Billion-Person Boom Town

THE BALTIMORE SUN

China is working tonight. And shopping tonight.

On Nanjing Road, Shanghai's main commercial street, the glass-fronted, chrome-trimmed stores are open past 9 o'clock, past 10 o'clock. The neon-bathed streets pulse with life, like Manhattan's Midtown, Tokyo's Ginza, Hong Kong's Golden Mile, Berlin's Kurfuerstendamm. Like Shanghai itself before World War when it was dominated by foreign capital and was variously known as the Paris of the East, the Whore of China, the Pearl of the Orient. But Shanghai has been in eclipse; only a few years ago it was a stronghold of Red Guard puritanism.

A rush of deliciously cool air envelops the stroller passing the open doors of the Nanyang Center, luring him to the feast inside: Jeans West, Benetton, Ralph Lauren -- all major credit cards accepted.

A few doors down the street is a floodlit construction site. The second shift is digging dirt, chipping construction blocks, hauling gravel. Some of the workers are on break, sucking up noodles. In a couple of hours the third shift will check in. These days China works round the clock.

Suddenly, China's is the world's most dynamic economy. Imagine a boom town -- say a gold-rush city or a sleepy hamlet that happens to sit where the government has decided to build an airport or a freeway. Suddenly there's money to burn, jobs for everyone. Everybody's working overtime, everybody's flush, seeking a short cut to the good life. Prices explode.

Now imagine these boom times on a scale of 1.1 billion people, one-fifth of humanity. China's growth rate last year was about 13 percent. This year it was rising, and the government decided to throttle back the economy before inflation (near 20 percent in the cities) eats up all the gains.

But in China, even austerity feeds growth. The manufactured credit crunch means high interest rates, which have lured more money into banks. So this year the government has cash on hand to pay farmers, who in past years sometimes had to make do with IOUs. Now the farmers can join the spending binge.

Of course, it's easier to grow if you start out small. Economists disagree on just how much economic potential China has. By traditional measures, China's economy is anemic for such a huge country; the value of all its goods and services is less than what Spain produces with one-thirtieth of China's population. China could keep growing at 13 percent for the rest of the century without overtaking Italy.

A revisionist accounting came out earlier this year. Re-weighting the statistics to reflect purchasing power in the local economy, the International Monetary Fund concluded that China already has the world's third-largest economy, trailing only the United States and Japan.

China is clearly a country in transition. The ancient Greeks said you could never step in the same river twice, because the river was never the same; the water you stepped in flows away and a new river replaces it.

China is like that. In Shanghai, whole square blocks of graceful, French-accented buildings from colonial days are boarded up. Signboards portray the joint-venture hotels and office skyscrapers that will replace them.

In Beijing, resident Westerners say that in two years the place is hardly recognizable. Traffic is thicker, the skyline higher, the people better dressed and bolder in conversation. The once omnipresent political slogans have been replaced by business come-ons touting China's openness to Western venture capital.

Other signs read, "A more open China awaits the 2000 Olympics." The tacit admission is that not long ago there was a "less open China," and human-rights groups (and the U.S. Congress) have charged that China is still not open enough.

The Beijing government obviously treated the award of the site for the millennial Olympic games (Beijing lost out to Sydney, Australia) as a potential acknowledgment of China's return to the world of nations after more than 40 years of self-isolation under communism.

For all its recent progress, China is still in many ways a Third World country. The country teems with construction work, almost all of it being done manually. In the Yangtze River town of Yueyang, men with shovels unload a gravel barge. Upriver, in Chongqing, platoons of squatting men shape building stone with hammers and chisels. All over China, men and women bearing burdens scamper through the streets, dodging bicycles, carrying their loads in paired baskets slung from bamboo shoulder poles.

But all this coolie labor is both a hallmark of a Third World country and a contrast. Elsewhere in the less-developed world idleness walks the streets; construction projects are begun and then abandoned; able-bodied men sit in the sun swapping stories; selling lottery tickets is considered employment. In Beijing, unemployed able-bodied men sit at curbsides with placards advertising their skills: laborer, mason, carpenter. They believe they have a reasonable prospect of getting a day's work, maybe more.

China has made phenomenal progress in relieving poverty. The World Bank estimates that 33 percent of Chinese lived in absolute poverty in 1970; by 1990, only 10 percent did. That represents 175 million Chinese lifted out of poverty -- at the same time population growth added 300 million people above the poverty line.

Throughout East Asia, the same trend occurs. Countries with widely different political and economic systems all show population growth that has been more than offset by declining poverty -- Indonesia: 60 percent poverty in 1970, 15 percent in rTC 1990; Malaysia: 18 percent in 1970, 2 percent in 1990; South Korea, from 23 percent to 5 percent; Thailand from 26 percent to 16 percent; the Philippines, from 35 percent to 21 percent.

The busy-ness and optimism of China differentiate it from many Third World countries and also from other post-Communist countries -- notably Russia.

Some Russians, of course, are busy -- you see them in Beijing, buying silks to stuff into suitcases and take back to Moscow for resale. But many more Russians seem to be in suspended animation: "We don't know what will happen. . . . We can't plan. . . . We are waiting to see what the future brings," my Russian friends write to me.

Chinese don't know what the future will bring either, but they assume it will be better than the past. Almost all Chinese encountered in a three-week visit last month said as much, and one ventured the opinion that Deng Xiaoping, the country's 89-year-old leader "is thinking about his soul and about his future reputation" and has already begun to liberalize the country politically.

If so, the word hasn't yet reached the hinterland, where Han Dongfang, a dissident labor organizer, made headlines last month. Mr. Han had been jailed with a tubercular cellmate until he himself caught TB. Released for medical treatment in the United States, he tried to return to his homeland, only to be nabbed at the border and expelled to Hong Kong.

The event was a reminder that China is still a fin-de-regime Communist country. The treatment of dissidents and the political charades surrounding the leadership are reminiscent of the last pre-Gorbachev years in the late Soviet Union.

Last month, most Chinese newspapers suddenly printed a photo of the Chinese premier, Li Peng, at the seaside in bathing trunks. Mr. Li had been an unperson for six months, out of public view, rumored to be either ill or in political quicksand. The photo showed not only that he could stand up and smile, but that he had no surgery scars, and -- most significant -- that he retained enough clout to get himself into the government-controlled newspapers. Then, two days later, he conspicuously was not among those listed as attending an important meeting.

Kremlinology was the semi-science by which Western scholars tried to guess who was up and who down in the Soviet hierarchy. It mattered because government policy could be anticipated depending on whether hard- or soft-liners seemed to be ascendant.

Well, Mr. Li is a hard-liner, one of the villains behind the Tiananmen Square massacre of four years ago. The events of August suggest either that he is gaining or losing ground, or perhaps that his thrust was parried. With the 89-year-old Deng Xiaoping also in seclusion, the most visible Chinese leader is Mr. Li's deputy, Zhu Rongji, who seems to be a vigorous economic manager with little record on human rights.

The interesting question is whether Kremlinology matters any more in go-go China. The leadership wages its intrigues and issues its pronouncements and, now and then, persecutes a dissident or two -- but is the rest of the country listening?

China's boom has fed on regionalism and foreign capital. Provinces, cities and even villages act more and more independently of Beijing's central control. Mr. Deng himself turned them loose when China's economic liberalization began in 1979. "Black cat or white cat," he said, "it's a good cat if it catches mice." Only 10 years ago, Guangdong province, the huge coastal area that includes Guangzhou (Canton), got 80 percent of its budget from Beijing; now it receives only 2 percent.

The difference is made up by enterprises financed and run by provincial and local governments, by taxing and licensing local entrepreneurs -- and by foreign investment, which in China reached a phenomenal $58 billion last year, mostly from overseas Chinese. By contrast, Russia received only $200 million in direct foreign investment (exclusive of loans and debt write-offs) last year.

In Hong Kong the same week that the dissident got bounced, the American giant Citibank announced that it was moving its China headquarters from Hong Kong to Shanghai. Analysts suggested that a steady stream of Western institutions will follow.

They are betting China's action is on the ground, in the shops and construction sites, no longer with an increasingly irrelevant central government. Beijing is far away, and Deng Xiaoping is old. Provided nobody rocks any political boats, there is money to be made.

Hal Piper is editor of The Sun's Opinion * Commentary page.

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