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Humpty Dumpty on the Great Wall

Review by M. V. Kamath
The Free Press Journal
Sunday, July 13, 2003

Book Review

The Coming Collapse of China
By Gordon G. Chang
344 pp Random House
Category - International studies : Pounds 14.99

There are, as everyone knows, scores of India-bashers who
have little love for India and less for Indians. From
Katherine Mayo down to contemporary India-specialists
there have not been people wanting who were convinced
that India is going down the drain. To them there is
nothing good about India and little positive to say. But
one has come across very few China-bashers. For some
reason, China has always fascinated westerners,
especially American Right from Edgar Snow onwards, there
have been writers and commentators who have invariably
presented China in a sympathetic vein.

Gordon G. Chang the author of this book is a rare
exception. Brought up as most people in India are to
treat China with some respect if not awe, it is hard to
take this book which speaks authoritatively of the coming
collapse of china seriously.

Chang's credentials are not to be sneezed. He has lived
and worked in China for almost 20 years, most recently in
Shanghai, as Counsel to the American law from Paul Weiss.
His articles on China goes the claim, have appeared in
The New York Times, The Asian Wall street Journal, the
Far Eastern Economic review. The International Herald
Tribune and not the least in South China Morning post and
reportedly he has been interviewed as an expert on
developments in China by CNN, CNBC and the BBC. It is
therefore hard to dismiss Chang as a nonentity not to be
taken seriously. According to him China looks powerful
and dynamic and those who have visited China briefly and
seen the splendour that is Shanghai have come wide-eyed
with wonder. But says Chang: China is a "paper tiger",.
As he puts it: "Peer beneath the surface and there is
weak China, one that is in long-term decline and even on
the verge collapse. The symptoms of decay are to be seen
everywhere". Chang points out to many factors. He says
there are "armies of the unemployed roaming China, the
single most immediate threat to the continued existence
of the party and the Government it dominates". More
significantly he says that "at any one time, the
unemployed and under-employed exceed the combined
population of France, Germany and the United Kingdom".
Can't we say that about India as well? Then again Change
says, "The symptoms of economic decline we say that about
India as well?" then again Chang says, "the symptoms of
economic decline are all too evident. State-owned
enterprises…. Are uneconomic. The state-owned banks are
hopelessly insolvent, as a group the weakest in the
world.

Deflation has gripped china for more than three years.
Mountains of obsolete inventory scar balance sheets.
Foreign investment stagnates. Corruption eats away at the
fabric of the economy and foreign currency fleece the
country". How much of that can we say of Indian as well?
This book was first published in 2001, hardly two years
ago. Writes Chang : "As time passes, they underlying
problems fester,. Economic dislocations become social
ones, with dark political overtones. At some point in
time there will be solution. Then the economy and the
government will collapse. We are not far from that
time". Really? Either Change is wrong or our
international news agencies are not telling the truth.
He says that "virtually every day unpaid workers,
resentful peasants and other disaffected elements of
society take to the streets …One day the central
government will not be able to maintain social order…
When that time comes, the consequences will be severe …
No government can withstand the will of all of its
people". Is this wishful thinking? Is this over-
reaction to the situation as it exists? Not that Chang is
always critical . He concedes that "in the extraordinary
era from 1978 through the middle of 1990s China had the
fastest-growing economy in the world perhaps the fastest
in world history". He also concedes that DEng Yipping
remade China "and, on balance it is a far better country
for all that he did". So it is not that Chang is
unmindful of the positive side of China and its economy.
What he therefore has to write about, for instance,
Public Sector Enterprise should be taken seriously.
These State Owned Enterprises apparently have been losing
heavily with workers, in turn losing their jobs. Writes
Change :"they used to demonstrate in the tens and
hundreds. Now they protest in the thousands and tens of
thousands". That is a dangerous situation. Shocking is
Chang's charge that the government has been cooking
figures and telling wholesale lies. Cadres falsified
statistics and Beijing leaders pretended not to notice.

There is an entire chapter on banking in China and it is
anything but complimentary Banks have been falling
"almost every week". Depositors took to the streets.
The big four Banks were insolvent. But were they dead?
As Change puts it "No . Not only are they alive, they are
actually thriving. Their story shown that when a country
design a system free from economic constraints, almost
any situation, even one completed divorced from reality,
can exist" And he adds, "Beijing will do everything in
its power to keep the state banks alive. That, however,
does not mean that they are assured of survival. It just
means that of all segments of the economy, banking will
be the last to fall". If what Chang says is true - and
there are many who agree with him - Chi9na has been
playing with statistics and they are not reliable. Chang
asks : "How can Beijing's technocrats know what they are
doing when their statistics hide the truth? No one know
how much more debt the Central Government can take on
because no one's working from the facts". It is an
amazing statement to make. But it is apparently true.
Chang has even less praise for China's legal system. He
calls the Courts "crippled" because they can't deliver
justice. Change says "it will take years for China to
develop laws protecting shareholders" and he adds " "The
courts won't help because the Party will not cede them
enough power.

"Jiang Zemin is resisting reforms that would weaken the
party authority over state enterprises". Such is the
situation in China as Chang sees it. The Communist party
apparently has been struggling to keep up with great
changes of over the last two decades, "but now it is
beginning to fail as it often cannot provide the basic
needs of its people". Corruption and malfeasance have
been eroding the party's support from shall hamlet to
great city. Central government leaders do not know what
to do. The institutions built over five decades have
become feeble. This is different China from the china we
have been hearing of and one suddenly becomes aware that
things in that great country are not what they seem.

How should India react to such a situation? Variously
with caution. It is not that India is perfect, but then
India has its advantages, the chief of which is democracy
and the prevalence of the will of the people. The Courts
function among us. But even as one reads through the
Coming Collapse of China one wonder whether like
Communist Party theorists, this author too, is taking us
for a ride. What is truth? The Roman Viceroy Pilot is
supposed to have asked. "We may not know it completely.
Truth has many sides but the wise will never let their
armour down.

India certainly shouldn't.

End of forwarded message

Jai Maharaj
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Om Shanti

Panchaang for 16 Ashadh 5104, Monday, July 14, 2003:

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