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Turmoil Could Lead to Chinese Isolation

October 19, 1998
Philadelphia Inquirer

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Democracy and capitalism are spreading to China. The question is, how much faith will they inspire when they finally take hold?

So far, capitalism and China are an uneasy couple. America won the Cold War so democracy, or at the very least, capitalism, must bear the fruits of the future. And so they have for many southern Chinese.

But these same rewards have not been reaped by the north. Because Beijing's politicians have never been completely convinced of the validity of Western faith in global trade, the current instability of the global market may increase the doubt already present in the Chinese political arena.

Hong Kong's economy is simply not what it was earlier in the decade, and trade between south China and the rest of Asia is faltering. While south China's economy has been augmented by trade with its neighbors, northern China would benefit far more from economic exchange with nearby Russia. But with Russia struggling to keep the ruble alive, a vigorous trade with Russia seems less and less likely. The chances that Russia's economy will provide much wealth for its trading partners in the near future are slim to none. Northern China, therefore, has little hope of bolstering its economy.

Beyond regional disparities, China as a whole finds itself in a newly vulnerable position. This increased economic vulnerability stems from its increased involvement in international trade. As a developing nation, therefore, China would be hard hit by an increasingly likely global recession. And if the Chinese economy dramatically suffers, a turnaround to the old days of closed-door policies is likely.

The United States has long preached the virtues of globalization, but for a nation that only recently began to glean the benefits of international trade, the costs of capitalism may appear far too steep. This is particularly plausible when we consider that Russia was intended as an exemplar of the myriad possibilities awaiting those who jumped on the bandwagon of capitalism, and its current economic status is less than promising.

China is fast becoming a major economic player, but it is in these early stages of transition that the progress made is least solid and most vulnerable. Those engaging China economically must realize that the recent economic reforms may not be permanent and that an unsteady global economy will push Chinese politicians back toward policies of isolationism.

Justine A. Rosenthal is a research associate at the Council on Foreign Relations.