MARK LEONARD

WHAT DOES CHINA THINK?

To Gabrielle

CONTENTS

Acknowledgements |
Introduction: The Liberation of Thought |
Chapter One: Yellow River Capitalism |
Chapter Two: Democracy in the Clouds |
Chapter Three: Comprehensive National Power |
Conclusion: China’s Walled World |
Dramatis Personae |
Notes |
Index |

INTRODUCTION
The Liberation of Thought

China’s very existence creates a problem for Western accounts of world history. The Bible didn’t say anything about China. Hegel saw world history starting with primitive China and ending in a crescendo of perfection with German civilization. Fukuyama’s ‘end of history’ thesis simply replaces Germany with America. But suddenly the West has discovered that in the East there is this China: a large empire, with a long history and glorious past. A whole new world has emerged.

Gan Yang, ‘The Grand Three Traditions in the New Era: The Integration of the Three Traditions and the Re-emergence of the Chinese Civilization’

Very few things that happen during my lifetime will be remembered after I am dead. Even 9/11 or the Iraq War – events which transfixed us, took innocent lives and decided elections – will gradually fade until they become mere footnotes in the history books. But China’s rise is different: it is the big story of our age and its after-effects could echo down generations to come. Like the rise and fall of Rome, the Ottoman Empire, the British Raj or the Soviet Union, it is the stuff from which grand narratives are wrought. For the first time since the end of the Cold War, a non-Western power is in the global premier league: China has joined the United States and Europe as a shaper of world order.

China’s scale is mesmerizing; its vital statistics are almost impossible for us to grasp. With one in five of the world’s population, China’s entrance into the global market place has almost doubled the world’s workforce. Already, half of the world’s clothes and footwear have a ‘Made in China’ label in them, and China produces more computers than anywhere else in the world. China’s voracious appetite for resources is gobbling up 40 per cent of the world’s cement, 40 per cent of its coal, 30 per cent of its steel and 12 per cent of its energy. China has become so integrated into the global economy that its prospects have immediate effects on our everyday lives: simultaneously doubling the cost of petrol while halving the cost of our computers, keeping the US economy afloat but sinking the Italian footwear industry.

The speed at which this is happening is even more shocking. Building construction in Shanghai takes place at such a breakneck pace that the city’s maps need to be rewritten every two weeks. A town the size of London shoots up in the Pearl River Delta every year. In the run-up to the Olympics, China is building enough new roads to go four times around the world. China has brought 300 million people from agricultural backwardness into modernity in just thirty years – a process of industrialization that took over 200 years in Europe. If current growth trends continue – which is admittedly a big ‘if’ – the People’s Republic could overtake the USA to become the world’s biggest economy well before 2050.

But this focus on scale, speed and measurable statistics is blinding us to a deeper question: will China’s rise change the nature of our world? We are getting used to China’s growing influence on the world economy – but could it also reshape our ideas about politics and power? China is the first country since the end of the Cold War with the ingenuity, scale and global exposure to shape the world in its image. Its gargantuan domestic problems are driving it to seek a new model of globalization. And its huge size means that other economies and nations connected to it – from America to Zimbabwe – will need to reformat their own systems to cope with China’s new ideas about economic development, political reform and world order. China is starting to think for itself. And, because of its stunning economic record, people around the world are starting to listen, and copy the Chinese model.

This story of China’s intellectual awakening is much less well documented than the now familiar tale of China’s economic revival. Although we obsessively study the ideas of different factions in America’s intellectual life – the Neo-Cons, the assertive realists, the religious right – how many of us can name more than a handful of contemporary Chinese writers or thinkers? Who knows what future they dream of for their country, or the world it is shaping? Europeans and Americans, in particular, are ill-equipped to answer these questions. Since the time when French and British missionaries first travelled to the East, the West has focused on what it wanted from China – and how to convert the Chinese to a Western way of life. People wrongly assumed that as China grew richer, it would also become more like us.

The accidental sinologist

China crept up on us slowly in the 1990s. For most of that decade, it was the preserve of regional specialists or fantasists from the business world who dreamt of making vast fortunes, but usually lost even more. However, at some indeterminate point around the turn of the millennium, China stopped being a subject for specialists. From my vantage point as director of a foreign policy think-tank in London, I remember noticing how – all of a sudden – almost every global challenge had acquired a Chinese dimension: from African development to the reform of the United Nations system, the Doha global trade talks to the Iranian nuclear programme, genocide in Darfur to oil prices in Venezuela. China was no longer a big country with which one could choose to enjoy trading or diplomatic relationships; instead it was starting to become part of the furniture of global politics, a universal factor with which we are forced to contend. In terms of political influence China had stopped being like other large developing countries such as India or Brazil. It was turning into something quite new: a miniature USA. I suddenly knew that without understanding China, it would be impossible to understand world politics.

I will never forget my first visit to the Chinese Academy of Social Sciences (CASS) in Beijing. I was welcomed by Wang Luolin, the academy’s vice-president (whose grandfather had translated Marx’s Das Kapital into Chinese), and Huang Ping (a former Red Guard who was then co-editor of the intellectual journal Dushu). Sitting in oversized armchairs – arranged in parallel against the wall in order to protect the backs of the hosts and guest of honour from enemy attacks – we sipped ceremonial tea and introduced ourselves. ‘The Foreign Policy Centre,’ I began, ‘is four years old. We have around twenty staff, we publish twenty-five policy reports a year and host around fifty seminars.’ Wang Luolin nodded politely and smiled before delivering his killer blow: ‘CASS is the highest academic research organization in the fields of philosophy and social sciences. We have fifty research centres that cover 260 disciplines and sub-disciplines, and 4,000 full-time researchers.’ As he said the words, I could feel myself shrink into the seams of my vast chair: Britain’s entire think-tank community is numbered in the hundreds; Europe’s in the low thousands; even the think-tank heaven of the USA cannot have more than 10,000. But here in China, a single institution – and there are another dozen or so other think-tanks in Beijing alone – had 4,000 researchers. I discovered later that even people at CASS think that many of these researchers are not up to scratch, but the raw figures were enough to intimidate me in that early meeting.

Wang Luolin’s one-upmanship on size was just the beginning of a well-worn strategy designed to bewilder and co-opt outsiders. We spent many hours engaged in polite conversation without touching on the specifics of our co-operation. These elaborate courtship rituals, seemingly devoid of substance or direction, have been honed over centuries to nullify Western negotiating strategies, and bind foreigners into Chinese ways of doing things, creating webs based on personal contact rather than contractual obligations. At the beginning of the trip, I had hoped to get a quick introduction to China, learn the basics, and go home. But after spending what felt like weeks in these introductory meetings, sitting around sipping tea and exchanging pleasantries I ended up getting sucked in.

I had stumbled on a hidden world of intellectuals, think-tankers and activists who were thinking big thoughts. I soon realized that it would take more than a few visits to Beijing and Shanghai to grasp the scale and ambition of China’s internal debates. My mind was made up – I wanted to devote the next few years of my life to understanding these radical developments; to document the living history that was unfolding before me. I became, so to speak, an accidental sinologist, visiting Beijing so frequently that it began to feel like a second home. And, with each visit, my entanglement with China’s fate grew deeper. I became friendly with many of China’s new thinkers and watched their theories develop over time, evolving in tandem with the breathtaking changes to their country. I saw them take Western ideas and adapt them into a new Chinese approach for dealing with the world – joining an intellectual journey that China began when it first became entangled with the West in the nineteenth century.

China’s Ground Zero

The old Summer Palace in Beijing was as large as a city. People who saw it said it was more grandiose than the pyramids; more perfect than the Parthenon; and more transcendent than Notre-Dame. Even Victor Hugo, a man rarely stuck for words, struggled to capture its beauty: ‘Build a dream with marble, jade, bronze and porcelain,’ he said, ‘cover it with precious stones, drape it with silk, make it here a sanctuary, there a harem … gild it, paint it, have architects who are poets build the thousand and one dreams of the thousand and one nights, add gardens, basins, gushing water and foam, swans, ibis, peacocks, suppose in a word a sort of dazzling cavern of human fantasy with the face of a temple and palace, such was this building.’

But this edifice, which took 150 years to build, went up in a whiff of imperialist smoke when British and French troops stumbled upon it in 1860. All that is left today are a few desultory fragments and some cardboard scale models which signally fail to conjure up the palace’s former glory. These dilapidated remains have been carefully preserved by successive Chinese governments. Like the scar of Ground Zero in New York City, they play a defining role in the Chinese psyche – arguably as great as any building that is still standing. The memory of the Summer Palace, ‘Yuanmingyuan’ as it is known in Chinese, acts as an open wound that can be salted whenever citizens need to be mobilized, or reminded of how the Communist Party saved China from foreign defeat. Yuanmingyuan is a physical embodiment of the ‘century of humiliation’ which ran from China’s defeat in the Opium Wars of 1840, through the loss of Taiwan, the various Japanese invasions and the civil war right until the Communist Revolution of 1949.

For some intellectuals, the remains of Yuanmingyuan also tell another story about modern China. This story is not about the damage which colonial powers have done to China, but of the destruction which the Chinese have inflicted upon themselves by importing – and misapplying – foreign ideas. In July 2006, Zhang Guangtian, an avant-garde theatre director, staged a controversial play, called Yuanmingyuan, that dramatized the relentless quest to modernize China by importing ideas from abroad, a history that has seen the country leap from one totalizing philosophy to another. Zhang Guangtian’s play challenged his compatriots with a heretical question: who really destroyed Yuanmingyuan? Taking the spotlight off the imperial powers, he showed how the Chinese people themselves have been complicit in the despoiling of this national icon which he treats as a metaphor for their dreams and ideals.

The story begins in 1860 with a group of peasants who lounge around, complaining bitterly about the Chinese emperor’s neglect of ordinary people. When a British soldier arrives on the stage, the peasants encourage him to attack the imperial palace so that they themselves can loot its remains. The same three actors then metamorphose into idealistic students – part of the 4 May ‘Science and Democracy’ Movement of 1919 – who desecrate the ‘feudal’ ruins to show their commitment to Western modernity. In the next scene the same actors return as Red Guards from the Cultural Revolution, turning the ruins into a rice paddy to show off their revolutionary fervour. The guards, in turn, become bureaucrats from the 1980s who line their pockets by converting the holy site into an amusement park. The action then shifts to 2005 when the same actors play local officials who line the lakes of Yuanmingyuan with plastic sheets in a bid to save water, causing such outrage that they provoke the country’s first ever public environmental hearing. The second part of Zhang Guangtian’s play is an unflinching exposé of the problems caused by China’s recent embrace of the market: environmental pollution, official corruption, the growing gap between rich and poor, the appalling conditions of China’s mines. The play confronts the audience with the need to take responsibility for China’s problems rather than assigning blame on foreign invaders. The playwright’s message is subtle: it is not a plea to shut China off from the world, but a call to his fellow citizens to forge their own path into the future, rather than blindly embracing Western goods and ideas. His play gives dramatic form to the question that is mobilizing his native country: what does China need to do to take control of its own destiny?

Under the shadow of globalization

A growing body of Chinese thinkers believe that since their country crawled out of the chaos of the Cultural Revolution, it has simply replaced the shadow of Maoism with another fundamentalist philosophy: the cult of the United States of America. They complain that when Deng Xiaoping opened China’s doors to the world, it was the USA that burst in. Its market philosophy set the rules for economic development. Its demands for democracy set the standards for political reform. And its foreign policy defined what was acceptable and unacceptable on the world stage. The USA has taken on the role of an all-powerful god whose moods define the weather. In the same way that Chinese peasants of old lived in constant fear of divine retribution, China’s most pressing goal has been to avoid the wrath of the hegemon, crafting a foreign policy that hides China’s ‘brightness’ with humble behaviour, while making ritual sacrifices on issues ranging from North Korea to Sudan in order to satisfy US demands.

For good and for ill, modernization became synonymous with Americanization in the 1980s and 1990s. At a superficial level, Communist China shed its red skin, and grew a new one branded with the symbols of mass consumerism – Starbucks penetrated the walls of the Forbidden City, McDonald’s and KFC signs lit up the high streets and malls of urban China, and kids learnt to cuss each other with Hollywood-inspired jibes: ‘get real!’ As the political scientist Yu Keping argues, ‘The American dream is the highest ideal for the young generation that grew up since the reforms. Everything in the USA, including American people, institutions, economy, culture and country, is so perfect that the American moon has become more round than the one in China!’

At a deeper level, China was forced to accommodate itself to the rules of a globalized world shaped by American capital and American military power. In this era – christened the ‘flat world’ by the journalist Thomas Friedman – all nation states are losing control of their fates: pushed out of the economic sphere by privatization, out of the political sphere by a ‘Third Wave’ of democratization, and out of the foreign policy realm by the stateless forces of capital, terrorism and trade. Many Chinese thinkers worry that by embracing the economic benefits of globalization, China risks being ‘flattened’ by an accompanying American political ideology.

Wang Xiaodong, one of a new breed of Chinese nationalists, argues that the embrace of American ideas springs from a kind of self-hatred. According to him, many Beijing intellectuals in the 1980s saw the Chinese people as an inferior nation with an inferior history: ‘In my opinion, this is not very different from Hitler’s racism,’ he claims, ‘the only difference between them [i.e. Chinese intellectuals] and Hitler was that they [i.e. the Chinese] directed this [hatred] against their own race. This is why I coined the term “reverse racism”.’ Although Wang Xiaodong’s analogy seems extreme and misplaced to many Chinese as well as Western ears, his arguments are symptomatic of a pervasive sense of intellectual insecurity that has driven China’s swings from one extreme ideology to the next.

Liberation

In 1993, Cui Zhiyuan, a Tsinghua University professor who was then teaching at Massachusetts Institute of Technology, wrote a seminal article calling for a new ‘Liberation of Thought’, arguing that after freeing themselves from orthodox Marxism, Chinese intellectuals should liberate themselves from their unquestioning admiration of Western capitalism. His goal was to break the boom and bust cycle that saw China embrace a new ideology every generation, and to encourage Chinese people to think for themselves. Rather than accepting the mantra that ‘there is no alternative’ to the neo-liberal agenda, he argued that China should draw on many sources to develop a new way, or as he put it an ‘alternative modernity’.

His call initially fell on deaf ears. China was still reeling from the Tiananmen massacre. Most of its intellectuals were cowed by the government’s violent response to the protests, co-opted by the Communist Party or living in exile. Party leaders were restarting their economic reforms. And the rest of the elite were too busy making money. But Cui Zhiyuan’s ideas are having an impact today, as China’s economic growth leads to a new self-confidence.

Even the nationalist Wang Xiaodong acknowledges that his country is outgrowing ‘reverse-racism’. In a recent talk, he cited the words of a well-known entrepreneur to make the point: ‘In the 1980s I went out of China for the first time, to Singapore … I was shocked by the culture, the technological progress, the urban splendour, the vibrancy of life. Our delegation dreamt “Could our country have a city like Singapore in fifty years time?” We were not hopeful. History has proven us wrong. It took just twenty-five years. Last year I went to Singapore, and in my view, it cannot compete with our Shenzhen, Dalian, Shanghai and Beijing.’

The self-confidence that comes from China’s economic miracle has – paradoxically – freed some of China’s thinkers to question the central tenets of the market revolution that produced it. Now that Chinese thinkers take their country’s giddy growth rates for granted, they are asking if the ideology of the 1980s and 1990s is really delivering all that it promised. Deng Xiaoping’s commitment to economic development, above all else, is being attacked by those who want to reduce inequality and stop the pillage of China’s environment. In the realm of political reform, some Chinese intellectuals are increasingly questioning whether liberal democracy is the right model for China in the long term. And in the realm of foreign policy, they are challenging the notion that nation states need to be marginalized by the stateless forces of globalization.

The intellectual emancipation that Cui Zhiyuan invoked is finally coming. In the same way that Europeans during the Enlightenment proclaimed that ‘God is dead’ and sought to craft a world in man’s image, Chinese intellectuals are today proclaiming their independence from foreign models and plotting the future on their own terms. The quest, according to the political scientist Gan Yang, is to draw on China’s historical experiences and create a new idea of modernity – rather than importing theories wholesale from abroad. He says:

Today we can see in China three traditions. One is the tradition forged during the twenty-eight years of the reform era … of ‘the market at the centre’ including a lot of concepts like freedom and rights. Another tradition was formed in the Mao Zedong era. Its main characteristics are striving for equality and justice. The last tradition was formed during the thousands of years of Chinese civilization, traditionally referred to as Confucian culture. In the past we have often behaved as if these three traditions were in conflict with each other. But they are not.

This is not the first time that Chinese have sought to combine foreign know-how with national identity. Confucian reformers in the nineteenth century strove to bolster the imperial system by using foreign ‘functional knowledge’ (yong) to preserve Chinese ‘essence’ (ti). And Deng Xiaoping labelled his market reforms ‘socialism with Chinese characteristics’. But where earlier generations started from a position of debilitating weakness, today’s reformers are coming to terms with China’s growing strength. And, what is more, this attempt is being bolstered by an intellectual debate raging beyond the halls of power.

The intellectual as king

This book is about the development of a new Chinese world-view. It shows how China’s quest for intellectual autonomy will act as the foundation for a new model of globalization. It follows the attempts by Chinese thinkers to reconcile competing goals; exploring how they can get access to global markets while protecting China from the gales of creative destruction they could unleash in its political and economic system. It shows how China will come to challenge the flat world of American globalization with a ‘Walled World’ of China’s own creation. Inspired by discussions with over 200 Chinese thinkers and officials over a period of three years, this book tries to chart China’s recent intellectual emancipation from Western ideas on economics, politics and global power, casting light on how Beijing’s new thinking could change the world order – thereby changing the West itself.

I do not purport to represent the multitude of views held by 1.4 billion people, or even the views of all Chinese intellectuals – many have been silenced by imprisonment, intimidation or exile. The thinkers represented in this volume are insiders. They have chosen to live in mainland China – learning to cope with the regime’s regular spasms of control and loosening up – in their quest to push for change within the system. Even they have sometimes fallen foul of China’s erratic censors. Several of the protagonists of this story have been stripped of important jobs in think-tanks and journals during the years that I have been writing this book – even as their ideas have received greater backing from the government. In spite of the ever-present threat of repression, incarcerations and censorship, intellectuals in China do count. Many of these thinkers have been called upon to brief presidents, prime ministers and senior party officials. In fact, they have more influence than their counterparts in many Western countries.

Paradoxically, the power of the Chinese intellectual is amplified by China’s repressive political system where there are no opposition parties, no independent trade unions, no public disagreements between politicians, and a media that exists to underpin social harmony rather than promote political accountability. Intellectual debate, in this world, can become a surrogate for politics – if only because it is more personal, aggressive and emotive than anything that formal politics can muster. Intellectuals can articulate the concerns of broader social forces – workers, farmers, entrepreneurs – and push for change in their name. The Chinese like to argue about whether it is the intellectuals that influence decision-makers, or whether groups of decision-makers use pet intellectuals as informal mouthpieces to advance their own views. Either way, the debates between thinkers have become part of the political process, and are used to put ideas in play and expand the options available to Chinese decision-makers. Although many scholars complain that Chinese intellectuals have lost their traditional role as the social conscience of the nation – and been co-opted by the government or drawn into arid specializations – the clashes between different factions, such as the ‘New Left’ and ‘New Right’, do capture real social divisions on the ground.

Thinkers like Wang Hui and Zhang Weiying, Yu Keping and Pan Wei, Zheng Bijian and Yan Xuetong are still practically unheard of outside of China. But we will soon find our world changed by their thinking. Each has won the ear of the government with plans for reform that will change the nature of China’s economics, politics and foreign policy. They are engaged in an old-fashioned battle between Left and Right – about the size of the state, the shape of political reform and the nature of power. However, from their heated arguments a new philosophy is emerging, one that will have important implications for the world.

Of course, big decisions will always be taken by big leaders: China may not have embraced the market without Deng Xiaoping; Thatcherism would not have happened without Thatcher; the dissolution of the Soviet Union would not have happened without Gorbachev; and the Iraq War may not have been launched without George Bush. And yet it is impossible to understand the broad sweep of historical change without studying the intellectual movements that crystallize around certain ideas, on which the leaders can draw. Thatcher did not invent monetarism herself but drew on ideas which had been bubbling away for many years. George Bush was influenced by the ideas of Neo-Conservative intellectuals. Deng Xiaoping did not suddenly decide to open up China’s market; he was influenced by perspectives developed by Chinese intellectuals who had been in contact with the West. And today there are new ideas bubbling up within China that could form the core of a new Chinese philosophy, the idea of a ‘Walled World’.

CHAPTER ONE

Yellow River Capitalism

In the 1980s, we were all reformists. We criticized old-style Maoist goals and practices. We looked at our circumstances through the ideas of the West. What we got was naïve and abstract because we didn’t really know what would happen to China once the market took off. We didn’t know that the market would create rich and poor: we thought it would benefit everyone. And for a few years it did.

Gan Yang

It was the Cuban cigars that first caught my eye. Half a dozen boxes of Cohiba, Romeo y Julieta and Montecristo piled high on Zhang Weiying’s desk in a haphazard monument to the economic opportunities of today’s China. These almost Freudian status symbols – worth several times a Chinese peasant’s annual income – are like pocket-sized pyramids, toiled over by workers for the rich to flaunt. Like the 300 skyscrapers of Shanghai or Beijing’s new Olympic Stadium they testify to the nature of an economy where labour has become a commodity, and money is spent almost as quickly as it is earned.

But for Zhang Weiying they are also pocket-sized fragments of freedom; products of a parallel universe – a republic of the West – that has been built alongside the Communist state in China; one whose dynamism he hopes will gradually eclipse and replace the last vestiges of Maoism. Like other economic liberals – or members of the ‘New Right’ as their opponents call them – he thinks that the planned economy is the foundation of political despotism; that China’s freedom will not come until the public sector is dismantled and sold off, and the state has shrivelled into a residual body designed primarily to protect property rights. Only then, according to the ‘New Right’, will a propertied class – a new civil society – be able to lay the foundations for democratic politics. The cigars, therefore, do not just show that getting rich is glorious, as symbols of private wealth they are milestones on the road to freedom.

Behind Zhang Weiying’s desk a glass-fronted display case glistened with the trophies and baubles of a distinguished career: books he has written and edited, pictures of him with Nobel laureates and statesmen, degrees from leading universities, and an award for ‘The Man of the Year in Chinese Economy’ from Chinese Central Television (CCTV) in 2002. They all reinforce the point that Professor Zhang Weiying has made it; that he is one of the most famous economists in China. But life today is getting tougher for economists like Zhang Weiying. After thirty years of ruling the roost with imported ideas from the West, they can feel China turning against them. Opinion polls show that they are the least popular group in China – on a par with traffic wardens and used-car salesmen in the UK. Public anger is growing over the costs of reform, with protests by laid-off workers coming together with concern over illegal demolitions, corruption and unpaid wages and pensions. As a result, the ideas of the market are being challenged by a ‘New Left’ which advocates a gentler form of capitalism. A battle of ideas is raging which pits the state against the market; coasts against inland provinces; towns against the countryside; the rich against the poor.

The dictatorship of the economists

Success is all about timing, and Zhang Weiying’s was perfect. He graduated with a degree in economics in 1982 – just as Deng Xiaoping’s opening and reform process was gathering momentum. It is hard for Westerners, used to life in a fissiparous open society, to understand a purposeful state like Deng’s China. Zhang Weiying frequently uses the word ‘missionary’ to describe the determination with which China pursued economic growth. In a similar way, Franz Kafka, the pre-eminent chronicler of life in the closed society, conjures up the singleness of purpose of the Chinese authorities in a different period in his essay on the Great Wall of China: ‘Fifty years before the building was begun, throughout the whole area of China that was to be walled around, architecture, and masonry in particular, had been declared the most important branch of knowledge, all others being recognized only in so far as they had some connection with it.’ When Zhang Weiying graduated in 1982, there was a new wall to build: China’s market economy. The Communist Party had declared that economic growth was ‘the central task’, and suddenly everyone wanted to be an economist. ‘Economics,’ as Wang Hui puts it, ‘acquired the force of an ethics.’ As the economy grew, so did the influence and wealth of the economists. They populated government taskforces, wrote plans for privatization and filled the boards of the newly privatized companies (131 of 274 independent directors in today’s listed enterprises are academic economists). They became the new high priests of China whose arguments increasingly trumped those of Maoist refuseniks (who were derisively known as fanshipai or ‘whateverists’ because they supported whatever policy decisions Chairman Mao made).

Deng Xiaoping’s ‘dictatorship of the economists’, as disgruntled political scientists, philosophers and sociologists called it, produced startling results. An average of 9 per cent growth over three decades made China the world’s third biggest economy by 2007. Three hundred million people rose from absolute poverty, while 200 million left their farms to work in industry. One hundred million joined the so-called middle class and 500,000 became millionaires. And a new generation of Chinese companies such as the computer giant Lenovo that bought IBM and the Nanjing car company that bought MG Rover entered the global corporate league.

Like Zhang Weiying’s own success, China’s economic miracle owed much to its timing. Unlike his Russian and Latin American counterparts who rapidly implemented measures to liberalize and privatize their economies – known as ‘economic shock therapy’ – the Chinese leader Deng Xiaoping did not have a mandate for radical reform. Many leading Communist Party officials such as Chen Yun, Li Xiannian and Deng Liqun were against market reforms. They continued to believe that China’s problems could be fixed by modernizing the planned economy and making it ‘more scientific’, like its Soviet counterpart. Deng Xiaoping and his allies were, therefore, unable to set a blueprint or timetable for China’s economic transformation. Instead, they opted famously to ‘grope for stones to cross the river’ – implementing incremental changes, one step at a time, without ever talking about the final destination. To his country’s lasting benefit, Deng Xiaoping heeded Bertolt Brecht’s advice that when there are obstacles, the shortest distance between two points can be a crooked line.

The village of zebras

Zhang Weiying has a favourite allegory to explain China’s reforms. He tells a story about a village whose residents rely on horses to carry out all their chores. The village elders, who had tirelessly argued that their horses were better than the zebras used in a neighbouring village, would harangue anyone who questioned their claim. Over time, however, the elders realized that the neighbouring zebras were, in fact, superior to the idle and greedy horses which they had so actively promoted. So, after years of hailing the virtues of the horse, they decided to embrace the zebra. The only obstacle was converting the villagers who had been brainwashed over decades into worshipping the horse. The elders developed an ingenious plan. Every night, while the villagers slept, they painted black stripes on a few horses. When the villagers awoke – shocked at the presence of evil beasts in their midst – the leaders reassured them that the animals were not really zebras, just the same old horses adorned with a few harmless stripes. The villagers gradually became accustomed to the presence of the strangely decorated animals in their midst. After a long interval the village leaders began to replace the painted horses with real zebras. These prodigious animals transformed the village’s fortunes, increasing productivity and creating wealth all around. Only many years later – long after all the horses had been replaced with zebras and the village had benefited from many years of prosperity – did the elders summon the citizenry to proclaim that their community was a village of zebras, and that zebras were good and horses bad.

Zhang Weiying’s allegory is an explanation of his most famous idea, the theory of ‘dual-track pricing’ which he first put forward in 1984. He argued that ‘dual-track pricing’ would allow the government to move from an economy where prices were set by government officials to one where they were set by the market, without having to publicly abandon its commitment to socialism or run into the opposition of local governments with a vested interest in central planning. Under Zhang Weiying’s approach some goods and services continued to be sold at state controlled prices while others were sold at market prices. Over time, the proportion of goods sold at market prices was steadily increased until by the early 1990s almost all products were sold at market prices. The ‘dual-track’ approach embodies the combination of pragmatism and incrementalism that has allowed China’s reformers to work around obstacles rather than confronting them head on. Rather than closing down the old central planning system, they first created an alternative reality alongside it. And when things went well, they reformed the old system to give it the best features of the new reforms.

Pearl River Capitalism: from permanent revolution to permanent innovation

Zhang Weiying was not the only person to call for ‘dual-track pricing’, but he was the first to do it publicly. He was soon given a plum job working for the Commission for State Institutional Reform which he held down from 1984 until 1990. Zhang Weiying was part of a group of young officials who found ways of making market ideas palatable to the older Communist elite. Their goal was to paint as many zebras as possible – to create a parallel market in the shell of socialist China.

China’s economic reforms had begun in the countryside with the dissolution of the ‘people’s communes’ and the end of collective farms in 1979. For over two decades before then, life in the countryside had been organized around collective ‘work units’ which lived together, worked together and ate together. The work unit was meant to replace the family as the primary unit of economic activity and social life. With the ‘opening and reform era’, these collective farms were closed down and replaced with smallholdings that were controlled by individual families who could decide what they wanted to grow, and more importantly kept the profits generated by their labour. This led to a huge surge in agricultural productivity which freed thousands of labourers from the fields. These workers were soon employed by a new crop of privately run factories – known as ‘Town and Village Enterprises’ – which sprang up all over the countryside. The wealth generated by China’s rural revolution allowed the local governments to benefit from the revenue generated by private industry. But these primitive trysts with the market were not what excited Zhang Weiying and his colleagues. This was just the beginning.

In their quest for a new China they looked beyond the landlocked rural plains where economic reform had begun to the outward-facing coastal provinces of the east. At the beginning of the 1980s, Shenzhen was an unremarkable fishing village, providing a meagre living for its few thousand inhabitants. Over the next three decades it has become an emblem of the Chinese capitalism that Zhang Weiying and his colleagues were building. Because of its proximity to Hong Kong, Deng Xiaoping chose Shenzhen as the first ‘Special Economic Zone’, offering its leaders tax-breaks, freedom from government regulation and a licence to pioneer new market ideas. The architects of reform in Shenzhen were not interested in replicating the low-tech industrial revolution that had taken place in the countryside at the beginning of the era of ‘opening and reform’. They wanted to build high-tech, capital intensive plants that could mass-produce the sort of high-value-added goods that could compete directly with the West. In order to get their hands on the technology and capital to turn their dreams into reality, the authorities set about attracting investment from abroad. Shenzhen alone succeeded in pulling in over $30 billion of foreign money to build factories and roads and develop its ports. The secret of Shenzhen’s success was its reliance on exports, rather than domestic consumption to fuel its growth. The decision to open the ‘Special Economic Zones’ up to the outside world provided a booster for the development of a non-state sector because foreign companies would set up joint ventures and shareholding companies. As a result, by 1992 half of China’s industrial output was generated by the non-state sector.

This pattern of building zones of radical experimentation to gradually produce more valuable goods and services was the key to China’s success. It was very capital intensive, and needed to be financed by drawing on the country’s massive savings and the revenues from exports rather than domestic consumption. It was based on the commodification of labour, as the coastal regions could suck in endless numbers of workers from the countryside in order to depress urban salaries. And it was laissez-faire – allowing wealth to trickle down from the rich to the poor organically rather than consciously redistributing it. Deng Xiaoping pointedly declared that ‘some must get rich first’, arguing that the different regions should ‘eat in separate kitchens’ rather than putting their resources into a ‘common pot’. As a result, the reformers of the eastern provinces were allowed to cut free from the impoverished inland areas and steam ahead.

The take-off of the coastal regions seemed to back up the claims of generations of Chinese reformers that their country had been held back by the conservatism of its inland provinces, which prevented China from competing with maritime civilizations such as Britain, France, Japan and the USA which had embraced the market, trade and innovation. The reforms of the 1980s unleashed a process of social change that went far beyond economics. The Chinese called it a ‘cultural fever’. It reached a cresc-endo in June 1988 with the showing of a six-part documentary called River Elegy in prime-time on the main state television channel. The series used the story of the Yellow River – often referred to as ‘mother river’ because it is considered to be the cradle of Chinese civilization – to launch a full-frontal attack on China’s traditions.

Rather than accepting the romantic ideal of the Yellow River as the embodiment of Chinese greatness, the series presented it – with its countless victims from flooding and drought – as an enemy of the Chinese people; the ultimate symbol of their irrational, erratic and earth-oriented character. Each episode targeted a Chinese tradition that was holding the country back. For example, the Great Wall was treated as a symbol of meaningless isolation, while the Ming dynasty was attacked for its ban on maritime activity. The pungent style of the narrator drove this point home in the very first episode: ‘There is a blind spot in our national psyche: it is a vague belief that all of the shame of the past century is the result of a break in our glorious history. Ever since 1840, there have been people who have used the splendours and greatness of the past to conceal the feebleness and backwardness of our present state … Yet the fact remains, our civilization is moribund.’ The narrators pleaded with China to break the bonds of traditional society that had prevented the country’s modernization. China, they argued, must now turn away from the countryside, focusing not on the Yellow River, but rather on the blue world of the ocean and the world beyond. The final images of the series show the Yellow River dissolving into the powerful sea which symbolizes the might of the Western world which has embraced modernity. In China’s universities and colleges, students spontaneously discussed and debated the issues raised in each episode of River Elegy. Five million copies of the script were sold as it became an instant best-seller. The reformist prime minister Zhao Ziyang arranged for the series to be re-aired on the main TV channel, Chinese Central Television.

Less than a year after the series was aired, the cultural fever took a decidedly political turn in the Tiananmen Square demonstrations of 1989. What began as a memorial march for the former Communist Party Secretary General Hu Yaobang on 15 April soon turned into a catch-all protest for political reform, workers’ rights and an end to official corruption. This incredible display of people power that dominated the streets of Beijing for six weeks gave the world a glimpse of a democratic China until it was abruptly wiped out by soldiers and tanks on 4 June 1989. The crackdown was more than a human tragedy; it became a defining moment in China’s political and economic development.

The two stories of Tiananmen

One of the students who was glued to the television during episodes of River Elegy was Wang Hui. He had been working on a PhD in Chinese literature when he joined the student demonstrations of 1989. Like most young intellectuals Wang Hui was a supporter of Deng Xiaoping’s ‘Open Door’ policies and a believer in the potential of the market. But when Wang Hui left the demonstrations for the last time he embarked on an intellectual journey that would change his world-view: ‘In the early morning of 4 June 1989, as I departed from Tiananmen Square in the company of the last group of my classmates, I felt nothing but anger and despair.’ As the government rounded up and punished the organizers of the protest, Wang Hui took off to the mountains and spent two years in hiding, getting to know peasants and workers whose experiences made him doubt the justice of unregulated free markets, and convinced him that the state must play a role in preventing inequality.

Until 1989, reformist intellectuals had been united in a journey to the West, regarding political and economic liberalism as a seamless whole, one that would benefit all Chinese people. Their enemies were the ‘conservatives’ who supported the Maoist status quo. After the bloodshed the reformers split into two camps: a ‘New Right’, led by thinkers like Zhang Weiying, who see free markets as the most important goal and are willing to make an accommodation with political authoritarianism; and a ‘New Left’, about whom we will hear more later, led by scholars such as Wang Hui, who emphasize equality and political democracy at the expense of total market freedom.

These tensions had been inherent in the demonstrations themselves. In the West, we saw Tiananmen as a confrontation between a brutal, unreformed communist state and a group of students longing to be part of the capitalist world of liberal democracy. But, in an important essay on the meaning of 1989 (which he wrote retrospectively from exile in 1997), Wang Hui takes the spotlight off the intellectuals and students and puts it on a wider group of workers who came to the square with more concrete social and economic demands. Their involvement in the protests had been triggered by mounting discontent about the radical market reforms of 1988 which had set off rocketing inflation and inequality. These workers had no interest in being part of the West. In fact, what they wanted was price stability, social security and an end to corruption and speculation. Wang Hui sees their concerns as part of the global resistance to neoliberalism, comparing Tiananmen to the anti-globalization riots that erupted in Seattle and Genoa.

According to Wang Hui, there were two different agendas in the square: one group wanted social welfare and protection from the market; the other wanted democracy and protection from the leviathan Communist state. If the protesters had faced in two directions, so did the repression that followed it. According to Wang Hui, the crackdown not only silenced calls for democracy, it also ended public debate about inequality. Once the tanks had done their work, the process of marketization speeded up. The price reforms that had been called to a halt in the second half of 1988 were implemented in September 1989. After Deng Xiaoping reasserted himself over the conservatives in 1992 – using his famous ‘Southern tour’ of the coastal cities of Guangzhou and Shenzhen to restate the case for reform – many more changes followed. The corruption, the smuggling, the unfair distribution of assets, the influence of interest groups on public policy, the overdevelopment of real estate, the problems with the social welfare system and environmental concerns, which the protesters had complained about, got steadily worse.

However, the threat of further repression meant society’s discontent was muted. As Wang Hui says: ‘Just as people have forgotten the sound of social fragmentation echoing behind the excitement at Tiananmen, neither can people remember that the market era referred to today as “neoliberalism” is hiding behind the political spectres of those on the square and has only in this way secured an exemption from social protest against it.’ What he means is that the stodgy, bureaucratic face of the traditional Communist Party has masked the most extensive and ambitious process of marketization and privatization the world has ever seen. By referring to the market revolution as ‘socialism with Chinese characteristics’, the authorities were able to use quotes from Marx and Mao to repackage the ideas of Milton Friedman and Friedrich Hayek. For Wang Hui, the tanks that pulverized the hopeful intellectual flourishing of the 1980s were working on behalf of market fundamentalism rather than Maoism. Contrary to the view of the repression as a reassertion of Maoist ideology, the authoritarianism was acting to silence workers’ anxieties about inequality. This is Wang Hui’s version of the zebra story.

For Wang Hui, China’s last fifteen years have felt like a hallucination:

those who thought that the movement had speeded up the process of Chinese democratic development discovered that they had been abruptly dragged back into an era they thought was passing away – the old language, old patterns, old characters, old announcements, old faces that should have retired from the scene all took the stage once again. These old patterns created a hallucinatory effect, such that no one became conscious of the fact that the actual functionof the repressive measures was precisely to re-establish the links among market mechanisms that had begun to fail.

On the surface it looked as though the old guard was emphasizing its Communist ways, but in reality market forces were being pushed through with unprecedented speed. This created an ironic situation where right-wing economists like Zhang Weiying – who like to talk about the withering of the state – have, in fact, been the biggest beneficiaries of one-party rule. The Communists have faithfully implemented his ideas for reform, while silencing critical voices on the Left.

Zhang Weiying was not immediately sure how things would pan out so he left Beijing for Oxford University to study for a PhD under the Nobel Prize-winning professor James Mirrlees. By the time he returned to China in 1994, the breakneck pace of reform had resumed. The size of the non-state sector had grown exponentially and China was already overcoming the international opprobrium which its brutal suppression of the demonstrations had provoked. Zhang Weiying immediately returned to the action, dividing his time between the business, academic and policy worlds. As well as sitting on a number of government task-forces, he runs the prestigious Guanghua School of Management at Beijing University, and advises a dozen of the biggest firms in China. Since 1995 he has been the most cited economist in Chinese economic journals.

Wang Hui and the left-wing reformers had a tougher time in the 1990s. Numbed by the ferocity of the assault on the protesters, disorientated by the bizarre alliance of convenience between the Communist Party and the new capitalist elite, and depressed by a growing body of thought that believed that history was coming to an inevitable end, he and his colleagues went underground. They fell back on the three weapons that James Joyce had advocated against repression: ‘silence, exile, and cunning’.

The rise of China’s ‘New Left’

I met Wang Hui in ‘Thinker’s Café’, a bright and airy retreat with comfy sofas and fresh espressos that sits on top of one of Beijing’s largest bookshops. Within a stone’s throw of three of the country’s most prestigious universities – Tsinghua, Beida and Renmin – it reverberates to the sound of earnest intellectual chatter. Today’s Wang Hui has overcome his despair. He has the guise of an archetypal public intellectual: a thin man with cropped hair, wearing a brown jacket and a black polo-neck sweater. He loves discussing abstract notions like ‘enlightenment’, ‘teleology’ and the meaning of ‘modernity’. Neither his J.-P. Sartre chic nor his trendy theoretical discourse would be out of place on the Left Bank of Paris.

But Wang Hui has not lost his anger about China’s condition. He has managed to stand aloof from the commercial mainstream. Because he has not joined the party, he has no official positions (unlike Zhang Weiying, he is not the director of a university institute or department). For a decade he held an influential post as editor of Dushu – the leading intellectual journal in China – but it was taken away from him with very little notice in advance of the 17th Party Congress in 2007. Although he is a professor at Tsinghua University, Wang Hui has an uncomfortable relationship with the authorities: writing reports exposing local corruption and helping workers organize themselves against illegal privatizations. He often uses the media to put the spotlight on government failings.

Wang Hui is one of the leaders of the ‘New Left’, a loose grouping of intellectuals that is increasingly capturing the public mood, and setting the tone for political debate. They are ‘new’ because unlike the ‘old left’ they support market reforms. They are Left, because unlike the ‘New Right’ they worry about inequality. Many sought exile in the USA in the 1990s, but now they are back to join the debate about China’s future. In an interview, Wang Hui set out their stall: ‘China is caught between the two extremes of misguided socialism and crony capitalism, and suffering from the worst elements of both systems … I am generally in favor of orienting the country toward market reforms, but China’s development must be more equal, more balanced. We must not give total priority to GDP growth to the exclusion of worker’s rights and the environment.’

Their philosophy is a product of China’s relative affluence. Now that the market is driving economic growth, they ask what should be done with the wealth. Should it continue accumulating in the hands of a privileged elite or can China foster a model of development that benefits all its citizens? Thirty years into China’s reform process they are challenging the philosophy of growth as the ultimate goal: instead of hurtling towards nineteenth-century laissez-faire capitalism, they want to develop a Chinese variant of social democracy. And while, like magpies, they adapt ideas from all over the world to Chinese conditions, they feel that China’s development should be built on Beijing’s terms. As Wang Hui says:

We cannot count on a state on the German or Nordic model. We have such a large country that the state apparatus would have to be vast to provide that kind of welfare. That is why we need institutional innovation. Wang Shaoguang [a political economist] is talking about low-price health-care. Cui Zhiyuan [a political theorist] is talking about socialized capital and reforming property rights to give workers a say over the companies where they work. Hu Angang [an economist] is talking about Green development.

Their goal is to challenge the imported ideas of ‘Pearl River Capitalism’ and replace them with a home-grown philosophy: ‘We have to find an alternate way. This is the great mission of our generation.’ And as the list of problems arising from the market grows almost as long as the many achievements, the senior leadership is taking note of their ideas. They are beginning to feel that their time has come.

Yellow River Capitalism

Henan literally means ‘South of the River’, because of its location on the banks of the Yellow River. This is the heart of inland China, the spiritual opposite of Shenzhen. Traditionally regarded as the birthplace of Chinese civilization, it is also home to a village that became the poster boy of the ‘New Left’ in the 1990s: Nanjie. In a deliberate experiment, Nanjie’s leaders created a synthesis of the market and collectivism, as they abandoned their agricultural heritage to embrace industrialization (the authorities built twenty-six factories making everything from instant noodles to plastic wrappers). Village life in Nanjie is resonant of nineteenth-century experiments in ethical capitalism such as Robert Owen’s New Lanark in Britain. The workers are paid above average wages and everyone is given free housing, free healthcare, rations of meat and eggs, and a daily bottle of beer. Primary and even college education is subsidized. The authorities look after the moral welfare of their citizens, not with religious sermons as in New Lanark, but through compulsory study-sessions of Mao’s philosophy and regular ‘criticism and self-criticism’ of each other’s behaviour. In 1996, the village was immortalized in a glowing book by the ‘New Left’ political theorist Cui Zhiyuan.

For him, the village was a living embodiment of an ‘alternative way’. It showed that the market could be used to finance social welfare; that success could be achieved in the rural communities of inland provinces rather than only on the coast. And it showed how government intervention – to provide health and education – could improve economic dynamism. Today some of the sheen has come off Nanjie, which is increasingly seen as an artefact rather than a model. But even in 1996, Cui Zhiyuan did not think that Nanjie could be universalized. Instead, he argued that it showed how China could survive in market conditions without slashing the wages, terms and social protection of its workers. It was an emblem of an alternative form of capitalism to that practised in the Pearl River Delta, one which I will call ‘Yellow River Capitalism’.

Where Wang Hui speaks slowly and deliberately, Cui Zhiyuan can be exhausting to follow. When he talks his sparkling eyes almost pop out of his head. His delivery is breathless with the enthusiasm of a mad scientist intoxicated by the pursuit of knowledge. As he draws on learned quotations to back up his points, one gets the sense that he is holding the ring for a perpetual argument that is going on in his head between his intellectual mentors: Niccolò Machiavelli, Jean-Jacques Rousseau, John Stuart Mill and James Meade. Cui Zhiyuan is one of the most optimistic members of the ‘New Left’, seeing experimentation as a key to solving China’s problems: ‘The present experience of Russia – and the experiences of developing countries around the world – demonstrate that these countries cannot achieve the wealth, strength and freedom of rich industrial democracies by simply imitating the economic and political institutions of these democracies. They must, to succeed, invent different institutions.’ For the ‘New Left’, the key to the Yellow River Capitalism is a philosophy of perpetual innovation – developing new kinds of companies and social institutions that marry competition and co-operation.

The weakest state in the world

‘Big state bad, small state good’ was the mantra of the economists in the 1980s and 1990s. But the ‘New Left’ team of Wang Shaoguang and Hu Angang has done much to turn that debate on its head. This odd couple – who had a chance encounter at Yale University – emerged as a sort of Lennon and McCartney for ‘New Left’ economics in China. In an influential report in the early 1990s, they argued that the Chinese state had the wrong kind of power: despotic rather than governing. Its ability to restrict the personal freedom of its citizens was second to none. However, when it came to running the country in an effective way, China’s state was one of the weakest in the world.

They showed that central government’s revenue had steadily fallen as a percentage of GDP from 31.2 per cent in 1978 to 14.7 per cent in 1992. As the central state’s budget fell, the income of local governments grew and grew, creating a series of ‘red barons’ in the provinces who used dubious ad hoc charges to line their personal and provincial coffers and increase their power. By the end of the 1980s, the ‘red barons’ had become as powerful as the central government.

For the ‘New Left’, almost all of the problems hampering China’s reforms – corruption, overheating of the economy, bad investment, non-performing loans, low levels of domestic consumption and growing inequality – had come about because the central government was too weak, rather than too strong.

Hu Angang estimates that the combined costs of illegal bribes, tax evasion, arbitrary local charges and straightforward theft add up to a staggering 15 per cent of China’s GDP every year. He shows how, without democratic accountability from below or fear of sanctions from above, provincial leaders put their own interests above those of the people, spending most of their extra-budgetary revenue on themselves and their families: higher salaries, cars, air-conditioning, refrigerators and shiny new office buildings. The solution, according to him, was to centralize the collection of taxes in order to prevent the proliferation of arbitrary charges and to create central institutions to tackle corruption.

The ‘New Left’ made a similar argument about the expensive white elephants such as luxury hotels, skyscrapers, state-of-the-art amusement parks and giant stadiums which local governments have become addicted to building. These unproductive investments, which contribute to an overheating of the economy, are built with money from China’s banks which Deng Xiaoping had freed from central control.

However, their most powerful argument is that a stronger state could help stimulate higher household consumption which currently stands less than 40 per cent of GDP, the lowest of any major economy. The ‘New Left’ claim that China’s model of development is unsustainable because there is a limit to the amount of goods and services that the rest of the world will be able to buy, so China will need to start consuming more of its own products. In the future, China will quite simply need to spend more, and save less. The ‘New Left’ correctly argue that domestic consumption will only rise when Chinese citizens feel less insecure. As long as there is no welfare state to protect Chinese citizens from illness, unemployment or old age they will save their money for the future, rather than spending it as they earn it. The ‘New Left’ claim that only a revitalized central government can provide the social safety net which would give Chinese citizens the confidence to consume. Their words have not fallen on deaf ears. The percentage of central government tax revenue has been gradually increased since 1994, and – rhetorically at least – Hu Jintao and Wen Jiabao have committed themselves to rebuild China’s welfare state.

Protecting public property

‘Property is theft’ has been one of the Left’s favourite expressions ever since Pierre-Joseph Proudhon first coined the phrase in 1840. But while the French anarchist was speaking primarily in conceptual terms, in China it is literally true. The ‘New Left’ talk of a new ‘enclosure movement’ – referring to the way that private landlords grabbed common land in England between the twelfth and nineteenth centuries – that is ripping up China’s social protection system and creating mass inequality. Every week newspapers and websites carry stories of party bigwigs carving up and plundering the nation’s assets under the cover of privatization. Property that was once taken from the rich and given to the peasants is confiscated from farmers and given to developers. Entire villages have been forced off their land to allow property speculators to build new developments; factories have been sold at knock-down rates so that their assets could be stripped and plundered. These cases have seen corrupt officials and crooked businessmen become overnight millionaires while the workers and land-owners whose assets they appropriated received derisory amounts of compensation.

The three letters that have come to symbolize the most brazen pillaging of collective resources are ‘MBO’, short for management buyout. In 2004, a little-known Hong Kong-based academic called Lang Xianping became a national figure when he used his slot on an obscure local Shanghai TV station to investigate and expose some of these abuses. His show caused such waves that Gu Chujun, the chairman of one of the companies that he exposed, took him to court for defamation with a plucky battle-cry ‘I’m fighting for the honour of the entrepreneurs.’ Before Gu Chujun lost his case and was put in prison, the economist Zhang Weiying came to his defence, complaining about the practice of ‘monsterizing and vilifying entrepreneurs’ and arguing that privatization should continue both for reasons of efficiency and principle. He argued that State Owned Enterprises will never take risks because their managers are appointed by bureaucrats; only capitalist entrepreneurs will create new wealth. Even if there are some irregularities in the privatization process, he claimed, it is a price worth paying because China will only be able to develop when the state has retreated from the economy, and its biggest companies are in private hands. Privatization will benefit all.

The ‘New Left’ disagree that state-owned companies will necessarily underperform, arguing that they too can recruit professional managers from the market who could be rewarded or punished according to their performance. What worries the ‘New Left’ most are the social costs of privatization. State Owned Enterprises, for better or worse, provided an ‘Iron Rice Bowl’ for their workers: as well as paying workers a salary, they organized education, pensions, housing, healthcare and even sport. Privatization and economic restructuring has not just deprived millions of workers of jobs, it has stripped them of the social protection that made their families’ lives viable as well. The fact that China has gone from full employment to a situation where there are 40–60 million unemployed – as well as tens of millions of migrant workers (mingnong) who live as exiles in their own country with no rights because they have no certificate of residence – has led to work becoming a commodity. The Chinese political elite have been divided for over a decade over the idea of introducing a law to protect private property. Wang Hui talks for many in the ‘New Left’ when he says ‘we have nothing against protecting private property, but shouldn’t we also have a law to protect public property?’

Cui Zhiyuan has an even more radical idea: a new way of sharing the profits of China’s State Owned Enterprises. China’s 169 biggest companies declared net profits of over 600 billion Yuan ($75 billion) in 2005. But in spite of their enormous profits China’s state companies do not pay dividends to their main shareholder: the state. The government is finally preparing to ask these firms to pay up. However, Cui Zhiyuan wants them to give the dividends to the people rather than the government. His model comes not from China’s socialist past, but from Alaska. Since 1982, the government of this bleak polar state has used some of the income generated by its massive oil reserves to set up a giant trust fund for its citizens, paying them a ‘social dividend’ worth thousands of dollars every year. Cui Zhiyuan argues that profits of State Owned Enterprises should be treated like Alaskan oil, going to the mass of Chinese people rather than a wealthy elite. He claims that this social wage would help to remove Chinese insecurity, allow citizens to take low-paying jobs and increase domestic consumption.

Green Cat Development

China’s ‘New Left’ do not just worry about the social impact of China’s breakneck development; they also worry about an environmental nightmare. On my own visits to Beijing, I always know when my plane has entered Chinese airspace: the pollution is so bad that I cannot see the ground. China’s air, water and land are being laid waste by the country’s relentless pursuit of economic growth. As development advances from the eastern coasts, the hinterland is becoming a barren, hellish wasteland – the poorest regions have been transformed into a dumping ground for industrial detritus. Two-thirds of China’s electricity comes from dirty coal, with a new coal-fired plant built every week. China’s factories blurt out toxic fumes and dump chemicals and waste in the rivers and lakes. Chinese agriculture uses fertilizers that are banned in the rest of the world. Already a quarter of China’s land has turned to desert, as a result of deforestation, and this is spreading at a rate of 2,460 km a year. As a result 30 per cent of China has acid rain; 75 per cent of lakes are polluted and rivers are contaminated or pumped dry; and nearly 700 million people drink water contaminated with animal and human waste. There is a shortage of arable land, as millions of peasants find that their fields are confiscated for development or contaminated by chemicals.

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