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    Greater China
     Nov 25, '13

Bullish on China
By Joseph R DeTrani

The Third Plenum of the 18th Central Committee of the Chinese Communist Party was a great success for President Xi Jinping. The Plenum relaxed the one-child policy, abolished re-education camps, committed the Party to the ongoing anti-corruption campaign and established a leading small group, under Xi Jinping’s direction, to provide oversight on economic reforms and other related domestic and international issues .

Most significant was the 60-point economic reform package that, among others, promised a decisive role for the market and the forces of supply and demand to determine the price of oil, gas, water, electricity and telecommunications. The reform package will liberalize and permit the market to determine interest rates, and thus force all financial institutions in China, including state-owned banks, to compete for deposits and make loans based on

risk assessments, not relationships.

The package permits the private sector, both domestic and foreign, to compete with state-owned enterprises. That is a long overdue necessity if China wants to insure a healthy rate of economic growth. Indeed, the reforms permit farmers to sell their non-agricultural land directly on the market, a decision that will be embraced by many in China who have witnessed local governments arbitrarily seizing property and the resulting thousands of public demonstrations against such acts. The reforms also relax the controversial household registration (Hukou) system and commit the central government to managing most of the country’s pension systems, health care, education and social security programs. These all are very positive decisions taken by the Plenum, which ended on November 12.

The breath of these economic decisions is potentially historic. It is of similar magnitude to the Third Plenum in 1978, which instituted Deng Xiaoping's economic reforms to put China on the path to becoming the world’s second-biggest economy. It is potentially similar to Premier Zhu Rongji’s Third Plenum in 1993, where market reforms were installed that modernized China’s economy and paved the way for membership of the World Trade Organization.

Economic reforms proposed at Xi Jinping, if implemented smartly, will insure continued vibrant economic growth for China. The focus on the market place for allocating resources and on the economic imperative for healthy consumer spending with a strong pro-business bias are necessary economic decisions that the Chinese people and the international community were hoping for.

Those who were hoping for political reforms to complement economic reforms were disappointed and will have to wait. The recent record in China, starting with Deng Xiaoping, was that political reforms were not a critical component for economic growth. To date, that has proven to be correct. However, can this impressive economic growth continue without any movement on political reforms? In many countries, it’s the “rule of law” that insures a level playing field for private businesses trying to compete with state-owned entities. It’s the “rule of law” that permits citizens to live in an environment that respects privacy, ownership and habeas corpus. China will know in the next few years if these economic reforms can succeed without movement on political reforms.

What is stark, however, is the comparison of these developments in China - and, indeed, in the whole of East Asia - to what is happening in other parts of the world. We are witnessing conflict and tensions that could result in state failures in the Middle East, South Asia, Sub-Saharan Africa, Central America and the Caribbean. We saw this with the Arab Spring and developments in Egypt and Syria and Libya. A number of these states are affected by poor governance, domestic and regional strife, terrorist organizations, organized crime and narcotics trafficking, with the potential for nuclear and biological terrorism if non-state actors have access to nuclear and biological weapons and materials.

The recent agreement with Iran on its nuclear program is a pause, to determine if a country that acquired 19,000 centrifuges to enrich uranium at levels beyond the 3-5% purity level, and is constructing a heavy water plutonium reactor that has one purpose – nuclear weapons – is serious about not seeking nuclear weapons. A break-out from Iran on its nuclear program will engender even more tension in the Middle East, with the potential for a significant nuclear arms race.

Given these developments and recognizing China’s impressive economic growth and recent decisions that engender confidence in continued economic growth, in conjunction with a dynamic Southeast Asia, it’s easy to conclude that more focus is needed on East Asia and the Pacific region.

Issues like the Senkaku Island dispute between China and Japan and difficult relations between South Korea and Japan need to be put into context so they do not distract from their impressive economic and political advances in East Asia. The focus should turn to on cooperation and economic growth and unanimity in dealing with a bellicose North Korea. It’s a region that the US correctly decided to give more attention to with its rebalance to East Asia.

Joseph R DeTrani was the Special Envoy for Six Party Talks with North Korea from 2003-2006 and the ODNI North Korea Mission Manager from 2006-2010. Until January 2012, he was the Director of the National Conterproliferation Center. He is currently the president of the Intelligence and National Security Alliance, a nonprofit. The views and opinions expressed in this article are those of he author and are not representative of any UN Government department, agency or office.

(Copyright 2013 Joseph R DeTrani)




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