China faces challenges of free trade

The Asahi Shimbun, Tokyo

Chinese Premier Zhu Rongji on Tuesday declared to the world that his nation's vast market must be more open to foreign goods and services. Zhu also proposed some policy planks that would provide greater social stability, among them an enhanced social welfare system and ways to reduce the burden on people for public spending. These proposals are intended to reduce the anxieties of the nation's workers and farmers about the hardships that might be brought on with the intensified international competition that results from China's membership in the WTO.

China needs to enact legislation to implement international trade rules and to ensure fair law enforcement, in keeping with WTO principles of openness and transparency, Zhu said. The government will crack down on fake reproduction products and severely punish such illegal practices as fraud and insider trading. At the same time, there will be drastically fewer administrative inspections and permits.

With these vows, Zhu underscored his government's determination to correct the flaws and bad practices of China's economy. But words alone will not be enough to erase injustice. Bribery and financial abuses are worming their way into the ranks of the ruling Communist Party. Last year alone, more than 170,000 party members were punished for corrupt behavior. Surprisingly, 16 top-level cadre were among those disciplined.

There is a limit to how much economic liberalization one-party rule can tolerate. It is unfortunate that Zhu made no reference in his speech to political reforms. He might have hoped to avoid roiling the political waters before the autumn party convention, which is expected to agree to a generational change in party leadership.

His statement was a candid acknowledgement of the downside of China's hard-won WTO membership. Unemployment is on the rise, and delay in paying workers has become a serious problem. The income gap between farm village peasants and city dwellers widens every year. Cheap farm produce from competitors such as the United States could lead to further increases in unemployment in farming villages, where 100 million to 200 million people are out of work. There is growing concern about the possibility of social unrest.

Zhu warned of an accelerating trend of protectionism accompanying tougher competition in international markets. He then proposed that China increase domestic demand and keep its economy on its growth track.

Zhu said China's government must be strict in dealing with disruptive elements to maintain social stability, and pledged to go after terrorists, religious extremists and ethnic separatists. But this must not become a campaign of religious oppression or human rights abuses.

It is notable that Zhu called for continuing military expansion. The government's defense spending for 2002 proposes double-digit growth for the 14th straight year.

If China does not wish to be seen as a security threat to its neighbors, it should increase transparency on its defense spending. This is another area in which China needs to be more open to the rest of the world.