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In Rural China, Baby Steps toward Democracy


When more than 500 inhabitants of the farming community of Houshicun, in northeastern China's Jilin province, gathered to elect their village chief in late February, they rejected the Communist candidate--the local Party boss. Instead, in a surprising move, villagers cast their paper ballots for 46-year-old Gao Zhili, a farmer who does not belong to the Communist Party. "I will do everything to reduce the burdens of the farmers," Gao declared.

The Houshicun election is just one example of the grassroots democracy beginning to take hold in China. The Communist Party has allowed China's 900 million rural residents to directly elect their village chiefs for more than a decade. But other, higher levels of government are pushing the experiment further, without Beijing's approval. Scores of townships in the provinces of Sichuan, Guangdong, and Shanxi have held elections for township chiefs, who are usually chosen by party representatives. Meanwhile, democracy is coming to China's labor movement, as Beijing begins to allow workers to elect local representatives to the officially sanctioned trade union for the first time. And cities such as Shenzhen and Qingdao are now choosing government officials after openly recruiting several skilled candidates for each job--a shift from the tradition of picking officials based on their Communist pedigree. "Only with an open system can we strangle corruption," says Ma Xinchuan, an official in the Shenzhen municipal government.

BLIND EYE. Such grassroots ferment contrasts sharply with the picture in Beijing, where some 3,000 members of the National People's Congress gathered on Mar. 5 for their annual 10-day session, mainly to rubber-stamp Politburo decisions. But even leaders like Premier Zhu Rongji seem more willing to accept limited experiments in democracy. "We need to press ahead with reform of the political system, implement democratic elections, decision-making, management, and supervision," he told delegates on the Congress' opening day.

Is there a chance Zhu and President Jiang Zemin would contemplate sweeping political reform? Don't hold your breath. They're not going to try anything that could lead to a challenge to the Communist Party. But some analysts think they will gradually allow more elections in townships, and perhaps on the county and city level later. Beijing has turned a blind eye to township elections held so far, even though they are not sanctioned by law. In Chinese reforms, there is a "history of local initiatives being given the green light as experiments, then eventually endorsed on a national level," says one Western diplomat, citing the examples of agricultural land reform and village elections.

As China moves ahead with painful economic reforms, Beijing may have little choice but to allow citizens more freedom to voice their concerns. Faced with growing worker unrest, officials in the Labor Ministry and in China's official union, the All China Federation of Trade Unions, are considering whether the right to strike should be legalized. And the government-sanctioned China Consumers' Assn. is stepping up its activity. After travelers complained about high train fares recently, the association won a promise from the Ministry of Railways to hold hearings before further price increases. "The adoption of public hearings is an important step towards Chinese democracy," says Wang Qianhu, the association's director of investment and legal affairs.

Consumer activism and local elections may seem like tiny steps. But in China's rigid system, they could represent the start of risky change. If China expands its democratic experiments, even slowly, Beijing will have to face more surprises like the Communist defeat in Houshicun. Plunging computer-chip prices are battering South Korea's Hyundai Electronics Industries Co., the world's second-largest maker of memory chips. In the latest sign of the company's financial difficulties, its American subsidiary, Eugene (Ore.)-based Hyundai Semiconductor America, was unable to meet a $57 million repayment on a project finance loan in early March. The Seoul headquarters of Hyundai Electronics has informed creditors, led by Chase Manhattan Bank, that it will repay the loan soon on behalf of the U.S. unit.

The payment default comes on the heels of a decision by state-run Korea Development Bank to roll over $2.3 billion in Hyundai Electronics bonds due this year. But the government-arranged relief program covers only about half of the $4.5 billion in interest-bearing debt owed by the company this year. To make up part of the difference, Hyundai Electronics plans to slash 25% of its workforce and raise $1.6 billion through asset sales and fresh borrowing. However, the company still needs to generate at least $600 million in additional cash.

Analysts say Hyundai Electronics is unlikely to avoid a liquidity crunch unless semiconductor prices turn around quickly. Prices for dynamic random-access memory chips have plunged nearly 80% since mid-2000, largely because of slowing demand for personal computers in the U.S. Hyundai Electronics, the most valuable asset of the Hyundai Group after the spin-off of its auto and shipbuilding units, posted a record loss of $1.9 billion last year.


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