Yet look around. Anyone who has seen more of the country lately than the Great Wall and the terra-cotta warriors would laugh at the idea that there is but one China. For the last two decades, divergent social and economic forces have silently but persistently pulled different parts of the country in different directions. In many ways Shanghai now has more in common with Seattle than with Xian. If an unemployed steelworker were to riot in the streets of Shenyang, he would do so for very different reasons from those of a disgruntled Uighur in Kashgar’s ancient market.
The question isn’t whether the People’s Republic will or should fragment. The question is what to do now that it has. No one–neither the party apparatchiks in Beijing, nor the CEOs of Western multinationals, nor the generals in the Pentagon–can afford to see only the China that makes headlines, the so-called factory to the world. The white-hot growth rates enjoyed by the People’s Republic over the last two decades have slowed. Unemployment is approaching double digits in many cities. Rural incomes have been declining in recent years. Beijing faces rising deficits and a mountain of bad bank loans. The new leaders who will emerge from this autumn’s Party Congress will confront a country where multiple realities increasingly clash. How they resolve those contradictions will determine if China really can be one.
When most outsiders speak of “China,” they are talking about a relatively thin slice of the country–the booming coastal provinces, where glitzy skylines and fashionably dressed crowds cause many visitors to wonder whether they’ve landed in Hong Kong by accident. In some Shanghai boutiques, you can fork over $100 for a brand-name polo shirt (no fake). Most people carry mobile phones. Young professionals hand out business cards inscribed with their English names, like Cindy or George.
In a sense, this is China. Coastal Chinese have a per capita income 75 percent above the national average and an effective purchasing power of almost $6,000 per year. Western businessmen may dream about what 1.3 billion extra pairs of Nikes could do for their bottom line. But most of them know perfectly well they’re after the wallets of the tens of millions of middle-class Chinese here who can actually afford them. The coast holds one other key attraction: a large pool of skilled labor and engineers. That has drawn a flood of foreign direct investment–about $30 billion in 2000 alone–and an influx of manufacturing so overwhelming that countries like Malaysia and Mexico fear they’ll soon have nothing left to make. All that money talks: some 13 of the 23 members of the Politburo have ties to the coastal provinces.
Yet with each passing year this “China”–which accounts for only 30 percent of the population–looks less and less like the rest of the nation. An entirely different China sweeps across the country’s vast hinterland–a landscape denuded by thousands of years of cultivation by small farmers. Nearly 600 million downtrodden peasants populate this, the former cradle of Chinese civilization, and their circumstances are declining. No Western chipmakers are rushing to set up factories in places like Kaifeng, the former capital of the Sung dynasty. Even worse, China’s accession to the World Trade Organization will ultimately open the doors to cheap Western grains and fruits, driving millions out of business. These Chinese already earn 25 percent less than the national average–some $700 per year–and yet are inundated with locally imposed taxes and fees. Despite their mind-boggling numbers, they have no representatives on the Politburo.
Their woes are mirrored in China’s northeastern provinces. Once the country’s industrial heartland, this is now its rust belt. Shuttered state-owned factories pockmark a gloomy landscape. Unemployed workers, when they are not demonstrating for jobs and back pay, gather on street corners looking for work. And economic hardship is not the only source of misery for the 107 million people trapped in the ruins of state socialism. An even bigger scourge is corrupt government and organized crime.
The rest of the People’s Republic resembles nothing so much as a frontier. These vast and sparsely populated margins are home to the country’s ethnic minorities–Tibetans, Uighurs, the myriad hill tribes of Yunnan. Illiteracy and poverty rates are high–per capita income in 2000 was 35 percent below the national average–and central control, often personified by Han settlers and military garrisons, is resented. In fact, the region’s stunning natural beauty and famed hospitality belie a deeply troubled relationship with Beijing: during previous periods of imperial collapse, this Wild West was the first to bolt. Today, pro-independence sentiments simmer in the two largest provinces, Tibet and Xinjiang. Yet despite the area’s outward backwardness, it is hard to imagine China without this region, which encompasses more than half the country’s land mass.
Finally, there is the Chinese diaspora. If the Overseas Chinese community, including Hong Kong and Taiwan, were imagined into a separate China, it would have a population of about 55 million and a GDP of $1 trillion in 1999 (the same as the People’s Republic). Like two other great diasporas (Jewish and Indian), this “bamboo network” is really a web of knowledge and commerce. It has also become the Middle Kingdom’s most valuable link to the rest of the world: in the past two decades this community has channeled more than $200 billion in investment to the mainland and helped build an export juggernaut in light manufacturing and consumer electronics. At the same time, many of these ethnic Chinese bring with them an experience of democratic freedoms that Beijing would rather keep from its citizens.
Maintaining some semblance of cohesion over this vast, diverse land overwhelmed all but the most competent Chinese imperial rulers. The price has been steep. For centuries the country was divided into warring kingdoms. Communism promised to change all that, yet its blunders have only deepened China’s underlying fissures. The fanaticism of the Cultural Revolution (1966-1976) alienated ethnic minorities. The government misallocated resources to capital-intensive heavy industries and neglected agriculture. Worse, Mao Zedong, who had never tilled the land, issued detailed edicts on how crops should be grown (“plow deep and sow densely”), with predictable consequences. State planning restricted the free flow of labor and capital. These policies kept people poor–and doubled regional income disparities from 1952 to 1978.
At first the reforms introduced by Deng Xiaoping reversed the trend. With market forces, not the government, channeling people and money, income disparities fell by 20 percent between 1979 and 1991. But Deng undermined this process with his famous call to “let some get rich first.” In practice, this meant giving priority to the coast. Foreign investors arrived en masse, pouring more than $300 billion into China in the 1990s. Within a decade, the entire eastern seaboard had been transformed–Industrial Revolution, Chinese style.
At the same time, industrial decay spread throughout the northeast as Beijing dragged its heels on reforming moribund state-owned enterprises. Progress in large agrarian provinces stalled as farmers could squeeze no more out of their land. Beijing, starved for revenue, began to force citizens to pay for their own medical treatment and education–which in practice meant that many peasants received neither. Throughout this period, the Wild West was practically forgotten. By 1999, regional inequalities had returned to 1978 levels.
Those yawning gaps are only going to grow wider. The market promotes efficiency, not equality. The flow of money and people from the hinterland and rust belt to the coastal provinces will continue as long as the rewards there are greater. Those left behind are doomed to face slow growth, tattered social fabrics and crumbling local governments. Some have suggested these regional disparities could push the People’s Republic toward disintegration. A more realistic danger is that the downtrodden Chinas will export their ills to rich China. An influx of millions of migrants could transform cities like Shanghai into Mumbai or Rio. Financial fraud, drug smuggling, the spread of HIV/ AIDS–these are among the problems.
The coastal provinces are defenseless against these threats. China’s famed dynamism is not unstoppable. Regional inequality, economic stagnation and political decay at the local level could fracture the country’s internal markets. An even more potent danger lurks behind this socioeconomic fragmentation–a political fragmentation that has already begun. Beijing’s authority is likely to erode as provincial governments, disillusioned about the center’s ability to look after their needs, decide to take matters into their own hands.
Luckily, Beijing still has some time to set things straight. In the short term, it needs to increase its spending on health and education in the hinterland and border regions. Authorities need to abolish onerous and illegal taxes. In the rust belt, the top priorities are to uproot incipient local mafia states and speed up economic reforms. All this requires money, of course. But where can Beijing, which collects only 17 percent of GDP in taxes, get the cash? China has no mechanisms to force coastal regions to increase their contributions so the money can be spent on other areas. China must therefore give more political voice to its noncoastal provinces. For a start, the new Politburo that will be named next month should include some party bosses from these regions.
The long-term solution lies in constitutional reforms that would turn China into a federalist state. But political engineering carries its own risks. (The last authoritarian regime to try something similar was the Soviet Union.) Chinese leaders may want to consider an unorthodox “bottom-up, top-down and cut-out-the-middle” approach. Give citizens a sense of empowerment with true local elections. Use a national vote to cement the legitimacy of the top leadership. Only then worry about instituting provincial elections. This will prevent the rise of Yeltsin-like regional strongmen. Of course, such a plan would likely doom the Communist Party, at least in its current form. But if its 2,200 years of history have taught China anything, it’s that emperors cannot knit this huge, disparate nation together. It’s time to give the Chinese people a chance.
