The Coming Collapse of China
By Gordon G. Chang
Random House; 362 pp. $25.95

Where is China headed?  To American-scale prosperity, military domination of Asia, and an epoch of cultural renaissance?  Or to hell in a handbasket?  You can find learned, thoughtful and well-informed commentators committed to both points of view, and many in between.  The strongest tendency of the last few years, however, has been towards deepening pessimism, and Gordon Chang’s The Coming Collapse of China, as its title indicates, is squarely within this tendency.  The author lightens his prognosis with some occasional expressions of hope, but these do not seem to me to carry much conviction, and the overall impression of his book is one of inspissated gloom.

Gordon Chang is not an academic, but a practical man who has lived and worked in China for twenty years as an advisor to American firms.  He was raised in a Chinese household; his father was born in China; he knows the country very well.  Probably because of his own work experience, he concentrates on the commercial and economic environment in China.  You might have got the impression from some of the more upbeat commentary in our news media that the Communist Party has faded into the background, stepping aside to give China’s entrepreneurial forces free rein.  Nothing of the sort, says Mr. Chang:  the Party’s urge to control everything in sight is irresistible.  It is irresistible to the cadres themselves, not least because it offers them endless opportunities to enrich themselves by corruption.  And there is no organized alternative power center in Chinese society that can resist it, because the Party never has, and never will, permit any such alternative to develop.

The Party is, of course, clueless about the actual mechanics of free enterprise.  They have made, and are continuing to make, every mistake in the book:  assuming that size will guarantee success (in rational economics, as the author points out, things happen the other way round), trying to “pick winners” and throw public funds at them, using the banking system as a vast “error account” to hide their fiscal failures, and so on.  Everything is done with an eye to regime survival, the Party’s one true priority.  Thus, having favored the creation of huge enterprises on the size-brings-success principle, they dare not let those enterprises compete freely for fear of the social consequences if one of them fails.  “Beijing is like a nervous referee in a boxing match, rushing in to stop enterprises from competing at the first sign of a nosebleed.”  Bankruptcy in China, Chang observes, is much more often brought about by political disfavor than by failure in the marketplace.

The Party doesn’t understand business because it fundamentally doesn’t like it.  This is a communist party, Gong-chan-dang, “the party of public assets,” as Mr. Chang helpfully translates.  Here is Chen Rong, a typical successful Chinese entrepreneur. 

Chen Rong doesn’t have President Jiang Zemin’s photograph in his collection, and he knows he never will.  Jiang simply doesn’t visit real private businesses, he notes.  And Chen’s picture with Huang Ju, Shanghai’s influential Party boss?  He came only after a “debate,” Chen explains. ... “He is a Party secretary, so he does not easily come to a private enterprise...”

This whole illogical, corrupt system, riddled with deception and self-deception (China’s official GDP numbers for year 2000 were issued on January 1st, 2001), is now facing a severe stress test:  China’s upcoming accession to the World Trade Organization.  Much of what passes for economic policy in China today will simply not be allowed under WTO rules.  The rules can be bent or ignored up to a point, as Japan and Korea have shown; but the victor nation in a WTO dispute has powers of unilateral retaliation against the loser, and China could bear only so much of this retaliation.  The Chinese leaders apparently understand the dangers they face, and in fact there is an anti-WTO faction among them.  However, the calculation seems to be that the great dislocation and social unrest that WTO accession will bring had better be endured while Party control is still strong.  “Each province and large city in China is boosting its policing capabilities in the run-up to accession.”  

Underlying all these economic issues are deeper matters that Gordon Chang can only hint at in the prevailing structure of taboos — issues of national character and mass psychology.  There is that maddening obsession with the surface of things, with the belief that if everything looks all right, then everything must be all right.  “Laying straw over a minefield,” is how one of Mr. Chang’s informants describes a typical exercise in cosmetic enhancement, of the kind familiar to anyone who has lived in China.  There is, too, the endless picking at old wounds, the tender cherishing of ancient grievances.  “Yes,” he points out, “the British burned the Summer Palace and the Chinese have a right to be angry.  Yet the British also burned the American capital, but when was the last time you heard anyone complain about the War of 1812?” 

Melancholy prognostications like Gordon Chang’s would be a little easier to bear if one did not know that observers have been making them for at least a hundred years.  Here are the closing words of Rodney Gilbert’s What’s Wrong with China (1932):

We have therefore to be grateful to the firebrand element in China which is driving furiously on towards the complete ruin of China as a nation, the utter collapse of foreign trade with this bad-boy people, and very possibly the martyrdom of those of us who are foolish enough to live in China:  and out of great weariness of the spirit and something like Petronian good cheer in the face of what is coming, our toast is: “More power to their elbows!”