On the Road: A View from the Chinese Interior

American businesspeople, journalists, and politicians accustomed to running up and down the East China coast, from glistening boardroom to humming twenty-first-century factory floor to the front end of the airplane, have often overlooked developments

But, most staggeringly, I learned that the superhighway that had taken me from Chengdu to Mianyang in an hour and a half would be completed all the way to Guangyuan by year's end: by 2003, Chengdu would be three hours' drive from Guangyuan County Seat. And the mountain communities through which we had labored would face a different future.

Behind all of this simmering change lie two ineluctable realities and at least the skeleton of a broad policy approach to the future of Chinese society. The first harsh reality is that the farm economy has far more people in it than can be efficiently deployed in agriculture, especially as, under the WTO, the agricultural economy of China must face the inflow of inexpensive high quality agricultural products from the world market. The second harsh reality is that the pattern of Chinese economic growth over the past twenty years has created a self-exacerbating discrepancy between the privileged and dynamic East Coast corridor and the struggling western regions of the country. The stronger the East becomes, the greater its power to attract investment and build capacity, and the weaker the power of the interior to do the same.

The skeleton of the regime's policy response to this is the vision of transforming hundreds of millions of underemployed and impoverished rural dwellers into workers--not in the state-owned behemoth heavy industries of the past, but in some sort of dimly-perceived new urban environment constructed within the until-now rural zones themselves. Exactly what these new workers will do -- what they will make, what services they will provide -- is the subject of intense discussion, and the entire enterprise, as a massive social engineering project by government, has not yet really been launched.

What the regime has launched, both with rhetoric and with infrastructure investment, is the "Great Development of the West", as seen in the shiny new freeways snaking across the underdeveloped regions of the country. While some have criticized this as budget-busting temporary make-work gimmickry, it is fair to speculate that no systematic economic development of languishing and backward regions could be hoped for if the basic sinews of a modern economy are not in place: transportation, telecommunications, energy. Time will tell, but my instinct is that "roads to nowhere", in China as in the United States, may turn "nowhere" into "somewhere" more effectively than skeptics might imagine.

For the time being, though, we have to ask how fully the dynamic modern sector of the Chinese economy can progress if the rural sector remains in deep economic distress. The rural economy faces real problems: declining crop prices; rising taxes and fees imposed on farmers by parasitic local-level government bodies filled with cousins and in-laws "eating imperial grain" (as they say about those paid with taxes and fees extracted from the peasants); rampant usurious lending to these peasants by bottom-rung cadres struggling to secure the money that must be sent up the administrative chain to meet tax and fee obligations; outmigration of millions of rural inhabitants unable to survive on the land and hoping for better times in the neon-lit cities and humming factories of the coastal enclaves; the difficulty of implementing centrally directed economic, political, and social reform in the face of entrenched holders of local privilege; and the potential power of modern exposé journalism.

A short trip off the beaten path, combined with some sobering reading of recent reports on rural problems, was a reminder that much remains unsolved, and these challenges will continue to bedevil the next generation of Chinese leaders. What happens in Beijing, Shanghai, and the other major coastal centers is critical to the future of the Sino-American relationship.  Even so, I have a hunch we all ought to be thinking about what is happening outside of town.

Robert A. Kapp is the president of the U.S.-China Business Council (http://www.uschina.org). This essay is adapted from his president's letter that appeared in a recent issue of the China Business Review