China Law Blog

China Inc. - The US Confronting a Completely New “China Issue"
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There was no break-through with the recent Bush-Hu meeting. In dealing with the visit of President Hu Jintao, President Bush seemed to be at a loss. Bush recognized that US-China relations comparing to the Cold War confrontation with the USSR is much more difficult to deal with. The former USSR was only a military power. Its economy was weak. Neither Nixon nor Reagan had to deal with low-price products flooding the US market. When the USSR leaders visited US, they did not land on the west coast waving purchase orders and bank cheques. Confronting a political dictatorship and at the same time a booming open-economy “half-human-half-beast’ juggernaut, US is at a loss of what to do.

The dilemma Bush faces today is the result of misjudgment of China by the West a quarter century ago. [Or even longer before - from supporting Chang Kaisek fighting against the Japanese and then the communists]. The US had always fantasized that in assisting China to take the road of market economy [and liberalism], the middle-class would emerge in China. Together with the western-educated returnees, the demand of democratic reform would naturally surface. Such expectations are pipe dreams now and will remain so in the foreseeable future.

In assessing China, the US committed two fatal errors. Firstly, since the June 4th turmoil in 1989, national assets and financial resources that had been monopolized by the “princelings” (children of the high officials) were opening up to the private entrepreneurs and foreign investors. As students of Beijing University marched on the street protesting government corruptions 20 years ago, today many of them emerged as millionaire entrepreneurs and corporate executives. With many multinational corporations operating in China, the brightest university graduates today are absorbed and employed by these three groups (state-owned enterprises “SOEs”, private enterprises and multinationals) enjoying the fruit of the “middle class”.

Any threat to the foundation of the ruling government is a threat to the private enterprises and the multinationals. In other words, the commercial interests of China today while still remaining under the control of the CCP (Chinese Communist Party) acting as its major shareholder have stepwise “IPO-ed” – from Haier’s directors, NBA star Yau Ming, to film director Chen Kaige. Many of the middle-class are now shareholders of this gigantic corporation,“China Inc.” (excepting the peasants and the migrant workers for the time being).

Such is the rationale of the policy of the “Three Representatives” - absorbing capitalists into the Party. The CCP first allowed the equity of the SOEs under its control to expand and liberalize. The result is the market economy driven by the reorganized interest groups has become irreversible pushing forward. Everyone is packed into the same fast-moving train; meshing together self-interests like blood in the same body. These entrepreneurs and executives do not have high expectation of and demand for democracy.

Today, the West is confronted with a completely new “China Issue”: a society that lacks moral beliefs, is only dedicated to the pursuit of material interest, centralizes its political power, carving out spheres of economic interests and wrapping resources from the 1.3 billion population, a people with insatiable desire to consume, its economy driven by the carving up of the market by the multinationals [and the major SOEs], hungrily eyeing the natural resources of the world - like a gigantic meteor crashing toward the earth.

The influence of the US on China’s democratic reform had been waning. China’s influence of the West’s economic infrastructure is increasing; notwithstanding in the balance of interests China still needs US far more than the US needs China.

The CCP has been and is deploying mercantilism in its politics, and the market to support its ruling power; completely ignoring the call of the US on human right. The US and the West should understand that the last opportunity of influencing China’s democracy was lost since the “June 4th” incident. Whether China wants democracy and human rights is left to the choice of its people. The priority of the West is to persuade and guide the Chinese to co-operate in the control of the world-wide pollution of the environment, and the avoidance of a world war fighting over natural resources

Whether following the path of democratic evolution or the continuation of dictatorship, the US cannot make the choice for China. South Africa’s human rights leader Steve Biko once said “the most potent weapon in the hands of the oppressor is the mind of the oppressed”. Once accustomed to the long rule of the emperor, the ruled turned from fear to complacency and reliance; longing to be ruled by the strongman.

The Chinese always long to have a benevolent emperor. [this being embedded in the mindset and the psyche of most Chinese people by the feudal teachings of Confucius for thousand years]. The rebellions of the peasants had been nothing more than to get enough food to fill their stomachs. There is no [and never had] demand of democracy … The West should not have any romantic notions of the “China Concept”, but to maximize their profits from the China market without putting all the eggs in one basket, dealing with the Chinese government in a rational manner, eyeing it as an opponent (but not a deadly enemy, nor a friend). In confronting a new “China Issue”, the West needs a completely new mentality and strategy – but this is not going to come from G. W. Bush.

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Note by this translator : The terms “military-industrial complex” and “Japan Inc.” were often used to describe the close relations between the government and industrial sector of the US and Japan. There was no wide-spread term as yet to describe today’s China as human history may not have encountered and experienced such an unique phenomenon; the intertwining of government and business, the rulers and the ruled - the party cadres in Armani suits - the corporation owned partly by the State, multinationals, its executives and the public - and even the priests of China’s Catholic Church and the Buddhist monks may be party-card carrying cadres. This is “China Inc.”

What would become of this half-human-half-beast juggernaut? Will it just march on sweeping away everything on its path, or self-implode (due to internal conflict of interest and in-fighting over the division of the loots), or evolve into something more humane and civil?

Personally, I would bet on the latter – though may be taking another decade to materialize.

Streeteconomist --

Thanks for checking in. You said a mouthful. You should start your own blog!