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spending from the workers and executives of the companies represented (Tyler A8).
It is conditions like these that have caused at least one analyst to predict
that China will be “the richest economy in the world within the next 25 years”
(Gilder 372). Shanghai is by no means unique to this growth. Additional foreign
investments have continued to pour into other areas of China. For example, the
Boeing Company recently announced its intention to “invest $100 million in a
plant in [Xian] China to make tail sections for 737 jetliners” (”Boeing” D4). In
addition, E.I. du Pont recently predicted “that its investments and business in
China could increase as much as ten times by the end of the century” (”Du Pont”
D2). Tellingly, du Pont’s chairman attributed the company’s negotiations of “as
many as 28 new projects in China” to the fact “that the country’s financial
changes, improved infrastructure and rising disposable income has [sic]
encouraged the company to expand its business activities” (”Du Pont” D2). The
Chinese government has made conscientious attempts to promote the strength of
the country’s economy while protecting its citizens. Just a few weeks ago, the
government instituted “tight-money policies, intended to control inflation and
slow what has been the world’s fastest growing major economy” (Shenon “China
Halts” D1). However, after doing so, China’s Securities Regulatory Commission
was forced to stop the issuing of new issues on the Shanghai and Shenzhen Stock
Exchanges because the value of the markets had decreased so greatly. This latter
move was “meant to calm millions of first-time Chinese investors who evidently
went into the market believing that stock prices could only go up” (Shenon
“China Halts” D1). Might this policy show a union of economic and moral concern?
If so, it demonstrates the desire on the part of the government to show some
kind of responsibility, some moral force, to its citizenry. At the very least,
the strategy appears to show a practical desire on the part of the government to
take control over what could have been a bad economic situation. Indeed, after
these measures were instituted, China’s trade deficit decreased (Hansell D2) and
the stock markets’ volume attained record highs (”Stocks Surge” D2). To be sure,
Chinese investors remain somewhat wary about the stock market and, ironically
enough, more control of the stock markets appears to be necessary (Shenon “A
Nail-Biting” D1). But, in discussing Chinese attempts to control inflation,
Philip J. Suttle, head of emerging markets research at the investment firm of
J.P. Morgan, has predicted that “[i]t looks as though the Chinese are going to
have the soft landing they are aiming for” (quoted in Hansell D2). China’s
interest in stock markets is no longer restricted to within its own boundaries.
This month, Shandong Huaneng Power Development Company, “the first mainland
Chinese company to have its primary listing on the New York Stock Exchange”
(”China Stock” D5), began trading shares. The stock should be an attractive one
to investors: Chinese electrical “demand … is expected to grow by a whopping
17 million kilowatts a year until the turn of the century” (Zuckerman D6).
Moreover, China stands to gain from the issue’s sales. “The company plans to use
the $311 million dollars it received from the offering to retire $83 million in
loans from … Chinese state entities. It also plans to expand its overall
generating capacity” (Zuckerman D6). Nor does this signify the only Chinese
attempt of raising capital from foreign sources on foreign soil. “Three more
power companies are expected to be listed in New York and Hong Kong in the
coming months” (Zuckerman D6). Given the apparent strength of the Chinese
economy as shown by huge public works projects, extensive foreign investments,
participation in the world economy, and a generally higher standard of living by
the populace, it would appear that China is now ready to join the world as a
modern capitalistic and democratic society. However, this is not quite the case.
The CCP retains vestiges of those characteristics of insularity and
intransigence as discussed by Nathan. Because of its human rights record, the
country’s economic growth is being impeded. That is, the politics of China,
which have always been allied with its economics, are now restricting
international growth. The United States, especially, has been concerned with
China’s treatment of political dissidents. In May, President Clinton decided to
end linking China’s trade status with the United States with its record on human
rights. The president has been criticized for this because of situations like
the following: trials for “‘counterrevolutionary activities’ [including] …
plans to use a remote-controlled airplane to drop pro-democracy leaflets over …
Tienenmen Square” (”China cracks” A13) have recently begun for fifteen
dissidents and labor organizers who were involved in the Tienenmen Square
protests. These trials have “been delayed twice, first to avoid negative
international reaction just before the decision last September on China’s failed
bid to host the 2000 Olympics and then this spring to avoid influencing
Clinton’s trade decision” (”China cracks” A13). In addition, China has
instituted “new laws effective in June [which] give sweeping powers to China’s
State Security Bureau to clamp down on dissidents” (”China cracks” A13). China
is fully aware of United States’ concerns about its human rights record. Given
the fact that the United States has made it clear to China that that record will
be allied with trade status, China’s timing of such restrictive activities has
caused United States legislators and administrators to question China’s
sincerity in its desire to have a favored trade status with the United States.
Indeed, just in the past few days, it took a last-minute lobbying campaign by
President Clinton and his Cabinet [to head off a] potentially embarrassing vote
by the House of Representatives to restrict trade with China as a way to punish
Beijing for reported human rights violations. (Bradsher A7) But China’s problems
in joining the community of the world market have more to do than with its
political ethos and practices. China appears not to understand or to be able to
follow through on fundamental modern economic practices. For example, the United
States has recently complained that “China has not complied with international
rules on access to its markets and protection of copyrights and patents” (Gargan
14). Such non-compliance could make it difficult for China to become a founding
member of the World Trade Organization, the successor to the General Agreement
on Tariffs and Trade and the body that is intended to promote global free trade
by lowering tariffs and other barriers, [which] will be formally constituted on
January 1, 1994. (Gargan 14) The specific nature of the United States’ complaint
has to do with China’s pirating of musical compact disks, video laser disks and
computer software. In fact, it is estimated that such pirating costs American
companies a billion dollars a year. This phenomenon seems to have to do with the
Chinese psychology as described by Nathan. In his 1981 essay he noted that China
did not wish to become a “technological client of the west. The preferred
solution is to buy one item and copy it” (Nathan 52). Clearly, this is not the
way trade works today. It is the United States’ position that China must adhere
to the rules of trade before it can be included in a trade organization.
Needless to say, exclusion from WTO would be disastrous for any country, but
particularly for an emerging market such as China. Even on a day to day basis,
China’s economic leaders seem unable to understand how some aspects of a market
economy work. In discussing the status of the Shanghai Stock Market, for example,
one stock dealer referred to it as “crazy” (”Stocks Surge” D2). Moreover,
American analysts have been amazed to discover in the Shanghai market “the lack
of regulation and the poor disclosure requirements. Some companies have been
listed for two or three years and have not issued an annual report” (Hansell D2).
It is no wonder that Chinese investors become anxious about their investments.
The issuance of shares in the Shandong Huaneng Power Development Company also
demonstrates the lack of expertise on the part of the Chinese in the modern
world market. In fact, according to one Hong Kong investment analyst, “‘[t]he
company wasn’t really a company. It was just a bunch of discrete plants that
they tied a bow around and wrote a prospectus on’” (Zuckerman D6). The
prospectus guaranteed a fifteen percent annual return on investments. In fact,
the return will no doubt be less than that because of prevailing currency
exchange rates and debt that the company will have to assume. To be sure, the
problems of the Shandong Huaneng Power Development Company and the Shanghai
Stock Exchange may demonstrate only the problems of an immature economy.
Nevertheless, if China wishes to become a viable member of the world economic
community, such shortcomings will have to be eliminated quickly. These apparent
problems may also be the result of an economic system that is run by the state.
Certainly, one thing that the CCP has attempted to do is create a market economy
while retaining a state controlled system. This structure may be possible but it
does have its critics. Steven N.S. Cheung, in an essay written in 1989, argued
for the “creation of private property by mandate” (31), feeling that
privatization in China would lead to necessary additional investment in the
society’s infrastructure and the establishment of a “judicial system that is
based firmly on the principle of equality before the law” (Cheung 32). Echoing
Cheung’s sentiments, James Dorn saw problems in the areas of Chinese banking and
finance. In this arrangement, Dorn argued, “the state controls the bulk of
investment resources. The lack of a private capital market has handicapped
economic development in China and hampered rational investment decisionmaking”
(43). In order to become a modern economic state Dorn argued for the necessity
of circumventing “China’s ruling elite who oppose the dismantling of state
monopolies and who benefit from price fixing and nonprice rationing” (51). Xu
Zhiming also saw the necessity for a revamping of the Chinese system: “We must
throw off the traditional system completely” (249) in order for economic reform
to thrive. Communist Party members, of course, articulate a different position.
In a recent interview that appeared in the Beijing Review, Feng Bing, Deputy
Secretary General of the State Commission for Restructuring the Economic System,
spoke to the issue of economic reform in China. It is striking that Feng spoke
of the benefits that the populace has received as a result of the economic
reform now occurring in China. That is, his comments appeared to demonstrate the
beneficence, or the moral force, of the Chinese Communist Party vis-a-vis
economic reform. He noted that such reform involves the essence of socialism:
“to liberate and develop productive forces; to eradicate exploitation; to remove
polarization; and … to attain the goal of common prosperity” (”Official” 12).
Thus, CCP leaders still appear to see their roles as representatives of a moral
force. CCP members and leaders wish economic reform not to be judged on just its
practical merits, but also as an effect of the moral force of the leadership.
Economic reform, then, becomes nothing less than a moral crusade and it is thus
easy to see why, for example, China “has staked its national prestige on
becoming a founding member of the World Trade Organization” (Gargan 14). Will
China succeed in taking its place among the nations of the world market? Will
the CCP succeed in retaining its political power given the drastic changes in
the societal makeup of China that are occurring due to the changing economic
realities? I would suggest that the chances are better for the former than for
the latter. Once the Chinese attain more sophistication relative to
international and national markets, institute a more manageable banking system,
and make a good faith effort to insure acceptable human rights, the country may
well become “the richest economy in the world within the next 25 years” (Gilder
372). However, whether or not these conditions can occur without a weakening of
the state controlled system is problematic. The most impressive and far-reaching
display of moral force by the CCP may well have to be a voluntary reduction of
its power over the people. Paradoxically, by weakening itself politically, the
party may demonstrate its true moral force by liberating, politically and
economically, one billion Chinese citizens.
“Boeing Planning to Invest $100 Million for China Plant.” New York Times: 9
August 1994, D4.
Bradsher, Keith. “Bill to Restrict China’s Imports Loses in House.” New York
Times: 10 August 1994, A7.
Cheung, Steven N.S. “Privatization vs. Special Interests: The Experience of
China’s Economic Reforms.”
Economic Reform in China: Problems and Prospects. Ed. James A. Dorn and Wang Xi.
Chicago: University of Chicago Press, 1990. 21-32.
“China cracks down on dissent after trade threat lifted, report says.” Hartford
Courant: 29 July 1994, A13.
“China Stock Is Most Active.” New York Times: 5 August 1994, D5.
Dorn, James A. “Pricing and Property: The Chinese Puzzle.”
Economic Reform in China: Problems and Prospects. Ed. James A. Dorn and Wang Xi.
Chicago: University of Chicago Press, 1990. 39-61.
“Du Pont Plans Increase In Chinese Investment.” New York Times: 10 August 1994,
Gargan, Edward A. “U.S. May Thwart China’s Trade Goal.” New York Times: 24 July
Gilder, George. “Let a Billion Flowers Bloom.” Economic Reform in China:
Problems and Prospects. Ed. James
A. Dorn and Wang Xi. Chicago: University of Chicago Press, 1990. 369-374.
Hansell, Saul. “Chinese Stock Markets Bounce Back, Rising 30%.” New York Times:
2 August 1994, D2.
Nathan, Andrew J. China’s Crisis. New York: Columbia University Press, 1990.
“Official on Economic Reform.” Beijing Review: 27 June-3 July 1994, 11-15.
Riboud, Marc. “China Leaps Upward.” New York Times Magazine: 27 December 1992,
Shenon, Philip. “A Nail-Biting Ride in Shanghai.” New York Times: 6 August 1994,
Shenon, Philip. “China Halts Listing of New Stock.” New York Times: 1 August
1994, D1, D4.
Shirk, Susan L. The Political Logic of Economic Reform in China. Berkeley:
University of California Press, 1993.
Solinger, Dorothy J. China’s Transition from Socialism: Statist Legacies and
Market Reforms, 1980-1990. Armonk, NY: M. E. Sharpe, 1993.
“Stocks Surge in China As Volume Sets Record.” New York Times: 9 August 1994, D2.
Tyler, Patrick E. “Economic Focus in Shanghai: Catching Up.” New York Times: 22
December 1993, A1, A8.
Xu, Zhiming. “The Impact of China’s Reform and Development on the Outside
World.” Economic Reform in China: Problems and Prospects. Ed. James A. Dorn and
Wang Xi. Chicago: University of Chicago Press, 1990. 247-253.
Zuckerman, Laurence. “A Foreign Offering’s Unsure Pedigree.” New York Times: 11
August 1994, D6.
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