WTO winds will blow away the old China

By Willy Wo-Lap Lam
CNN Senior China Analyst

(CNN) -- Globalization is not a dinner party. Much has been written about the impact of China's entry to the World Trade Organization (WTO) on the country's economy.

However, it is clear WTO accession and globalization in general will chip away at not only Beijing's "economic sovereignty" but also the power base and prerogatives of the Chinese Communist Party (CCP).

About two years ago, the CCP and State Council set up a special team to study the WTO's impact on domestic politics.

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While the team's findings have not been publicized, it is clear WTO accession will pose severe challenges to the authority of the party and state apparatus.

In a prescient paper written soon after the dissolution of the Soviet Union in the early 1990s, a group of sons of party elders argued that to avoid the fate of the USSR, the CCP must never lose control over the economy and businesses.

There seems little doubt, however, that both the party and the central government have to sever links with enterprises in the post-WTO order.

Largely because of WTO-related pressures, Beijing last year began asking state-owned enterprises (SOEs) to beat a retreat from more than 150 competitive industrial sectors.

In several years, private firms, foreign firms and joint ventures will split up the sky with SOEs.

As more Chinese get their paychecks and services from non-state entities, the party's authority may be dealt a body blow.

Then there are the unexpected side-effects. For example, the CCP's ability to start and operate party cells in joint ventures and wholly-owned foreign concerns may be challenged by overseas businessmen.

Equally significantly, the party and government have since the 1950s exercised control over the economy and the country mainly through issuing decrees, often in the form of hongtou wenjian or "documents with red letterheads."

Monopoly powers

These diktat and executive fiats enjoy the same status as legal statutes -- and cadres and citizens alike are required to treat them as such.

After WTO accession, however, it is obvious that these documents with red letterheads will have to go.

First to be affected will be party and government orders giving monopoly powers to certain SOEs -- and fixing the prices of their products.

After all, the WTO's central spirit is the rule of law -- and respect for fair competition and other global standards.

Beginning late last year, Beijing has asked provincial and municipal administrations to do a thorough vetting of hongtou wenjian with the view to invalidating most of them -- and replacing them with proper legislation.

In an article entitled "Beware that hongtou wenjian may violate the law," the official Xinhua news agency reported last week that a couple of SOEs in Anhui province have lost their monopoly in the course of the campaign to weed out state fiats.

Party-dominated

Yet the WTO's fallout will not be restricted to the abolition of this or that particular state decree.

The very concept of a party-dominated legal system is imperiled.

It is an open secret that since 1949, the law courts -- as well legal interpretation in general -- are under the thumbs of a secretive CCP organ called the Political and Legal Affairs Commission.

Another pillar of CCP domination -- the control over information -- is jeopardized.

This is even though WTO protocols so far signed with the United States or the European Union have made no provisions for joint venture newspapers or TV stations.

But these WTO agreements do allow for joint venture Internet companies, although foreign partners cannot hold more than 49 percent of total shares.

Analysts say Beijing will find it difficult a few years post-WTO to resist pressure to open up the news business, even though initially foreign partners may only be allowed to handle advertising, marketing and distribution.

Also under threat will be Beijing's vaunted ability to guard "state secrets" from foreign eyes.

For example, the CCP leadership has refused to allow Western companies to conduct information-related businesses such as polling and market research, for the obvious reason that such activities can yield a bonanza of politically sensitive data.

After WTO, Beijing may no longer be able to keep up the bamboo curtain.

Indeed, police and state security departments are keenly aware that many Western-style commercial operations can have heavy political overtones.

Networkd of salesmen

A case in point is direct or door-to-door marketing through close-knit, quasi-pyramid networks of salesmen. In the mid-1990s, Beijing asked several foreign firms in the areas of cosmetics and household products to stop direct-sales activities.

An internal paper cited the political implications of such tightly organized marketing teams, which often boasted several tens of thousands of sales people.

The document said law and order, a euphemism for CCP control over everyday life, might be threatened if "hostile foreign forces" including quasi-religious bodies were able to use such sales networks to pursue anti-Beijing goals.

Consider also the fact that post-WTO, the state may have to yield its monopoly over education to foreign institutions, including commercial operators.

Direst consequence

Already in Shanghai and Shenzhen, more and more nouveau riche parents are sending their kids to international schools, where Marxism-Leninism is hardly taught.

From the party's standpoint, the direst consequence of WTO entry may be changes in people's thinking.

As a Beijing-based social sciences professor put it, if everything is now being done according to international -- in many instances, Western and American -- norms, more people will cast doubt on CCP ideology.

"It will become clear that values and systems such as socialism and 'dictatorship of the proletariat' run counter to global trends," the professor said.

WTO accession, of course, will not affect the party's hold over control mechanisms such as the army, the People's Armed Police and the police.

Yet a pluralistic market milieu will afford ordinary folks ample opportunity to thumb their nose at the CCP -- and with devastating effect.

For example, well-trained personnel including scientists, engineers and mangers can vote with their feet by working for foreign or joint venture firms, not government departments or SOEs.

As State Councilor Wu Yi put it in an internal talk, globalization meant first of all a fight for talents between government units and SOEs on the one hand, and multinationals on the other. People can also vote with their pocketbook.

If Chinese have lost faith in the authorities, they may convert their renminbi into dollars and euros, put their money in foreign banks, patronize foreign insurance companies, purchase foreign stocks instead of local ones -- and, a few years later, buy Global Daily instead of People's Daily.

Perhaps because of fear of impending loss of control, the Jiang Zemin administration has in recent months cracked the whip on dissident organizations and imposed blanket censorship on the media.

Over the long haul, however, there seems little doubt the forces of economics will triumph over outdated dogmas -- especially those that serve only a privileged minority.