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Capitalism Edges a Toe Into China

Jiang's initiative could have history-shaking consequences

September 19, 1997

China's long march toward economic change has taken a huge leap forward with the Communist Party's historic decision to end state ownership of industries. President Jiang Zemin's initiative, unveiled at the 15th party congress, which ended in Beijing this week, will move China into freer markets and private ownership. But, of course, firmly under the rule of the Communist Party.

Political change is not likely in the short term, but the plan to sell small and medium-size state industries to shareholder groups or private owners marks a revolutionary shift in Beijing's socialist-style economy. This abandonment of a central tenet of communism could eventually lead to some democratization of China. Its leadership presumably is closely tracking the experience of other Asian nations where prosperity and growing middle classes have sparked political change, ending or modifying authoritarian rule.

In unveiling China's economic changes at the party congress, Jiang, who also is general secretary of the party, was careful not to use the word "privatization," perhaps in deference to party elders who opposed the elimination of state ownership, a historic principle of socialism. Nevertheless, Jiang is steering China toward a system with capitalist proclivities masked by socialistic euphemisms.

He portrayed a business-minded China that can accept individual wealth and diverse private ownership (individual investment in a state-owned business is called "public ownership"). Jiang encouraged mergers, standardized bankruptcy procedures and even the heresy of layoffs for greater efficiency, "so as to form a competitive mechanism selecting the superior and eliminating the inferior."

In short, the market will rule. It is the latest twist on the late Deng Xiaoping's "socialism with Chinese characteristics."

The 15th party congress ended Thursday with Jiang managing to sideline his main political rivals and securing a younger, better-educated Central Committee. His plan to sell off the money-losing state enterprises received praise from an International Monetary Fund meeting in Hong Kong. The shift is not likely to be easy for the Chinese people, so long buoyed by socialism. But it is a step that China has little choice but to make.

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