On Eve of U.S. Visit, Hu Pushes Reformist Image

President Hu Jintao has in the run-up to his U.S. tour launched a vigorous campaign to project himself as a reformer. Apart from courting public opinion in the West, the Chinese Communist Party (CCP) General Secretary is anxious to fend off criticism from forward-looking cadres and intellectuals that economic, and especially political, liberalization has lapsed since he and ally Premier Wen Jiabao took power in late 2002. Moreover, the country’s “leftists,” or quasi-Maoist conservatives, have taken advantage of the Hu-Wen team’s failure to close the rich-poor gap to try to regain lost political territory.

At the National People’s Congress (NPC) earlier this month, Hu told parliamentarians that his administration would “uphold the [country’s] reformist orientation without any hesitation.” “We must lose no time in pushing forward reform,” Hu added. “We must accomplish new breakthroughs regarding reform in important areas” (China News Service, March 6). In fact, the Hu-Wen team had designated 2005 as “the year for accelerated reforms,” and Premier Wen indicated that during the five years covered by the 11th Five Year Plan (2006-2010), reform would be entering the “deep-water zone” (Xinhua, December 19, 2005). Following Hu’s pronouncements, the official media have run stories about how a dozen-odd government departments plan to “storm the fortress” of reform in the coming year or two.

Yet most changes so far have been in the economic and financial sectors that were already mandated by the protocols that Beijing had signed for admittance into the World Trade Organization in 2001. These have included allowing, in most cases, carefully selected Western firms to enter areas including banking (stakes in large state banks to be held by overseas banks are generally restricted to 20%), insurance, and retailing. Other adjustments, such as a slight relaxation over state control of the renminbi’s exchange rate, were the result of heavy pressure put to bear on Beijing from countries such as the U.S. that had incurred massive trade deficits with China.

Liberal academics and intellectuals have at least indirectly faulted the Hu administration for hesitancy in pushing for reforms, particularly those related to the political system. Senior economist Wu Jinglian, a one-time adviser to former premier Zhu Rongji, has since late last year cited several shortcomings in the reform process. He noted that most shortfalls had to do with “systems and institutions,” especially the fact that “the legal environment that is a prerequisite for a modern market economy has yet to be established.” Professor Wu deplored the fact that efforts to rationalize the ownership structure of many large state-owned enterprises (SOEs) and monopolies through means such as converting them to shareholding companies have not materialized (China Youth Daily, February 13). At the same time, the masses’ dissatisfaction has increased because public services such as education and health care have deteriorated or become terribly costly.

Noted theorist Zhou Ruijin has put the spotlight on what he euphemistically called “the less-than-perfect state of the reform of the political and legal systems.” Zhou, a former deputy chief editor of the People’s Daily, pointed out that high school fees, expensive medical care, and runaway real-estate prices had undercut popular support for many reform initiatives. This was despite the Hu-Wen team’s apparent commitment to “putting people first” and “building a harmonious society.” “A ‘harmonious society’ should be a civil society, a society where citizens can decide for themselves and run their own affairs,” Zhou indicated in an interview with the Beijing media. “Harmony can only be achieved through the law, as well as [the work of] individuals and social organizations” (Beijing News, March 15).

Wu and Zhou, both deemed establishment intellectuals, are too polite to accuse the Hu leadership of being too timid—and too beholden to vested interests—to consider more difficult aspects of liberalization. This is despite the fact that the millstones round the neck of progress are well known. They include the CCP’s refusal to give up control over vital aspects of the economy—including the largest and most profitable SOEs—and more significantly, the growth of a new exploitative class, which consists of an “unholy alliance” between corrupt cadres and “red capitalists.” It is the fast-expanding clout of officially-sanctioned, near-monopolistic business groupings as well as quasi-privatized, over-charging government units that are behind exploitative phenomena in the economy, such as sky-high education, medical and housing costs. Moreover, consumers and NGOs are in most cases denied basic rights to blow the whistle on—let alone penalize—the culprits.

Since last autumn, academic and intellectual circles in Beijing and Shanghai have been gripped by the debate over what Chinese scholars called “the inadequacy of the provision of public goods.” The media have run numerous horror stories about the fact that more than half of the country’s 800 million peasants cannot afford a clinic or hospital visit. Moreover, leftists, or remnant Maoists, have seized the opportunity to attack the Hu-Wen team for continuing ex-president Jiang Zemin’s policy of, in effect, rendering the country quasi-capitalist. For instance, influential economist Liu Guoguang earlier this month alleged that “corruption and capital based on the power [of officials] are expanding, and this runs counter to the nature of socialist reform.” (Wen Wei Po [a Chinese-run Hong Kong daily], March 24). “We must make sure that leaders at every level are really Marxists,” he added. “The new liberalism of the West does not suit socialist China.” During the NPC, various deputies have decried that the country’s privatization policy has resulted in the massive loss of state assets. Others have noted that the central government has been selling off the stocks and shares of state banks to foreign firms at rock-bottom prices—and that this move jeopardizes state security. The promulgation of a property law, which would among other things have made it easier for farmers to claim ownership over their individual plots, was shelved indefinitely (Time [Asia Edition] March 14).

In response to the leftists’ fusillades, senior cadres in the National Development and Reform Commission pointed out in a recent conference on restructuring the economy that reform must go on despite its imperfections. They indicated that on the question of speeding up reform, “there should be no hesitation, delays or [merely] going through the motions” (Wen Wei Po, March 24). The big question, however, is what kind of reforms the Hu-Wen team is prepared to push further.

There is no evidence that the Hu-Wen team will go the distance in either political change—in the sense of the Communist party sharing power with groupings such as NGOs or non-official trade unions—or even the more restrictive exercise of thorough administrative and institutional restructuring. The ills of many reform programs can only be cured through further promoting market forces and the rule of law, and, especially, allowing NGOs and the media to scrutinize corruption-prone officials as well as monopolies that enjoy CCP patronage. The Hu-Wen leadership, however, has resorted mostly to executive means to tackle socio-economic malaises. Take for example, the plight of restive, exploited peasants who were responsible for the bulk of the close to 90,000 cases of protests and riots last year. The CCP authorities have shied away from the only solutions that would work: allowing peasants to form non-party-run farmers’ unions, or expanding and upgrading village-level polls so that peasants will at least have the means to throw out malfeasant cadres.

On the surface, Premier Wen, who has handled the agriculture portfolio for nearly ten years, offered the peasantry at the NPC a reasonably generous arrangement. He abolished agrarian taxes and vowed that the central government would spend at least 340 billion yuan (US$42 billion) per year on rural infrastructure as well as education and health care in the countryside. Yet the farmers’ happiness about this dispensation may be tempered when they realize that central and local government departments are spending some 300 billion yuan (US$37 billion) per year just to maintain their fleets of cars. Moreover, cadres of all levels are charging the government about 500 billion yuan (US$62 billion) per year for overseas trips, banquets and other entertainment expenses (Xinhua, March 17).

Soon after Wen became premier in March 2003, he pledged to abolish the one layer of administration—towns and rural townships—that lies between counties and villages. Given that China has about 40,000 such units—and that the salaries of millions of civil servants at that level come basically from the taxes and other levies imposed on peasants—this move could both promote government efficiency and alleviate rural hardship. Yet this bold plan has been shelved due to immense opposition from vested interests. At the same time, the central government is adding new bureaucracy to fight recurrent problems that have been attributed to reform. For example, the State Council, or cabinet, recently set up an Office for the Rectification of Erroneous Practices (OREP) to investigate and root out corrupt or improper practices of government departments as well as semi-official institutions such as hospitals and schools. This is despite the fact that the party and government already have several units, such as the Ministry of Supervision and the Auditor-General’s Office, that are responsible for promoting clean government.

While meeting with President George W. Bush as well as congressmen and businessmen in Washington next month, President Hu will surely exude confidence and zeal about reforms in areas ranging from the Chinese currency to the country’s open-door policy. What is also quite certain, however, is that the life-long CCP apparatchik will only implement those changes that will not exacerbate the already alarming state of social instability in China. Nor will he entertain liberalization measures that will cut into the longevity of the party’s much-touted status as “perennial ruling party.”