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Anniversaries offer Beijing little to celebrate

December 15, 2008

John Garnaut
The Age
December 15, 2008
 
 
China's immense progress is jeopardised by its inability to pursue reforms.
 
THURSDAY is the official 30th anniversary of the beginning of China's era of reform. It marks a pivotal moment for humanity when a fifth of the world's population turned from poverty, self-sufficiency and dictatorship towards prosperity.
 
It should be a day to reflect on the extraordinary achievement of hauling nearly two-thirds of China's population above the World Bank's poverty line, thanks to the fastest sustained economic growth in history. Instead, the economy is faltering and the Communist Party is struggling to chart a credible path.
 
There is a risk that the anniversary will turn out to be less of a milestone than a bookend for what was possible in the absence of political reform.
 
The Beijing leadership will probably propagate the untruth that ill-disciplined America is responsible for everything that is going wrong with the economy. They can point to figures such as last Thursday's export data, showing exports shrank 2 per cent over the year to November, rather than today's industrial production numbers, which will show an alarming drop in domestic demand.
 
There will be little mainstream discussion about how the unique political system has exacerbated economic imbalances that inflated GDP growth on the way up and crushed it on the way down.
 
Political choices since 1989 have ensured that China does not collapse or descend into civil war like other former communist states. That is no small achievement. But the same choices entrenched a hierarchy of unaccountable officials, powerful bureaucracies and state-backed capitalists over workers, peasants and landholders. The system conspires to accelerate the accumulation of capital by lowering the prices of exports, land, wages and environmental degradation.
 
This has led to excessive investment in heavy industry and construction while leaving little money for consumers, reducing the space for genuine private enterprise and providing weak incentives for delivery of crucial services such as health and education. It has created a country of First-World hardware but developing-world software.
 
Unlike the United States, there will be no election to enable the public to vent its dissatisfaction and move on. There will be no new set of leaders to abandon policies that are not working and start again.
 
And despite the misgivings of many individual leaders and advisers, the collective leadership seems to know no way out of the economic malaise other than to siphon ever-more resources towards the interests of capital. The Government is responding to a demand slump caused by an oversupply of airports, apartment blocks and fancy government buildings by building more. The bill will be deferred, but one day will fall due.
 
It is far too early to dust off books such as The Coming Collapse of China, but the economy and political system are stuck at a crossroad. The coming year is looming as China's annus horribilis.
 
There will be plenty of festivities to mark Thursday's official anniversary. But the leadership will be distracted by the problem of suppressing less glorious landmarks.
 
The Public Security Bureau, which bears primary responsibility for ensuring a "harmonious" atmosphere, is standing ready to make a mammoth security clampdown.
 
A PSB officer told BusinessDay last week: "Next year will be the anniversaries of Tibet, Falun Gong and Tiananmen. It's going to be much more tense than anything we saw this year. It's not just me, everyone thinks so."
 
The foreboding dates start with the 50th anniversary of the "Liberation of Tibet", for which many Tibetans remain profoundly ungrateful.
 
It also marks the 10th anniversary of the Falun Gong "sit-in", when former president Jiang Zemin's paranoid and brutal crackdown turned a meditation cult into a political movement dedicated to the end of party rule.
 
And then will be the big one: the 20th anniversary of the June 4 military suppression at Tiananmen Square. On that date, the party showed it lacked the confidence to loosen its grip and open itself to independent accountability. Since then, it has pushed reforms when it could, but always subordinated them to the imperative of maintaining a monopoly on political power.
 
Some officials are confident that the campaigns for Tibet, Falun Gong and remembering Tiananmen are all losing momentum. China's security apparatus is certainly well equipped to deal with all of them. But suppressing dissent requires more political control, which will tend to exacerbate economic imbalances.
 
The party also has to work out how to deal with protests and riots that will erupt as workers lose their jobs and corrupt officials continue their abuse.
 
The party has proved more durable and flexible than outsiders thought possible. The high investment rate will provide a foundation for economic recovery that other countries don't have. But it will take all of the party's improvisation skills to steer the economy through to October's 60th anniversary of Communist Party rule without increasing the chances of an economic and political disaster down the track.
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