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CHINA: Government Puts Brakes on WTO

by Robert MarquandChristian Science Monitor
March 16th, 2001

BEIJING -- At midday a fragrant dumpling soup sells briskly as a neatly dressed man toes the sidewalk in this working class neighborhood of Beijing. Liu Songmei is an unemployed farmer from Hunan province, here to find work as a carpenter.

Mr. Liu, one of as many as 150 million out-of-work farmers in China, finds a job about "every other week," he says, "but nothing today." He makes 60 yuan a day ($7.25), and spends half of that on a room shared with several others. "We have enough to eat, but we aren't saving anything," he says.

After a strong '90s-era push by China's top echelon of reformers to insert this huge but developing country into the fast lane of the world's economy, including World Trade Organization membership this year, a quiet but significant shift toward caution is under way, with a wing of Communist Party brass reportedly worried about the potential social pressures that wrenching and wholesale structural changes to China's economy may bring.

China's WTO membership, for example, agreed to by the US Congress last fall amid fanfare, may not take place this year, analysts say.

Yesterday, China's biggest annual political event, the National People's Congress - 10 days of giant red flags fluttering in the stiff March breezes, and Beijing streets choked with black limousines - came to an end.

On the surface of the meeting, all appeared tranquil and even uneventful. A new "Five Year Plan" for the economy was unveiled to 2,900 officials from the provinces. Business and trade on the wealthy east coast and in Hong Kong remain dynamic. The nation's growth rate has leveled off but is strong at about 7 percent, officials say.

Yet small signals under the surface suggest worry over the mindsets of ordinary Chinese. There are, for example, restless peasant and working classes - of which the recent crackdown on the outlawed Falun Gong movement is part of the story. In the next five years, economic ministers say, between 40-to-50 million of 800 million farmers will be laid off each year, as the country moves to modern farming techniques. China signed off on a WTO agreement that requires it to meet developed world standards on crucial farm subsidies, but Chinese officials and many Western agriculture experts now argue this standard must be eased: The developing- country subsidy of 10 percent of output is about double that of the developed-country standard.

There are concerns over laid-off workers from the industrial sector, the fallout from a transition away from state-run enterprises. In a press conference March 10, a high ranking minister hinted that about 52 million industrial workers will lose jobs over the next five years. Already, 10 million are officially redundant, though the exact figure is hard to reckon. China has some 145 million registered industrial workers. The government classifies many of the laid-off as not employed but looking, and not counted as jobless.

Authorities take as progress what they say is a slow but steady public adjustment to a new economy. "Today, people can accept that state-owned enterprises can go bankrupt," said State Economic Trade minister Li Rongrong March 10. "Three years ago people could never accept this."

Yet in a one-party state that next year begins a transition to newly appointed leaders, including premier and president, some officials are concerned about leaping into the unknown - even while continuing to integrate into world markets.

"They are worried about instability, and they should be," says a Western scholar working in Beijing with the unemployed. Some laid-off factory workers "go to neighborhood officials saying they have been good comrades all their lives, but are worried about the future.... What they hear is, 'There are already too many people with your problems. You need to take care of yourself.' "

Official employment rates range between 3 and 5 percent. But outside experts say the real figure ranges between 15 and 30 percent.

"I think it is more than 30 percent," says Han Dongfang, a former dissident who publishes the "China Labor Bulletin" out of Hong Kong. "But ... the dangerous thing is a lack of social security."

At the NPC meeting, officials announced a new social security and pension system. Unlike the old plan, workers would eventually have to pay into the new safety net - and farmers would largely be left out. The government estimate for the switch - $5 billion - contrasts with a Bank of China International figure of $850 billion. Bank officers say that number can be covered if the state taps the savings of Chinese and also sells assets - if, the implication is - no one pockets large sums on the way to public till.

The WTO transition is still being absorbed. At levels where reforms must happen, only recently have bureaucrats come face to face with the small print, analysts say. The accord requires a great deal of new legal language, levels of visibility, and foreign involvement.

This week, a press conference was notable for its lack talk about a clear date for signing the WTO accord. But after 15 years of negotiations, accession is a "foregone conclusion," said Minister of Foreign Trade and Economic Cooperation Shi Guangsheng. Last month, Mr. Shi said that October or November may be opportune.

Outside analysts say it may take longer. "Even if you just look at the procedural questions, the EU goes through a two month review," argues Nicholas Lardy of the Brookings Institution. "I question whether it will be signed in 2001 at all."

Part of the new caution has to do with a leadership reportedly unsure how to solve its succession next year, facing an unfamiliar US administration that is talking about high-tech arms sales to Taiwan, and a world economic slowdown that includes China's two biggest investors, Japan and the US.

While China's police and security networks are too extensive for violent demonstrations, in northeastern provinces, coal miners, steel workers, and other heavy industry unemployed have protested. Reports this week have 5,000 cabbies in Lanzhou ringing local government headquarters over higher taxes. Much of the attraction to the Falun Gong movement is among peasants and workers who have felt alienated or are jobless.

Another body of workers has simply left home for low-paying jobs in urban areas, creating a floating set of semi-employed drifters estimated at as many as 500,000. Official fears of these workers organizing is high.

Analysts say it is significant that though China agreed last week to sign the UN's International Convention on Economic, Social and Cultural Rights, it left out of its agreement the right of workers to form trade unions.

"To have an entire body of workers suddenly organizing outside the party. Well, that's what bothered the leaders about Falun Gong," says one local Chinese expert. "Imagine a whole class of angry people suddenly organizing. That would be madness, in our view."





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