A big chill is blowing through China. With ailing reformer Deng Xiaoping out of the picture, conservative groups are reasserting their power in Beijing. The military, allied with the Communist Party and bureaucracy, is reclaiming its authority over supporters of open markets and a more liberal political society. It may be a temporary setback. Or it may not. Business beware.
The latest crackdown from the State Council cited national security reasons in ordering Reuter, Dow Jones, and other financial-news agencies to submit to control by the state-run Xinhua News Agency. The goal is to restrict the flow of information into China, and perhaps give the news agency a piece of the growing financial information services pie.
In politics, Beijing has cracked down on religious groups as well as human-rights activists. The military is again drilling students in the virtues of the Communist Party and it has intensified its saber rattling against Taiwan. Economically, Beijing has proposed scrapping preferential tax policies for foreign companies and killed plans to reform the banking system. Piracy of U.S. intellectual property continues.
What is the West to do? It is clear that delinking trade and human rights is not turning China into an open society. But the West should continue to support the forces for economic and political change. Cowed by the military, they remain a strong and growing constituency inside China. They are also China's only hope for entry into the World Trade Organization. The current wave of heavy-handed policies emerging from Beijing can only keep China from joining the WTO at this time.