View from the Wall

Changes and Challenges

China after Joining the WTO


The year 2001 was significant in the history of China. In 2001 China finally won the competition to host the 2008 Summer Olympic Games. In 2001 China also finally joined the World Trade Organization (WTO) after 14 years of negotiations. Winning the Olympic bid was significant in a symbolic way. On the other hand, joining the WTO was significant because it substantially impacted China in practical ways. A year has passed since the WTO entry. China is experiencing tremendous changes at all levels. If we pay attention to these changes, it is not difficult to see where China is heading.

Strong Economical Development.

China’s economic growth has been increasing steadily since joining the WTO. Available statistical data all point to 7.4 to 7.8 percent annual growth. Imports and exports are both expanding with exports surpassing imports. At the same time, foreign investment has been steadily pouring into China’s market. From January to July of 2002, China approved a total of 1.8 trillion dollars of foreign investment, a 32 percent increase over the same period last year. China has established a series of policies to encourage and attract foreign investment.

In the financial and banking world, China is experimenting with new reform. State owned banks will eventually be challenged by foreign banks entering China. Thus, China is planning to open up financial, insurance and banking businesses to more competitors. The government has recently stepped up its effort to weed out tax evaders by strengthening the tax laws and their enforcement. At the same time, China’s customs office has effectively stopped smuggling. China’s foreign reserve and currency exchange rate remain stable.  All these developments point to a growing Chinese economy that will continue to grow over the next several years.

Major Social Changes.

The greatest change occurring in China since joining the WTO is not economic but social. Most prominent is the structure that makes up Chinese society. The traditional role of the government in controlling all levels of governance is gradually changing. This is in line with the policy of reforming the laws to suit the new market economy. The Chinese government has abolished more than 3,000 laws and regulations according to the requirements set forth by the WTO, while many new laws are on the drafting board. Many government regulations are being replaced by laws.  Government administration and management are becoming more legalized and systematic.

At the grass roots level, direct election has expanded from the villages to the cities. Recently, direct elections for neighborhood representatives were held at selected districts within the city of Beijing.  “Conforming to the international standard” has become a concept widely accepted by the Chinese people since joining the WTO. This “international standard” refers to the accepted social standard of modern Western societies. The expansion of this “international standard” is evident not only in the business world, but also in many aspects of people’s lives. For example, it affects the language people use. One can now see bilingual street signs (Chinese and English) on the streets of Beijing. Beijing’s policemen, taxi drivers, government workers and even residents are urged to study English. On one hand, the obvious reason for this is the 2008 Olympic Games. However, it is also aimed at helping Beijing evolve into an international city. This new “international standard” is also influencing Chinese society structurally. Capitalism is no longer an abstract concept; it is a living principle seen in everyday life of the Chinese people throughout the nation. The old class struggle and planned economy are history. The Chinese people are accepting a new paradigm from top to bottom.

Increasing Social Tension.

As light contrasts with darkness, so there is another side of China behind the new prosperity. The dark side of China includes high unemployment, a wide divide between rich and poor, corruption among officials, environmental problems and moral decline. By joining the WTO, China in essence accepted the principles of globalization and capitalism. China is no longer a Marxist style socialist country. When the pursuit of wealth surpasses the desire for fairness and goodness, a wide gap between the rich and the poor develops, and an “every man for himself” mentality becomes the new standard by which many people live. The new game rules favor those with power and wealth. The Communist Party is becoming a party for special interest groups; it is no longer an advocate for the working class. The working class feels they were betrayed by the party. Farmers feel they are left to fend for themselves like they did before the Communist era. Intellectuals feel they must keep their feelings to themselves.

Moral decline is like a plague that exists in every corner of society. Christian faith continues to grow despite the government’s disapproval. Spiritually hungry people are searching for something that can bring them hope. The new religion of “materialism” has long ago replaced the socialist ideology. Utilitarianism and pragmatism are in vogue. Many young people now live by the philosophy, “Live it up today, for tomorrow I may die.”

China’s Future Direction.

Many foreigners are often perplexed as they travel throughout China. They see skyscrapers filling the landscapes of Shanghai, Beijing, and Shenzhen. They see capitalism alive and well in the southeastern costal areas. They see severe poverty in Yunnan and Guizhou’s mountainous regions. They see huge numbers of unemployed workers in northeast China. They see Muslim antigovernment activities in northwestern China. How do you define China? How do you interpret China? Which is the real China? The answer is that China is a mosaic. Joining the WTO did not change the complexity of China; it merely revealed its complexity for the world to see.

Social tension in China since joining the WTO has intensified. This does not necessarily mean that China is heading toward collapse. Rather, a huge middle class is currently being formed hastened by WTO accession. A great majority of the people in China are neither rich nor poor. As this giant excommunist society evolves into a capitalistic society, a great social force can be unleashed safely and gradually through the governing principles of market economy and privatization.

Large domestic market demand along with exports, plus a successful domestic east-west development strategy, shielded China from the global economic downturn. The big east-west wealth divide will allow China to continue to tap into her own low cost labor in the future. As foreign investment, Western style management and technology continue to pour into China, it will continue to maintain its position as the world’s largest manufacturing base. As long as China does not revert back to its old planned economy, the middle class will increase. There will be more and more Chinese who own homes, cars and stocks.

Middle class people do not like social instability. Thus, the new middle class will be the major force to maintain stability in China, allowing China to continue her growth and development. While a great majority of the Chinese people are not satisfied with what they have right now, most would not want to go back to the old revolutionary days. Some of the poor wish they could go back to the old Communist days, but they are a small minority. The majority support peaceful reform. China’s middle class will not allow instability to surface without intervening.

This is the very reason that no matter who becomes the new leader of China this winter after the 16th Party Congress, he cannot and will not alter the existing course of reform. Different leaders in the party are mere reflections of differing ideologies. However when it comes to transitioning the party from a workers’ party to an elitist party, from Marxism to a market economy, these leaders all agree it is the only way for the party to maintain control. Their disagreement is only regarding the methods and strategies about how to get it done.

On the other hand, the lack of political reform in comparison to market reform will only bring greater challenges to the Communist Party after the 16th Party Congress. The internal and external pressures to reform politically will only increase. The Communist Party has no choice. Social tension can only be resolved as society moves forward, not the other way around. Thus, the Communist Party must make progressive political reform, and those reforms will need to be drastic at times. The Communist Party, as a ruling party, will eventually become an ideological background issue. In the forefront will be Nationalism, replacing it as the new official government ideology. It will then be integrated with the traditional Confucian philosophy to totally replace Marxism.

Conclusion.

WTO entry made it possible for China to transform itself into a capitalistic society. Despite the challenges, China’s economy will continue to grow. Globalization, the internet, and high technology will not permit anyone to lead China back to its old Marxist past. Political reform may take place in ways beyond normal expectations. While the Chinese Communist Party continues to be the ruling party, it no longer exercises Marxism. China cannot escape being more involved in global affairs; it will become an influential major nation. The Taiwan issue may bring uncertainty and may affect China’s development, but it will not be able to alter the course down which China is heading. It is better to join with her and help her stay on a straight path during her journey to reform rather than standing in her way.

Huo Shui

Huo Shui (pseudonym) is a former government political analyst who writes from outside China. View Full Bio