The congress of the Chinese Communist Party in Beijing is being hailed by the local press as “a landmark gathering”. On this occasion the hyperbole is probably justified. In his 13 years as leader of his country, party leader Jiang Zemin has seen a consummation of the economic liberalization of Deng Xiaoping, who embraced capitalism with the memorable phrase, “Let a thousand flowers bloom”.
In fact, in the last twenty years, many millions of economic flowers have blossomed, as China carved itself a quite considerable place in the world trading system. Following the classic route taken by other developing Asian economies before it, China began by making any and every sort of low value item, from party poppers to tin toys and has progressed rapidly to a high technology manufacturing base.
China’s economy continues to boom, while most of the rest of the world is struggling with recession, simply because it still has so much economic ground to make up. If its export markets decline, it has the ability to turn to its huge and increasingly wealthy domestic market, to soak up excess production.
The capitalist entrepreneur and the Communist Party hierarchy have lived ambiguous existence, side by side. China’s boom however has come about because the times when the central state bureaucracy stood in the way of entrepreneurial development have been heavily outnumbered by the occasions when, either through vision or backdoor connivance, the authorities have fostered and encouraged economic activity. The result has been a quite remarkable transformation of cities such as Shanghai in just a few short years. A relative few Chinese has become exceedingly rich, many more have become moderately wealthy but there is still an overwhelming majority which has only, at best, felt a marginal benefit from the dramatic flowering of capitalism. The greater part of this last group have been country people, whose innate conservatism as well as the distance from the great commercial centers have blocked them from the filtering down of many benefits.
If, as is widely expected, the Beijing Congress concludes with the appointment of new leaders and the adoption of capitalism as party policy, these country people, along with other traditional Communist Party forces, are in danger of feeling abandoned. Capitalism and social engineering are not obviously compatible, so the new Beijing leadership is going to have a difficult balancing act to perform.
It is probably accurate to believe that the reason that China’s extraordinary capitalist boom has succeeded so far is the ambiguity of private business’s relations with the Communist Party authorities. Beijing thus had the ability from time to time, to slow the breakneck pace of development. The very uncertainty in the relationship between entrepreneurs and the party gave the authorities that control. As and when the party’s approach to capitalism is formalized, the hidden checks and balances will have to be transformed into open legislation, enforced by commercial courts which must be seen to act independently, to give a high level of comfort to foreign investors. International money has thus far poured into China because world companies were anxious not to miss out on the opportunities presented by the world’s biggest market. But as China’s economy matures, the approach of outsiders is going to become more sophisticated and discriminating. The boom will very probably continue for some years, but it will be much harder for the Communist Party to control it. The one thing that the Party Congress is not embracing is Western-style democracy. Party bosses know that once strong leadership goes, China has always fallen apart into rivalry and civil strife. They intend to share power with no one. They believe that they can stay true to socialist values. They also think that they can allow unbridled capitalism with the growth of great fortunes and all the temptations toward corruption that such wealth brings. They may be right. But, if they can manage it, it is going to be a neat trick.
