A Superpower in the Making

China is rapidly attaining the status of a great power, but the uncertainties it faces are profound. What follows the death of Deng Xiaoping? Will the Hong Kong integration go well? Will Beijing and Taipei continue to move from crisis to crisis? What about energy shortages, environmental problems, corruption, et al?

We have learned humility from the collapse of the Soviet Union. Every China expert now begins with a caveat: None of us really knows what will happen after Deng goes (assuming he hasn't already). The sensible approach is to develop several scenarios and examine their implications.

Scenario No.1: China completes the transition to a market-based economy. Within the coming decade, it overtakes Japan as Asia's largest economy. Economic reformers maintain control, and Hong Kong is successfully incorporated into the People's Republic of China. Closer economic and cultural ties are developed with Taiwan.

As with Korea and Taiwan, prosperity leads to political reform and considerable economic freedom. The rise of a middle class and of private enterprise disperses power in the society. As a result, pressures arise for greater personal freedom. A modern legal system is gradually constructed, which helps attract Western investment. Infrastructure shortcomings and energy shortages worsen as the economy expands and environmental pollution accelerates. Dealing with all these issues will be a tall order. If China can succeed, it will give the United States a run for its money in the middle of the 21st century.

Scenario No. 2: China reverts to communism. Hard-liners take control after Deng. They quickly limit or reverse economic reforms. The privileges of the special economic zones are restricted, as are the special benefits to foreign investment. The vibrant economy of Hong Kong is squeezed. The power of the military increases, given the desire to maintain order. A stronger military engages in more saber-rattling in the South China Sea and makes serious threats to Taiwan.

China's economy nose-dives. Much foreign investment moves to Southeast Asia and Australia. India pushes to replace China as Asia's leading growth area. That huge nation boasts widespread use of English and a modern legal system. India, however, is also hobbled by a cumbersome bureaucracy, which inhibits investment and entrepreneurship.

Scenario No. 3: The onset of instability and fragmentation. What we can call the "outer empire" (which excludes the Han or ethnic Chinese) separates and fragments. Candidates for splitting off include the Muslim areas of Mongolia and Xinjiang (the latter containing vital oil reserves), Tibet, and Manchuria.

More likely than any one of these three is some combination of them. The result could be a shifting mix of economic openness, socialist ideology, and local independence.

In any eventuality, Americans should learn to accept China becoming a great power with all sorts of foibles and shortcomings. Many complementarities are possible between our two countries. China possesses a large labor supply and potential markets, while the US has technology, marketing capability, and organizational know-how. Several American businesses' successes are quite stunning. For instance, Procter & Gamble is China's largest daily-use consumer-products company.

Not all is sweetness and light in the relationship between China and the US. Americans doing business there report serious negatives, such as corruption. Even experienced Hong Kong investors got burned in 1989 when they opened a restaurant for tourists near Tiananmen Square, just a week before the shooting. No amount of due diligence would have prevented that fiasco.

*Murray Weidenbaum is chairman of the Center for the Study of American Business at Washington University in St. Louis.

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