Despite China Pact, Reform May Be a Slow Boat

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So when the new day dawned in Beijing Thursday, was it filled with the promise of economic reform and trade-driven prosperity? Not quite. The House of Representatives' vote on Wednesday to extend permanent normal trading partner status to China and allow its entry into the WTO may have strengthened the hand of Beijing's economic reformers, but that may not be enough to reverse the setbacks they've suffered over the past year in the factional political battles inside China's ruling Communist party. Although the reformers grouped around Prime Minister Zhu Rongji had hoped to use the market-opening requirements of WTO membership to leverage an accelerated transition toward a free market economy, they've encountered increasing resistance from hard-liners led by National People's Congress president Li Peng.

President Jiang Zemin mediates between these factions, and his statements and actions are often interpreted as a reflection of the balance of power. A little over a week ago, Jiang called for the strengthening of the role of Communist party cells in privately owned businesses — the latest in a series of statements and decisions over the past year that signal a growing caution over making a great leap forward on the path to capitalism. Last August, Jiang called for a revitalization — rather than privatization — of state-owned enterprises, stressing they'd play an integral role in China's future. And in February, the National People's Congress claimed an increased slice of authority over economic policy, which had previously been Zhu's domain.

Zhu's power within Beijing's closed political system suffered a serious setback in April last year when he failed to bring home a deal from Washington, where he'd gone to negotiate a final agreement on WTO membership. (Although the two sides had been close to agreement on trade matters, the Clinton administration was politically unable to press a deal with Beijing amid the fallout from nuclear espionage allegations.) But skepticism over rapid reform has grown over the past year, less because of Maoist nostalgia than out of concern that its immediate consequences — massive unemployment with no social safety net — will provoke widespread unrest that could undermine Beijing's grip on power. It was the same concern to maintain order that drove the crackdown last year on the Falun Gong religious sect, which while it had no obvious political agenda represented an independent nationwide organization that the communist leadership found threatening. So while WTO membership will formally commit Beijing to open up large sectors of its economy to foreign competition, the realities of implementation are likely to be governed by the overriding concerns of China's leadership to maintain social control. In other words, it's going to be slow going.