Removing the Roadblocks to Reform - Foreign-Invested Companies Provide Half of All Chinese Exports and Much-Needed Jobs. the Leadership Wants to Expand This Sector through Competition Induced by WTO Membership

Article excerpt

Last October in Shanghai, I struck up a conversation with a group of Chinese college women volunteering for the meetings of the Asia Pacific Economic Cooperation forum. At first they were shy about speaking English, but the discussion turned lively when we realized we had common economic interests.

They peppered me with questions, eager to find out what an American thought about China joining the World Trade Organization (WTO) or U.S.- China relations. But they were most animated about Shanghai's future: Did I think Shanghai would overtake Hong Kong as the financial and commercial capital of China? They were quite determined it would and were excited about playing a role as their city, and country, achieved great things.

These young faces reflect one side of nationalism in contemporary China: a determination to succeed as individuals, a loyal dedication to place of origin, and a fierce pride in being Chinese. This brand of nationalism does not eschew Western ideas or influences but grapples with them and seeks to apply some aspects to benefit Chinese society.

Yet in other segments of society, nationalism takes on xenophobic and strident tones, resting on the belief that the country is humiliated by Western pressures on issues from human rights to weapons sales. These diverse attitudes are united, however, by a sense of growing national strength and confidence, arising from economic achievements, and the conviction that China will at last play its due role in the world after centuries of inferiority imposed by foreign aggressors.

The Chinese government is challenged to respond to these distinct nationalistic strains in its domestic reforms as well as in international dealings, particularly with the United States. The different strains are not bound by age or socioeconomic status; indeed, there is a growing subculture of online chat rooms filled with the young and educated who express virulent anti- American views.

This group may not be representative of general society, but the government views this extreme nationalism as potentially undermining its authority. In moments of crisis with the United States, government intervention has sought to moderate the tone. In short, the government's balancing act of nationalistic rhetoric is a delicate one. It cannot be seen as giving in to Western pressure but must also portray economic integration with the West as in the best interests of Chinese society.

China joins the WTO

Why would the Chinese leadership seek to join an international trade regime that requires adhesion to externally imposed rules? The answer was often not clear during the 16 years of negotiations, and both Chinese and WTO members harbored doubts. Discussions began in 1986, but the Tiananmen Square tragedy brought a halt to Western governments' interactions with China in 1989.

When talks resumed in 1995, the WTO was a new organization with a much broader mandate than its predecessor (the General Agreement on Tariffs and Trade, or GATT). The Chinese balked at the extent and depth of the new requirements, and until the Asian financial crisis in 1997/98, negotiations often stalemated.

When the crisis stalled export growth and foreign capital, China's leaders realized that foreign capital, technology, and expertise were essential to further economic gains. Providing a rising standard of living has become a tool to retain their political legitimacy. Their success has spurred the creation of privately owned companies in China, which number about 1.2 million and contribute about one-third of the GDP. The leadership wants to strengthen this sector and expand through competition induced by WTO membership.

A more extensive and deepened integration with the global economy is now the mantra. China's accession to the WTO is strangely ironic: in order to retain control, the Communist Party has decided to open up the economy, and society, to the international community. …