The economic price of China's authoritarian political system has just gone up, for both the new leadership now taking office in Beijing and the global economy as a whole. SARS (severe acute respiratory syndrome) began in Guangdong province, the heart of China's export economy. Yet it is now clear that Chinese authorities waited three months to even admit there was a problem. It kept SARS secret, then denied its existence when it began to spread to Hong Kong. The lack of transparency in China's body politic contributed significantly to transforming a local outbreak into a threatening global epidemic. We now know that SARS is fatal to only 4% of those infected -- it is no bubonic plague. But the world may not be so lucky next time. The biggest challenge ahead for President Hu Jintao and Premier Wen Jiabao could prove to be closing the gap between China's increasingly modern economy and its closed, antiquated polity.
While Beijing is no longer brushing aside the problem, it is still paying the price for the cover-up. Singapore Prime Minister Goh Chok Tong has cancelled a state visit. The World Health Organization issued a warning for travelers to avoid southern China and Hong Kong. The World Economic Forum postponed its China Business Summit, due to take place in mid-April in Beijing. The upcoming Guangzhou Trade Fair is likely to be a disaster, with foreign buyers expected to largely boycott it. The U.S. State Dept. disregarded Chinese assurances that the capital was safe and offered employees, their families, and all nonessential staff in Beijing, Shanghai, Chengdu, and Guangzhou air tickets out of the country.
So far, the thousands of factories in Guangdong that supply the U.S. and the world with electronic and other goods have kept running despite SARS, maintaining critical supply chains to global corporations. But dozens of American, European, and Japanese corporations have banned travel for their managers to the region. If SARS continues to spread or if new diseases develop, corporations may look toward Mexico, Southeast Asia, or other parts of the world as locations for their factories.
SARS is perhaps the most serious challenge to China's future that it has faced in recent decades. President Hu and Premier Wen want to focus on helping rural farmers and privatizing state-owned companies, postponing political reforms to a later time. They may not have that luxury. China must soon become a truly modern country, with an open and transparent political system. Its economic future depends on it.
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2003, Bloomberg L.P.
Printer-Friendly Version
