Enter the dragon

Conventional wisdom insists that nations ruled by Communist parties are regimented, unimaginative failures. Yet nowhere on earth is changing so fast and on such a scale as in China, where market economics and rampant consumerism meet the remnants of Maoism, throwing up paradoxes with profound implications for its 1,3-billion people — and for the rest of the world.

Tony Blair will arrive tomorrow for a two-day visit, during which he will hear evidence of the change from politicians in the capital, Beijing, and businessmen in the fast-expanding commercial centre of Shanghai.

It is not clear, however, if even the leadership in its heavily guarded Beijing compound knows exactly what is going on in the 3,7-million square miles between the booming development zones of the coast and the huge deserts and mountains on the doorstep of Central Asia.

China is racing to meet its future, confident it will grow into a superpower within a couple of decades, with all that implies for the West and for its Asian neighbours. Yet it remains stunted under the authoritarian hand of a Communist Party for which the retention of power has become an end in itself.

It is the main motor of international expansion, but it contains an uncomfortable expanse of shady zones and, owing to its size and diversity, is very hard to control.

China’s gleaming airports put Heathrow to shame. The size of construction projects have led to the joke about the crane being the national bird.

The tycoon class has expanded so substantially that the American business magazine Forbes produces an annual list of China’s 100 richest. Car production is rising by millions of vehicles a year. There are about 300-million mobile phone users. Shopping malls are crammed with designer clothes, real and counterfeit. Top tickets for Real Madrid’s forthcoming game against a Chinese team are priced at £125 each.

Figures issued last week showed that, despite a dip last spring because of the Sars epidemic, China’s economic growth should still hit the 7 per cent target for the year, with industrial production up by 16 per cent in the first six months. Though there are doubts about the precision of official figures, this rate is even higher in the special economic development zones where big, modern factories ally automation with low-cost labour

Having started by making cheap goods, Chinese firms are moving on to more profitable ones as their country’s membership of the World Trade Organisation guarantees them access to world markets.

From toys to computer chips, just about everything seems to come from China these days. Despite Sars, exports in the first half of this year bounded by 34% to the equivalent of £120-billion. Foreign investment, bringing money, technology and expertise, rises by the year as Western and Japanese executives put the country at the top of their plans.

A recent article by an American economist was headlined: ‘What happens when everything is made in China?’

That raises concern about foreign jobs being exported to China — as in the decision by Waterford Wedgwood crystal to close British factories and shift production to China for lower costs. But, while international pressure on Beijing to revalue its currency upwards grows, economic expansion is making the mainland a major importer of raw materials, machinery and factory components. Its purchases of crude oil rose by a third in the first half of this year and it could be the salvation of the world steel industry.

On his drive from the airport, Blair will see Beijing engaged in a huge building programme running up to its staging of the 2008 Olympics. In Shanghai, a new business district has gone up on marshland, and gleaming blocks of flats line the eight-lane roads into the city. A German magnetic levitation train whisks passengers in from Shanghai’s new Pudong airport at 250mph, and a Japanese ‘bullet train’ is likely to link the city to Beijing.

Shenzhen, a pioneering economic development zone across the border from Hong Kong, has grown from a small town into a city of millions attracted by work in its fast-growing factories. Chongqing, capital of the biggest province, Sichuan, is being transformed from a shabby city notorious for its nasty climate into what aims to be a model of growth in a special zone containing 30 million people.

The Three Gorges dam, with its enormous hydro-electric potential, has gone into operation, and there are plans for a mammoth waterway across the country to check the recurrent pattern of droughts and floods. Visit city centres from the once-isolated Kunming in the lush south-west to Manchuria on the border with Russia, and you find the same lines of glass and concrete offices, shops and flats on proud display as signs of modernity.

A middle class is emerging and, this being China, it is numbered in hundreds of millions. Artists and writers challenge tradition in a major way. The ‘iron rice bowl’ of cradle-to-grave welfare promised by Mao Zedong is being smashed. Beijing’s development is demolishing the alleyway hutong houses that were a characteristic of the capital for eight centuries.

Modern life is eating away at the traditional family: 14 per cent of households now consist of either a single adult or a childless couple who both work. Older people are deeply worried about the future, as their children save to pay for health care and private education. At a lunch in Beijing, the Education Minister spoke to me enthusiastically about the model set by Warwick University for attracting paying students.

A lot of dark areas lie behind the bright lights on the Yangtze cliffs of Chongqing and the Shanghai Bund, where the huge Hong Kong and Shanghai Bank building from before the Second World War has been restored as the headquarters of a local development organisation.

Income inequalities are enormous. Factory modernisation has boosted unemployment, and there are periodic demonstrations by workers who have not been paid. Outside the city centres and modern apartment blocks, China’s urban areas are dirty, unhealthy and overcrowded. Workers newly arrived from the country sleep out around train and bus stations, and drive down the already tiny wages paid for manual labour on all those building sites.

Low health and safety standards are highlighted by repeated industrial accidents and the recent spread of Sars. Pollution and environmental destruction are high. Floods kill an average of nearly 4 000 people a year.

The government has launched a series of high-profile crackdowns on major offenders, but corruption is embedded. Badly paid officials exploit their position — in one city, police stopped motorists to tell them their cars contravened cleanliness regulations: they had a friend standing by to wash vehicles for a small fee.

Much of rural China, which contains most of the country’s people, is left behind. Depending on the criteria adopted, upwards of 100-million Chinese live below the absolute poverty line. Though cities are linked by a fast-expanding motorway network, rural communications remain poor. Farmers stage periodic protests about local officials levying ‘special taxes’ for their own enrichment.

Many villages are age-old huddles of mud or adobe huts without sanitation. One villager joked that, if the government really wanted to reduce the number of children, it should lay on electricity so people could watch television at night rather than having sex.

Foreign financial houses have started trading in Chinese shares, but the stock market is run largely for speculation and to direct capital to well connected firms. The banking system is shot through with huge bad debts as a result of channelling money to politically favoured enterprises rather than those which could best use the cash.

The reform of state enterprises seems to be taking longer than expected. Corporate accounts often bear little relation to reality. An inquiry found recently that most state firms cooked the books. No wonder some commentators see as inevitable the scenario outlined in a recent book called The Coming Collapse of China.

Some of the highest-flying businessmen have crashed to earth – the second-ranking person on the Forbes list for 2001 has just been jailed for 18 years for fraud. Huge smuggling rings involving local dignitaries have been uncovered. Municipal officials in Manchuria’s main city were found to have been in cahoots with the local mafia.

This is partly the result of such rapid development in a country with no independent legal system, where favours that bring the chance to make a fortune are bought and sold. But the way China is developing poses a distinct problem for the organisation that sits obstinately on top of that system and has used its ability to hand out favours and punishment, as the glue that holds it together. As an old Maoist once said, if the Communist Party does not get rid of corruption, it is done for; but, if does get rid of corruption, it is doomed anyway.

Since the move to the market launched by the patriarch Deng Xiaoping two decades ago, individual liberty has grown enormously. Walking in the streets of Chinese cities, you do not feel the oppression that characterised eastern Europe under Communism. Taxi drivers joke about the leadership, and only the politically ambitious pay much attention to its ideological forays.

That is, in its way, what the leadership is after. Its basic gamble is that growing wealth will provide a legitimacy to replace the tenets of Maoism. After the first, second and third ways of politics, welcome to China’s fourth way where the prospect of getting rich means that politics, in the conventional Western sense, can be pigeonholed for so long as the economy roars ahead.

So, though there have been some electoral experiments at local level, democracy is far away, as it has been throughout China’s history. For the new leadership of President Hu Jintao, as for his predecessor, Jiang Zemin stability is paramount – the Cultural Revolution is held up as a terrible example of what can happen when things get out of hand.

Crossing the political line is perilous. Dissidents are out of the headlines in the West, but they are still persecuted relentlessly. Members of the deep-breathing Falun Gong exercise group are arrested as a security threat. Tibet remains tightly policed, and the war on terrorism is a convenient pretext for cracking down on the mainly Muslim population of the vast western territory of Xinjiang.

China has put on its best face for the world, particularly since it realised the benefits to be gained from 11 September. Blair and the other leaders beating a path to Beijing should realise, however, that, useful as foreigners are, China has never set much store by them. The round-eyes can provide technology and money, but the country will go its own path, making temporary alliances that suit it while increasingly using its clout as it chooses, in its bid to displace Japan as Asia’s economic and political motor.

To do that, the leaders Blair will meet this week have to maintain the breakneck momentum of ‘socialism with Chinese characteristics’ to demonstrate that ‘It’s the economy, stupid’.