen Square in 1989 and the condemnations of the outside world. The economy has surged ahead - in 1995 gross domestic product grew by 11.2 per cent and is expected to rise more than 10 per cent in 1996. The growth of China's coastal provinces in the past ten years has been astonishing. China's reserves are about $90 billion. Her economics minister has argued that if the reserves of Hong Kong are added to this figure, then the amount overall exceeds that of the United States. Inflation has dropped below 10 per cent after peaking at 25.5 per cent in 1994.

China has leadership problems at the highest level. The paramount leader, (as he is still called) Deng Xiaoping, is in his nineties, and China can only await his demise. However, the leadership problems are much less acute than those of Russia.

China's leaders struggle with the bizarre concept of "socialism with Chinese characteristics". There are huge discrepancies between the coastal towns and the rural hinterland which is a source of much discontent. State-owned enterprises are still making huge losses and services like banking and transport need modernising.

All political protests are ignored or punished. Yet, when one considers the magnitude of the problems facing the leadership a generous, if cautious, tribute should be paid. All of China is in the process of being educated in the broadest possible sense in the ways of the market economy. Given that China has had a centrally planned economy since 1949, any move in the market must be profoundly instructive.

Discussions about education are anecdotal or technical, the latter involving data bases to ascertain the research of scholars in the field. There is possibly a middle ground of sensible generalisation. Thus everyone knows about the Chinese tradition of the scholar-bureaucrat dating back 2,000 years that linked education to the arts of government. This tradition still persists in many subtle ways. The interesting question is how the old educational practices help the new China to make progress. The answer is not easy to find.

There are numerous western critics who argue that too many recent graduates are not able adequately to cope with the demands of the modern market economy. A western executive of a professional company in Beijing argued that Chinese staff might work well enough for about three years in his company. Then they would just "hit a brick wall and stop getting better" (Financial Times, June 1996). The executive put the blame on the education system, which he said "is better at turning out first-class scientists than graduates who can perform complex business tasks". He may well be referring to the legendary mathematical prowess of so many Chinese students. One possible example is in the use of business consultants, for there is no such animal in the lexicon of "market socialism".

Education has not yet been able to make the jump from its classical Chinese base to the world of the market. The Chinese are adept in the use of the computer and in designing and certainly copying them. But China does not know its destination. There are still schools of Marxism-Leninism in China, but society is no longer explicable in Marxist-Leninist terms.

The economic miracle can be explained in simple terms. Chinese people do not see the need for an economic theory to explain their impressive entrepreneurial streng-ths. Instead, fuelled by investment from Hong Kong and Taiwan and by the willingness of authority to allow a form of entrepreneurial "capitalism", the economy has forged ahead. Chinese society is a confused society. The 1997 Communist Party Congress will have to reconcile the advance of society on "capitalism lines" with what is left of socialism.

The ninth Five Year Plan, (1996-2000) will have to write the letters of credit of a modest market economy without undermining the role (and the rule) of the party.

Perhaps the best education China can have is from the relevant experience of three other Chinese states, Hong Kong, Taiwan and Singapore. These three can teach China the way forward in a million practical ways. China's spectacular growth has not been self-generated by some sudden transformation from Maoist orthodoxy to free-wheeling capitalism. Rather it is the result of the willingness of Hong Kong and Taiwan in particular to develop China on the basis of commercial principles.

The comparison with the case of Russia is instructive. If Russia had been fortunate enough to have had a Hong Kong, Taiwan or Singapore on its borders its future would have been far different. Russia looks to the West at least in some measure for whatever handouts are available but, more often than not, not forthcoming.

Russia's tradition, like that of traditional China, is to await orders from the centre. However, China has managed to break that particular mould. The life or death of President Boris Yeltsin is of overriding importance to the future direction of Russia. The death of Deng is largely irrelevant.

The Chinese economy has been taught the realities of the modern world. Unlike Russia, China has been the recipient of a gigantic process of economic education in the broadest sense but its formal educational system has yet to catch up. The Chinese leadership has to balance the need to allow economic change with unremitting hostility to any movements in the political arena.

Peter Harris is emeritus professor of politics at the University of Hong Kong.

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