Posted on 13/12/2001

Cassandra Chang?

China expects its recent admission to the World Trade Organisation to
propel its economy to new heights, but a new book says the move could
produce the opposite and spell the beginning of the end for Communist Party
control over the world's most populous nation. Chang could be playing
Cassandra to the WTO's hype, then again, he could be looking at the way WTO
affects national economies and be issuing a prudent warning.

First-time author Gordon Chang holds nothing back in his book, "The Coming
Collapse of China," whose title says it all, as far the author is
concerned, even though many academics say he is overstating the case. China
has long sought admission to the WTO, believing that membership will bring
unprecedented access to other countries' markets. But membership will also
force China to open its own markets, accelerating reform of its business
and financial practices. Negotiations over China's entry to the WTO had
been under way for the past decade when Beijing and Taiwan were granted
admission to the multilateral trading system last week.

In his book, Chang, a US attorney who lived in Asia for 15 years before his
recent return to the United States, argues that WTO membership will
accelerate a process of opening in China that will ultimately undermine its
Communist Party and economic system and lead to their collapse. While not
widely accepted by US academics, who maintain a more moderate outlook,
China experts say Chang's work is well researched. "The book points out
that once China joins the WTO, it crosses the line," Chang said in a recent
interview during a tour to promote the book. "The overriding thesis is
this: China is not prepared for accession to the WTO." Chang argues that
WTO membership will severely limit China's ability to regulate its economy
by forcing it to play by a new set of rules designed to facilitate the flow
of goods and services between WTO member nations. He says applying those
rules in China will only fuel discontent with the ruling Communist Party.
Chang says many state-run factories, long considered the country's "iron
rice bowl," already teeter on the brink of failure.

Credibility collapse

Chang predicts that unemployment and unrest will spiral out of control as
companies from other WTO member states grab unprecedented access to Chinese
markets and drive state-owned enterprises out of business. He says the
failure of state-owned enterprises will also bankrupt China's already shaky
banking system, where lenders more often than not make loans based on
Communist Party directives rather than sound lending practices. "There will
be economic failure, which will lead to political collapse," Chang says.
"The party's basis of legitimacy is to be able to deliver prosperity. When
that fails, all they'll be able to deliver is nationalism."

Other China experts have adopted more moderate views, though most agree the
country will face some major growing pains before and if it eventually
emerges on more sound economic footing. "There's certainly plenty of
alarming things going on in China," said Richard Baum, director of the UCLA
Center for Chinese Studies. "Nobody who looks hard can be devoid of worry
about China's future. But to put all those worrisome points together ...
and say China is on the verge of collapse - such a conclusion is not
warranted by the richness of the evidence.

Baum, who listened to Chang discuss his book at a recent seminar in Los
Angeles, said he believes that China will likely "muddle through" many of
the problems it now faces on the road to economic development. "The odds on
any extreme possibilities - a sudden collapse or some kind of democratic
breakthrough - are less likely, 20 percent or less," Baum said. "The
remaining 60 to 70 percent would be various muddling through scenarios."

Chang, meanwhile, admits that his view is decidedly downbeat. "People say
it's a very negative view," he said. "It's negative if you like the party,
positive if you don't. There is so much instability in China today, but
much of that is sloughed off by foreign experts." Chang said one of his
main reasons for writing the book is to show the public how dire China's
situation really is. "I wrote the book because I was concerned we weren't
seeing China in a proper light," he says. "We should see it as a country
that's quite unstable, and the trends in motion tend to undermine that
state."