COUNTRY PROFILE China Mongolia

Transcription

1 COUNTRY PROFILE China Mongolia This Country Profile is a reference tool, which provides analysis of historical political, infrastructural and economic trends. It is revised and updated annually. The EIU s quarterly Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom

2 The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. London The Economist Intelligence Unit 15 Regent St London SW1Y 4LR United Kingdom Tel: (44.20) Fax: (44.20) london@eiu.com New York The Economist Intelligence Unit The Economist Building 111 West 57th Street New York NY 10019, US Tel: (1.212) Fax: (1.212) /2 newyork@eiu.com Hong Kong The Economist Intelligence Unit 25/F, Dah Sing Financial Centre 108 Gloucester Road Wanchai Hong Kong Tel: (852) Fax: (852) hongkong@eiu.com Website: Electronic delivery EIU Electronic New York: Lou Celi or Lisa Hennessey Tel: (1.212) Fax: (1.212) London: Jeremy Eagle Tel: (44.20) Fax: (44.20) This publication is available on the following electronic and other media: Online databases FT Profile (UK) Tel: (44.20) DIALOG (US) Tel: (1.415) LEXIS-NEXIS (US) Tel: (1.800) M.A.I.D/Profound (UK) Tel: (44.20) NewsEdge Corporation (US) Tel: (1.718) CD-ROM The Dialog Corporation (US) SilverPlatter (US) Microfilm World Microfilms Publications (UK) Tel: (44.20) University Microfilms Inc (US) Tel: (1.800) Copyright 1999 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN X Symbols for tables n/a means not available; means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK

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4 Comparative economic indicators, 1998 EIU Country Profile The Economist Intelligence Unit Limited 1999

5 1 November 16th 1999 Contents China 4 Basic data 5 Political background 5 Historical background 11 Constitution and institutions 13 Political forces 18 International relations and defence 22 Resources and infrastructure 22 Population 23 Education 24 Health 24 Natural resources and the environment 26 Transport and communications 27 Energy provision 28 The economy 28 Economic structure 30 Economic policy 38 Economic performance 40 Regional trends 42 Economic sectors 42 Agriculture and forestry 44 Mining and semi-processing 45 Manufacturing 47 Construction 47 Financial services 49 The external sector 49 Trade in goods 52 Invisibles and the current account 53 Capital flows and foreign debt 54 Foreign reserves and the exchange rate 56 Appendices 56 Sources of information 57 Reference tables 57 Population 57 Labour force 58 Transport statistics 58 National energy statistics 58 Government finances The Economist Intelligence Unit Limited 1999 EIU Country Profile

6 2 59 Investment in assets by source and purpose 59 Money supply and credit 59 Gross domestic product and gross national product 60 Gross domestic product by expenditure 60 Gross domestic product by sector 61 Price indices 61 Agricultural production 62 Gross agricultural output value, by sector 62 Total sown area, by crop 62 Miscellaneous agricultural statistics 63 Industrial production 63 Banking statistics: sources and uses of credit funds by state banks 64 Exports 64 Imports 65 Balance of payments, IMF estimates 66 External debt 66 Official development assistance 67 Position of China vis-à-vis BIS-reporting banks 67 Foreign reserves 67 Exchange rates Mongolia 68 Basic data 69 Political background 69 Historical background 71 Constitution and institutions 71 Political forces 72 International relations and defence 72 Resources and infrastructure 72 Population 73 Education and health 73 Natural resources and the environment 74 Transport and communications 74 Energy provision 75 The economy 75 Economic structure 75 Economic policy 77 Economic performance 78 Economic sectors 78 Agriculture and forestry 78 Mining and semi-processing 79 Manufacturing 79 Construction EIU Country Profile The Economist Intelligence Unit Limited 1999

7 3 79 Financial services 79 Other services 80 The external sector 80 Trade in goods 81 Invisibles and the current account 82 Capital flows and foreign debt 82 Foreign reserves and the exchange rate 83 Appendices 83 Sources of information 83 Reference tables 83 Population 84 Labour force 84 Government finances 84 Government revenue 85 Government expenditure 85 Money supply and credit 85 Gross domestic product 86 Gross domestic product by expenditure 86 Gross domestic product by sector 86 Consumer prices 87 Crop production 87 Livestock numbers 87 Meat production 87 Mineral production 88 Output of selected industrial products 88 Main trading partners 89 Balance of payments, IMF estimates 90 External debt 90 Net official development assistance 91 Foreign reserves 91 Exchange rates The Economist Intelligence Unit Limited 1999 EIU Country Profile

8 4 China China Basic data Land area Population Main towns 9,561,000 sq km 1.25bn (end-1998) Population (m), end-1997 Chongqing a 30.6 Tianjin a 9.0 Shanghai a 14.6 Shijiazhuang 8.6 Beijing (Peking, capital a ) 12.5 Wuhan 7.2 Chengdu 9.9 Qingdao 6.9 Harbin 9.1 Guangzhou (Canton) 6.7 a Includes the surrounding counties. Climate Weather in Shanghai (altitude 7 metres) Language Weights and measures Continental, with extremes of temperature; subtropical in the south-east Hottest months, July and August, C (average daily minimum and maximum); coldest month, January, 1-8 C; driest month, December, 36 mm average rainfall; wettest month, June, 180 mm average rainfall Mainly Putonghua, based on northern Chinese (the Beijing dialect known as Mandarin); local dialects and languages also used The metric system is used alongside certain standard Chinese weights and measures, of which the most common are: 1 catty or jin=0.5 kg 2,000 catties=1 tonne (approx) 1 picul or dan=50 kg 20 piculs=1 tonne 1 mu= hectare 15 mu=1 shang=1 hectare Currency Fiscal year Time Public holidays, yuan/renminbi (y/rmb)=10 jiao=100 fen. Average exchange rate in 1998: Rmb8.28:$1. Exchange rate on September 2nd 1999: Rmb8.28:$1 January-December Zone I (Urumqi) six hours ahead of GMT; zones II, III and IV (Chongqing, Lanzhou, Beijing, Shanghai, Harbin) eight hours ahead of GMT; nine hours ahead of GMT during Beijing summer time, mid-april to mid-october January 1st (New Year s Day), February 4th-7th (Chinese New Year), May 1st (Labour Day), October 1st-2nd (National Days)

9 China 5 Political background China has been ruled by the Chinese Communist Party (CCP) since The highest formal organ of power is the Politburo Standing Committee of seven members, currently headed by the general secretary of the CCP, Jiang Zemin. Jiang is also state president, and chairman of the Central Military Commission (CMC). Other important institutions are the State Council, led by the premier, Zhu Rongji, and the National People s Congress (NPC), a largely rubber-stamp parliament. Since March 1998 the NPC has been chaired by Li Peng. Although restrictions on intellectual freedom have been eased since the late 1970s, the current leadership will not tolerate any opposition to the CCP s political monopoly. Historical background Five millennia of history The communists rise to power Some of the defining features of Chinese civilisation, such as its unique writing system, have endured since the country was first unified by the fearsome founder of the Qin dynasty, the first recorded emperor of the whole country, Qin Shi Huang Di, in 221 BC. Traditional Chinese historians interpreted subsequent history as following a dynastic cycle. Over a period, sometimes lasting several hundred years, a dynasty would expand, flourish, decline and finally lose power, in an insurrection sparked by a discontented peasantry, or in a foreign invasion. Long periods of unity were interrupted several times by long periods of disunity. The last imperial dynasty, the Qing, was foreign, composed of a Manchu nobility from the north-east, whose language and culture differed from that of the majority Han Chinese population. But like the Mongol Yuan dynasty ( ) before them, the Qing became assimilated; the heyday of the Qing was in the 18th century. In the 19th century the Chinese political and economic system, which was by then moribund, was further weakened by long and debilitating internal revolts and by the depredations of foreign powers seeking to carve out spheres of interest in China. The imperial system finally collapsed in The republic established in 1911 proved unable to preserve China's territorial integrity. Centrifugal pressures emerged, and by the early 1920s the country had disintegrated into a patchwork of warring fiefdoms. The national government was led by the Nationalist Party (the Kuomintang, or KMT), a bourgeois party founded by Sun Yat-sen and then led by Chiang Kai-shek, which was reorganised in 1924 along Leninist lines. A united front, formed in 1924 with the infant CCP, ended in 1927 when the KMT turned against the CCP. This prompted the CCP, after a few failed attempts at urban insurrection, to become predominantly a rural, peasant-based party. It survived several encirclement attempts by the KMT in its remote rural strongholds in southern China, and in trekked across vast distances to a new base in Yan an, in Shaanxi province in the north-west the famous Long March. It was during this arduous and dangerous journey that Mao Zedong established his position as the supreme leader of the CCP, a position he retained until his death in 1976.

10 6 China A second, uneasy united front, imposed on Chiang by mutinous officers in December 1936, was formed when the CCP and the KMT combined to resist Japanese aggression. (Japan annexed Manchuria in 1931 and mounted a fullscale invasion of China proper in 1937.) The Japanese surrender in 1945, however, was followed by the eruption of full-scale civil war in China between the CCP and KMT. The KMT was divided and corrupt and its troops illdisciplined, and its support base was quickly eroded by rampant inflation and corruption. Thus, the US-backed KMT forces were routed with unexpected ease by armies of the not so well-equipped but better-disciplined CCP. In 1949 the KMT established a government-in-exile in the unliberated island province of Taiwan, and on October 1st Mao proclaimed the founding of the People s Republic of China (PRC), with Beijing as its capital. Mao and internal party struggles, The 1980s: economic but not political change Until his death in 1976 and for some time afterwards Mao, who sought to gather absolute power into his own hands, dominated politics in China. Mao s towering personality also weakened the institutional basis of the party-state, because it precluded the establishment of a secure succession mechanism or consensus-building system. During the so-called Great Proletarian Cultural Revolution, which was launched in 1966, Mao, seeing his own influence eroded after the disastrous Great Leap Forward of 1958 and the consequent famine in , turned to the masses to overthrow his rivals in the party hierarchy, with the ideological pretext of pursuing his own millennarian brand of egalitarian socialism against the forces of pragmatism and revisionism. The chaos of the early years of the Cultural Revolution left the army as the only viable political institution and Mao turned to the military to restore order in After the death in 1976 of both Mao and his widely respected lieutenant, the premier, Zhou Enlai, senior military figures moved quickly to arrest the most prominent of Mao s leftist colleagues, including his wife, Jiang Qing, and the other members of the so-called Gang of Four. Mao s designated successor, Hua Guofeng, presided over a period of normalisation, which was marked by the return to power of Deng Xiaoping, the most senior of the purged pragmatists to survive the Cultural Revolution. In December 1978, at a watershed meeting of the party s 11th Central Committee, Deng and his supporters achieved predominance over Hua and other leftists. In 1980 the Cultural Revolution was reassessed as a national disaster and Mao himself was deemed to have been only 70% good. Apart from the chairmanship of the CMC, Deng never took the most senior official positions for himself. He sought to ensure the continuity of the reforms that he instituted by ruling through a succession of younger men who shared his belief in the priority of economic advance over political purity. But, as a result of China s tradition of rule of man rather than rule of law, combined with the damage done during the later Mao years to the institutions of party and state, Deng s personal imprimatur was necessary to maintain the pace of reform and secure the all-important acquiescence of the army. Tensions between reformers, like Deng, and conservatives worried about the dilution of socialist orthodoxy brought about by greater economic liberalism were a persistent feature of Chinese politics in the 1980s and 1990s. Thus,

11 China 7 Deng s personal intervention was at times necessary to push forward the reform process. One reason for Deng s prestige, especially with the army, is that he was never seen as anything other than orthodox politically. This was illustrated by the harsh crackdown on dissidence after the democracy wall movement of late 1978 and early 1979 had outlived its usefulness. Deng was committed to the maintenance of order, which to the Chinese leadership is synonymous with the continued monopoly on power of the CCP. The Beijing massacre The 1990s: Marx and the market The collective leadership: Jiang Zemin s technocracy Market-oriented reforms, growth in the personal incomes of millions of citydwellers and a rapid expansion of foreign trade and links with developed countries inevitably brought a desire for political change, as well as for greater cultural openness. These demands were voiced by intellectuals, students and, most worrying for the party, urban workers. Such demands were perceived by China s leaders as challenging the authority of the CCP and so as tantamount to sedition. Deng s first two chosen party leaders were ditched for having leant too far in the direction of political reform. The first, Hu Yaobang, was ousted following student demonstrations in The second, Zhao Ziyang, was sacked in 1989, after large-scale street protests (triggered by the death of Hu) were ended only by the massacre of unarmed civilians in the approaches to Tiananmen Square in Beijing on the night of June 3rd-4th As party leaders, both had to take the blame for the failure of communist indoctrination. The 1989 massacre was followed by widespread condemnation from the West and a period of political repression in China and an obsession with the need for stability. However, the collapse of communism in the Soviet Union and in eastern Europe led to a rethink. The main threat to the CCP s rule, it was argued, did not lie in pressure for political change but in failure to achieve healthy and rapid economic growth. In 1992 Deng, then aged 88 and in theory fully retired, re-emerged in a famous tour of the rapidly growing areas of the south to launch a new campaign his last for faster and bolder economic reform. As in the mid-1980s, the emphasis of political rhetoric was no longer on the importance of Marxist orthodoxy but on the need to achieve growth by whatever means were most appropriate, albeit with the caveat that CCP rule would be preserved. Deng s last appointed heir was Mr Jiang, a former mayor of Shanghai. By the time Deng died in February 1997, Mr Jiang, who was first elevated following the fall of Mr Zhao, had used his period as heir apparent to consolidate his position among important constituencies. He moved gradually to combine the important roles of party leader, state president and chairman of the CMC. Jiang now heads a collective leadership, the contours of which were clarified at two important meetings in late 1997 and early At the first, the 15th congress of the CCP, a new Politburo and Politburo Standing Committee (PSC) were elected. At the annual meeting of the NPC in March 1998 delegates chose a new government. Jiang s immediate subordinates are the former premier, Li Peng, who is now the chairman of the NPC and of its standing committee, and Mr Zhu, who succeeded Mr Li as premier at the meeting of the NPC in March 1998.

12 8 China The Politburo Standing Committee Jiang Zemin Hu Jintao Li Peng Wei Jianxing Zhu Rongji Li Lanqing Li Ruihuan Other Politburo members a Ding Guan gen, head of propaganda Tian Jiyun, vice-chair of the National People s Congress (NPC) Li Changchun, party secretary of Henan Li Tieying, minister of Commission for Restructuring the Economy Wu Bangguo, vice-premier, responsible for state-owned enterprises (SOEs) Wu Guanzheng, party secretary of Shandong Chi Haotian, vice-chair of Central Military Commission (CMC) and minister of defence Zhang Wannian, vice-chair of CMC Luo Gan, state councillor Jiang Chunyun, deputy chairman of NPC Jia Qinglin, party secretary of Beijing Qian Qichen, vice-premier, foreign minister Huang Ju, party secretary of Shanghai Wen Jiabao, secretary-general of Central Finance and Economic Leading Group Xie Fei, party secretary of Guangdong a Listed by stroke order/number of surnames. At the 15th congress the two vacancies created by the retirement of Qiao Shi and Admiral Liu Huaqing on the most important committee in the country, the PSC, were filled by two relatively young newcomers to the top echelon: Wei Jianxing (born 1931), and Li Lanqing (born 1932). Mr Wei, regarded as close to Mr Qiao, has headed the important Central Commission for Discipline Inspection since 1992 and took over as temporary party secretary of Beijing in 1995, replacing the disgraced Chen Xitong. Mr Li, a vice-premier with experience in international affairs and education, took the seventh place on the PSC. He is regarded as a reformist but lacks a broad power base. Also on the PSC are Li Ruihuan, the chairman of the Chinese People s Political Consultative Conference (CPPCC, a pseudo-democratic advisory body which incorporates the few non-communist political organisations allowed), and the slightly younger Hu Jintao, a former governor of Tibet and now president of the central party school, who specialises in doctrinal matters. Mr Hu, who became state vice-president at the March NPC, is viewed as a possible successor to Mr Jiang. Over the last few years Jiang has managed to have his protégés and associates promoted to senior positions in the People s Armed Police (PAP) and the military. At the 1995 meeting of the NPC he was able to secure the promotion

13 China 9 to the rank of vice-premier of Wu Bangguo (formerly party secretary of Shanghai) and Jiang Chunyun (formerly party secretary of Shandong), and placed them in charge of overseeing industry and agriculture respectively. There was some opposition, especially to the latter s promotion, and there have been mutterings about Jiang Zemin s Shanghai clique. A collective leadership It has frequently been remarked that Mr Jiang s leadership is necessarily collective, because he lacks the charisma and personal authority of the Long March generation of leaders. Because it is collective it is also consensus-driven and therefore more dependent on compromise than was the case when Deng acted as the ultimate, behind-the-scenes arbiter. That said, a sound consensus appears to exist behind the current, cautious but steady approach of Mr Jiang, which is technocratic in style. Mr Jiang and his allies, notably the current and former premiers, Mr Zhu and Li Peng, appear to agree that the current socioeconomic system is in need of reform rather than fundamental change and that the political system can be made to function better by a vigorous attempt to purge corruption and by the introduction of a somewhat more open and responsive style by government at all levels. To the extent that a collective leadership involves building an institutional rather than a purely personal base for the exercise of authority, it must be seen as a further step forward in the institutionalisation of the CCP regime. A stress on the need to establish the rule of law, rather than government by personal fiat, is a key part of institution building. Even if the Chinese political system cannot survive the reform process in the long run, there are signs that it is maturing. Mr Jiang may be China s Brezhnev; China s Gorbachev has yet to emerge. The fault lines under the surface of the unified face presented by this collective leadership are usually hidden. But they do emerge from time to time. It is generally believed, for example, that the reformist Mr Zhu and the conservative Li Peng (widely abhorred for the part he played during the Tiananmen Square protests in June 1989) are at odds, and not only about the desired pace of economic change. Their enmity has taken concrete form in conflicting public statements about the vast Three Gorges Dam project on the Yangtze. After decades of procrastination, work on this project started in the mid-1990s, during Mr Li s second term as premier and mainly because of his support. As soon as Mr Zhu become premier and therefore the ex officio supremo in charge of the project, he began to make public remarks critical of the way in which the project had been supervised, drawing attention to corruption and incompetence. These remarks were taken to imply doubts about the value of the whole project. Mr Li, meanwhile, who is a trained hydraulic engineer and has sponsored several major dam projects, took pains to make public his continued support for the Three Gorges Dam. Fighting corruption and lawlessness Mr Jiang is determined to pursue efforts to preserve the legitimacy of the CCP, not only by pursuing economic growth, but also by rebuilding the party s credibility. A continuing campaign against corruption in the party and lawlessness in society, pursued since 1995, is central to this effort. Corruption is widely perceived to run wide and deep within the party, and the fact that only

14 10 China a few high-level officials (most notably, the above-mentioned former secretary of the Beijing municipal Communist Party committee, Chen Xitong) have been exposed as corrupt tends to confirm the cynicism with which much of the population regards the party and even the conduct of politics. Attempts are being made to reinvigorate the CCP and to strengthen its ideological basis by means of nationwide emulation campaigns which, in the Important recent events 1989: The massacre of anti-government protesters in Beijing takes place in June. Jiang Zemin replaces Zhao Ziyang as general-secretary of the Chinese Communist Party (CCP). In November Mr Jiang gains the powerful position of chairman of the Central Military Commission (CMC) following the retirement of Deng Xiaoping. 1992: Deng goes on his southern tour to launch a new campaign for reform. The 14th CCP national congress adopts a platform of socialist market economy. 1993: The National People s Congress (NPC) re-elects Li Peng as premier for five years in March; Mr Jiang becomes head of state as well as party leader. 1994: The US president, Bill Clinton, renews, unconditionally, China s most favoured nation (MFN) trading rights, ending the link between annual renewal and human rights issues. 1995: The president of the Philippines, Fidel Ramos, accuses China of stationing warships around the Spratly Islands in the South China Sea in February. Parts of this area are claimed by China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei. China is outraged at the US decision to allow the president of Taiwan, Lee Teng-hui, to make a private visit to Cornell University, from which he has a doctorate. Relations with the US and with Taiwan come under severe strain. The publication of a Proposal for Formulating the Ninth Five-Year Plan at the fifth plenary session of the 14th Central Committee signals a renewed commitment to gradual reform. 1996: China s truculence in the run-up to the first democratic elections in Taiwan in early 1996, which includes the holding of military exercises using live ammunition, causes widespread anxiety about China s intentions. Mr Jiang continues to strengthen his hold on power by intensifying a drive against corruption and crime and appointing his supporters to key positions in the military. South Africa announces its intention to switch recognition from Taiwan to China, effective from the beginning of : The death of Deng, aged 92, is announced. Mr Jiang steps smoothly into greater prominence, a role confirmed as the year progresses by his ability to promote his allies. In July China resumes the exercise of sovereignty over Hong Kong, which becomes a Special Administrative Region (SAR) of China. The 15th congress of the CCP further consolidates the leadership around Mr Jiang. The two men considered to be least loyal to Mr Jiang Qiao Shi and Liu Huaqing are disqualified from membership of the Central Committee (and hence from the Politburo Standing Committee, PSC) on grounds of age. Many of the new appointees are allies of Mr Jiang and the new Central Committee has a technocratic flavour in keeping with the Jiang- Li Peng axis. Mr Jiang makes the first visit to the US since 1985 by a Chinese head of state. The improvement in bilateral relations which the visit signals is consolidated by the release, on medical parole, of the dissident Wei Jingsheng, who flies to the US in November. 1998: The new premier, Zhu Rongji, is confirmed in his position at the NPC meeting in March. President Clinton goes to China in a reciprocal visit in June, and appears to give concessions over Taiwan. 1999: At the March meeting of the NPC, the state constitution is amended, following changes to the CCP s constitution in Deng Xiaoping Theory is added to the ideological buttresses that support CCP authority; the rule of law is reinforced; and the importance of the private sector is stressed and offered legal protection. The bombing of the Chinese embassy in Belgrade by NATO in May places further strain on an already difficult relationship with the US and further delays China s entry to the World Trade Organisation. In July Taiwan s president raises the stakes in the potentially flammable cross-straits relationship by announcing that bilateral relations should be conducted on a special state-tostate basis. China s furious reaction was, at least until late September, largely vocal. In November China and the US reach a market-opening agreement, removing a significant obstacle to China s accession to the WTO.

15 China 11 late 1990s after nearly twenty years of economic reform, have a curiously anachronistic ring. Jiang is also determined to rebuild the party from the grass roots and spends much time and energy pursuing this goal. The prominent role played by the military fighting the floods that affected China in mid-1998 allowed the regime to re-emphasise the links between party, people and army ties on which so much emphasis was placed during the Maoist era. The army In mid-1998 Jiang took his campaign to eradicate corruption a big step further by ordering the military to give up its business empire. During the reform era, the military developed thousands of businesses, ranging from cellulartelephone networks and aerospace companies to karaoke lounges and massage parlours. But Chinese entrepreneurs have long complained that the military uses its influence to eradicate competitors and circumvent the law, for example, through smuggling. If the call for renewed ideological purity rings hollow with most Chinese, there is no doubt that they are concerned about crime and corruption, especially when the privileged abuse their positions. Public executions and purges, especially of minor party functionaries, can be expected to continue and even to increase as the regime seeks ways to renew its mandate. Religious rights The realisation that the quasi-religious Falun Gong, a sect that practises qigong (a form of traditional Chinese exercise) and Buddhism, has many thousands of adherents all over the country and is well organised has alerted the authorities to a new potential danger. In July 1999 the sect was banned and a concerted attack launched on its US-based leader, Li Hongzhi. Constitution and institutions The constitution is subject to frequent changes Provinces, SEZs and autonomous regions The constitution is essentially descriptive rather than normative and has been subject to frequent revision. The latest version, which was promulgated in 1982 and amended in 1988, describes China as a people s socialist dictatorship led by the working class, and based on an alliance of workers, peasants and intellectuals. Despite much talk, and some limited action on political reform during the 1980s, the basic political structure remains that of an authoritarian one-party state. China is divided into 22 provinces, five autonomous regions and four municipalities. The provinces range from the most populous and crowded, Henan, with 94.3m people, to Qinghai, with just 5m. The most recent adjustment was in March 1997, when the 30m-strong administrative area of Chongqing, a city of 15m, and surrounding districts and counties were hived off from Sichuan, previously the most populous province. Previous changes included the separation of Hainan from Guangdong province in 1988 to become a separate province, as well as a special economic zone (SEZ). Four other SEZs had been established in 1980 on the southern seaboard. The SEZs enjoy considerable financial autonomy and offer a more liberal climate for foreign investors. The role of the SEZs was somewhat undercut by the opening in 1984 of 14 more coastal cities offering similar incentives for foreign

16 12 China investment. The situation for the SEZs worsened further in 1990 when cutthroat competition for foreign investment by localities all over China broke out, whether or not they had been designated for the task by Beijing. Most have now created their own development zones, replete with a range of investment incentives. The so-called autonomous regions have no more autonomy than provinces. The name, however, recognises the pre-revolutionary predominance of non- Han ethnic groups in Guangxi (Zhuang, an ethnic group in south-west China), Tibet, Xinjiang (Turkic, Uighur Muslims), Inner Mongolia (Mongols) and Ningxia (Chinese, Hui Muslims). The four municipalities of Beijing, Shanghai, Tianjin and Chongqing are provincial-level entities. Sub-provincial administration The legislature Below the provincial level, administration is further subdivided into prefectures, counties and townships, and, within cities, into districts. The people s communes established during the Great Leap Forward of 1958 as the country s basic administrative unit have been disbanded. In some places, however, the communes village-level subdivisions or production brigades still function within the new framework of the contract responsibility systems. Production brigades comprise several villages, and production teams of either part or all of a village. By the end of 1998 there were 104 rural prefectures, 227 prefecture-level cities, 437 county-level cities and 2,126 counties. There were 664 cities, including four municipalities with the status of provinces, and 737 districts, the urban administrative subdivision. In theory, the supreme organ of state power is the NPC. It is elected every five years, passes laws and treaties, nominates the executive and approves the constitution. It has roughly 3,000 members, indirectly elected from lower-level people s congresses. It meets in plenary session for two to three weeks each year, usually in March-April. Between sessions many of its powers are vested in a standing committee of around 200 members which drafts laws and handles NPC business when the parliament is not in session. In most Stalinist partystates, the legislature, like the rest of the state apparatus, is subordinate to the party. The NPC is no exception and has been a rubber-stamp body, approving decisions made by the CCP. However, during Mr Qiao s term from 1993 to 1997 as chairman of the NPC and its standing committee it showed more muscle. Delegates took to questioning the premier more closely when he delivered the annual address to the full session and on occasion voted against appointees of the top leadership. Although the casting of protest votes is likely to continue, the new NPC chairman, Li Peng, will ensure parliament remains under tight CCP control. Under Deng, a measure of direct electoral democracy was introduced at the lower-level people s congresses, at the township (or district) and county and village levels. There are triennial elections. In theory, any candidate can stand if nominated by ten voters, and there have to be between 30% and 50% more candidates than seats. In practice, however, all candidates are required to support the leading role of the CCP. There has been talk about extending direct elections to higher levels, but no action has been taken yet.

17 China 13 The State Council The highest organ of state administration is the State Council which is, in effect, the cabinet. Its composition is decided by the NPC, acting on party recommendations. It is headed by a premier, whose term is, in theory, concurrent with the five-year life of the NPC. The work of the State Council is presided over by an executive board, usually with about 15 members, composed of the premier, his deputies (there are currently four vice-premiers), state councillors and a secretary-general. Below the State Council come the various ministries and commissions, as well as a number of important stateowned industrial enterprises. The State Council Premier: Zhu Rongji Vice-premiers: Li Lanqing, Qian Qichen, Wu Bangguo, Wen Jiabao State councillors: Chi Haotian, Luo Gan, Wu Yi, Ismail Amat, Wang Zhongyu Secretary-general: Wang Zhongyu Ministry of Foreign Affairs: Tang Jiaxun Ministry of National Defence: Chi Haotian State Development Planning Commission: Zeng Peiyan State Economic and Trade Commission: Sheng Huaren Ministry of Education: Chen Zhili Ministry of Science and Technology: Zhu Lilan Commission of Science, Technology and Industry for National Defence: Liu Jibin State Ethnic Affairs Commission: Li Dezhu Ministry of Public Security: Jia Chunwang Ministry of State Security: Xu Yongye Ministry of Supervision: He Yong Ministry of Civil Affairs: Doje Cering Ministry of Justice: Gao Changli Ministry of Finance: Xiang Huaicheng Ministry of Personnel: Song Defu Ministry of Labour and Social Security: Zhang Zuoji Ministry of Land and Natural Resources: Zhou Yongkang Ministry of Construction: Yu Zhengsheng Ministry of Railways: Fu Zhihuan Ministry of Communications: Huang Zhendong Ministry of Information Industry: Wu Jichuan Ministry of Water Resources: Niu Maosheng Ministry of Agriculture: Chen Yaobang Ministry of Foreign Trade and Economic Co-operation: Shi Guangsheng Ministry of Culture: Sun Jiazheng Ministry of Public Health: Zhang Wenkang State Family Planning Commission: Zhang Weiqing People s Bank of China: Dai Xianglong National Audit Office: Li Jinhua Political forces The role of the Chinese Communist Party The Central Committee By 1997 the CCP had about 58m members and was the world s largest political party. Party membership is a benefit in material and professional life, and in some government bodies effectively a prerequisite of advancement. The CCP s structure parallels, and supervises, that of government and legislature. Its main decision-making body is a Central Committee consisting, as of 1997, of 151 full members and 191 alternates. The Central Committee is elected at a five-yearly party congress, normally in the months preceding the first session of a new NPC. The most recent party congress, the 15th, was held in September The next is not due until The Central Committee

18 14 China meets in plenary session about twice a year. In the interim most of its power is vested in a Politburo which currently has 22 members. The Standing Committee The 15th party congress Party and government are still intertwined The secretariats and commissions The People s Liberation Army Uniquely, the CCP adds a further tier of centralised leadership, the Politburo Standing Committee, of seven members, who are the most powerful people in the country. Usually, the Politburo will include some people of purely party standing and provincial- or municipal-level party secretaries. But it may also include the premier and his deputies, other important state councillors and representatives of the military. The 15th quinquennial congress of the CCP, the first since the death of Deng, was held in September As well as performing the task of electing the new Central Committee, the congress approved the policy line hammered out in meetings held in the run-up to the congress and presented in a key-note speech by Mr Jiang. The centrepiece of the congress was the decision to elevate Deng Xiaoping Theory to form part of the constitutional ideology of the CCP. This endows the leadership with the pragmatic ideology necessary to pursue reform, for example of the ownership of industrial assets. In the late 1980s there was much talk of the separation of functions of party and government. The party would concentrate on its proper role of providing ideological leadership, while day-to-day economic and administrative management would be in the hands of the government. This separation has not taken place, however, and at the national level it still seems irrelevant whether it is the State Council or the CCP which makes administrative decisions, since the top echelons of both bodies are staffed by almost the same people. The apparently clearcut line of pyramidal control within the CCP is complicated by its various secretariats and commissions. The central secretariat handles the day-to-day business of the party. The general secretary is the party leader, following the abolition in 1980 of the post of chairman, and has the power to convene Politburo meetings. The Central Commission for Discipline Inspection, with responsibility for the internal discipline of the party and hence managing a strong network of informers and spies as well as personnel files is a particularly powerful body. One of Deng s aims was to demilitarise politics. He did this by making use of his prestige as a legendary military commander in the revolutionary war and his status from 1973, and again from 1977 to 1980, as the chief-of-staff of the People s Liberation Army (PLA). Representation of the PLA in the top organs of state and party has steadily diminished. Until the 14th party congress in 1992 only one Politburo member, the then defence minister, Qin Jiwei, was a military man, although the president, Yang Shangkun, also a Politburo member, had strong links with the army. The PLA s share of the government budget similarly declined from about 6% of GNP in the late 1970s to less than 3% in the late 1980s. The army was reduced in size by about 25%, to 3m. However, following the bloody crackdown by the military on popular demonstrations in 1989 the army s presence was more felt in the Politburo; there

19 China 15 were reports that a number of generals attended its meetings, albeit in a nonvoting capacity. The increased politicisation of the military could also be seen in the role that the PLA played in the conduct of foreign policy, particularly towards Taiwan: it was widely believed that the large-scale intimidatory military exercises by China in the Taiwan Straits in 1995 and 1996 were due to Mr Jiang and other leaders pandering to military demands for China to take a more hardline stance towards Taiwan. The retirement of Liu Huaqing from the PSC in 1997 suggested that the civilian leadership was once again trying to reduce the direct political power of the PLA. A directive issued by Mr Jiang in July 1998 ordering the military to give up its business empire further indicated that the PLA s influence was on the wane. The military is, however, unlikely to be fully pushed out of politics. There was evidence in mid-1999 that the process of handing over large (and often unprofitable) parts of the military business empire to civilian, often private, management, was not going smoothly. The army was reported to be dissatisfied by the amounts of compensation on offer; many of the enterprises in question were proving hard to dispose of. The profile and clout of the PLA were again raised by the heightened tension with Taiwan in Ultimately the PLA s political power is guaranteed by the military s role as the protector of party rule in China. The People s Armed Police The Central Military Commission Worker organisation is discouraged From 1989 Mr Jiang has put a lot of effort into building up the People s Armed Police (PAP). This has partly been aimed at easing dissatisfaction within the PLA about having to take up responsibility for civilian crowd control. Mr Jiang, who initially had little authority within the military, also built up the PAP to strengthen his own political power base. Control over the army was vested in two parallel commissions, the State Central Military Commission and the party CMC. The bodies usually have identical membership, and the State Central Military Commission is rarely reported as meeting, leaving no doubt as to the intended truth behind the oftrepeated maxim that the party controls the gun. The chairmanships of the two commissions were the last posts Deng held, until , when he handed both jobs to his designated successor, Mr Jiang, a man with no previous military experience. The CCP has tried hard to maintain China s monolithic power structure, leaving various identifiable interest groups in effect under-represented. Although there are national organisations supposedly looking after the interests of women, farmers and workers, all are tame bodies pliant to the will of the CCP. It is noteworthy, for example, that even before the CCP mobilised against student protesters in 1989 it had denounced as counter-revolutionary the independent trade unions that had sprung up during the protests. The CCP remains extremely nervous of any sign of worker organisation, mindful of the role of Solidarity in the downfall of party rule in Poland. The party has enforced social control and political discipline in large measure through the pervasive role of the work unit. State factories provide not just a salary but housing, education and political indoctrination. The so-called

20 16 China neighbourhood committees, often composed of the retired, provide another mechanism of control in the cities, in such areas as family planning and crime prevention. But these systems of social control are gradually breaking down. This is partly because of the government itself, which is pursuing structural reform of the state-owned enterprises (SOEs). It is also because social mobility, and the aspirations which nearly twenty years of strong income growth have brought with them, have made people less susceptible to constant surveillance. The shrinking bureaucracy Localism The bloated government bureaucracy began to be streamlined in In March of that year the NPC voted to cut the number of central government ministries to 29 from 40 and to lay off half the 8m civil servants. Ministry-level reform has now been undertaken; thousands of civil servants have lost their jobs. Local governments are to do their share of job-cutting during 1999, but are likely to proceed much more slowly. China is almost the same size as the continental US. Many of its provinces, autonomous regions and municipalities are the size of European countries. The provinces extend over a large landmass and have widely differing resource endowments. Some are sparsely populated; others, mainly along the eastern seaboard, have for many decades been among the most densely populated places on earth. Lines of communication are poor and, apart from the Yangtze river region, tend to follow a north-south axis. Sheer size, diversity and difficulty of communication have meant that even at times of comparatively strong central control the unitary state has been far from uniform. After 1949 there was a centralising thrust, based on the Soviet model of control and development. Both economic and political decisions were of a top-down nature. But some local variation was inevitable and in the 1960s the Third Front industrialisation policies adopted in response to the Sino-Soviet rift, which prompted a wave of investment in manufacturing activities in the interior of the country, helped to create an economic model characterised by local autarky, de-concentrating the economy and encouraging a measure of devolution of economic initiatives. It was on local initiatives that many of the reforms of the late-1970s were based. The reform era has greatly increased the de facto autonomy of local governments, mainly as a result of a devolution of resource mobilisation powers and spending responsibilities. This has tended to encourage the timehonoured practice of resistance albeit usually passive rather than active to directives from above when these are not perceived to be in the interests of local areas. Local governments have also increasingly become entrepreneurs and major stakeholders in local enterprises. The culture of commerce has spread down into the bureaucracy and local governments tend to regard their mandate as being heavily economic in content, consisting largely of the requirement to maximise employment and revenue-raising opportunities in the areas under their jurisdiction. These attitudes and actions create a particularism that can frustrate the aims of the central government and in the competition to attract foreign investment,

21 China 17 for example can lead to wasteful duplication of effort. Local governments are also anxious to maximise their ability to retain revenue collected locally and this makes it difficult for the central government to increase its tax take. At the moment, the central government can usually command compliance, albeit sometimes reluctant and slow, with its major policies. But most provincial bureaucrats and cadres are now appointed locally and the loyalties that they are building up present an increasing constraint on policy at national level. There are those who argue that devolution is irreversible and that it will increase so that the Chinese state is eventually organised on federal lines. On the other hand, the powers of political patronage enjoyed by the central government are still considerable and there is a centralising thrust to current economic policy. Main political figures Jiang Zemin: President, party general secretary and head of the military, Mr Jiang rose to the top because he was the candidate most acceptable to China s senior political figures following the popular protests of 1989 and the military crackdown that ended them. Mr Jiang is now attempting to fill the role of political arbitrator and senior statesman in the leadership, rather than becoming involved in day-to-day policy implementation. This makes him less vulnerable to policy failure than other front-line figures, such as the premier, Zhu Rongji. Li Peng: After stepping down as premier in March 1998, Mr Li is now chairman of the National People s Congress (NPC, the largely rubber-stamp parliament) and remains number two in the political hierarchy. This is despite the unpopularity generated by his personal involvement in the bloody crackdown on the peaceful Tiananmen Square demonstrations in Beijing in He is likely to force the pace of legislation through the NPC to keep abreast of the reform programme, but uncertainty remains over the state of his health, and a heavy workload could force his premature departure. Zhu Rongji: Mr Zhu was elevated to third in the leadership behind Mr Jiang and Mr Li at the 15th congress of the Chinese Communist Party (CCP) in September 1997, and appointed to the top executive post at the March NPC in He is, however, not universally politically popular, especially in the provinces where an abrasive and no-nonsense manner has earned him few friends. Mr Zhu s position was weakened by the economic downturn of and China s failure to secure membership of the World Trade Organisation (WTO) during the premier s visit to the US in April Hu Jintao: Mr Hu has made rapid progress in the political hierarchy, and is now the youngest member of the Politburo Standing Committee (PSC). Appointed vice-president in March 1999, Mr Hu is emerging as the heir-apparent to Mr Jiang. His age makes him especially acceptable to the younger generation of leading figures at home and overseas. Li Ruihuan: Mr Li is the chairman of the Chinese People s Political Consultative Conference (CPPCC) and a member of the PSC. He rose from humble origins under the protection of key veteran luminaries, including Deng Xiaoping, who elevated him to the PSC along with Mr Jiang in Mr Li can be counted on to keep the CPPCC to its historical role of insignificance. Wei Jianxing: Head of the Central Commission for Discipline Inspection Committee, Mr Wei was made head of the Beijing municipal party committee for a period following the ousting of the discredited Chen Xitong. Mr Wei was elevated to the PSC at the 15th CCP congress. Li Lanqing: Elevated to the PSC at the 15th CCP congress, Mr Li has been one of the country s vice-presidents since He features regularly in the media, expounding on economic and other issues.