Made in China

MINXIN PEI QIAO SHI HENRY PAULSON BOBBY RAY INMAN ANTHONY LAKE

As it prepares to host the 2008 Olympics, Chinas authoritarian development model, which has sustained high growth for two decades, is entering a fragile new stage. Tainted toys and other products have made the American consumers on whom China relies wary even as the debt-and-decit ridden American economy relies on Chinas massive foreign reserves to keep going. In the meantime, China's aggressive search for raw materials in Africa is causing a backlash while its cyberspying probes into Western defense systems are reviving Cold War-like tensions. The US treasury secretary, a top China expert and former intelligence ofcials offer their views.

Made in China Label Wont Survive Without Rule of Law

is a senior associate and director of the China Program at the Carnegie Endowment for International Peace, inWashington, D.C. He is the author of From Reform to Revolution: The Demise of Communism in China and the Soviet Union and Chinas Trapped Transition:The Limits of Developmental Autocracy.
MINXIN PEI

beijing The Chinese governments execution of the countrys former chief food and drug regulator earlier this year was intended to send a strong message, both to warn its ofcials and to reassure the international community that Beijing is taking decisive steps to make its food and drugs safe. This proverbial act of slaughtering a chicken to warn the monkeys undoubtedly will have a short-term effect of restraining venal ofcials who populate the countrys creaky regulatory bureaucracies. Only the irredeemably greedy would tempt fate when the central government in Beijing, embarrassed by the intense international scrutiny of unsafe Chinese products, is waging a campaign against corrupt regulators in the food and drug industries. But it is questionable whether a short-term campaign, Chinas favored mode of policy implementation, can ensure the safety of Chinese products and restore public condence. The challenges facing China are more than a few bad apples in its bureaucracy. In terms of capacity, the countrys regulatory and inspection agencies are understaffed and ill-equipped to police a vast territory dotted by countless shady operations that thrive on producing fake or even dangerous goods for a quick yuan. Socially, the collapse of public morality and a get-rich-quick mindset pervasive among entrepreneurs have created a permissive milieu for antisocial behavior. Politically, the countrys half-nished reforms have resulted in many anomalies that further impede the enforcement of regulations. Indeed, the scandals of tainted food and fake drugs vividly illustrate the limits of Chinas current growth strategy and the perils of authoritarian crony capitalism. Since the early 1990s, the ruling Chinese Communist Party (CCP) has pursued a single-minded strategy that relies on rapid economic growth to maintain its legitimacy and power. Based on its reading of the fall of the Soviet Union, the party has vowed not to repeat the two fatal mistakes responsible for the Soviet collapse: economic failure and democratic reforms. Consequently, the CCP greatly relaxed its control over economic activities but kept a tight grip on politics.True, this strategy has worked wonders for the CCP for more than a decade.With the quadrupling of its economy, the country has
The scandals of tainted food and fake drugs vividly illustrate the limits of Chinas current growth strategy and the perils of authoritarian crony capitalism.

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become the worlds fourth-largest economy and the third-largest exporter. The CCP has also remained securely in power. However, this strategy has huge delayed costs. While it has boosted economic growth, it also has stunted the growth of the rule of law, press freedom and civil
The Leninist party-state governance model gives too much power to local party bosses.

society (all of which are viewed by the ruling party as threats to its political supremacy).The obsession with social stability, a code word for political survival, has signicantly weakened the governments capacity to regulate a far more dynamic, diverse and complex economy, and to police its own agents, who have enormous power but are not accountable to the public. To make matters worse, the Leninist party-state governance model, in which the ruling party maintains a parallel organization within all state bureaucracies, gives too much power to local party bosses and deprives key regulatory institutions of their autonomy. Thus, on paper, China boasts numerous laws and regulations designed to make its food, drugs and consumer products safer.The countrys regulatory agencies

Document: Qiao Shi on Chinas Long March to the Rule of Law

The following document is excerpted from an interview by NPQ editor Nathan Gardels with QIAO SHI at the Great Hall of the People in Beijing in 1997. At the time Qiao, Chinas former intelligence chief, was head of the National Peoples Congress and the third-ranking member of the Politiburo Standing Committee. Before he was retired in a power struggle with Li Peng and Jiang Zemin, Qiao was Chinas leading ofcial proponent of strengthening the rule of law.
NPQ

| Xu Kuangdi, the former mayor of Shanghai, has said that China

already experimented with democracy during the Cultural Revolution, and it was a disaster. In your mind, is there some middle ground between Western-style democracy and Cultural Revolution-type democracy that you see emerging in China? What are the features of such a system?
QIAO SHI

| The Cultural Revolution was not democracy, it was turmoil

which brought great suffering. An important reason by the Cultural Revolution took place and lasted 10 years was that we had not paid enough attention to the legal system. It was from this bitter experience that, by the end of the 1970s, we began to stress the need to improve the legal system and law, to maintain stability and continuity in this system of law and make it very authoritative. According to the constitution of China, all power in the country belongs to the people, and the people exercise state power through the National Peoples Congress (NPC) and local peoples congresses at various levels.

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may also have impressive nominal power and mandate. But in reality, such regulatory agencies are ineffective since their key personnel are all appointed by the local CCP organizations and are, naturally, beholden to the interests of local party chiefs. This situation creates two conicts. Institutionally, a regulatory agency is tasked to ensure product safety, but a local party chief cares more about local economic growth, on which he depends for his promotion (just as the CCP relies on economic performance for its legitimacy). So the local party boss would understandably be more permissive in allowing rmstaxpayers and job creatorsin his jurisdiction to engage in activities that regulators regard as harmful, such as environmental pollution and production of unsafe or fake products. Given the unequal political power between the local party boss and the regulators, the party boss usually gets his way. The second conict arises when the local party boss personally benets from such shady economic activities.To seek protection, Chinese entrepreneurs bribe their local
To ensure that the people are the real masters of the country, that state power is really in their hands, we must strengthen these institutions and give them full play. At the same time, it is necessary to improve grass-roots self-government so people can manage their own affairs. Since China began its reform and opening up, we have steadily reformed the electoral system to expand the powers of the Standing Committee of the NPC and given autonomy in elections to both rural and urban residents. As for the legal system itself, we have formulated a large number of laws on ethnic minorities, rights of consumers, of the disabled and women, on compensation for being wronged by authorities, on the rights of those being prosecuted so that we now have laws to go by for the main aspects of social life in China. Our criminal law has been systematically amended to better embody the principle that punishment should be prescribed for specic crimes, that punishment should t the crime and that all should be treated equally before the law. Clearly, any infringement upon laws by the law enforcers, overriding of laws by administrative authorities or perversion of justice for personal gain must be stopped.
NPQ
A regulatory agency is tasked to ensure product safety, but a local party chief cares more about local economic growth.

| In this vision of a democratic system of law in accord with Chinese | In principle, there is no conict since the party itself emphasizes

socialism, will the law ultimately be above the party, or the party above the law?
QIAO

that no organization or individual has the prerogative to override the constitution or the law.

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ofcials with money and equity stakes in their companies. As a result, rms producing harmful products become untouchable for local regulators. With an independent judiciary, a vibrant civil society and a free media, China could have contained such ills of crony capitalism. Nothing is more effective in ghting systemic corruption than transparency, public opinion and an impartial thirdparty enforcer. Unfortunately, China does not have these institutional and social assets because the CCP views them as threats to its survival. It is time for Chinese leaders to jettison such old thinking.Without reforming the Leninist party-state governance model, China will unlikely develop effective regulatory regimes compatible with its new economic and social conditions. As Chinas presence pervades the global economy and Chinese exports account for a large share of the worlds consumer-products market, failure to clean house at home will have
The Made in China label, now synonymous with low prices, could quickly lose its consumer appeal.

serious consequences that could ultimately imperil the CCPs survival strategy. If foreign consumersand their governmentsbelieve that Chinese products are unt for consumption and the Chinese government is not taking effective measures, they will curtail Chinese imports signicantly. The Made in China label, now synonymous with low prices, could quickly lose its consumer appeal. Responding to market pressure and reducing reputational risks, Western rms with manufacturing operations will likely shift their investments to countries with better safety and quality controls. Since foreign trade now accounts for more than two-thirds of Chinas economy, such developments could have a devastating impact on the countrys export sectors and hurt economic growth. The choice for Beijing is clear: Short-term xes, such as making examples of a few corrupt ofcials, cannot solve Chinas food safety problem. To regain the condence of the consumers of Chinese products, it must demonstrate sustained political commitment and undertake many of the institutional reforms it has resisted for years.
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