China in Transition

The Dark Side of China's Development: He Qinglian's The Pitfalls of Modernization

Chi Hung KWAN
Consulting Fellow, RIETI

During the planned economy years, economic development in China suffered a setback as efficiency was sacrificed for the pursuit of equality. In reflection of this, efforts to shift toward market reforms that place priority on efficiency rather than equality began in the late 1970s under the leadership of Deng Xiaoping and his banner of allowing some people and some regions to get rich first. As a result, China has achieved remarkable economic growth, but at the same time it is seeing a rise in such problems as the spread of corruption, the widening gap between rich and poor, the imbalance among regional economies and a loss of morals. The Pitfalls of Modernization focuses on this dark side of economic development and puts forward the argument that it stems from the "marketization of power." Furthermore, it warns that lopsided reforms that keep the political structure of the country unchanged will only bring miserable results, and stresses the need for democratization.

The "marketization of power" in this book refers to the abuse of power for economic profit in present-day China, where guarantees for equal opportunity and equal rules are insufficient. As the author points out, a handful of those in positions of power at state-owned corporations and the privileged classes have easily accumulated wealth through the embezzlement of the assets of state-owned enterprises. In contrast, people in the lower strata of society have been left behind, and this situation in present-day China is indeed very similar to that in Britain in the 17th century, when it was at the stage of primary accumulation of capital.

The contents of this book are specific and easy to understand, not least because the author, He Qinglian, has utilized her experience as a journalist and uses abundant examples to illustrate her theories. For example, regarding corruption among senior officials at state-owned enterprises, she exposes such tricks as (1) the acceptance of bribes in connection with the transfer or sale of state-owned assets, (2) the use of public funds for personal pleasure, (3) the creation of "independent kingdoms" through nepotism and (4) the transfer of income and assets of state-owned firms by setting up separate companies (this includes cases where parents are bureaucrats and their children are engaged in business). Furthermore, she also presents vivid accounts of corruption among bureaucrats, the manipulations of the mafia and the misery of farmers.

As for reforms, Ms.He, who calls for fairness on the economic front and democratization on the political front, positions herself opposite to pro-establishment mainstream economists who place weight on efficiency and authoritarianism. As a representative of the anti-establishment economists, she is always critical of the government's policies from the viewpoint of the socially weak. Because of this, she is popular among the common people but on the flip side of the coin she is not always held in favor among government officials. In fact, the original version of this book, which was published in China in 1998, was viewed as an anti-establishment work, and was later banned. Ms.He herself had to defect to the United States out of fear of persecution.

As this shows, this book is significant in that it sounds the alarm by showing the limits of a development strategy that places priority on efficiency. But because the author refuses to acknowledge any part of the bright side of the ongoing reforms, the book fails to objectively grasp the full picture of the Chinese economy. For instance, there is insufficient explanation as to why China continues to experience high growth while Russia has remained stagnant despite the fact that the various problems facing the Chinese economy are similar to those in Russia after the collapse of the Soviet Union. When we take note of the fact that the greatest difference between China and Russia is that in the former, single-party rule by the Communist Party is maintained, while the latter has moved to a democracy, it remains questionable whether speeding up the democratization process will really let China avoid a crisis.

In the first place, there is no indication whatsoever of the specific contents of the just and democratic society that Ms.He envisions, nor of how such a society might be realized. I would like to see policy proposals that maintain a balance between fairness and efficiency that would indicate what sort of strategy China should embrace to avoid the pitfalls of modernization.

While optimistic views regarding the future of the Chinese economy seem to dominate the tone of the mass media, this book has become a bestseller, following in the footsteps of "The Coming Collapse of China" by Gordon Chang, whose selling point is his pessimistic view regarding China. What does this mean? I am sure that there are many readers who want to gain an understanding of "the reality of China"without being influenced by the media, but I also believe that there are a great many who seek a sense of relief that Japan will not have to try too hard to get its own house in order if China stumbles. Neverthless, this sort of thinking will not lead Japan to extract itself from the pitfall of long-term stagnation.'

He Qinglian, The Pitfalls of Modernization   Soshisha, 2002
The author, He Qinglian, was born in Hunan Province in 1956. She studied history at Hunan Normal University and earned a master's degree in economics at Fudan University in Shanghai. After teaching at the Hunan College of Finance and Economics and working in the publicity department of the municipal Communist Party Committee of Shenzhen, she became a writer and editor of the Shenzhen Legal Daily. She moved to the United States in 2001 and currently lives in New York, where she continues her activities.

January 10, 2003

January 10, 2003