Survey China: No Time Like the Present

No time like the present

Mar 23rd 2006
From The Economist print edition

If China wants to reform, it should act while the economy is booming

CHINA is an emerging power, but it still lacks the resources and the will to exert its influence globally. This year's budget calls for an increase of nearly 14% in the foreign aid it hands out, to $1.1 billion. Last year China received its last shipment of food aid from the United Nations, and it is becoming increasingly active as an exporter of aid from South-East Asia to Africa. But at an international donors' conference in Beijing in January at which a total of $1.9 billion was pledged to deal with bird flu, China offered a mere $10m, against America's $334m and Japan's $155m. As Robert Sutter, a former American diplomat, puts it, China is not yet “ready for the prime time” with big contributions to international good causes.

In exerting “soft power”, defined by Joseph Nye of Harvard University as “the ability to get what you want through attraction rather than coercion or payments”, China hardly matters at all on the world stage. It is still struggling to define its development in a way that will keep foreigners happy. The term “peaceful rise” was fashionable for while, but then some officials felt that the word “rise” sounded too menacing. Now the term of choice is “peaceful development”.


China tries to avoid portraying itself as an economic power, preferring to be seen as just another developing country. When it puts men in space, it does so to generate pride at home. Yet when foreign donors suggest that if it can afford such things it no longer needs so much outside help, China worries that the world is turning against it.

Although its economic rise does matter hugely, it is still right to see China as a normal developing country, more concerned with its own internal problems than with trying to influence faraway countries, and profoundly insecure about the sustainability of the “miracle” that it has achieved. Jonathan Anderson of UBS argues that China's economic rise is really no miracle at all. Rather, it is a repeat (albeit concentrated on a single country) of a similar growth pattern already seen elsewhere in Asia. From 4% of world GDP today, Mr Anderson writes, China's share could well rise to 11% in 20 years' time. In 1965, Japan and other East Asian countries (excluding China) together accounted for 4% of global GDP. Twenty years later, their share had increased to 13%.

Curiously, it is often foreigners who point to China's strengths, whereas the Chinese media are full of downbeat reports. Unemployment, the growing gap between rich and poor, social unrest, crime, destruction of the environment, the health-care crisis, corruption: these are all subjects about which considerable gloom is permitted, as long as it does not involve blaming the political system itself or lead to predictions of China's collapse.

Added up, these problems could indeed be construed as serious threats to the party's survival. Not only is China's income distribution among the most unequal anywhere in the world—certainly worse than Russia's—but it has taken only a couple of decades to get to that point. Chinese people in their 40s and older began their careers at a time when China had one of the world's smallest income variations. China's situation may not be that much different from America's, but it is perceptions that count, as the United Nations Development Programme noted in a recent study. In America, less than 65% of the population think that income inequalities in their country are too wide. In China, the proportion is 95%.

Chinese officials sometimes say that income inequality in their country is close to, if not beyond, a “danger line” beyond which it poses a serious threat to social stability. Yet this overstates the problem, given that the measure is so skewed by the massive difference between urban and rural incomes. Resentment of inequality tends to be directed mainly at one's neighbours. And although inequalities within urban areas and in the countryside are big too, they can sometimes serve as a spur to greater effort—at least as long as the economy keeps growing.

As this survey has made clear, strong growth will not guarantee an easy ride. The National Development and Reform Commission, China's chief economic planning agency, has said that even with growth at 8% this year, China would be able to provide jobs for only 11m out of a total of 25m urban unemployed and new entrants to the urban workforce. That sounds worrying. But the general concensus is that growth will actually be closer to 9%, and many people find work in the grey economy and make ends meet. Unemployment is high in areas such as the rustbelt of the north-east, but not in cities of key political importance such as Beijing.

Even for many of those with legal jobs, life is far from easy. Last year the average monthly wage of migrants from the countryside—who provide the majority of manufacturing labour—was a mere 852 yuan ($105) a month. They had no health-care or pension benefits, and certainly no independent trade unions. Even so, getting a job in a town or a factory remains a better prospect for most people than sitting idle and poor in the countryside.

Corruption, though rife and egregious, has not badly blemished the image of any top leaders, apart from Chen Xitong, a former Politburo member who was sentenced to 16 years in prison in 1998 for accepting bribes. This may be thanks in part to the extreme secrecy surrounding top leaders' lives. But there is anyway little public grumbling that Politburo members are using their power to amass fortunes in foreign bank accounts. What really worries ordinary citizens are health care and education for themselves and their families, but here a restructuring of the way the government allocates money for these, and a boost in spending (which China can afford) could help a lot.

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There are plenty of ways in which China could make itself fairer, freer and more open—and by doing so not only keep its people much happier but make its rise seem less unnerving to the West. A poll conducted by Ipsos-Reid last April indicated that 54% of Americans believed that the emergence of China as a superpower would be “a threat to world peace”. Nearly a third of Americans, it suggested, thought that China would “soon dominate the world”. More than 70% of Americans did not think that China would soon become a true democracy.

Some of the reforms needed could be achieved with little political change: giving farmers clear rights to their holdings; creating a social-security system that covers everyone; reducing the fiscal burden on low-level governments; and eliminating administrative barriers to internal migration. Some of these would be difficult or expensive, but they should be achievable without colossal disruption.

Some progress is being made. A revised compulsory-education law now being debated would for the first time specify central and provincial government's responsibilities for school funding. Officials say the aim is to provide free nine-year compulsory education in the countryside by the end of 2007.

Political reform is harder. For any progress to be made towards greater pluralism, sooner or later some organised opposition to the party would have to be allowed. That could cause massive social upheaval in a country undergoing such rapid change. But this is a risk that China will have to take. Waiting for its people to reach a certain level of education or income, which is often the official excuse for doing nothing, would not necessarily make the transition any easier when it eventually comes. It would, however, increase the risk of an explosion of discontent should the economy slow down. That could truly unnerve China's neighbours and the West. The best time for reform is while the economy is still booming.