Hu Jintao's reform tightrope

2006-06-29Asia Times

BEIJING - China seems to be moving in the direction of a new property law, a need we identified in Part 1 of this report (Hu Jintao and the new China (, June 28).

The approval of such a law has been postponed for almost two years because of strong opposition and the great difficulty of setting in order the present chaos of all that could be defined as property in China. One sticking point is the definition of collective property, in which a village controls the local land. How hard should be these rights? Should the rights to such property be divided among the villagers, or merged in the person of the village chief?

If the rights were divided, they would provide for better management of the land while enabling a "political" challenge to the authority of the village chief. But then there is the issue of how the villagers could claim property. At present, if someone moves out of the village he loses all claims to the property without compensation, while someone who moves in automatically is entitled to a stake in the village land. Therefore village chiefs have relatives and cronies move in and force adversaries to move out. Clearly this must change, but how to do it without causing a riot among thousands of villagers where the interests of a large part of the population are tied with those of the village chief?

Then there is the even larger problem of defining private property, its limits but also its rights. But no matter what the difficulties, the new property law must pass. This was the message between the lines of a People's Daily commentary [1] urging government to press ahead and deepen reforms "of the economic system and including political, cultural, social and of other aspects of the system". This is because "reforms are all-encompassing. They do include the economic basis as well as the higher construction."

However, the crucial sentence was about private property: "Encourage, support and guide without any hesitation the development of the non-public economy," said the commentary. It did not forget the public economy, but it did not make clear whether there is a difference between state and collective property, that is, between what is owned by the village and what is held by the state at, for example, the central or provincial level.

There is huge opposition to regulation by law of private property. The opposition is twofold: on principle and on real interests, and the two complement each other but are not consistent with each other.

In principle the opposition is straightforward and noble. A new law on private property could whitewash all improper acquisitions of the past. Millions of people who took advantage of the their position or family relations to acquire land and property in the murky times of the move from a socialist to a market economy would have their acquisitions redeemed and legalized. In the meantime, millions of other people who were honest and law-abiding, who did not take advantage, or had no opportunity to do so, would be officially poor, without any compensation for their honesty. Yet again, thousands of unlucky people tried to grasp the opportunities at hand but got caught, and now live in prison or got the death sentence. If there has been unfairness in the past, the state should not now stamp its seal on it by legalizing it. Millions would be up in arms about it.

On the other hand, there are the less noble souls who fear that the legalization of property will end their present privileges. If the peasant has clear rights over his land, then the village chief can't act as a middleman, pocketing huge margins between the price paid by a real-estate developer and the funds received by the peasant. Besides this, corrupt tycoons have nothing to gain from a new property law. Their money has been taken abroad and has come back in the form of foreign investment, so their rights are already protected. If the state of confusion over property rights goes on, they will have more time and opportunities to play their tricks, prolonging the bonanza.

In fact the new property law would harm the interests of this new class of "robber barons", not those of the poor. If the current confusion over property rights goes on, the poor will be ruined and the robber barons will make the country barren. The alternative is not between an egalitarian country and one full of wrongs. The alternative is between many wrongs and fewer wrongs - unless, of course, we think a communist paradise can be of this world. But how many people in China want to go again through the Great Leap Forward, the Cultural Revolution or even some kind of Sovietized economy making everybody poor?

But then there is the greater political question mark. As China's leaders are steeped in Marxist education, they know that legalization of property rights is the first step toward political rights. People with legal property will want to defend it, and if their property rights are guaranteed, their defense will be fully legal, and it will be a political right. One could easily see where this would end - a massive political change, suggested by the People's Daily and announced by President Hu Jintao during his speech at Yale University on April 22 during his trip to the United States. Hu said that by 2020 the Chinese political landscape would greatly "improve", meaning (1) that the political system now is not too good, and (2) that by then we can expect greater democracy.

A reference to greater democracy in the future and larger political reforms was the main thrust of a speech that Zhang Yi, from the Society of Strategy and Management, gave at the Bilderberg conference held in Canada this month. Strategy and Management, which used to publish a homonymous journal, is a non-governmental organization with Chinese characteristics and strong bonds with the government but also a high degree of independence. Zhang Yi's speech was exactly in line with Hu's Yale speech and expanded on it.

By 2020 China should have a per capita gross domestic product of some US$3,000, if it grows at the present speed, without taking into account a revaluation of the yuan. That per capita GDP is considered in China some kind of threshold for democracy. With that much money in their pockets, people will want to have rights and defend their property.

The ideal direction is then set: slow movement from property rights to a more democratic system around the year 2020, when China's GDP could be some $8 trillion (without yuan revaluation), safely the second-largest in the world after the US.

Hu's official ideological adviser Zheng Bijian [2] has said the resurgence of China will have to be linked to peace - only this can defeat the two ideas that besiege the country now, the theory of China as a threat and the theory of China's coming collapse. He stressed the need for greater reforms, political and cultural, to improve the quality of the life and open up for greater democracy. No timetables were set, but improving the level of civilization of the Chinese people will be a long-term project.

But two forces at work may have different timetables for both economic and political reforms in China. One force wants a slower pace, while the other may impose a faster one.

The bureaucracy factor
The bureaucracy in China would like a slower pace for reforms, if not a total halt. This is a relatively recent phenomenon, and the reasons for it are simultaneously simple and complex.

When in the late 1970s Chinese leader Deng Xiaoping launched his reforms, government and Communist Party officials were in total disarray. Some of them had been criticized at the beginning of the Cultural Revolution, had then been rehabilitated and were reinstated in their posts, while others had moved in during the Cultural Revolution and now were sidelined to make way for the rehabilitated ones. Both groups felt wronged by the party, both were disaffected by its ideology, and nobody had a real turf to defend.

In such a situation, the bureaucracy had no reason to oppose reform. On the contrary, the reforms were an occasion to make some extra cash. There were no clear lines, either ethical or legal, between right or wrong in the new market economy, and nobody clearly forbade officials (especially at the beginning) from trying their hand in business. Deng simply said, "To get rich is glorious" - he did not say, "To get rich in an honest way is glorious." Besides, after three decades of communism, where all economic exchanges were wrong, who knew what was honest and what was dishonest?

Furthermore, it seems that Deng clearly nudged the officials to be entrepreneurial - it would make the country rich and would build political consensus for the reforms. The officials had a stake in the reforms, they wanted them, they would make money out of them. Corruption was rife, and not limited to a small group of high officials - it trickled down at every level, to create a large mass of consensus. So corruption was also the immediate fuel to start and move the engine of reforms.

But corruption needs a murky situation, privileges to be sold or granted at whim. Citizens have to beg officials to get away with something. But if the picture clears, if the economy starts rolling and property rights solidify, then corruption is an obstacle and has to be done away with. But after almost 30 years of reforms, the privileged positions of officials have become consolidated. If reforms move fast, if property rights become clearer, officials lose power, privileges and concrete instruments to line their pockets.

If the state grants the farmer clear property rights over his land, the local official can no longer buy the land and resell it to a developer for a fat profit. Developer and farmer will talk directly to each other. And then the official will be obliged to make sure no rule is broken by either party; the official should step back and hope that nothing happens requiring his intervention.

But this is a very different profile from the present official who takes everything into his own hands and pushes reforms and change like the chief executive officer of his locality, including land transfer. The kind of official who will enforce property rights is not available now, and it is hard to imagine that the cooperation of China's Central Party School with Harvard University's Kennedy School of Government or with Italy's Alta Scuola di Economia e della Finanza could make up for this shortfall.

And so there is large constituency that has privileges and rights to defend and has had a positive experience in running the country, and sees no reason to change

Furthermore, no country can function without its bureaucracy, and even if some changes can occur it is hard to eradicate habits ingrained during 30 successful years and that are based on an old tradition when officials were small emperors and all the people went out of their way to ingratiate them. China cannot turn its back on officials who have brought the country this far, and even if it were to do so, it simply could not function without them. In any country the bureaucracy is one of the most powerful constituencies, and this is even more so in China, the country that invented bureaucracy, that it is held together by bureaucracy and where now the emperor himself is a bureaucrat.

Yet other forces press for change.

The Ma Ying-jeou factor
China must change because of Taiwan and because of Ma Ying-jeou. The "pro-independence" Chen Shui-bian is done for - even if he doesn't resign as president of Taiwan he will be a lame duck. Meanwhile "pro-unification" Ma Ying-jeou is rolling in. For Beijing he represents a larger risk than Chen. The possibility of Taiwan proclaiming independence was extremely dangerous (it would have meant war destroying both the island and the mainland) but was also very thin. But Ma, chairman of Taiwan's opposition Kuomintang (KMT), is a different kettle of fish.

When talking about the possible unification of Taiwan and the mainland, there is the question of the two different systems in Beijing and Taipei. If integration should choose the most modern system, then Taiwan could push for its own over that currently used on the mainland. Furthermore, if there were reunification, the KMT would try to set up shop in China and recruit new members. It might want a deadline for democratic elections in China where the KMT could run against the Communist Party.

These are all theories, just floating ideas. But clearly the probable election of Ma as president of Taiwan in 2008 could start talks on reunification. If these were successful, Hu would then have outdone all his predecessors, including Mao Zedong, because he would have managed the peaceful reunification of China. But then he would also have to face the urgent matter of political reforms, of accommodating KMT requests. Ma, or whoever is in his place, may not want to wait decades to regain a position in Beijing.

But the KMT requests are just the opposite of those coming from local officials on the mainland. Thus any kind of scenario could be imagined for the clash of the two trends, the domestic one embraced by mainland officials, and the external one, Ma Ying-jeou. The eight years during which Ma could be in office in Taipei, from 2008 to 2016, could be very shaky for Beijing, as that will bring China very close to the 2020 date of Hu's speech.

But at the same time, while reunification is a quasi-religion in China, the terms for this reunification are totally hazy. Beijing knows it has to give up something, but the large constituency of the retired old guard watching the younger leaders over their shoulders are pretty miserly. They know that the more Taiwan gets, the less influence they might wield, and they could always scream betrayal, accusing those dealing with Taiwan of selling out. Yet reunification cannot be achieved at no cost.

So Hu Jintao is walking a tightrope, like a revolutionary, ferrying the country into the future, something that proves that behind the caution, the formality, the detachment, and the reserve, he might well be one of the most daring leaders China has ever had.

Indeed, he needs a lot of courage to move ahead even with the first "insignificant" step of a law on property.

(This is the concluding article of this report.)

1. Zhong Xuanli, "Haobudongyao di jianchi gaige fangxiang", People's Daily, June 5. It is noteworthy that the commentary came out the day after June 4, as if indicating that the consequence of the Tiananmen Square incident on that date in 1989 would be certain reforms.

2. Zheng Bijian, "Shixian wenming fuxing he qiangguo meng", Xinhua, June 14. (2006-06-29 Asia Times)


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