China After Deng

The last "paramount leader" is gone. Will stability reign?

He was the bland one, the quiet apparatchik, the one who was never supposed to last at the top. But for eight momentous years, Jiang Zemin has survived as China's President, patiently preparing for the moment when his patron passed on. Now, Deng Xiaoping is dead, and the world is wondering: Can the disciple assume the master's mantle?

It will be difficult for Jiang to match all of Deng's accomplishments. The aged revolutionary, after all, deftly steered China from a period of stagnation and rigid communist ideology into its current era of vibrant growth and tremendous change.

Up to now, Jiang, at 70 still young by the standards of Chinese leadership, has done a remarkable job of hanging on to power. The coming months will be crucial to the consolidation of his power. And the uncertainty that follows any Chinese leader's death will put strains on everything from economic planning to U.S. relations. But the betting is that Jiang will remain China's leader at least over the short term.

The world will be especially sensitive to developments in China over the next 12 months. China watchers in the U.S. will be on the lookout for human-rights violations as the Beijing government claims Hong Kong. China's economic policies are an issue on both sides of the Atlantic. In Europe, nationalists are citing the flood of inexpensive Chinese goods as a prime example of what's wrong with globalization. American business' love affair with China is also eroding as profitless investments there become more difficult to justify. And Chinese imports to the U.S. are hitting record highs.

CRITICAL TIME. The last thing China needs now as it aspires to a bigger role on the world stage is a succession struggle. The Feb. 19 passing of Deng, who succumbed at 92 to Parkinson's Disease and other ailments, was long expected and doesn't immediately alter the power structure in Beijing. China watchers see Jiang heading a collective leadership dominated by a handful of other politicians in their 60s and 70s, including Premier Li Peng and economic czar Zhu Rongji. "The major leadership changes have already been made," says American International Group Inc. Chairman Maurice R. Greenberg, a longtime China investor.

Yet though Deng's increasing infirmity left Jiang and his collective leadership in charge for at least two years, his death still creates uncertainties. Had Deng died a year from now, Jiang would have had more time to put loyalists in party posts. Already, the jockeying has started for the 15th Party Congress, set for the fall of 1997. These congresses, held every five years, are used to announce key personnel shifts. Now, Jiang's detractors may feel more emboldened to challenge him--and move to block some of his initiatives and appointments. "The time between now and the Party Congress is critical for Jiang," says University of Michigan China expert Kenneth G. Lieberthal.

Forced to keep one eye on his opponents, Jiang is likely to exercise caution on a range of policies from economic reform to relations with Washington. Although Jiang clearly craves the prestige of world statesman he would earn by normalizing relations with the U.S., he won't want to be seen as too conciliatory at a time when strident nationalism is replacing Maoist ideology. "Don't look for any bold departures soon," says H. Lyman Miller, director of China studies at Johns Hopkins University's School of Advanced International Studies.

Jiang won't be a sitting duck. Back in 1989, Deng elevated him from Shanghai mayor to become head of the Communist Party. He then became the makeshift replacement as heir apparent for the disgraced Zhao Ziyang, who was blamed for abetting the Tiananmen Square uprising. Since then, Jiang has strengthened his hold by promoting allies, many from Shanghai, to top positions. He worked tirelessly to shore up relations with the military. And he accrued more titles than any other official. Besides being Chinese President and party leader, he heads the powerful Central Military Commission. Now, he is angling to revive the position of Chairman of the Communist Party, a job that went out with Mao Zedong.

Despite his resume, Jiang, like his rivals, lacks a critical credential. Unlike Deng and Mao, Jiang and his contemporaries were not present at the creation of the Chinese Communist Party and did not endure the rigors of the Long March of 1934-36. Deng was last in a line of "paramount leaders" who could force consensus through the power they wielded in the party, the military, and the economy.

Because Jiang lacks Deng's status and power, he will not be able to act as forcefully in tackling China's myriad problems. That could be troublesome, given the need for strong leadership on the economic front. The challenge is to keep China's economic success moving forward in the face of challenges to further reforms. The good news is that China's economic growth is still in the range of 10%, while inflation has been tamed from a sizzling 21% in 1994 to single digits today. What's more, China's foreign reserves have swelled to a healthy $100 billion, allowing monetary authorities to start to live up to long-promised commitments to the International Monetary Fund to make the renminbi convertible.

But structural weaknesses are growing more glaring and must be dealt with if China's growth is to be sustained. The worst problem is the woeful financial shape of state enterprises, 50% of which continue to lose money, despite years of reforms. The financial system is struggling with a huge portfolio of bad debts. Even more worrisome, the gap between China's rich coastal provinces and its impoverished interior is widening. That's a major reason why agricultural workers continue to flock to big cities. This "floating population" is estimated at up to 100 million. While most have found work, others have resorted to crime. These problems need to be tackled. But for the past two years, Jiang has backed off from dealing with tough reforms for fear they may stir up unrest.

Further delay on economic reform is likely, as Jiang's team seems to be waiting for this year's two big events to go smoothly. Once the handover of Hong Kong is completed, he needs to ensure that the territory will not be a source of political instability in the mainland. Jiang also will want to be sure that the Party Congress proceeds as expected and ratifies his leadership. If he passes both of the tests, some experts think, his team won't wait too much longer to get back to the economy. "After the Congress, we'll see more momentum in economic reform, especially of the state sector," predicts Johns Hopkins' Miller.

In foreign policy, Jiang is also likely to avoid big changes. For outsiders who have become alarmed at China's growing military power and assertiveness over territorial claims in Asia, the big question is whether Jiang will be able to keep hard-liners at bay. While he was in control, Deng was a critical check against militarists and ideologues who wanted to take a combative line against the U.S., China's main political rival. Even with Deng's support last year, Jiang was unable to prevent the hard-liners from pushing China into a potentially dangerous military confrontation with Taiwan and the U.S. That's when Beijing used missile tests in a vain attempt to influence the island's elections. Jiang, who had crafted a policy of quiet diplomacy toward Taiwan, was criticized for being soft on Taiwan's push for greater recognition.

Jiang clearly still has to strengthen his hand against the hard-liners and others. How he handles this challenge will test Beijing's ability to manage a lasting and peaceful transfer of power to leaders who lack the legitimacy of the original revolutionaries. It's up to the quiet party man to steer China safely into an uncertain future.

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