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Rethinking China

Cover Story


A pattern of disturbing behavior--from saber-rattling over Taiwan to strong-arming Western business--is causing concern about China's swiftly growing power

This was the hope: After decades of hostility and conflict, China would open to the outside world and embrace at least some Western values. Businesses would be able to tap the Middle Kingdom's vast market, creating wealth at home and in China. Gradually, as the Chinese tasted the fruits of economic progress, they would demand and obtain greater political freedom, easing both the Communist Party's iron grip and any possible threats from the People's Liberation Army.

Today, that vision, which has framed the world's approach to China for 15 years, is being put to a crucial test. The reason is that China is making a surprisingly huge impact everywhere, from the Taiwan Strait to shop floors in America, in ways that weren't predicted when Deng Xiaoping opened his country to the world in 1979. In stunningly short order, a powerful China has emerged. As an economic force, it is entering and altering the global marketplace--and in some cases, writing its own rules.

The new China holds out both promise and peril. Alongside the potential of the world's largest untapped market is the danger of a poorly understood nation whose political and military agenda is increasingly at odds with that of its neighbors and would-be partners. Partly as a result of this dissonance, a rethinking of China is beginning to take shape in Western corridors of power. In some sense, it's a more important reassessment than the one that took place following the Tiananmen Square massacre of 1989. That could be explained as a one-time tragedy, however reprehensible. Now, as China toughens its line on a range of issues, some China-watchers are wondering if an economic colossus is emerging that could challenge Western interests while shunning political reforms at home.

Around the globe, concerns about China's economic strength are mounting. China chalked up a $35 billion trade surplus with the U.S. last year, while its own markets remain closed in sectors where U.S. businesses are competitive, such as telecom services and finance. Japan's deficit amounted to $14 billion, while Europe's has doubled, to more than $13 billion. In intellectual property, China is notorious as one of the world's greatest ripoff artists and seems increasingly bent on strong-arming U.S. and European companies into transferring jobs and technology as the cost for entering its markets (page 59). Already, China is churning out electronic products from color TVs to semiconductors, and it's determined to develop its own globally competitive players in fields such as aerospace and autos.

But China's economic power becomes more ominous to the West as its Communist leaders continue to crack down on dissent. Everything from the harsh 14-year sentence given last December to human-rights activist Wei Jingsheng to the neglect of female orphans offends Western sensibilities. Without a strongman at the helm, Beijing's leaders are obsessed with social stability. Donning Mao suits and making conservative speeches to prove his credentials, President Jiang Zemin, Deng Xiaoping's handpicked successor, is stoking nationalist sentiment while shunning risky reforms. In mid-February, for example, China ordered users of the Internet to register with the police or face punishment.

RUSSIAN ARMS. Meanwhile, the role of the military is rising. To bolster his position, Jiang is giving the generals a bigger say in foreign policy than they had in the Deng era. After years of skimpy military budgets, the 3 million-strong People's Liberation Army is gaining a bigger slice of the pie. Russian weapons are flowing into China at record speed, including the recent purchase of 26 Su-27 fighter aircraft. In a show of force, the army has mobilized 150,000 troops for large-scale maneuvers aimed at intimidating Taiwan. Equally disturbing are China's sales of nuclear technology to Pakistan and U.S. archenemy Iran.

Such developments are heightening concerns in Washington. "Our policy accepts China at its word when it says that it wants to become a responsible world power," says U.S. Defense Secretary William J. Perry. "But China sends quite the opposite message when it conducts missile tests and large military maneuvers off Taiwan, when it exports nuclear-weapons technology or abuses human rights," he adds. While the Clinton Administration wants "comprehensive engagement" with Beijing, the dialogue is clearly not going well. New strategies are needed (page 65).

Magnifying the perception of China as a danger is the hard line toed by the current leadership. As Beijing politicians jockey to consolidate power while Deng grows frail, they cannot afford to appear weak by kowtowing to the West. Their saber-rattling over Taiwan has sent tremors throughout Asia. China considers Taiwan to be a Chinese province, and Beijing's leaders are trying to scare the Taiwanese from voting for pro-independence candidates in the Mar. 23 presidential elections. China sees its posture toward Taiwan not as a foreign military adventure but as an internal matter.

NEAR-FEUDAL CONDITIONS. What is missed in this contretemps is that the Chinese military cannot act much beyond its own coast without great cost. It could surely punish Taiwan, but it has no blue-water navy or mainline battleships. The largest and most modern vessel it boasts is a small destroyer that is obsolete by U.S. standards. So while a shooting war with Taiwan is always possible, it is highly unlikely.

More important, for all its aspirations, China remains a vast developing country, with a per capita annual income of $450. Many of its 700 million peasants live in near-feudal conditions, while 100 million have flooded into the cities looking for work. If unemployment hits a predicted rate of 7% in four years, anadditional 54 million, about equivalent to France's entire population, will be on the streets. Crime and corruption, already on the rise, could worsen.

Even so, the expectations of the Chinese people have risen to the point where China's leaders can't really slow the pace of reform sharply because they need growth to retain power. Beijing damped economic growth to 10% in 1995, from 11% a year earlier, in part by reining in the most prosperous provinces. But few expect growth lower than 9% for the next decade.

So while many bold economic changes are stalling, others are accelerating--such as plans for a convertible currency that would tie financial markets firmly to the outside world. China is also moving forward, albeit not at a pace the U.S. seeks, to protect intellectual-property rights. Beijing will dramatically slash tariffs in April. In the past two years, it has also enacted an unprecedented number of new laws to bolster foreign-investor confidence.

VOLATILE SWINGS. The path of Chinese history has often been alarmingly erratic, unlike the well-oiled rise of postwar Japan. But China has a population 10 times Japan's, and sheer size makes fine-tuning the economy impossible.Volatile swings can wreak havoc: One bad crop year, for example, would wipe out the huge trade surplus.

But as in Taiwan or South Korea, it could take a decade or two more for deep political change to take root. A more enlightened generation of Chinese, many with Western educations, is waiting to inherit power. "Before you know it, people my age will be running China," says a fortysomething mainland economist educated in the U.S.

But accepting such a view requires patience of Western policymakers, and that's in precious short supply as China shoulders its way onto the world scene. From Seoul to Singapore, Asian leaders are also trying to find ways to deal calmly with the giant that has awakened in the neighborhood. For Americans, though, China combines all the emotional issues: the fear of job losses, a human-rights record that still offends American values, and fears of military confrontation. That is a potent brew indeed--particularly in an election year.

As the West's debate about China expands, it is sparking a reaction from the mainlanders, who fear an effort to "contain" their country's rightful emergence. Although the Chinese may not be enamored of their present leadership, many give Beijing credit for overseeing the most prosperous period in modern history. When the U.S. lobbies against holding the Olympics in Beijing or threatens to revoke China's most-favored-nation trade status, these attacks are considered strikes against China as a nation--and not against the leadership they're intended to punish. "As a Chinese," says a 30-year-old computer engineer in Beijing, "I'm getting disgusted with the U.S."

That's what makes the current situation so unsettling. No matter what happens with Beijing's power struggle and the fist-shaking at Taiwan, China's already large economy is set to double in the next 8 years, making it the world's sixth-largest, while its military capability will grow considerably. The stage will be set for one of the most important showdowns of the early 21st century.BY JOYCE BARNATHAN IN HONG KONG, WITH STAN CROCK IN WASHINGTON, BRUCE EINHORN IN NEW YORK, AND BUREAU REPORTSReturn to top

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