The Last Mile: China off the record

Jan. 6, 2006
Dramatic changes in the skylines of Shenzhen, Shanghai and Beijing in a short period of time imply rapid and rampant developments in China's economic

Dramatic changes in the skylines of Shenzhen, Shanghai and Beijing in a short period of time imply rapid — and rampant — developments in China's economic centers, but that's only the most obvious part of the story. Fundamental economic, social and cultural changes will come at a much slower pace outside these industrial regions.

Coincidence had it that former Chinese leader Deng Xiaoping and I were both in the Shenzhen Special Economic Zone on the same day in 1992 to check on the progress of China's experiment in economic reform. Shenzhen was small enough then that I sat in traffic waiting for Deng's motorcade to pass. On my most recent visit last fall, it would have been possible to overlook a dozen motorcades in this metropolitan area of 8 million people. Its skyline is nearly as impressive as neighboring Hong Kong's. Deng's economic experiment was clearly working in the Pearl River Delta.

Deng launched an industrial revolution by allowing reforms to develop outside official channels and adopting those that proved successful. He was attempting to overcome the legacy of Mao Tse-tung and the Cultural Revolution which had turned China into an economic recluse made up of largely selfsufficient agrarian communities. Many Western businesses in China have discovered this piece of Chinese history in the form of mandated local sourcing.

While the former Soviet Union's transformation abolished central planning, China retained central control but they allow more regional execution. This is clear in a master plan for infrastructure development. If proposed regional infrastructure developments — such as much-needed highway construction or port upgrades — fit the master plan, they get support and funding from the central government. Thus, some projects move very rapidly, while others crawl.

The Cultural Revolution stopped or stalled some higher education. The resulting skill shortage is very apparent and will take time to reverse.

With the Pearl River Delta and Yangtze River Delta developing at hyperspeed, some of the old state-run factories (and their workers) are being left behind. Their ability to catch up will be a critical factor in China's transition. Some observers fear social upheaval could result if the mostly middle-aged workers in this group don't share in the economic rise of China.

Despite a concerted effort of the government to push development beyond the coastal industrial centers, other regions lag behind Beijing, the Pearl River Delta and the Yangtze River Delta.

Deng's view that socialism doesn't mean shared poverty set the goal for China's transition. The path he chose was to build infrastructure rather than tear down old institutions — there was no symbolic Berlin Wall to demolish to signal the sudden abandonment of the old ways. He didn't dissolve the central government.

For some, China's measured pace is no less painful than the sudden transition was for Eastern Europe.

The reassurance Deng must have gotten during his tour in 1992 helped to accelerate China's emergence as a world economy, but it will require patience. Today, China is a low-cost source; tomorrow it could be the world's largest consuming market. As Deng's reforms gathered momentum, they have carried not only China's economy but the world economy with them. That's why some cast a very cautious eye to progress in China.

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