China's Main Danger. Stagnation, not revolt

CHINA is not a political and social volcano about to erupt, despite the impression left by much academic and popular analysis. Rather, the genuine issue is whether or not China's capacity to manage its growing problems effectively will diminish dangerously over time. I say this recognizing the acute problems China faces and the human toll its modernization will exact in the future, a future in which there probably will be violence and unrest. This turbulence, however, will be episodic, localized, and manageable in the short and medium terms, albeit at possibly considerable cost.

Among the problems facing the People's Republic are: rising budgetary deficits; a money supply that threatens rekindled inflation; weakened central leadership; large unemployment and underemployment; rising popular expectations amidst the reality of a decline in some urban and rural incomes; mounting regional and social inequalities; alienation among intellectuals; stagnant industrial productivity and rising government subsidies to enterprises (33 percent of state enterprises lost money in the first half of 1990); a government fearful of political reform that would provide means for the peaceful transfer of power; and, no elite consensus on how to escape the cul-de-sacs of the planned economy.

Nevertheless, a principal danger of viewing China's current situation in overly apocalyptic terms is that American public and private decisionmakers will be inhibited from building economic and cultural relations out of a misplaced expectation that enduring and mutually beneficial links will be unwise due to a coming deluge.

We need to get back to basics in thinking about stabilizing factors at work in China. Beyond the oft-mentioned Chinese fear of disorder (an alleged cultural aversion that has not prevented disorder before), the single most important stabilizing factor is China's peasantry. This mass is not only comparatively isolated and uneducated. It has also benefited greatly from a decade of reform. There is little evidence that China's peasants are now motivated to destabilize things. In a discussion I had with a Chinese intellectual recently, we agreed that ``the dreams of China's intellectuals seem not to be the dreams of China's peasants and workers.''

This brings us to China's workers, notable participants in the later stages of the Tiananmen demonstrations. I believe that China's urban workers in state enterprises in some ways prefer the security of a planned economy to the uncertainties that are an essential feature of a reformed market economy. The past four decades of an egalitarian work ethic and industrial featherbedding of enormous proportions have taken their toll.

Richard Nixon, in his book ``In the Arena,'' notes that a Soviet economic adviser observed that in the USSR ``ideology has become psychology.'' This appears true in China as well.

The fears of China's state-enterprise workers are evident in their opposition to the concept of bankruptcy and their role in helping peacefully to clear Shanghai's streets of students and others in June 1989. China's state-enterprise workers are ambivalent. They support reform (in the abstract), they want less corruption, and they want improved living standards. However, they appear unexcited about the prospects of having to work harder in a much less secure economic environment.

The material circumstances of urban residents also is important to this assessment. Despite a sluggish market and mounting inventories (especially of durable goods), urban markets are well stocked with produce and consumer items. Life may not be great, but it is far better than the conditions that have catalyzed the breakdown in the Soviet Union and Central Europe.

Further, Mao Zedong's successful revolution taught that enduring social change requires a disciplined leadership possessing an ideology capable of mobilizing workers, peasants, and intellectuals alike. No such alternative, either ideological or organizational, exists in China today.

In short, beyond the largely alienated intellectual class, the conditions favoring massive, widespread, disciplined, potent, and sustained social upheaval appear weak. Instead, the principal danger facing China is interminable policy gridlock resulting from elite conflict and uncertainty, autonomous local authorities who resist needed moves, and a populace that itself is unwilling to make the short-term sacrifices that will lead to a better future. As a result, mounting ecological, demographic, and economic problems will not be addressed effectively. The center may become increasingly weak.

In this situation, what guidance can be given to public- and private-sector policymakers in the United States?

Rather than benign neglect, we must nurture both central and regional relationships; focus commercial and economic links on areas performing well; concentrate government and exchange relationships on basic institutional, educational, and agricultural development; and maintain constructive, workmanlike ties with Beijing in the solution of common bilateral and global problems. We must do so because a China that does not effectively manage its problems is not in the world's interest.