The Heritage Foundation

Lecture #363 on Asia

February 10, 1992

February 10, 1992 | Lecture on Asia

Chinese Water Torture: Subversion Through Development

(Archived document, may contain errors)

Chinese Water Torture: Subversion Through Development

By Andrew B. Brick Tracking China-related issues inWashington these days can be an exasperating occupation. A newspaper reporter recently asked me to comment on an American presidential candidate's claim that Deng Mapping, China's paramount leader, was "a n 85-year-old chain-smoking com- munist dwarf." Deadpanned the reporter: "Is Deng the world's only dwarf leader or the only communist dwarf leader?" (And that's not the half of it: the "85-year-old!' Deng, size notwith- standing, has long since enjoyed his 87th summer.) A new low in U.S.-China policy has thus been reached. The "dwarf factor" apparently has en- tered into Washington's continuing struggle over how best to deal with one of the world's least pleasant, least cooperative, and most enigmatic regim e s. Name the issue and it probably plagues the Sino-American relationship. Beijing has its own international agenda, not necessarily consis- tent with any other international agenda, nor with any consensus of international interests. Its human rights recor d is appalling, from Tibet to Tiananmen, and beyond. It peddles missiles to Middle East thugs and underwrites some of the world's most reprehensible juntas, like that of Burma. Obviously, these are not trivial matters-no matter how one evaluates the implic a tions of Deng Xiaoping's diminutive stature. Problems in the U.S.-China relationship have enormous weight and reach, affecting vital personal, commercial, and national interests around the globe, not to mention (insofar as U.S. policy makes any difference ) China's own future. Doing Business. The impact of the burgeoning Washington-Beijing trade deficit on Taiwan's commercial interests is a case in point. Yes, you read that right: on Taiwan's. Of course, they do not have official relations, so the poor comm u nist Chinese on the mainland and the rich capital- ist Chinese on Taiwan today do business only indirectly. But do they do business! So much so, in fact, that possible U.S. retaliation against China for accruing to itself a $13 billion trade advan- tage, t he probable imbalance in 1991, would end up doing substantial injury to the some 3,000 Taiwan-owned factories on the mainland producing goods for export. So what does Taipei do? It makes provision for the import of semi-finished goods from the mainland in t o Taiwan, where they will be completed and then exported to the U.S., labeled "Made in Taiwan." One of the beneficiaries of that end run is a man named Tony Chen. When it comes to matters involving China, Tony Chen of Taiwan has plenty of advice for Ameri can policy makers. "You want to give Beijing a hard time?" he always asks me, rhetorically. "Then adopt policies that help break the so-called iron rice bowl'@-communism's welfare state. "We Chinese are by na- ture economic animals, you know."

Andrew B. Bri ck is Senior Policy Analyst for Chinese studies at the Asian Studies Center of The Heritage Foundation. He delivered this lecture at Florida, State University.Tallahasee, Florida, on January 22, 1992. ISSN 0272-1-155. 0 1992 by The Heritage Foundation.

Forceful Entrepreneur. Tony Chen is a big, beefy guy and forceful as a bulldozer. His lec- ture continues: "Encourage Chinese to make lots of money, then prosletyze democratic virtues. It -worked that way-on Taiwan. Businessmen like me are the revolutiona r ies you seek." Mind you, this comes from an unabashed go-getter-an oriental Sammy Glick-who has a sign on his of- fice wall that demands, "Why aren't you a millionaire yet?" He runs a clothing factory on an industrial estate outside of Xiamen in mainland C hina's Fujian province. His workers sew hid- eous clothes-stone-washed denim mini-skirts trimmed with sequins-and then he ships them to trendy fashion mongers throughout Eastern Europe. Against the backdrop of cold war, it is downright perverse to think o f Tony Chen as a revolu- tionary. He scarcely seems ideological, much less anti-communist. But revolutionary he is. Dealing in everything from snake oil to widgets, he claims to "peddle futures on the frontlines of Greater China's new world order."

Washington policy makers could do worse than to heed his advice.

Businessmen from Taiwan act as if they have found the keys to a long-locked treasure chest. The treasure in this case: breaking communism's hold on mainland China, and releasing its vast reserves of assets and opportunities. Indeed, when it comes to treasure chests, few compare with Taiwan itself. Think about it: Some 20 million people on an island the size of New Hampshire traded almost $250 billion worth of goods with the rest of the world in the l ast two years. The island is so rich that the an- nual interest earnings on its $80 billion of foreign currency reserves-the world's largest, by the way-add at least 2 percentage points each year to Taiwan's gross national product. That an increasing amou n t of this economic success is driven by the island's commercial con- tacts with mainland China is both intriguing and revealing. Indeed, with cheerful indifference to officialdom on both sides of the Taiwan Strait, the mainland and Taiwan are being bound t o- gether ever mare tightly. Some in Taipei worry that these growing contacts form a kind of dependence on trade that will make the island hostage to the old men in Beijing. But who really is hostage to whom? In spite of a ban on direct dealings across th e Strait, indirect trade through Hong Kong be- tween Taiwan and the mainland has expanded almost 40 percent annually each of the last four years. Some $7 billion worth of raw materials and intermediate products passed through Hong Kong last. year headed fo r mainland China's southern provinces. And investment by Taiwan's businessmen is rising, too. Official estimates say it exceeds a cumulative $2 billion; but this seems unduly modest, and especially so if travel takes you to some mainland cities these days. Businessmen's Boast. Indeed, travel with me, briefly, to the town of Xiamen in Fujian prov- ince. For all intents and purposes, Xiamen might as well be part of Taiwan. Fully a third of the $3.5 billion total investment in Xiamen since 1986 is from Taiwan. Taipei businessmen swarm over the place like bees to honey. In a bar at a local hotel, one businessman boasts of renting land in the city for 35 cents a year on seventy-year leases and hiring locals at a tenth the going rate in Taipei. Throughout southern China, the barflies repeat the essence of this boast. Whether they are Chinese from Taiwan, Hong Kong, Thailand, Indonesia, Malaysia, the Philippines, or Singapore, it is their factories that daffy work around the clock and make southern China one of the- most dynamic Asian tigers of them all.


Just consider: A Republic of South China that extended from Guangdong to Fujian provinces and included Hong Kong and Taiwan would have a population of 120 million, a combined gross domestic product of $320 billion , and would be an economic force roughly comparable to Brazil -only with much brighter prospects. Ask almost any Chinese-or even Asian-businessman, and he will tell you that this is his revolution, and that of thousands like him. Put simply, the mainland' s commercial development constrains the leadership in Beijing more than any American sanction ever could. China's eco- nomic explosion, and the forces impelling it and released by it, are eclipsing Beijing's influence on and leverage over the nation's peri p hery. The implications of all this are yet unclear and frequently overstated-warlordism, for in- stance, seems unlikely. But the logic driving the commercial contacts is compelling: the momentum seems irresistible. To hear the Tony Chens of the world tell it, political change can in- sinuate itself into a society as a consequence rather than as a determinant of economic growth. It is an idea worth considering, this idea of a revolution without borders.

P erhaps it should not come as a surprise that Asians-es pecially Chinese from Taiwan- would offer Americans this kind of advice for dealing with Beijing's doddering old guard. Few know better the travails of dealing with the Chinese communists. Few understand as well that hints of change in Beijing come infreq u ently and tantalizingly, and almost always prove illusory -ounces on one side, of a scale outweighed by pounds on the other. Unlike Americans, who tend to approach China as if the ties that bind must be all or nothing, Asians relate to and work with China because they have to. For one thing, China simply cannot be ignored. Geostrategically it is so obviously important-as a brake to North Korean nuclear ambitions, as a conduit to the murderous Pol Pot in Cambodia, as a buffer to the twin specters of Soviet d isintegration and Japanese expansionism, the latter well under way. And for another, As- ians have drawn a lesson from the global democratic revolution that many Americans have not yet even begun to learn: Specifically, that there are two ways to bring ab o ut the downfall of total- itarian communist regimes. Pent-up Demand. One way, the method used by America on Moscow and its satellites, is a four-decade struggle of containment, isolation, and confrontation. It is geopolitics to the ex- treme. It is what u s ed to be known as cold war. But cold war need not be the only way. Subversion through development works too. It may work better. The notion here is simple: When communists engage in perestroika or glasnost-as China has done since the inception of its so-c a lled "open door" policies in the early 1980s-they imple- ment, by definition, meaningful market reforms. These reforms, even if only partial, open a communist country to outside influences, and in the end create political grievances that under- mine the e x tant regime. This pent-up political demand cannot forever be contained-, certainly it cannot be readily channeled. When all is said and done, reform communism proves to be communism's last stage. To hear some businessmen tell it, the violence in Tiananmen , though terrible, is the price of change and evidence that the subversion is working. So Asians continue the revolution. They do not discriminate, they do business with everybody: communist China, Vietnam, Cuba, North Korea, you name it.


Political con sciousness and totalitarian rule prove such an unstable combination in conditions of modernity, it is no wonder that the concoction dwarfs Deng Xiaoping's worst nightmares. 'Beijing runs scared in the new world order, warning its minions against the so-ca l led "peaceful evolution" of the socialist state. It is trapped by capitalism. That Asians understand the relationship between the marketplace and the peaceful revolution of steady attrition should come as no surprise. After all, they have lived with it an d learned by ex- perience. Unprecedented Democracy. The case of Taiwan is instructive. There, the idea that political change can enter a society as a consequence rather than as a determinant of economic growth is of the nature of conventional wisdom, and w i sdom that has been tested. As Beijing presses ahead with its repression, Taipei presses ahead with democracy. Taiwan's democratic example, in fact, is without precedent in Chinese history. It confounds glib Western pronouncements that the Chi- nese people do not understand democratic principles, and sets the standard for the future. The locomotive that drove Taiwan's commercial development rapidly made the old politics on Taiwan obsolete. There actually was political subversion by economic development. As t he island's economy grew, so did its middle class, and their typical concerns along with it. The com- mercial cadres demanded the same accountability from their government as was demanded of them by their businesses. Free market economics had become free m arket politics: People no longer accepted discrimination for reasons of ideology, religion, or ethnicity; they no longer ac- cepted controls on an individual's movements or rulers who were not freely chosen. To hear Tony Chen and his like tell it, the sam e locomotive could redefine both mainland China and Chinese civilization. The key here is an ethnically based and entrepreneurially driven Chinese network that spreads throughout Southeast Asia. It is a diaspora stoked with masses of dollars. This Greater C hina is commercially (and even in some sense politically) borderless and ever more influential. * In Indonesia, a Chinese minority makes up 5 percent of the population but controls 75 percent of the wealth. # In Malaysia, three decades of politics have be e n dominated by a debate over the division of wealth between the Chinese minority and the Malay majority. The nation's biggest foreign investor: Taiwan, topping $2.3 billion in 1991. # In Thailand, half the nation's gross domestic product is produced in Ba n gkok, a Chinese city in Thai disguise. * In the Philippines, Chinese families and businesses-family-based conglomerates- prosper amidst the country's continuing decay. As one U.S. trader expressed it in discussions with The Heritage Foundation: "Chinese F i lipinos are tight-knit, understand the connections, and know how to manipulate their corrupt little world." * In Singapore, some three thousand multinationals have set up shop and watch impressed as the Chinese city-state plans a so-called "growth triangl e " with the Malaysian state of Johore and a handful of Indonesian islands off the Wast of Sumatra. * In war torn Indochina, most operating Cambodian factories, from distilleries to cement mills, have been sold or leased to Sino-Khmer businessmen and their overseas Chinese cousins from Hong Kong, Singapore, and Thailand. Question: Who is the largest investor in Vietnam? Answer: Taiwan.


And in southern China, economies boom beyond all expectation. Hong Kong serves as the management and financial hub of a region where economic growth tops 13 percent a year. At this rate, an economy doubles every six years. Twenty percent of Hong Kong's bank notes circulate in Guangdong province, where some 16,000 Hong Kong-owned factories employ three million workers and e x port almost $11 billion worth of goods a year. Guangdong's estimated GDP: $78 billion, or $1,230 per capita, roughly the equivalent of Thailand's and almost double that of Malaysia. By the year 2000, predicts the Economist magazine, the region could be as rich as southern Europe. And you thought the emerging economies of Asia were Japan's back yard!

In such light, it is easy to see how China, on average, grew three times faster over the last de- cade than the wealthiest twenty countries in the world. It is also understandable that China is likely to be Asia's fastest growing economy in the first half of this decade. But development on the mainland does not necessarily presage the peaceful evolution of that society. As it was in the months and years precedin g June 1989, subversion by modernization could again bring turmoil and bloodshed in its wake. This is so because reform communism con- tinues to fuel expectations that Beijing simply cannot meet-not and remain what it is. Trying to reconcile the irreconcil a ble, Beijing's old men want the certainties of a centrally planned economy and the dynamism of free enterprise, but without the sclerosis of centralism or the uncertainties of freedom. The result is an economic reform program that spawns powerful centrifu g al forces out toward the provinces and inherently undermines the Party's central control. All the while, pressure mounts: Light and heavy industrial output continues to rise, but quality does not. Intellectuals remain scarred, and embittered, by years of p ersecution. A bloated bureau- cracy continues to overregulate everything within its reach. A deep reservoir of discontent seethes among students and young workers. Corruption is endemic in the economy. And society increasingly is stratified between the ha v es and have-nots, the privileged and the vast majority of servitors. % BeQ!ng Endpme. Stability is by no means assured (or even very likely), but the peaceful rev- olution has its goals and its agenda. For the Chinese around the world, with their remarkab l e business ties and commercial savvy, those intentions are sufficient reason to pursue constructive engagement with the incumbent communist regime. For make no mistake about it, this is an en- dgame. As the decrepit leadership in Beijing battles to forest all obsolescence in what's left of the 20th century, Chinese throughout Asia are carving their niche for the 21 st. A commercially borderless China? Try for size a Greater China Co-Prosperity Sphere.



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