China seeks to modernize its industries

In the second of several dispatches on the CCP's 10-day 15th Party Congress, which opened on Sept. 12th in Beijing, our Asia correspondent Harvey Stockwin reports on the lack of consensus which preceded the congress, and the colossal task which China faces as it seeks to modernize its industrial inheritance from a more fervidly socialist past.

BEIJING (JP): As the 15th Chinese Communist Party (CCP) Congress got underway last Friday in the Great Hall of the People in Beijing, some key decisions still had to be decided, amid clear signs that the "collective leadership" is finding it difficult to reach consensus on key personnel changes.

In CCP vocabulary, every congress -- they are held every five years -- is a great historical event on the CCP's inevitable road to progress. The grandiloquent propaganda extolling the CCP's achievements, past, present and future, flows through the proceedings, and so it has been on this occasion.

Yet, in historical fact, ordinary plenums of the CCP central committee, as in the case of the famous Third Plenum of the Eleventh Congress in 1978 when Deng Xiaoping took charge, have frequently been far more historically significant than party congresses.

Usually, the congresses have been carefully arranged in advance, so the remarkable fact about this congress is that there are clear signs that on some key issues, such as personnel changes, the party's leaders have failed to agree on the congress script.

In part, this is a reminder that the 15th congress is the first congress since the early 1960s when China has not had a paramount leader capable of compelling consensus among the squabbling factions -- or making the divisions deeper by coming down on one side or another.

Except for the period in the early 1960s when he briefly lost power, Mao Zedong was the great looming presence behind the CCP from the time it took power in China in 1949. After a brief interregnum of two years after Mao died in 1976, Deng Xiaoping has been the CCP's patriarch since that Third Plenum in 1978.

So far, and not surprisingly, no dominant personality has emerged in the short period since Deng died last February. Party propaganda has portrayed President Jiang Zemin as the accepted "core" of the third generation CCP leadership. But clearly, Jiang has yet to reduplicate the dominance of Mao and Deng. The very fact that everyone is supposed to endlessly reiterate that Jiang is the core of the leadership indicates some uncertainty about his actual clout. When a party document omitted the ritual phrase recently, everyone sat up and took notice.

As already reported by The Jakarta Post, agreement was not reached on personnel changes when the CCP's top leadership spent three weeks in August at the summer seaside resort of Beidaihe, and when an enlarged politburo meeting took place in the first week of September. Now, the indications also are that a clear consensus on personnel changes also failed to emerge at the four- day Central Committee meeting which ended just before the 15th congress opened.

It is unlikely that these matters will be finally decided at a plenary session of the 2,048 delegates attending the 15th congress. Conceivably, agreement on the top-level power shifts will only be reached belatedly at the first plenum of the new central committee chosen at the 15th congress, which customarily meets immediately after the congress concludes.

For outsiders, Chinese or foreign, a key moment will come if, as happened after the last congress in 1992, the new Politburo Standing Committee holds a formal meeting with the media. They will appear in protocol order and this will signal the power shifts if any.

So far, Chinese television coverage of leadership meetings over the last few months has shown the seven members of the Standing Committee in the same order as decided five years ago. Jiang Zemin comes first, Prime Minister Li Peng second, National People's Congress chairman Qiao Shi ranks third and the man widely expected to be the new Prime Minister when Li retires early next year, Zhu Rongji, is fifth.

Li Ruihuan, chairman of the Chinese Peoples Political Consultative Congress, comes fourth, while the oldest member, General Liu Huaqing, is sixth and the youngest standing committee member, Hu Jintao, is seventh.

Immediately prior to the congress, there were two dramatic developments, both of which will be analyzed in greater depth in subsequent dispatches.

First, the disgraced former mayor of Beijing, Chen Xitong, was expelled from the party amid clear signs that he may also be put on trial. This is being widely portrayed as a decisive move by Jiang Zemin. But the fact remains that Jiang and the rest of the leadership has delayed for over two years since dismissing Chen on charges of corruption. Therefore, it seems likely that Jiang and Prime Minister Li may have been forced reluctantly to taking this belated step of expulsion against Chen. The persons or factions doing the forcing could be the same ones who are delaying final agreement on personnel changes.

Second, unsigned petitions were circulating among congress delegates pleading for the reinstatement of the former CCP Secretary-General Zhao Ziyang, purged in 1989 for opposing the hard-line posture which led the CCP to order the Beijing Massacre. While Chen's expulsion has been reported in the Chinese press, the fact of these petitions has not been mentioned.

When the 15th CCP Congress finally opened, President Jiang Zemin nudged China further away from communist orthodoxy, while making it perfectly clear that China would remain under the CCP's control.

In a two-and-a-half hour speech of over 30,000 Chinese characters, Jiang, who is also secretary-general of the CCP, effectively rejected continued reliance on government-controlled industries, while at the same maintaining that the CCP would pursue other kinds of public ownership.

Jiang never used the word "privatize", but what he was actually advocating was the gradual switching of some 300,000 state-owned enterprises (SOEs), and particularly the 103,000 in the industrial sector, into a more capitalist structure. The industrial SOEs have long been a colossal drag both on the Chinese economy and on China's finances since the majority of them have to be subsidized, sometimes heavily, often to produce goods which no one wants to buy now that Chinese consumers have a greater degree of choice.

The CCP has talked about reforming the SOEs for a long time and in a sense, Jiang merely continued that trend, since he was not explicit about what was actually being done, and did not provide the specifics of how the SOEs would be reformed.

But his words are important in that they indicate that the CCP is finally facing up to the need to modernize a major industrial sector. However, the fact that Jiang never used the word "privatize" even though that is what is intended in many cases, indicates a lack of courage in confronting the problem. In a nutshell, the leadership prefers to appease those who still believe in communist orthodoxy.

The party faces an extraordinary difficult task. Many of the larger SOEs are effectively small welfare states for the excess of workers whom they employ, providing things like pensions, housing and education for the workers and thereby saddling themselves with an impossible cost structure.

The SOEs are estimated to employ between 100 million and 150 million urban Chinese. Obviously as these are transferred to the private sector -- the other kind of public ownership which Jiang had in mind -- there will be massive redundancies, bankruptcies and job losses as the new ownership seeks to make uneconomic SOEs profitable.

China's communist government has to worry about growing urban unrest. There are already between 50 million and 100 million rural unemployed who have made their way to the cities, looking for work. If the reforms indicated today are carried out briskly, the total number of unemployed could reach socially explosive dimensions.

On the other hand, if the reforms are carried out too cautiously, China will gravely damage the economic and financial success it has just achieved. Small wonder then that Jiang offered something less than total clarity on how the CCP would tackle this tremendous task.

This first CCP congress after the death of former paramount leader Deng Xiaoping saw Jiang mention Deng at least 50 times in his opening speech. The official ideological banner of the CCP will now be amended to include "Marxist-Leninist, Mao Zedong and Deng Xiaoping Thought" as a tribute to the former leader. Given the reform plans advanced today, and the privatization they entail, the Deng slogan which best fits the current situation is that China is heading towards "socialism with Chinese characteristics".

Another important change indicated by Jiang was that the forces of the People's Liberation Army (PLA) will be reduced by another 500,000 men by the end of the century. This follows the one million men reduction in the 1980s, and will bring the PLA (which includes the air force and navy) down to a total strength of around 2.5 million, instead of the four million when Deng took control in 1978.

This should not be seen as a reduction of China's military power. What it does mean is that China will rely more and more on higher technology in its weaponry, and on importing arms from foreign countries. China will be better able to afford to do this if the de facto privatization plan announced today is smoothly carried out.