- The Washington Times - Friday, November 30, 2001

HONOLULU Successfully hosting the Asia-Pacific Economic Cooperative Summit in Shanghai in October allowed China's leaders to show off the country's major advances over the past two decades. Now China enters uncharted waters.
The Chinese leadership will be kept busy dealing with the consequences of three important events that took place recently: the award of the 2008 Olympics to Beijing; China's entry into the World Trade Organization (WTO), which will take place Dec. 11, and President Jiang Zemin's July 1 announcement that capitalists can join the Communist Party.
Taken together, these events hold the potential to fundamentally alter China's economy, society and form of government in the early 21st century.
In the short term, the 2008 Beijing Olympics present a big coup for China's leaders. Olympics euphoria has given the Chinese people a sense of self-esteem and pride, bolstering the internal legitimacy of the regime and serving as a rallying point to unite the country behind a common goal.
In the longer term, though, China's leaders will struggle to avoid two feared situations: the "Moscow scenario," where an incident in China, such as a major human-rights abuse, triggers a boycott by Western nations; and the "Seoul scenario" where international media attention surrounding the Olympics provides an opportunity for social interests to voice their displeasure with the political system and its leaders.
Fear of these two possibilities will create a strong incentive for China's leaders to stick together, especially after a younger generation takes over in 2002-2003. Using the Olympics to present China as an advanced nation will also exclude major improvements in human rights or sweeping political liberalization, since the Communist Party will want to keep a lid on challenges to the status quo.
Rather, Beijing will be presented as a showcase for China's accomplishments in economic openness, modern infrastructure, environmental protection and cultural prowess.
More fundamental than the "real" Olympics to China's transformation over the next decade is what Vice Premier Qian Qichen has termed the "Economic Olympics" global competitive pressures generated by WTO membership.
While the Chinese leadership tends to stress the challenges ahead, on the whole it has not quite grasped the political and social implications of WTO entry. Beijing's leaders see the WTO as a means to a specific end development of an advanced, competitive and globally integrated economy. Yet, to fully implement WTO rules and regulations, China's economic and political system will require fundamental restructuring: Regulatory, administrative and judicial systems need to move away from China's culture of arbitrary rule-making and corruption.
Restructuring China's bureaucracy and judiciary will also entail changing the way local, provincial and central governments interact, since the present system leaves too much latitude for local governments to flout national policies.
Finally and perhaps most significant, China's entry into the WTO will not only grant greater market access to foreign corporations. If a truly level playing field takes root in China's economy, some of the biggest beneficiaries will be private Chinese firms. Discriminated against since at least the advent of communism, China's private sector is bound to become the most significant domestic economic force.
The rise in importance of private capital in China was most clearly demonstrated by President Jiang's speech during this summer's celebrations of the 80th birthday of the Chinese Communist Party. For the first time in the history of the People's Republic, private entrepreneurs will be allowed to enter the party.
To some extent this officially sanctions what has been going on for some time. Many high-level party cadres have gone into business, and in some regions leading entrepreneurs had already been invited to join the party.
Nonetheless, officially welcoming capitalists, formerly regarded as "exploiters," to the vanguard of the proletariat is without precedent.
Over recent months, the incongruity of this move has triggered a spat.
Hard-line Marxists and local government officials have directly attacked Mr. Jiang for his betrayal of the socialist cause. The president's response has been quick and resolute. He has ordered the closure of two leftist journals and scaled back implementation of the new policy. Private business leaders will be granted party membership only on an experimental basis in 10 of China's provinces.
Despite these minor setbacks, moves to incorporate private capital into the Communist Party are likely to continue. The private sector now accounts for around 50 percent of China's Gross Domestic Product. This ratio is set to rise as private corporations grow bigger and buy out inefficient state enterprises.
Mr. Jiang's policy toward capitalists thus reflects a cool-headed pragmatism. Deep shifts in the political and economic fabric of China are forcing the Communist Party to adapt. The party must broaden its base to include China's new elites, especially professionals, managers and entrepreneurs. The party also needs the support of private businesses to carry out reforms and bolster the government's finances.
In turn, many of the new social forces crave the political recognition, greater security and open channels to influence government policy that party membership can bring.
The challenge for Mr. Jiang and China's new leadership after 2003 will be to manage the unintended consequence that the inclusion of new social forces in the Communist Party generates. From the party leadership's point of view, the inclusion of private business leaders and professionals should strengthen party control. The party can integrate the country's most "advanced productive forces" into the political establishment and regain influence over business a realm over which it has been losing influence.
Ideally, professionals and private business leaders will become dependent on the Communist Party for patronage and status, thus assuring the survival of the present political system.
But at the same time, Mr. Jiang's move is likely to fundamentally alter the nature of the Communist Party. Once accepted as full members of the political elite, capitalists will gradually co-opt the Communist Party. The money of the private sector will erode the influence of civil servants, intellectuals and state enterprise officials who staff the present party apparatus.
Clashes between interests of the communist regime and the newly emerging professional, entrepreneurial and managerial classes might thus hamper China's transition to capitalism.
In the end, though, the rise of private capital, aided by China's WTO entry and the Olympics, is likely to continue. It will strip the Chinese Communist Party of what is left of its Marxist ethos and commit it to further integration into the global economic system.
Christopher McNally recently joined the East-West Center in Honolulu as a research fellow specializing in China's political economy. For information about EWC programs or publications, contact Public Information Officer John H. Williams at: [email protected]

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