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In China, The Party Is The Problem (Int'l Edition)


International -- Asian Business: CHINA

IN CHINA, THE PARTY IS THE PROBLEM (int'l edition)

If progress is to continue, Jiang must curb the Communist elite

It wasn't the type of public display Chinese television viewers are used to seeing from their taciturn leaders. Speaking at a eulogy for Deng Xiaoping, who died on Feb. 19, President Jiang Zemin openly sobbed as he praised the Communist Party patriarch and vowed a "deepening" of the reforms Deng launched 18 years ago.

Whether it was heartfelt or merely political theater, Jiang's emotional performance conveyed the strain he will face in living up to his promise to "make greater contributions" than his predecessor. It's true that Jiang, 70, has amassed the most powerful titles in China, including head of the party, state, and military. But it is unclear whether he can tackle the biggest challenge of all: reforming China's Communist Party and easing its iron grip on power.

Beijing's reluctance to reform its stifling political system affects much more than the freedom to dissent. The party wields enormous economic influence through powerful ministries, and cadres and their children hold posts in state and local enterprises. The upside is that many influential Communist leaders now have a vested interest in preventing any big rollback of market reforms. "Everybody who has any power supports reform for selfish reasons," says Shan Li, Hong Kong-based executive director at Goldman, Sachs (Asia).

But the interests of the cadres often collide with the interests of the market. Courts now play a bigger role in mediating business disputes, but fairness disappears when a well-connected official is involved. People are free to start small shops and buy stocks but forbidden from organizing an independent chamber of commerce or publishing an unapproved financial newsletter.

The party's pervasiveness also is a prohibitive check against the privatization of state enterprises. Some leaders, eager to preserve one of socialism's last bastions, want to bolster the state sector rather than shrink it. Furthermore, cadres running these companies do not want to lose power or perks. State dinosaurs account for about 40% of industrial output and have run up as much as $240 billion in bad loans. What's more, party officials are under pressure from the state sector not to open China's markets too fast to meet conditions for entering the World Trade Organization. "This is a real challenge to party authority," says James J. Przystup, director of the Heritage Foundation's Asian Studies Center. "The closer they get to our standards of WTO admission, the more pressure they will create for dismantling the system."

The party's supremacy also places limits on how far China can move toward reforming its arbitrary legal system. Lately, there has been some progress, such as a new criminal procedure law that limits the time suspects can be held without charge. But an independent judiciary would undercut the party's control. "I don't think it suits Jiang's interests to go all out with legal reforms," says a Western diplomat. "The party believes its power is paramount."

As leaders jockey for power in the runup to the 15th Party Congress, some may seize on these issues. The chairman of the National People's Congress, Qiao Shi, has been calling for a greater rule of law. And on a recent trip to Shanghai and Jiangsu Province, Qiao declared there must be a "sense of urgency" in reforming state enterprises. Jiang and other politicians are vulnerable to attacks from hard-liners as well. Days after Deng's death, Maoist ideologue Deng Liqun (no relation to Deng Xiaoping) bitterly attacked Jiang and Deng for undermining the state sector and veering from Marxist doctrine.

There are legitimate reasons for the party to worry. One is that workers will take to the streets to protest job losses and revolt against party and government leaders. Diplomatic sources say that as many as 60% of workers at state companies in the northern industrial city of Shenyang have not been paid for months. Similar problems are arising in Tianjin, a city not far from Beijing.

Keeping the economy churning is especially important because, with the demise of Marxism as a credible ideology, there is little other justification for the party's dictatorship. But rather than float big new ideas for running China now, Jiang is sticking to safer themes. One is his ongoing call for a "spiritual civilization," a combination of nationalism and traditional Chinese and socialist values that apparently is meant to fill the ideological void.

WITHERING? Still, it's hard to see how the tremendous forces that Deng set into motion will not ultimately erode the party's power. Already, the state sector is shrinking in the face of growing competition, a rising middle class is growing fed up with corruption, and foreign investors are demanding legal protections. The optimistic scenario is that the party will wither peacefully as fewer young Chinese join.

The risk is that social pressures will explode long before the next generation takes over, perhaps because of a sharp economic downturn. That would force the party to come up with a new compelling justification for retaining control. But if Jiang does have a grand vision for leading China into the next century, so far he has not articulated it. To survive in the long run, Deng's heirs will need to demonstrate more than an ability to look out for No.1.By Joyce Barnathan in Beijing and Bruce Einhorn in Hong Kong, with bureau reportsReturn to top


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