Unbreakable China

China:  The Next Economic Superpower
by William H. Overholt
Weidenfeld & Nicholson

There are 18,000 Avon ladies successfully selling Western-style cosmetics door-to-door in China's Guangdong province.  According to this relentlessly upbeat book, the Avon army is symbolic of China's march towards a golden future of dynamic capitalism, national harmony and unprecedented prosperity.

Much of China:  The Next Economic Superpower reads like an attempt to drum up investment business.  Its sales-pitch tone may not be very surprising:  William Overholt is the head of Bankers Trust in Hong Kong.  While he has a long connection with China and is the author of several books on Asia, his complex subject deserves better than the simplistic treatment it receives here.

Overholt provides plenty of statistics and examples to underline the potential of China's economy.  In examining the transition from a centrally-planned economy to a market system, he cites the success of the approach of economic liberalisation within a framework of tight political control (a lesson, he says, China learned from watching South Korea, Taiwan, Singapore and Indonesia), and the failure of trying to implement simultaneously democratisation and economic reform (as in the former Soviet Union).  He predicts that democracy of an Asian rather than Western sort will inevitably follow prosperity, as in other countries of the region.

UNTENABLE VIEWS

But there are severe problems with such a view.  China's leaders, including those who will follow Deng, have never taken the view that representative democracy in a free-enterprise economy is the ultimate goal.  Even in its authoritarian days, South Korea, by comparison, always saw democracy as essentially desirable:  the questions were when and how, not if.  But the hard men of Beijing emphasise that their system is not, nor is ever intended to be, capitalist/ democratic, but socialism with Chinese characteristics.  This always sounds like a socialist political system with enough economic liberalism to prosper materially.

Related to this are Overholt's forecasts on Hong Kong's future.  He predicts few difficulties in the 1997 transition, mainly on the grounds that Hong Kong is too golden a goose for Beijing to strangle.  Yet it may not be so easy:  the attitude of China's leaders towards Chris Patten's democratic initiatives, for instance, has been consistently antagonistic.  No worries, says Overholt;  merely rhetorical bumps on a road inexorably leading onwards and upward.  In fact, he believes that China's political and economic development would proceed even faster if there was less criticism about human rights and other distasteful matters from elsewhere, especially in the United States.

Overholt identifies the coastal regions as the engines of China's decade of explosive growth.  Each of the three powerhouses are linked to external, capitalist partners:  Guangdong/ Shenzen with Hong Kong, Fujian/ Shanghai with Taiwan, Shandong/ Tianjin with Japan and South Korea.  Wealth is slowly trickling into the hinterland, but it is a slow and inconsistent process.  Overholt believes that those at the bottom of the new economic order will be content with the crumbs that fall from the nouveau riche plates.  Maybe they will;  maybe not.  The point is that the answer, like much about China today, is not clear.  But it is a point that Overholt misses.

CENTRAL CHALLENGE

It is in the difficulties facing the central government that Overholt is most willing to gloss over China's problems, although the decentralisation of power that helped to create boom conditions in the first place is now causing major problems for Beijing.  The provincial governments, as well as fiefdoms within the administrative system, are proving reluctant to give up their new-found freedom.  The result is constant friction, such as the protracted battle between Beijing and Guangdong over taxes.

Similar problems exist elsewhere.  Fujian is essentially conducting an independent foreign policy in relation to Taiwan.  Even the People's Liberation Army (PLA) operates as an independent commercial entity, especially in the missile- and equipment-selling business, regardless of the views of Beijing.  (The Next Economic Superpower notes in passing that one of the PLA's biggest earners is the manufacture and sale of high-powered speed-boats used for smuggling).  It is no longer even certain that the PLA is politically reliable.  Another Tiananmen Square-style crackdown would, above all, be bad for PLA sales.

The crucial issue is whether Beijing's political control, already substantially frayed, can continue.  Can the centre hold?  If not, then the path forward is Far less certain and is certain to include some unpleasant twists and turns.

Overholt notes these problems only to airily dismiss them.  China has a long history, he says, and internal dissension is a constant theme.  The local chieftains will defer to the emperor in the end.  In any case, other NICs have experienced disparities in the rate of growth but have still hung together.

Can it really be that simple?  Will a combination of economic growth and historical habit suffice to keep the nation together?  Overholt, with the bottomless optimism that only a banker with his eye on a billion-consumer market can muster, has no doubt about it.  But the real world may be less agreeable.

Overholt has a good ear for an anecdote, and The Next Economic Superpower includes a wealth of interesting tips.  For example, he suggests that anyone trying to set up a factory in China should lock in local support first, gradually working upwards through the political hierarchy rather than starting at the top.  Useful advice from a successful China hand:  but it is in the Big Picture that the book fails to convince.

The book is not without value, but it should not be the only work about China on the shelf.  For a broader and more realistic view, a wise reader should also consider more analytical (if less accessible) books, such as Gerald Segal's The Fate of Hong Kong, a book which lays out a number of possibilities for China's future.  By doing so it admits that China, above all, is not a country where anything should be taken for granted.