Present at the Stagnation

Is China's Development Stalled?

Minxin Pei thinks that China's transition from communism to democracy is stalled. Pei, a senior associate and the director of the China Program at the Carnegie Endowment for International Peace, supports his view by pointing to China's lack of government accountability, weak administrative institutions, and widespread corruption and repression. His description of these problems is accurate, but his interpretation of their import is questionable.

Since the death of the reform pioneer Deng Xiaoping, in 1997, most China experts have subscribed to one of three main theories about the future of China's government: that it will collapse, democratize, or remain authoritarian. Gordon Chang argued for the first view in his 2001 book, The Coming Collapse of China. Chang's list of China's problems included most of those Pei discusses as well as others, such as subversive religious sects, resentful ethnic minorities, budget deficits, and job losses expected to follow from the country's accession to the World Trade Organization. Based on his experiences as a lawyer in Shanghai, where he witnessed lying, cheating, and social decay, Chang predicted that a revolutionary uprising of the disaffected would overthrow the Chinese Communist Party (CCP).

Bruce Gilley laid out the case for the second view, the inevitability of democratization, in his 2004 book, China's Democratic Future. He noted China's liabilities but also stressed its assets, including its century-long tradition of democratic values and its large new middle class. Gilley agreed that the current authoritarian regime is out of sync with the needs of a modern economy and society but argued that the regime's opponents are too weak, divided, and dispersed to overthrow it. Drawing on social science theories about the conditions needed for successful democratization, he predicted that pro-democracy factions in the CCP's leadership and in Chinese society would come together during a future power struggle and, with the help of a largely competent state bureaucracy, set China on the path to a democratic future.

Others (including this author) have put forward a third possibility, resilient authoritarianism. This perspective emphasizes the CCP's continued ability to sustain popular support through a combination of economic growth, skillful repression and propaganda, and foreign policy successes that gratify a nationalist public. The CCP conducted an orderly leadership succession in 2002 and 2003 that brought to power a new generation of competent technocrats, who have since announced programs to address such issues as peasant poverty and insolvent banks. The regime faces numerous problems but shows no sign of either collapsing or democratizing.

Pei contributes a valuable fourth perspective to this debate. He draws in part on recent polemics by Chinese intellectuals about the state's declining power and rising social and economic inequality -- problems some so-called neoleftists attribute to a sellout of China's resources and autonomy to foreigners. Many of the Chinese scholars participating in this discussion are neoauthoritarians. Pei, by contrast, is a democrat. He believes that China should be moving toward "a market economy and, perhaps potentially, to some form of democratic polity" but is unable to do so because its political institutions remain underdeveloped. The echo of Samuel Huntington's Political Order in Changing Societies is intentional; Pei gratefully acknowledges Huntington's teaching and inspiration.

In four monographic chapters, Pei exposes the weaknesses of the reforms of the Deng and post-Deng eras. Examining China's political structure today, he finds that its legislative institutions are ineffective, its courts not independent, and its village elections seldom competitive. He also finds that dissent is suppressed and that China's economy is not in good health. He argues that China's much-praised gradualism has produced a bastard system in which bureaucrats, not markets, set certain commodities' prices; banks take big losses on loans that government officials order them to make; and money-losing state-owned enterprises (SOEs) dominate key sectors. Moreover, the government has failed to provide the people with education, public health, a clean environment, or safe workplaces, in part because its revenues as a share of GDP have fallen since the reform era began, in 1978. As a result, the regime faces discontent among both rural residents and the urban unemployed.

The core problem is corruption, which Pei describes as "endemic" and "systemic." Both the failures and the successes of reform seem to encourage it. Over the past few decades, the government has become larger and more decentralized -- and more predatory. Decentralization, intended to stimulate initiative, has instead led to more frequent bribery of local officials. Because government cadres are pessimistic about the regime's longevity, they have an incentive to get rich while they can. As a result, Pei says, some local governments have become "Mafia states" allied with criminal gangs. Rather than enforcing honesty, the party survives through patronage. Thanks to rising prosperity, the political elite can cream off resources without impoverishing the nouveaux riches. The political class thus has no incentive to undertake authentic reform.

Pei concludes that if China remains on its present course, it "risks getting trapped in a 'partial reform' equilibrium." The concept of a partial reform equilibrium is imprecise: When is reform anything but partial? And if there is an equilibrium, then what is the problem? But the phrase accurately conveys Pei's concern that reform has stalled -- a worry shared by some people in China. The same feeling was pervasive in China in 1987-88, and it helped trigger the nationwide student and worker demonstrations of 1989. According to Pei, the sense of progress that was key to the regime's legitimacy in the 1990s has disappeared.

THEY HAVE A PLAN

Pei's energetically argued thesis provides a useful corrective for those who see only construction cranes and cargo containers when they look at China. But it requires scrutiny on two levels.

First, Pei provides only weak evidence to support his contention that China should be headed toward democracy and full marketization (which Pei defines as little or no state control of prices, few or no state monopolies, and little or no government intervention in bank lending). Deng rejected Western-style democracy, saying he wanted only political reforms that would enhance administrative efficiency. Pei acknowledges Deng's stance but seems to put more stock in the proceedings of a study group that Zhao Ziyang convened in 1986 and 1987, when he was the CCP's general secretary, to explore the options for political reform. The study group (whose proceedings were revealed when one of Zhao's secretaries came to the West and wrote a book about them) considered some radical ideas that might truly have democratized China if they had been implemented. Yet the political reform proposals that Zhao presented to the 13th Party Congress in 1987 were modest. Shortly thereafter, the 1989 Tiananmen Square crisis and the fall of the Soviet Union drove home the message to the party's leaders that they should keep a firm grip on power. (Zhao was no longer among them, having been purged after Tiananmen.) There is no evidence that anyone in the Politburo under Jiang Zemin or Hu Jintao ever favored reforms that would make it possible for people outside the party to challenge its power. Accordingly, the reforms that Pei sees as "stillborn" were probably never intended to lead to anything more than the administrative streamlining and controlled consultative processes that are in place today.

Similarly, China's economy has not achieved full marketization because that was never part of the CCP's plan. Rather, economic reformers such as former Premier Zhu Rongji and current Premier Wen Jiabao intended to produce a leaner and more competitive -- and thus stronger -- state sector by exposing a select group of SOEs to the discipline of international and domestic market forces under the watchful eye of a sophisticated and professional regulatory bureaucracy. The prices of key commodities and factors of production (such as energy, rail transport, and, as Pei points out, labor, real estate, and credit) remain under the state's control. It is true that tens of thousands of weak state enterprises have closed or gone private since the beginning of the Deng era, but the state has selected about one thousand of the strongest and most strategically placed SOEs to receive as much state help as they need to succeed, not only domestically but in some cases globally. And although some banks have allowed foreign companies to buy minority stakes, they remain state-owned and continue to support both the state-subsidized "pillar" SOEs and state-prioritized infrastructure projects.

In short, the regime never intended to let globalization wash away either its political or its economic power. Pei may believe that Beijing's plans are irrelevant because they fly in the face of Western theories about the inevitability of marketization and democratization. But proving that an authoritarian regime can prosper through modernization is exactly what is at stake in the Chinese experiment, which is why dictatorships from Kazakhstan to Iran are keenly watching its progress. Pei's thesis of a "trapped transition" implies a teleology that the Chinese leadership does not accept -- and that needs to be defended rather than assumed.

The second problem with Pei's thesis is that although his facts are correct, they do not amount to a balanced picture of China's condition. Any purely negative account of China overlooks a lot of things that China is getting right. For example, the government has announced the abolition of both the household registration system, which blocked job-seeking peasants from enjoying full resident status in cities, and the "custody and repatriation" procedure, under which the police randomly swept up and abused peasants and others who were living in cities illegally. It ended the grain tax, which contributed to the widening income gap between the countryside and urban areas. It is trying to shift more of the impetus for economic growth from export sectors to domestic consumer demand, partly by shifting more income to farmers and partly by improving the social safety net. In addition, Wen recently announced plans to provide free education nationwide through the ninth grade, improve health care in rural areas, and strengthen the protection of rural residents' property rights.

Reforms in China are always only partial; fine slogans are accompanied by fine print, often secret. Local resistance, bureaucratic opposition, and shortages of money slow reform and sometimes defeat it entirely. But skepticism about Beijing's initiatives should be measured. The newly announced reforms fit a pattern of policy innovation that has produced substantial results over the course of almost 30 years. Past performance is no guarantee of future results, but at a minimum, continuing reforms show both that the regime is aware of its governance deficits and the strains in its changing society and that it is taking steps to address them.

Pei's research itself testifies to the regime's proactive posture. His information on corruption and institutional weakness comes from internal party reports, state- and party-controlled newspapers, officially sponsored scholarly journals, State Planning Commission reports, state statistical yearbooks, surveys of public opinion conducted by Chinese social science institutes (whose sampling techniques, Pei should have warned readers, are seldom up to scientific standards), and Web sites such as the official Xinhua News Agency's xinhuanet.com. The fact that institutions owned by the state and the CCP are such a rich source of information on the regime's pathologies is revealing, because although Chinese media and research institutes operate with increasing autonomy, the party still guides their work. When its guidelines are disregarded or flaunted, reporters and scholars are fired, sometimes jailed, and their publications or institutes risk being closed. It is doubtful that so many reporters and academics are evading such strictures that the regime can no longer censor them fast enough. More likely, the authorities use this stream of reporting and research to collect information on emerging problems, warn party cadres to improve their performance, and show the public that the party is acting on its concerns. It remains to be seen whether the strategy will succeed. But at least the regime is addressing the problems Pei sees, because it sees them itself.

Likewise, Pei's evidence that Chinese society has become more turbulent is not proof that the regime is in danger of collapse. An array of actors -- nongovenmental organizations pressing for official action on issues such as HIV/AIDS and the environment, legal-aid offices helping migrant workers sue companies and the government, pensioners and laid-off workers petitioning for back wages and pensions, journalists embarrassing local officials with investigations of mining accidents and land grabs -- pose challenges for various levels of the party and the government. It is an open question, however, whether these forces threaten the regime or strengthen it. The interests of the central authorities are not always aligned with those of corrupt or incompetent local (or even high-level) officials. Social contention may be frightening when it boils up from beneath the surface after having been repressed for a long time, but it may still serve the survival interests of the regime if it is managed well.

Most crucially, Pei ignores the central fact of Chinese political life today: the power and unity of the central party elite. The fate of dictatorships is decided less by the societies they rule than by the dictators themselves. Authoritarian regimes survive if the members of their core leadership stick together, believe in themselves, and keep the support of the army and the police. Western and Chinese analysts alike scan constantly for signs of factional struggle over power or principle in China. No such struggles are known to have taken place so far under Hu. By all appearances, he has consolidated his power.

WHAT NEXT?

Three of the four theories about China's future do a poor job of offering predictions about what is around the next corner. Only Gilley commits himself to a definite forecast: he projects that the democratic transition will be successful and that the democratic regime will consolidate itself, with beneficial results for social stability and world peace. In Chang's theory, it is not clear what happens after China collapses. The idea of resilient authoritarianism begs the question of when incremental adaptations actually change the nature of the regime. Pei's model is no clearer; his guesses about how China might escape its transition trap include democratization (which he fears may run out of control and lead to a social convulsion), regime collapse, or a "devolution of power," by which he seems to mean the de facto federalization of China, with local governments experimenting with different political and economic models.

Of course, even the most astute analysis of current trends may not accurately predict the future. Major changes in a society, as China's past amply illustrates, are often disjunctive. And so it is prudent to ask what events could derail whatever process is taking place in China today. Two wild cards stand out as being of sufficient magnitude to potentially change the course of China's history: one is a drastic weakening of the U.S. economy that would destroy the livelihood of many Chinese and disrupt the social contract between the CCP and the Chinese people; the other is a war between China and the United States over Taiwan that would dramatically alter China's relations with the rest of the world and attitudes within China itself. Other, less likely events, such as a war on the Korean Peninsula or a mismanaged epidemic, could have equally far-reaching effects. The possibility of such external shocks to the Chinese political system highlights the fact that China's future has become inseparable from that of the rest of the world.

Although U.S. influence over China's internal development is probably marginal, it is interesting to reflect on American leaders' ambivalence about the future they want for China. Democracy, prosperity, stability, freedom, rule of law -- if all good things go together, U.S. policymakers face no difficult choice. But because change is risky, Washington seems to want it both ways: Washington wants to sustain a dictatorial regime in China because the current government in Beijing is a familiar interlocutor, while at the same time it wants to push China to democratize. Chinese leaders are said to worry a lot about whether the United States would like to see a "color revolution" in China. At this point, the answer has to be that U.S. leaders do not know themselves.