- The Washington Times - Wednesday, November 9, 2011

Fourth of four parts

HONG KONG Chinese political and business leaders are increasingly triumphant after two decades of rapid economic growth that lifted unprecedented millions of people out of poverty and turned the nation into an economic superpower, saying their success proves its political and economic system is superior to the Western model.

In extensive talks with a series of Chinese leaders, an oft-cited point of criticism is the gridlock and “dysfunction” they see in Washington. They say fawning by U.S. political leaders seeking re-election has created an “entitlement culture” where the public has grown dependent on government largesse. Now, with the United States facing monumental economic and debt problems, the political system has been unable to curb generous entitlement programs or counter the economic downturn.

But Washington’s political stalemate is not the only subject of derision in private and public conversations in China. Ordinary citizens also have watched aghast as European countries amassed huge and unpayable debts with their unwieldy welfare states. Now, with the public violently resisting reform, these spendthrift countries seem headed for a monumental financial crisis that threatens to shake the entire global economy.

Even in the Westernized enclave of Hong Kong, where leaders are trying to implement democratic reforms, some officials point to the serious difficulties facing the U.S. and unfolding crisis in Europe as evidence that Western democracy does not work or provide lasting well-being for the people.

“A small but influential group holds critical views of democracy” in Hong Kong, said Chris Yeung, news director at the Hong Kong Economic Journal. “The problems in the U.S. have given ammunition to these people.”

By contrast, critics say, the rapid economic progress that China’s authoritarian government engineered in the past two decades through a succession of five-year plans - sweeping aside potential obstacles and opposition through bureaucratic fiat and sometimes brute force along the way - has served most people well.

The self-serving rhetoric of China’s leaders runs against the historic democratic tide rising elsewhere in the world that has spawned the Arab Spring and other movements that have brought pro-Western forces to power.

But leaders in Beijing point out that hopes in the West for a “Jasmine Revolution” by citizens in China have not been realized because most Chinese, they contend, are content with the economic gains they have made. Democracy as carried out in the West, they say, is seen as a threat to that progress and a hindrance of further growth.

“We believe our political system corresponds to China’s needs,” said Liu Qing, an analyst at the China Institute of International Studies, a Beijing think tank that closely mirrors the government line. “It allows us to have economic development, improve living standards and remain harmonious. Ninety-nine percent of Chinese are satisfied with the current situation.”

Ms. Liu told visiting U.S. journalists that Western media coverage of China has been biased, often focusing on the repression of human rights in Tibet or elsewhere rather than the broader picture, where the government has championed “economic rights” for the people - in particular, plentiful jobs in export industries.

“People like political stability” in China, she said. “People have a vivid memory of what chaos means” after experiencing the convulsions of Mao Zedong’s Cultural Revolution in the 1960s. “The prevailing attitude is: Don’t rock the boat.”

The widespread belief in the U.S. that China doesn’t allow free debate also is wrong, she said, pointing to frequent criticisms of the government on Internet blogs and chat rooms by the nation’s 500 million “netizens.” Still, people know they shouldn’t “overstep their limits” by attempting to “overthrow the government,” she said.

China is now at a pinnacle of global leadership and influence as a result of its emergence as an economic superpower, even as the U.S. and other major industrial powers fell into disrepair as a result of the 2008 financial crisis, said Guo Zhenyuan, an analyst at the institute.

China gained the admiration of developing nations around the world with its ability to weather the crisis emanating from the U.S., even emerging from the downturn as the world’s main engine of growth, while its superior economic performance provoked jealousy in the U.S. and other developed nations, he said.

“The international financial crisis has obviously strengthened China’s international position and amplified its international influence, so much so that the relationship between China and the world has been taken to a turning point,” he said.

Criticizing Washington

Ronnie Chan, a wealthy Hong Kong developer who obtained U.S. citizenship through naturalization and votes in U.S. elections, is nevertheless downright dismissive of U.S. leaders and what he sees as partisan bickering and a tendency to pander to the public.

Mr. Chan’s open venting and outspoken views have won him the nickname “Typhoon Ronnie” among business associates. His company, Hang Lung Properties Ltd., has invested $6.4 billion in malls in Shanghai, Shenyang and Jinan, among other projects in China.

Mr. Chan said U.S. political leaders are so focused on short-term gains that they fail to make the painful long-term choices and changes in social programs needed to ensure the solvency of the government and vitality of the economy.

Chinese leaders, by contrast, lay out plans for the long term and systematically achieve them, producing unprecedented gains in living standards and a remarkable two decades of uninterrupted growth at nearly double-digit annual rates.

This proves that the Chinese system is better than the democratic system that the U.S. promotes around the world, Mr. Chan said.

China’s more-enlightened economic management can be seen today, proponents say, as the nation battles a housing bubble by imposing strict new down-payment requirements on housing speculators and forcing them to pay higher taxes.

That contrasts with the U.S., which in the past decade took no action and allowed its housing and credit bubbles to keep inflating and eventually burst, leading to the worst financial crisis and economic recession since the Great Depression and persistent economic problems.

To alleviate the hardship for the middle class caused by soaring housing prices, China’s central government showed dramatically how it can quickly move mountains this summer by ordering local governments to build 10 million housing units by the end of the year and 36 million units by 2015. That will flood the market with cheaper housing options for millions of middle-class consumers who have been shut out of the ownership market by the speculative bubble.

While the Chinese system could be improved in various ways such as instituting a better legal system, Mr. Chan said, it would not get better if people were granted more political freedom and the right to vote. That, he said, would only lead to the kind of dysfunctional welfare states seen in the West.

Pushing back

Alan Turley, a vice president of FedEx Express in Hong Kong who has heard the criticisms of modern democracy, said that ironically, many American businessmen might agree that the democratic process is less efficient than the Chinese system of top-down government.

But, like many Americans, he is offended by the increasingly shrill attacks on U.S. ideals.

“When they’ve had a successful government in place for 230 years, maybe they can criticize,” he said.

Although China’s government usually achieves what it sets out to accomplish in relatively short order, businesses also encounter plenty of obstacles dealing with the bureaucracy there, he said.

Mr. Turley sees problems with corruption, protectionism and the “dead weight” of bureaucratic approval processes in China. Businesses also get little help from the government in resolving legal disputes, he said.

Despite these difficulties, he said, U.S. businesses continue to be drawn to China because of the huge growth potential. “This is where the opportunities are,” he said.

Others point out that, whatever the criticisms, China continues to invest the vast majority of its $3 trillion in foreign exchange reserves in U.S. Treasury bonds, an endorsement of the U.S. political system and economy. In that sense, its actions speak louder than its words.

“Despite all of the failings of current American political affairs and the anemic economic recovery, the U.S. market remains the best bet” for China and everyone else, said Chris G. Christopher Jr., an economist at IHS Global Insight.

Hong Kong future at stake

The increasingly strident denunciations of democracy in elite business and political circles pose significant obstacles for Hong Kong, which is in the midst of a transition to democracy arranged by the British government when it turned over the city-state to China in 1997. The heavy hand of Beijing is now in control of the transition.

Hong Kong residents are due to vote for a chief executive in 2017, but whether it will be a free and unfettered election remains in doubt.

Mr. Chan and other wealthy businessmen aligned with him, who have considerable influence over Hong Kong’s unelected government, are resisting full democracy. They contend that it would ruin Hong Kong’s efficiently run government and world-class economic and financial system - which routinely gets top ratings from Washington’s Heritage Foundation and other free-market advocacy groups.

Hong Kong-style enlightened but authoritarian government, Mr. Chan said, is better than an inefficient and slow-moving democratic government.

Jasper Tsang, president of Hong Kong’s Legislative Council and a proponent of full democratization, said resistance to democracy from Hong Kong’s business and political elite is an obstacle.

“There are still some sectors of our community that believe it could do more harm than good,” he said. “President Obama’s difficulty with Congress is cited as an example where party politics will slow down or even paralyze the government.”

Political and social reforms that Hong Kong has implemented in recent years, such as the institution of a minimum wage, “do not always appear desirable” to these people because they cause the government to “lose some of its efficiency,” he said.

Chinese business people are horrified when they hear about environmental and community groups holding up major infrastructure projects in the U.S. for years, and they are afraid that full democratization will cause the same kind of economic obstruction in Hong Kong, he said.

“They believe democracy will lead to a welfare system. Politicians have to campaign on promises to spend more. They will raise taxes, and we’ll lose our competitiveness,” Mr. Tsang said. Hong Kong’s government revenues and spending, he said, currently are limited to no more than 20 percent of economic output.

“I can perfectly understand their views and reservations,” said C.Y. Leung, convenor of the Executive Council and a candidate to become Hong Kong’s next chief executive. He noted that Hong Kong has achieved high living standards without full democracy.

“When you give people ballot papers, each carries the same weight. Things will change,” he said. “It’s a question of how abruptly we can accept these changes.”

Despite its image as a bastion of free-market capitalism, Hong Kong’s government is heavily involved in the private sector, particularly in housing, Mr. Leung said. About 30 percent of the population’s housing is heavily subsidized by the government, he said, and demands may grow for more subsidies as people gain the vote.

“We don’t know where to draw the line as to where the entitlement should stop,” he said. Further, just like many Western democracies, Hong Kong has an aging population, and pressure likely will mount to raise the city’s constitutional limit on government spending to accommodate the elderly, he said.

“You can’t turn your back on them. That will be a big cost in the future,” he said.

Ma Ngok, a professor at the Chinese University of Hong Kong, said a generational divide has emerged over democracy in Hong Kong, with younger people demanding a quicker transition to full suffrage and older people holding back and more willing to defer to the Beijing government.

“A lot of people think Beijing will not give democracy to Hong Kong, period. There are all these tricks” the government can use, such as choosing the candidates who run in the elections, Mr. Ma said. “Others are more optimistic that there will be a free election in 2017.”

Mr. Ma agrees with skeptics who expect Beijing to control the nominations of two or three candidates for chief executive, while appearing to allow a free vote.

“Beijing is not opposed to elections, as long as they know the results ahead of time,” he said.

• Patrice Hill can be reached at phill@washingtontimes.com.

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