PREFACE 
 
    He Qinglian was born in Shaoyang in the province of Hunan in 1956. Sent as a teenager to work in the countryside on a railway construction site, she studied history at Hunan Normal University and economics at Fudan University in Shanghai, passing out in 1985. After teaching jobs in Changsha and Guangzhou, she moved to the Special Economic Zone of Shenzhen, working first in the publicity department of the municipal Party Committee, and then on the Shenzhen Legal Daily. In August 1996 she completed a book on the social and economic ills of China after two decades of reform policies, declined as too explosive by eight or nine publishers. But after it appeared in Hong Kong in 1997 under the title China’s Pitfall, an expurgated version was published in Beijing as Modernization’s Pitfall in January 1998, with a preface by Liu Ji, Vice-President of the Chinese Academy of Social Sciences, then an adviser to Jiang Zemin. The book was an immediate sensation, as a blistering indictment of far-reaching inequality and corruption in the PRC, selling 200,000 legal copies and vastly more pirated ones. 
 
    The essay translated here appeared in the March 2000 issue of Shuwu [House of Books], a journal published in Changsha. The number sold out within ten days. More radical than her book, the article met with a swift reaction from the authorities. The Propaganda Department of the Central Committee of the CCP denounced it as a ‘liberal’ document guilty of ‘inciting antagonism between the different strata of Chinese society’, and sent an investigative team to Changsha to find out how it could have seen the light of day. In May meetings were summoned of the Guangdong Provincial Committee and Shenzhen Municipal Committee of the Party, at which confidential directives were given that her works were no longer to be mentioned in the media. On returning from a trip abroad in June, He Qinglian was demoted from her editorial position at the Shenzhen Legal Daily, and placed under domestic surveillance. Her article, however, continues to be the focus of intense unofficial discussion, amid increasing intellectual ferment in China. In study circles, it has been compared—only partly in jest—to Mao’s famous Analysis of Classes in Chinese Society of the twenties, as a gripping class analysis of Chinese society for these times. Disavowing the analogy, He Qinglian has said that where Mao’s text set out to identify the agents, allies and targets of a social revolution, her concern is simply to bring home to her compatriots some unquestionable realities of the country in which they are living. 
 
    The class structure of Chinese society has undergone a profound transformation since the beginnings of the reform-policy period in 1978. The elite, previously selected on a political basis, is now also being recruited on the basis of ‘wealth’ and ‘merit’—profoundly affecting the underlying social structure. These new sections of the elite are now beginning to form their own interest groups, social organizations and lobbying channels, beyond the already established political ones. The working class, hitherto the constitutionally decreed ‘leading class’, and the peasantry, the ‘semi-leading’ class, have both been marginalized; intermediate social organizations are developing apace. All these processes have led to thorough-going changes in the relations between the state, society and the individual. We have reason to believe that, after China joins the WTO, interest groups will multiply further, and relations between them will undergo yet more complex change. 
 
    Before the Reform Era, China was a highly unified, centralized society, in which political, economic and ideological centres largely overlapped. The whole society obeyed a paramount interest—that of the Party—and the value-system appeared to be equally unified. This situation reflected the distribution of essential resources. At that time, the government monopolized not only the basic material resources of society—land, property, income and so forth—but also the political resources of power and prestige, and the cultural resources of education and information. There were no independent, non-governmental resources, and no intermediate organizations; an essentially binary structure, ‘state vs. people’, prevailed. Chinese people at that time had no material goods beyond some simple furniture, clothing, cooking-ware, bedding, and so on. Their incomes, too, were woven into the governmental distribution system. Peasants lived under the rural institutions of the People’s Communes, mainly dependent on the labour-point system for their earnings, while urban dwellers relied on the wage scale fixed by the Personnel and Labour Ministries. Under this highly unified, monolithic state, it was impossible to form any social group with independent goals. 
 
    Inequality and corruption 
 
    The thrust of Chinese reforms has been gradually to reallocate the possession of social resources. However, as this author has repeatedly pointed out, the principal form this has taken has been a process of privatization of juridically public assets by the power-holding stratum. Its most striking feature has therefore been a glaring inequality in the distribution of national resources—an inequality that has been the starting point of the restructuring of class relations in China in the past twenty years. The way in which current political and economic elites have crystallized has been tellingly described by the sociologist Sun Liping and his colleagues. They write: 
 
    Transferability between political, economic and cultural capitals in China has yielded a type of commutation significantly different from those analyzed by Ivan Szelenyi, which we may call ‘insider’s transfer’. Characteristic of this phenomenon is the pattern of ‘missing no chance’, whereby inter-generational transfers of various types of capital within a family lineage have reinforced the switchable potentials of the different capitals themselves. In other words, in each upheaval in the distribution of resources, the existing power-holders have never missed out. Some of the high points in this sequence have been: the resumption of nation-wide university entrance examinations in the late seventies; the opportunities for study abroad in the eighties; the openings for speculation in the experimental urban reforms of the mid-eighties; the selection of the ‘Third Generation of Leaders’ in the late eighties; the commercial fever—‘jumping into the sea’—of the early nineties; the trade in diplomas of higher education in the mid-nineties. These were all links in a chain of ubiquitous capital accumulation by this group. If a middle class has had difficulty emerging in China, it is partly because so many of the resources necessary for one have already been cornered.1 
 
    Though the total size of the elite that now controls a stock of ‘all-encompassing capital’ is not large, it enjoys commanding power over political, economic and cultural life. Most of its members made their fortunes not through technological innovation or industrial enterprise, but by reproducing and exploiting monolithic positions of power to accumulate personal wealth. 
 
    This process of power-generated capitalization was studied in some detail in my book The Pitfall of Modernization, published in 1997. Since then, however, the forms of corruption in China have undergone considerable changes. In the eighties and early nineties, malversation was mainly an individual affair. Typical cases included Yan Jianhong, the former President of the Guizhou International Trust and Investment Company; Gao Senxiang, once head of the Chinese Trust and Industrial Bank in Shenzhen; or Wang Jianye, the former boss of the Shenzhen Planning Office. But by 1995 corruption had developed from an individual to an organizational stage. A number of features distinguished such organized corruption. Often the leaders of social organizations were those most heavily implicated in cases of corruption, utilizing the public authority entrusted to their institution or branch of the state apparatus as the key asset in ‘power-money exchanges’. For their part, lower-level social organizations would mobilize the public resources under their control to bribe upper-level organizations, in pursuit of more financial support, better administrative deals or greater business opportunities. The case of Deng Bin in Wuxi City, Jiangsu Province, illustrated these trends. In the corruption scandal in the port of Zhanjiang in Guangdong Province, the Party Secretary, the Mayor and leading figures in other government departments were all involved—and subsequently caught. Revelations of corruption in the Army offer similar examples. 
 
    By about 1998 corruption in China had developed further, from an organizational to an institutional or systemic stage. Three features define this new phase. Firstly, corruption has now permeated the bulk of the party and state apparatus. Secondly, corruption has become an established arrangement within institutions, as official posts are traded as counters in the redistribution of political, economic and cultural power. Qi Huogui, former party secretary of Dongfang City in Hainan Province; Yang Shanxiu, former mayor and deputy party secretary of Anyang in Henan Province; Zeng Jincheng, former head and deputy party secretary of Zhoukou district in Henan; and Zhu Zhenjiang, former mayor and deputy party secretary of Hebi City in Henan, all sold official posts on a large scale.2 Thirdly, official campaigns against corruption are often no longer real threats to it, but rather instruments of political leverage and blackmail for personal gain. The case of Ruian City in Wenzhou District, Zhejiang Province, where a rural hooligan used evidence of local officials’ corruption as a lever to gain control over the whole of the political, and part of the economic and personnel structures, of the Ruian region is indicative.3 These forms of corruption are rich in ‘Chinese characteristics’, if we compare them with the scene in developed countries, because of the different social systems. On the other hand, their upshot is very similar to patterns in Latin America or Southeast Asia. The power and wealth of the few keep them on top, but the crudity of their route to enrichment means that society has no moral respect for them. 
 
    Political and economic elites 
 
    Chinese society today can now be broadly categorized into a small elite layer, a much larger middle layer, and a burgeoning layer of marginalized groups beneath (although the composition of these layers, and the relations between them, remain fluid). Within the elite itself one can distinguish three distinct groupings, possessed of different types of resources: political, economic and intellectual. We will begin by examining the first two groups, and then go on to discuss the slightly different situation of the intellectual elite in the next section. 
 
    Together, China’s political and economic elite today comprises about seven million people, or one per cent of the employed population.4 The political elite proper consists of top state officials, high- and middle-ranking local officials, and functionaries of large state-owned, non-industrial institutions. The composition of this elite shows a high degree of continuity, since many of its members previously held positions within the planned-economy system, although others have entered its ranks during the techno-bureaucratization process of the reform era. Only a small minority of the old elite has lost social status through retirement or defeat in factional struggles. The majority have been able to use their previous administrative roles to ensure a smooth access to market opportunities—and thus to reconstitute themselves and their families as members of the ‘second pillar’, the economic elite. This group include the managers of state banks and large-scale state enterprises—still preponderant within the Chinese economy [dominating steel, cement, mining, engineering, aerospace, oil and petrochemicals, as well as media and telecommunications]; the executives of large and medium companies; and the owners of large or medium private firms. The first four of these, at least, can claim to have a literal blood-kin relationship with the ruling political elite for, as we have seen, there has been little substantial change in personnel since before the reform era, beyond the transition from a political elite in a planned economy to an economic elite in a semi-marketized economy. Elite cadres began to ‘love the market’ in the mid-eighties, and soon understood how to turn the power they wielded into the personal accumulation of wealth, beginning the process of recomposing themselves into a property-holding class. 
 
    The final contingent of the economic elite—the owners of large or medium private companies—can be further divided into three types. One comprises families from an official background, who have been able to acquire wealth most conveniently through a ‘one family, two systems’ arrangement (parents in government, children doing business). Kin connexions of this kind are ideal for rent-seeking activities. Another group has made its way up from non-official backgrounds, by deft exchange of ‘extra-systemic’ material assets for ‘insider’ power resources. It too thrives on rent-seeking operations. Both of these types are linked to the political elite through personal connexions rather than institutional channels, deploying their ties with government officials to maximize their own interests at the expense of organs of public authority. 
 
    By contrast, a third type has achieved success mainly by seizing market opportunities, particularly in the hi-tech sector. The formation of this stratum can be briefly summed up as follows. By the end of the seventies and early eighties, privately run enterprises started to appear in both rural and urban areas, albeit always closely linked to interests in local government. The never-ending changes in official definitions of China’s economic system—initially, ‘the planned economy leads, the market economy supports’, then ‘a planned commodity economy’, followed by ‘a socialist market economy’ and now ‘a socialist market economic system’—have in part been a reflection of the ailing condition of state-owned enterprises since the mid-eighties. As their deficits have deepened, they have ceased to function as the major tax base of the government—becoming indeed serious fiscal burdens. It is against this background that private firms have acquired greater importance, and their legal position has gradually altered. Accompanying this process, the general quality of this layer of private entrepreneurs has improved: formerly composed mainly of outcasts from the previous employment system, laymen with barely acceptable education, it is now gradually becoming a stratum whose average educational level is higher than that of the national population. By 1998, the proportion of university graduates in this sector had increased to about 20 per cent.
 
    The lobbying activities of this group in pursuit of their own interests have become stronger and stronger, and their enthusiasm for political participation correspondingly more intense. Persistent efforts have led to the creation of their own organization, the All China Association of Entrepreneurs and Commerce (ACAEC), their own newspaper—the Chinese Commercial Times—and more and more seats in official organizations such as the People’s Congress and the Political Consultative Committee (PCC), although these bodies are not at the core of political power in China. According to a 1996 document, more than 5,400 private entrepreneurs were selected or recommended as members of the People’s Congress above county level, more than 8,500 as members of the PCC, and close to 1,400 as committee members in the Youth League, not to speak of eight members in the National People’s Congress itself. Many businessmen have also entered leading bodies of the ACAEC at national, provincial, municipal or district, and county levels. These figures can only have increased in the past few years.5 Welcome news for this layer has been the emergence since 1998 of the cutting-edge topic of ‘constitutional revision’ to protect private property from infringements, inspired by the conviction that private riches form a legitimate part of the total wealth of society—a discussion that has clarified the logic of free enterprise to policy-makers and public alike. 
 
    Although the lifestyle of the two major circles of the elite—political/governmental and economic—may appear slightly different, they share some basic features: high-speed living, limited spare time, abundant consumption and similar tendencies in their leisure pursuits and sexual proclivities. The reason for the similarity is that the ‘cultural consumption’ of the political elite—whether sexual consumption or general entertainment—in most cases takes place in the purlieus of the economic elite. As the class consciousness of this elite gradually crystallizes, urban spatial structures are starting to register considerable change. In some of the larger, more economically developed cities, concentrated elite neighbourhoods and mini-urban communities are already beginning to form, responding to the transformed lifestyle demands of the ruling group. 
 
    An intellectual elite 
 
    The intellectual elite is separated from the run of general technical workers by its possession of a commanding social position and credible authority over public opinion. This stratum has experienced drastic splits and fractures during the reform era, taking a rather different path from that of the political and economic elite, with markedly distinct stages to it. Under the rule of Mao Zedong—who once remarked that the greater one’s knowledge, the more reactionary one becomes—intellectuals were dismissed as ‘stingy ninth-rankers’ [in a hierarchy where the working class was formally accorded the first rank, the peasant class the second, and so forth]. Policies for intellectual work in the humanities were strictly instrumental, to serve Mao’s continuing revolution. At the beginning of the Reform Era, however, the publication of an official article under the title ‘The Spring of Science’ offered an encouraging signal to intellectuals, most of whom identified strongly with the economic and political changes of the time. Intellectuals, in fact, provided the main social support for the reformers of this period within the Party, while conservatives were mainly concentrated within the state bureaucracy. During the nineties, however, the inequalities generated by marketization have triggered increasing strife within the intellectual stratum. Although a segment of the intellectual elite has developed into an interest group tied to the ruling politico-economic bloc, a far greater number have gained very little from the economic reforms; instead, their relative socio-economic position has been irreversibly lowered. The attitude of intellectuals towards the reforms is therefore no longer one of unconditional support, but is now guided by the dictates of self-interest. 
 
    A section of the intellectual elite has been a beneficiary of the reforms. Scientific and technological knowledge, as well as certain social sciences such as economics and legal studies, have all become important cultural capital since the Reform Era began. Capable technical experts, lawyers, economists and engineers quickly monopolized high positions in social institutions, with a minority also entering the core of the power elite. This group of experts has been extremely successful in transforming their previous political capital into social capital, the network of social connexions that served them so well under the Planned Economy Era once again playing a significant role in the rent-seeking China of today. Driven by self-interest, some elements have taken up positions that are in direct contrast to their earlier values and beliefs. Their ample cultural capital and money-driven ideology have been put at the service of the economic elite, enabling them to get a handsome share in the first round of wealth accumulation. 
 
    This group are important allies of the new economic elite, who need the help and cooperation of economists, legal experts, social scientists, artists and—especially—the media, those who control social opinion, in order to gain a seat within the legitimate ruling order. It became clear some years ago, during official discussions of policy for the property market and for the development of family-car production, that elements of the intellectual elite were able to affect government policies both through their influence on public opinion and by their role in advisory bodies. This was plain evidence of their alliance with certain interest groups, and energetic participation in pre-emptive rent-seeking activities. Sometime earlier, articles on the internet revealed that family members of a well-known economist were involved in profiteering ventures. The important point here is not so much what commercial activities relatives get up to, as whether ‘theory’ joins with money to further particular interest groups, under the guise of serving the welfare of all—abusing social norms and misleading official policy. 
 
    The relationship of this sector of the intellectual elite to the political elite is strikingly different from the pattern before the Reform Era. In his essay ‘On the Four Social Elites in Today’s China’, the Sino-American scholar Cheng Xiaonong divides the intellectual stratum as a whole into a ‘commercial group’, a ‘highbrow group’, a ‘populist group’ and a ‘conservative group’, according to the affiliation of each with specific interest groups. This is a realistic analysis. Cheng argues that, by reason of their education and social background, the outlook of technocrats within the current political elite is not simply determined by their own institutional interests, but is liable to influence from elements of the intellectual elite.6 This makes a striking contrast with the disposition of the political elite of the previous generation, who did not doubt that a great ideological gulf separated themselves and the intellectual elite of their time. Today, however, when the latter is deeply divided into different camps, the political elite can borrow or take up ideas from intellectual groups of its choice, causing an acute ‘think-tank complex’ among some circles. 
 
    In reality, intellectuals have never formed a unified interest group, and it is logical that some should have formed linkages to power amid today’s rapid social differentiation. The problem for the ‘think-tank’ sector is its confusion of two sets of essentially different rules, those appropriate to ‘politics’ and to ‘scholarship’. The goal of politics is to maximize rewards with scant concern to means, and to balance between various interest groups. Social conscience is never the starting point in the thinking of politicians. On the other hand, scholarly pursuits aim at truth, and in seeking it, may attain virtue or beauty too. The sector of the intellectual elite with ties to policy-making circles tends to mix the two sets of rules, wrapping up proposals promoting particular interests as a ‘new general theory’, and so misleading society at large. On the other hand, the ‘highbrow’ sector suffers from the serious drawback that many of these intellectuals know very little about the actual problems of society. Their social criticism tends to be excessively radical, and lacking focus on empirical issues. Compared to these two types, populist intellectuals have relatively less theoretical training. Many are still confined to an old-fashioned ideology, unable to advance beyond the class struggle maxims of the Chinese version of Marxism. In this respect, they are close to those categorized as conservatives by Cheng Xiaonong, the traditional ‘Left’ in China rather than the ‘New Left’ that has arisen in recent years. As social change accelerates, conflict and regroupment among intellectuals will become more and more pronounced. In all probability some old comrades will become opponents of each other in future debates over political and social issues. 
 
    The relationship between intellectuals and governments has always been problematic in developing countries. The experience of Latin America and Southeast Asia suggests that when intellectuals in these societies forget their conscience and abandon their social obligations, the result is a thorough-going corruption and complete deterioration of collective life. Nor is national dignity to be restored merely by barking back at the developed countries that ‘you too suffer problems of corruption, and are not much better than us’. 
 
    An underdeveloped middle class 
 
    In the eighties and early nineties, policy loopholes allowed quite a few people from the lower end of society to rise in the economic scale. Occupations traditionally associated with intellectual strata lost prestige, while the standing of government staff, service and commercial workers improved. However, since the mid-nineties some technically advanced enterprises have given rise to a new middle-class, assessed by income and status. This group can be envisaged as a ladder with two parts. On the top rungs are well-paid intellectual workers, managers of middling and small enterprises in the state sector, private owners of middling and small firms, white-collar employees of firms with foreign investment, employees of state monopolies, a total of about 29.3 million people, some 4 per cent of the total workforce.7 
 
    On the lower rungs we find specialized technicians, scientific researchers, lawyers, teachers in higher education and middle schools, rank-and-file employees in the arts or media, average functionaries in government, middle- and lower-level management in state enterprises, upper-level self-employed and traders. These groups amount to about 82 million people, or 11.8 per cent of the employed population. With certain exceptions—some private owners of middling and small firms, managers of state equivalents, individual entrepreneurs or traders, and elderly employees in state monopolies—most of this stratum is well educated and progressive in spirit. They are the counterpart of the credentialized middle-class in Western countries. But they form a far smaller proportion of the population. 
  
    A marginalized working class 
 
    Traditionally defined, China’s working class consisted principally of employees of state enterprises. Today, however, the Chinese working class comprises two broad sectors. One continues to be those who labour in state-owned or large-scale collectively-owned firms; the other is made up of employees working in foreign, joint-venture, or Hong Kong and Taiwanese firms, or in township-and-village enterprises (TVEs). The two sectors are differentiated by distinct types of relationship between the workforce and the state (or managerial agency representing it) on the one hand, and the workforce and capital owners (along with their agents) on the other. At present, with the exception of white-collar employees in Euro-American firms, every part of the Chinese working class is in turmoil. 
 
    Before the Reform Era the industrial labour force in China was, much like that in any capitalist economy, divided into core and peripheral sectors. The former were registered employees in state-owned firms; the latter were long-term or temporary workers in collective enterprises in urban or rural areas. The latter represented only a small portion of the total industrial workforce. The relationship between the working class and the state had two main dimensions. There was the balance between management and workers in the sphere of production, where the labour process on the shopfloor and the extent of workers’ participation or control over it was determined; and there was the sphere of distribution, where the worker was allocated a given share of the earnings of his work-unit by the state, which set his wages, medical insurance, pension system, and so forth. In those days it was not so much the labour system that generated discontent, as the totalitarian political system. In the production process, managers did not have much real control over their employees, who worked at their own preferred speed—management had to make many compromises to gain their cooperation. The saying ‘state-owned firms have no idea of efficiency’ pointed to this reality. On the other hand, under the relentless surveillance of the party branch and party members, workers had no space for a personal life. Even in very private settings, casual conversation could bring the risk of being labelled counter-revolutionary. As for conflicts in the sphere of distribution, they mainly concerned the fairness with which resources such as promotions in rank and payment, or housing allowances, were allocated. China did not have a middle class, but workers of state-owned firms could be compared to a ‘semi-middle-class’ in China at that time. Strict residential controls acted as a social boundary that excluded peasants from coming to the towns, blocking flows between social classes in the interest of urban dwellers. In these conditions, the main body of a ‘substitute middle-class’ was composed of workers of state-owned enterprises and other urban work-units, all of them organized under party control. 
 
    Once the reforms got under way, however, the labour market opened up and state control over private life gradually loosened. Individuals now might criticize the government in private conversations without the fear of being thrown into jail—public spaces remaining another matter. Into what was once a direct link between the state and working class, a series of intermediate agents have now cut in—bureaucrats, local power-holders and capital. With the diversification of production systems, relations between workers and firms now exhibit a range of types. 
 
    Collective contracts 
 
    The ‘collective contract’ predominates in state or collectively owned enterprises, which account for about 70 per cent of the industrial labour force, or some 120 million people.8 In these firms, we find management, party branches, councils of workers’ representatives, and trade-unions. In theory the coexistence of these bodies is meant to balance power between them, but personnel arrangement procedures have betrayed this purpose. Often a chief manager of a company will concurrently occupy the post of party secretary, while a powerless but veteran deputy manager might be assigned the presidency of the trade union, and the chairman of a firm would be a representative of the worker’s council. The reason is very simple: all management personnel, including the heads of companies, are also nominally employees of the state, and so have the same right as ordinary workers to join the trade union. Generally speaking, collective contracts have been observed very poorly in recent years. Many firms do not take the documents they sign seriously, some simply going through the motions, others supplying false information, and yet others taking the view that their contracts are non-binding, ignoring the articles in them. Sometimes, what happens in practice is the exact opposite of what has been explicitly stipulated in a contract. For instance, in the collective contract signed by a firm in Changchun, the provincial capital of Jilin in the north-east, it is laid down that when a worker is charged with any breach of discipline, the trade union must be a party to the procedure, verifying the facts and signing the verdict, with a final binding power on the decision taken. In reality, when the president of the trade union once differed from the management over the punishment of a worker, not only did the head of the firm pay no attention to his judgement, but he removed the dissenter from his post. Cases like this are by no means unusual. The result is that most trade-union leaders have to react ‘cautiously’ to contractual violations by executives. In their words, ‘a collective contract is indeed a legally binding agreement. But who would dare to bring charges against our managers in court? How could we keep our rice bowl?’9 
 
    In the initial stages of the Reform Era, it was noticeable that managers of state-owned firms still did not give a high priority to raising productivity or improving the quality of output: they spent most of their energy negotiating with their employees over workers’ demands for stable or increased shares of the firm’s budget. But under ever increasing market pressures in the nineties, state-owned enterprises—generally outdated in their equipment and short of financial reserves—have fallen into a vicious circle, as markets for their products have contracted, funds have been corruptly diverted to private firms or into the pocket of small managerial cliques, and the central government has tightened its fiscal squeeze on them. In consequence the number of unemployed or ‘off-post’ workers has steadily increased. By 1999, the shadow of unemployment had fallen over most state-owned firms. Officially published figures put the jobless at 12 million, but the actual number must be far higher than this. In short, workers in state-owned firms have seen their social status sink swiftly and drastically, losing their once protected positions day by day. The result has been a major shrinkage in the middle layers of Chinese society, and a rapid expansion of its lower layers, an obvious formula for social instability. 
 
    Western investment 
 
    The situation is quite different in firms that combine Western capital with Chinese state enterprises, or companies set up in China solely with investment by multinationals. In these the trade union, party branch, and Chinese managerial staff typically form a unified front, which takes much the same attitude to foreign investors in their firm as managers in state-owned enterprises do towards the state—that is, treating them as a welfare fund. Most such firms are financially well-endowed, pay relatively high wages, offer cleaner, safer and more up-to-date working conditions, and provide better housing and other benefits than even profitable big state enterprises. Their employees thus often attract the envy of other workers. Relations between management and labour-force exhibit no sharp class struggle. Often, in fact, workers’ discontent is directed not at the foreign owners but at the Chinese managers, with complaints that they are incompetent, corrupt or nepotistic. In terms of total investment capital and number of firms, this type of company is still quite marginal. American corporations are the third biggest foreign investors in China, but the combined value of European and US investment does not yet amount to even 10 per cent of working capital in the PRC. Of a total of 7 million workers employed by foreign capital, Western firms account for only a small proportion. In the eyes of the media their significance lies in the advanced technology they introduce and the training abroad they can offer Chinese managers. Alternatively, business schools run by foreigners in big cities may disseminate ideas of human resource management, and provide a training ground for modern marketing and managerial skills. In the long term, this could show some results, as Western and Chinese partners come to the conclusion that manpower management by negotiation and consensus creates the best incentives for a loyal workforce. 
 
    Asian firms—back to the past 
 
    Elsewhere, regression in capital–labour relations is a stark phenomenon in China today. What we are witnessing is a return to conditions common during the Industrial Revolution of the nineteenth century, of which Marx wrote the classic critique in his monumental work Capital. In the PRC today, workers employed in firms financed by Asian capital are typically forced to toil continuously for ten or twelve hours every day, with a three or four minute trip to the toilet at specified times, and no weekend off. Workers in such firms earn very low wages, in poor and dangerous conditions. Accidents occur frequently. Fires due to the absence of safety measures regularly cause dozens of casualties. Many firms producing toxicants take no protective steps of any kind, a phenomenon widely reported in the media. Particularly in firms set up by Taiwanese or South Korean capital, struggles between workers and owners frequently erupt. Along the south-east coast, in cities like Shenzhen, Dongguan or Nanhai, the incidence of labour–capital conflict is very high. Though Guangdong Province has issued Labour Protection Acts, the ‘East Asian dragons’ seldom take them seriously. 
 
    This pattern of regression puts the Chinese government in a very awkward position. In name, China is still a ‘socialist state where the working class is its own master’, and all toilers enjoy basic human rights. In reality, local governments competing to attract overseas capital typically bend to investors’ demands. Moreover, many local cadres cultivate good relations with foreign owners in their own personal interest. Even though they know perfectly well what are the working and living conditions in such factories, they would never intervene to do anything about them. When the more daring media dig out shocking stories, they will usually refuse to cooperate with reporters, and try to prevent them from pursuing the truth. Whenever major disasters occur, such as the fires that regularly burn workers to death, investigations invariably discover that cadres from the responsible offices of local government never urged the investors to install fire alarms or extinguishers as the Acts dictate. Nevertheless, the enquiry into such incidents is usually concluded in a rush, with the excuse that ‘to protect local economic growth, we must not dampen the enthusiasm of investors’. Within the already marginalized mass of workers and peasants, the labourers in this zone, overwhelmingly composed of immigrants from the interior, are the most helpless: far away from home and family, without any channel to voice their grievances. 
 
    Peasants under pressure 
 
    The Chinese peasantry was the beneficiary of the first phase of the reforms. The initial family-contract system did for once give peasants the sense of being liberated. However, as the focus of the reform moved to urban areas, rural regions have experienced increasingly grave problems, which many experts and scholars specializing in village and agricultural research have pointed out in recent years. Wen Tiejun of the Chinese Academy of Social Sciences even claims that China’s agriculture has now become an economic sector that runs at pure cost, yielding no net profit. According to the authorities, the fundamental problems facing Chinese peasants are three-fold. Firstly, they labour under excessive economic burdens imposed by the state. A series of governmental apparatuses, known as ‘the seven institutes and four offices’, has been newly created for the administration of rural localities. These heavily expanded bureaucratic settings host an increasing number of functionaries outside the realm of production, on the backs of a decreasing labour force. It is alleged that the agricultural taxes collected by them are often not enough to pay the bureaucrats populating these offices, so that cadres employed by them turn to levying their wages directly from the farmers around them. Another burden on peasant households comes from corruption, as local cadres try to show off their ‘achievements’ or enrich themselves by launching construction or infrastructural projects, without considering for a moment what it means for a peasant economy to foot the bill for these. Some experts are now suggesting abolition of the monetary tax on agriculture altogether, to lift the weight of the ‘seven institutes and four offices’ from the shoulders of the peasantry. 
 
    Secondly, incomes from farming remain very low, since the huge size of China’s rural population makes it impossible to modernize its agriculture by economies of scale, while current backward farming methods have virtually reached the limit of their output capacity. The combination of massive rural over-population and limited arable land is likely to make it for a long time all but impossible to increase the income of the peasants, who still make up 70 per cent of China’s 1.2 billion people. In these conditions, increasingly serious conflicts are breaking out between peasants and local administrations in rural areas. The bureaucratic tasks assigned to local cadres are in direct conflict with the interests of peasants. Every year, the collection of grain for state granaries, the distribution of tax quotas, and enforcement of the one-child policy lead to a rash of incidents. Peasants have no guaranteed democratic power. In recent years experiments with village elections have sought to meet this problem, but in most cases they have resulted merely in the form, not the substance, of change. Only a minority of villages keep their administrative work open and transparent to the public. Many rural cadres commit fraud or corruption. The worst is that quite a few local administrative powers have fallen into the hands of local bullies. Peasants are harassed by rural hooligans all the time, as I have shown in detail in my book The Pitfall of Modernization. 
 
    Together the working class, rural-urban migrants, and the peasantry comprise some 480 million people, about 69 per cent of the total work-force.10 Whatever the difficulties of their life, compared to the truly marginalized groups in Chinese society, they are at least employed. Given that their relatively low educational level does not facilitate occupational mobility, to have work at all in a society undergoing rapid structural change is not such a very bad lot. For they could at any moment fall into the ranks of a social group that is much worse off. 
 
    A vast marginal population 
 
    It is estimated that the total ‘off-post,’ unemployed and pauperized rural population together make up some 100 million people, about 14 per cent of the total available workforce.11 In other words, about 80 per cent of the Chinese people live either at the bottom or on the margins of society. Such a distribution is bound to lead to social instability. A survey of 197 criminal cases involving ‘post-waiting’ youth (instead of admitting the existence of unemployment, the PRC has created the terms ‘off-post’ or ‘post-waiting’, all too expressive of what are often referred to as ‘Chinese characteristics’) in northern Jiangsu Province since 1991 shows that they have five major features. (i) Overwhelmingly, these are crimes committed for gain. Of the 197 cases, 60 involved theft; 24 burglary; 12 fraud; 9 kidnapping; 5 drug-dealing; 26 extortion; 9 prostitution—for a total of 145, or 70 per cent of the total. The economic connexion with the penury of the ‘off-post’ population is evident. (ii) The first one or two years ‘off-post’ is the peak period for criminality, especially for workers discharged from poorly managed, very low-wage, heavily loss-making firms. (iii) Young male workers under the age of 35 are the principal culprits, accounting for just over 80 per cent of ‘off-post’ criminals. (iv) The offenders had no special skills before going ‘off-post’ and, although their educational level is higher than the peasant average, it is still far below the requirements of contemporary society. (v) With a previous experience of collective labour on the shopfloor, off-post workers are recruited to criminal gangs at a higher rate than peasants. Among the accused in the 197 cases, about one fourth were involved in collaborative crimes, under more than a dozen ring-leadders.12 
 
    Such an analysis has general implications. For the factors causing the discharge of workers from state firms are plain. As the economic system is progressively restructured, those enterprises that are equipped with an outdated technology are being gradually eliminated, while the newer industrial sectors require a much more qualified labour-force. The ‘off-post’ workers from state-owned firms of today, and the rural workforce that has never received any professional training, will never be able to make their way into these technology-intensive sectors. The result is going to be structural unemployment, which a whole generation (mainly those who left high school in the years of the Cultural Revolution) will have to face—a problem closely related to China’s demographic profile, and the unlimited supply of unskilled labour in the country. Some people argue that by joining the WTO China will see the creation of 10 million jobs, which will ease the current painful levels of unemployment. Such predictions are at best half-truths, since the new employment opportunities will be available only to those with some skills and professional training. 
 
    One often reads comments in the media to the effect that the real problem is that off-post workers have been spoilt, and are too choosy about the jobs they will take. This may hold in a few cases, but is certainly not true in general. Others even theorize the situation as the rule in any social transition, which always requires certain social groups to pay more for progress than others. Hence off-post workers must be sacrificed for the good of the nation. If such arguments are not entirely without foundation, they fail to come to terms with the fact that this painful period will not end until a whole generation has disappeared from history, and China’s population has reached a zero or negative growth rate. Furthermore there will be an even worse problem in the future, causing yet more social suffering. The increase in school fees will make it very difficult for the parents of children from lower social classes, let alone marginal strata, to pay for their education. Yet these two groups have the highest birth-rate. If inequality of educational opportunity is to be reduced in future generations, measures are required now to stop the passing down of poverty from generation to generation. 
 
    Floating criminals 
 
    The large number of wandering peasants in Chinese cities and at the margins of Chinese villages are also a well-spring of various forms of criminal activity in the PRC today. The majority—over 75 per cent—of criminals in big cities such as Beijing, Guangzhou and Shenzhen, are non-resident ‘three-have-nots’. Some well-equipped investigators have made local studies of this phenomenon that offer rarely seen and detailed analyses of it. For example, a cadre at Jurong prison in Jiangsu Province surveyed the 202 prisoners under his supervision. He found that three demographic features defined these peasant offenders. The majority—64.5 per cent—were unmarried; most—59 per cent—had criminal skills; and not a few—16.5 per cent—had been in jail before. Their offences revealed a shift from hidden and individual to open and organized crimes: from thefts to hold-ups, and from isolated action to gang operations, particularly burglaries, heists and hooliganism, involving a large number of people. Such criminal groups will typically have their own organization, plan of action, distribution of tasks and quotas, locations for fencing goods, and rules for dividing swag. A noticeable new feature of this peasant criminality is its use of specialized skills or facilities for breaking the law. Thus bus drivers familiar with neighbourhoods along their routes will help to organize repeated hold-ups of their passengers; repair mechanics will steal or alter key parts of other people’s motorcycles; locksmiths will open houses for ransacking.
 
    The most important finding of this survey, however, is the changing motivation of peasant criminality in recent years. Previously, many peasant prisoners displayed clear signs of psychological imbalance, which had led to conflict with the law without any deliberate aim of challenging it. By contrast, the majority of those caught after 1996 had committed crimes with the conscious intention of breaking the law and defying moral prohibitions. ‘Since other people are living a highly enjoyable life’, one prisoner said, ‘I, who am lonely and impoverished, should be able to find some stimulus and relaxation. Even if this means committing a crime, it is still my only chance of experiencing something different in life.’ The author comments:
 
    Many young people from the countryside, suffering from acute poverty and longing to become rich, have understood the market economy in a very subjective and irrational way, misunderstanding its values and identifying them simply with money and entertainment. Once their view of social values becomes topsy-turvy, their sense of right and wrong quickly follows. Greed becomes “happiness”; the Mafia boss a “hero”; lack of taste “entertainment”. All of these normative inversions are inter-related and inter-active, orienting criminal conduct in corresponding directions. 
 
    In somewhat different language, a report by Zhang Nanyan of the Prison Bureau in Henan Province reaches similar conclusions about rural criminality.13 
 
    Black societies 
 
    The floating population of migrants in China has given rise to quite a number of underground gangs, of which the principal type is the ‘black society’ organized on a provincial, city, county, township or village basis. Relatively well-known examples that have attracted legal repression are ‘Xinjiang Gang’ in Shanghai, the ‘Beijing’ and ‘White Shark’ Gangs in Guangdong, the ‘Ganzhou Gang’ in Jiangxi, or the ‘Wolf Gang’ in Shanxi. These black societies, composed of company employees, post-waiting youth or peasants, are bonded by ties of personal friendship. Some have well-designed vertical structures, with a formal hierarchy and strict disciplinary rules, often simulating kinship relations to cement the organizational network. Other types are based on real clan ties, or professional connexions.14 The ever-increasing number of jobless provides a great army-in-preparation for black society recruitment. It can be predicted that black societies will play an increasing role in Chinese social life in the future. Historical experience, both in our own country and elsewhere in the world, suggests that the most authoritarian state is likely be more merciful to ordinary citizens than the most open-minded black society. 
 
    Intermediate associations 
 
    Modern societies are generally characterized by multi-layered social participation in the determination of public policies. Each social class will have its own channels for protecting or expanding its interests. This is particularly true of middle classes, which will often mediate or negotiate between higher and lower classes—a role that depends in turn on the existence of various intermediate associations. The weakness of the middle strata in China determines the weakness of such organizations, most of which do not, in fact, derive from the self-interested pressures of upper or middle income strata. Before the Reform Era, all social organizations were under strict state control. More than a hundred nation-wide associations and more than six thousand local associations existed by the early sixties, until they were paralyzed by the Cultural Revolution. With the onset of the reforms, they began to revive and by June 1996 there were more than 1,800 such registered national organizations, and nearly 200,000 local ones.15 Some were set up through party or governmental initiatives, to fine-tune control of a social or economic sector—like the Association of Private Firms, not to speak of the ACAEC. Others have been formed by enterprises, particularly professional bodies like the Association of Fashion Design or the Association for Interior Decoration. Still others are fraternities or alumni associations. 
 
    With the exception of the last type, which are definitely unofficial, all of these organizations operate in a ‘semi-official, semi-civil’ fashion, under the watchful eye of the government. The leaders of these intermediate organizations (including the Association of Private Firms and the Association of the Self-Employed) are all appointed by the state and paid as civil servants. Functionally, the associations usually have a double face. Towards the government, they represent their constituents; towards society, they represent the government. One body, in effect, occupies two positions. The state, for its part, has rationalized its administration of this area. From 1976 to 1988 confusion reigned, as there were no unified procedures for registering or monitoring social organizations, until the State Council charged the Ministry of Civil Administration with bringing order into the situation. After the spring of 1989, the government realized the importance of controlling this domain closely, and issued new regulations for the registration and administration of social organizations, setting up a double layer of supervision over it. All social organizations had henceforward to accept a dual system of control, one from the Registration and Administration Office, and the other from the occupational Ministry under which the activities of the given association fell. In 1998 the regulations were tightened to eliminate loopholes in them. 
 
    Typical of the results are the so-called ‘three shi’: the Accountants’ Association, Auditors’ Association and Lawyers’ Association. Since the professional tasks of accountant and auditor in many respects overlap, the first two merged into a single body in 1997. Theoretically, auditors and accountants are guarantors of public trust in the operations of any enterprise, while lawyers are defenders of the interests of their clients, which are certainly not those of any court. However, the relations between these two big organizations and the government give a fair idea of the situation of intermediate associations in today’s China. Lawyers have a very bad reputation in Chinese society. For the outcome of legal cases does not generally depend on the verification or otherwise of whether violations of the law have occurred, but rather on how skilful a lawyer proves to be, and above all how strong his connexions are with the court. There is a saying inside the profession: ‘To fight a law suit is to fight for one’s connexions’. It is a common occurrence to hear lawyers promoting their services by telling clients how intimate they are with a certain judge. Collusion between lawyers and judges in a law suit is far from unusual in China. There are even cases where the same lawyer will succeed in acting as the representative of both plaintiff and defendant. Public opinion holds the legal profession in very low esteem. 
 
    The situation of the Association of Accountants has distinct features of its own. Today, when a Chinese firm prepares annual accounts, or the manager of a factory is about to leave his post, or a state enterprise wants to change its share structure or make a public offer on the stock market, the company or executive in question is required to present an audited report by an officially registered accountant. Typically, the audit is not carried out to improve internal management or modernize capital structure, but to comply with an administrative formality. Thus what the firm or manager will be looking for is not an institutional accounting standard, but an individual flexibility that can set aside professional ethics. If an accounting firm cannot meet the pragmatic demands of its clients, it will lose business. Intense competitive pressures and the absence of disciplinary sanctions within the profession thus ensure the production by some firms of falsified balance-sheets. The results are notorious. In 1998 a nation-wide total of 478 accounting associations were warned, intervened in, fined, had their licences temporarily revoked, illegal earnings confiscated, or were dissolved. No less than 103 firms and nearly 1,000 branch offices were shut down, over 5,000 personnel discharged.16 Accountants as a profession pay a much higher price than do lawyers for illegal practices—punishment is both more severe and more frequent. Their reputation is now so low that when a domestic company makes a public share-offer on a foreign stock market, a balance-sheet audited by a local accounting firm is considered unacceptable. Under this kind of ill repute, the profession has been forced to some self-examination. But if the social environment that ‘forces ordinary women into prostitution’ does not change, such self-reflection is unlikely to bring much improvement to the professional ethics of Chinese accountancy. 
 
    However, although social organizations are generally still unable to defend the interests of those they are supposed to be representing or to participate in the making of public policy-making, and possess little negotiating power vis-à-vis the government, they have created a certain ‘overlapping space’ in Chinese social life, acknowledged by both society and the state, that is new. If there is not even more political interference with it, the role of this domain in the future development of the country will become increasingly important. For here is the potential for a public sphere, carved out of an iron-block social life, in which citizens can participate in non-obligatory, voluntary activities. 
 
    The dangers of polarization 
 
    At the beginning of the reforms, most Chinese intellectuals imagined that China was entering the path to a middle-class society. This, it was widely believed, would bring social stability. For—so this argument went—middle classes act as a buffer between higher and lower classes, mitigating conflicts between them, and so affording political stability; they diffuse a moderate, conservative outlook inimical to extreme or radical doctrines, facilitating ideological stability; and their lifestyle is dominated by consumption, furnishing—when they become a majority of any society—a vast and steady consumer market, assuring economic stability. The development of private enterprise, the redistribution of state property, and the introduction of share-holding raised high hopes of such an evolution. The fact that today there are members of the intellectual elite who view corruption as a benign phenomenon, helping to wind down the old economy, is testimony to the power of this outlook. 
 
    Reality, however, has disappointed these illusions. Since the starting-point of the reforms, which took the form of an intrusion of political power into the market, acute social polarization has occurred. Not only has China failed to develop a diamond-shaped distribution of income with a large middle-class in the centre, but it has moved towards its very opposite—a pyramidal social structure,  akin to that in Latin America or Southeast Asian countries like Thailand and the Philippines. A small minority is perched on top of a huge mass of depressed or marginalized strata, comprising more than 80 per cent of the population, with a quantitatively under-developed middle class in between. The experience of modernization elsewhere indicates that higher education is the principal machine for producing a middle class, one of its functions being to inculcate mainstream—that is, middle-class—norms. But in China those in receipt of a higher education form a very small portion of the total population. The country still visibly lacks the means to produce a substantial middle class. 
 
    Social polarization can be seen in the pattern of urban development. As we have seen, many large or medium Chinese cities now have wealthy neighbourhoods, often guarded by state-of-the-art security systems. Consumption too is highly stratified. Speciality stores sell high-fashion items to the rich; street stalls offer cheap wares to the poor. Commercialized political power redistributes wealth to an elite now reproducing itself across generations. Members of the middle or lower classes are acutely aware of the mechanisms of dispossession and exploitation. The most obvious phenomenon is the contrast in the fate of managers and workers when a state enterprise goes bankrupt. Workers are thrown off-post without the slightest compensation, but a former manager or head of a factory never falls into the same pit of poverty. On the contrary, he will often be re-employed by the buyer of the firm’s residual assets—not because of his skills as a manager, but for his cooperation in disposing of state property. Such bosses display ever-stronger anti-social tendencies. The result is a rise in terrorist incidents, physical attacks on the rich, stoppages and sabotage in state-owned enterprises—all manifestations of class conflict. The extent of social tension can be measured by the escalating crime rate, including the number of murders. 
 
    Cadre selection 
 
    The roots of China’s problems today lie, among other factors, in the bane of backward and anachronistic cadre-selection. For a long time now there has been no rational basis for the way officials are picked in China. There is no examination system. Nor is there any open democratic mechanism. Mystification surrounds the whole process in which leaders ‘discover’ a talent, ministries ‘take care’ of gifted people, or—still worse—a party boss picks out a certain ‘successor’. Such patterns readily generate corruption, as appointments are based on personal connexions, incompetents cannot be removed from office, and positions are even put up for sale. Not long ago the media exposed the case of a party secretary at county level who sold more than two hundred posts during his tenure; and this is only one instance. The endless stream of corruption cases and abuse of power by cadres acting as local bullies are only a small fraction of the problem—many cases never reach the public eye. Judged by their behaviour, these are power-holders of very low quality. In general, a political elite should not only display competence in social administration, but be capable of considering the interests of classes other than its own, if only to protect its own position in the long run, by allowing them some share in the distribution of common resources. Unfortunately, the current power elite in China is not only incapable of thinking of the interests of other social classes, it cannot even think of the longer-term interest of its own class. Its mentality is expressed rather in the adage: ‘Power must be utilized before its expiry date’. Posts freely referred to as having ‘gold content’ are inseparable from fraud and corruption. These people know as clearly as anyone else that the country will have no future along this path. That is why, while shouting loudly that ‘socialist China is the best’, they look for various channels to send their children abroad. 
 
    Current policy-making reveals a feature that now differs from the pattern of the last two decades. More and more economic policies are based not on considerations of any overall national interest, but on a nexus of benefits to a specific social group. Such critical issues for the national economy as the restructuring of lop-sided industrial sectors or cleaning up of bad debts in the banking system remain perpetually unresolved, because tackling them would affect the interests of some elements of the political or economic elite. Production of family cars, far in excess of the traffic that existing infrastructures will bear, continues to ‘develop’ under various special favours. Property construction is out of control, paralysing the banks with a huge volume of bad loans, but appears unstoppable. At a time when everyone knows that the purchasing power of Chinese people in general is still very low, talk of affordable housing for urban households is never followed by action, since cheaper flats would hurt vested interests. Measures that would allay social discontent, such as forbidding the use of public vehicles for private purposes, cutting down on official banquets, preventing unauthorized collection of ‘fees’ from peasants, often become mere paperwork travelling from office to office. By contrast, policies that exploit public authority to further elite interests, like those designed to facilitate lay-offs and cut welfare benefits in a time of economic depression, lessening the burden on the state at the expense of increasing social tensions, are rushed through with rare determination. 
 
    Perhaps the most typical example of this pattern occurred in early 1999, a period when official policies and pronouncements boosted the stock exchange without restraint, helping certain interest groups to lift a bear market with the stimulus of public funds and bank loans. Once the market was artificially inflated, these groups sold off quickly, leaving ordinary small players to take all the losses. Practices like this are plainly incompatible with any long-term stability for the nation, serving only to make quick fortunes for the new-rich. That such suicidal policies could be pursued in China is testimony to the myopia of a political and intellectual elite that has lost confidence in the future of the country that is in its hands. The government of the PRC has made its choice between the elite and the majority of the people. If it has done so, the reason lies not only in the tilting social basis of the ruling party, but in a more general slide towards a ‘rent-seeking society’. The ship named China is sinking under the devoted efforts of a power elite that has long prepared a retreat for its family members. When it is no longer possible to be a CCP cadre, it will be time for a comfortable retirement abroad. 
 
    Media 
 
    Chinese news media have always been under centralized state control. Since the Reform Era, this control has loosened, leaving more room for independent management. But all channels remain ultimately under governmental authority. Private individuals or companies are still not legally allowed to operate in the publishing sector. On the other hand, since the government has asked certain newspapers to find their own financial resources, telling them to ‘take their risks in the market economy’—a policy editors have described as ‘tying your limbs, then kicking you into the sea’—many publishers have been forced to turn their attention to consumers, while taking care not to offend the government. In consequence there is an economic difference between a party newspaper and a mass newspaper. The former is funded out of government revenues, and cannot afford to be innovative in either editorial direction or reportage: its one duty is to be obedient. The latter, on the other hand, have to survive on sales, which means they must try to be popular and entertaining. 
 
    However, while there are publications that occasionally carry relatively daring criticisms of the status quo, they are always being watched by the authorities, and often get ‘yellow card’ warnings. In recent years, when the economic situation was not very encouraging, the government tightened control over the media. Ironically, in the same period private companies started to buy up certain newspapers and journals sub rosa. Transactions of this kind cannot be officially registered or acknowledged. The deal is usually sealed by a private contract signed by the purchasing company on the one side, and the work-unit in charge of the purchased journal on the other. Both are then bound by the private agreement. The risk falls mainly on the buyer, since if the deal is discovered by the government, or broken by the other side, the company has to write off the loss. The current reorganization of the news media could cause another redistribution of resources in this sector, the results of which may prove quite different from the intended goals. Another challenge to the government, of course, comes from technological progress. The spread of the internet, now becoming popular with the generation under 35, is an alteration of the means of communication that poses a serious challenge to official controls, and makes it likely that the days when the Chinese media were completely under the thumb of the government will soon be a thing of the past. 
 
    Into the WTO 
 
    China’s bid to enter the WTO has focused the attention of Chinese people all over the world, leading to all kinds of predictions about its impact. Some very influential scholars have expressed an ultra-optimistic view, to the extent of claiming that, after entry, multinational companies will force China to accept the rules of their game and thereby help the country to stamp out corruption. Such a prognosis blindly ignores experience. Most Latin American and Southeast Asian countries are member states of the WTO, yet suffer from rampant corruption. Particularly in Latin America, the typical regime was for many years a political dictatorship, allied with domestic monopolies and foreign capital. How could it then be that, when the WTO has yet to clear away domestic corruption anywhere else, China alone will enjoy this magical effect upon joining it? For that matter, however strong the US may be, when its multinational companies come to China, they have to follow the local example and play by the Chinese rules of the game, if they want their share of the takings. If we think of the extent to which China has become a ‘rent-seeking society’, and of the past performance of foreign capital on getting permission to enter China, it should be clear that we have to take the battle against corruption into our own hands. 
 
    What we can be sure of is that China’s entry into the WTO will accelerate its rapid social polarization. If the knowledge functional for a market economy can be categorized as a sort of capital, and social connexions are a kind of resource, those who possess these assets will be well placed to take full advantage of the opportunities China’s membership will provide—far more so than those without them. Euphemistically speaking, the former are prepared and the latter unprepared for the great adventure. The same is true of the gap in regional development within China. The richer provinces will have the resources and the capital to make use of the opportunities afforded by WTO membership; the poorer ones will not. The political elite will soon figure out the best way to cooperate with foreign capital. The intellectual elite will become further divided, as some elements of it update the clients they serve. Today’s economic elite will confront a more complicated situation. Sectors with little chance of joint ventures with foreign capital risk being wiped out in an open competition with multinationals (the telecommunications industry has already spoken of this danger). Branches and firms that command a certain market share and an established reputation will most likely opt for collaboration with foreign capital, to cut the costs of competition for market share. Foreign capital will be happy to oblige. On the other hand, small and medium firms, especially those township and village enterprises (TVEs) that can offer technical services only at a low level and have been kept alive mainly by a high level of public commissions, will probably be discarded soon after China joins the WTO. Without policies to counteract these consequences, the result of China’s membership will inevitably be to fuel the explosive enrichment of an upper class and further marginalize the middle and lower classes. 
 
    China today has developed a social structure quite different from that which existed before the Reform Era. But this has emerged gradually, without a sharp break with the past, as the power-holders of old have been transformed into a new type of elite. The most crucial missing element in this society is any social movements. The only movements in today’s China are demographic—migrations. A country which possesses social movements has a mechanism for self-reflection and self-adjustment. For what these represent is always a collective endeavour to find the shapes and norms of a new life. Judged by this criterion, during the two decades of reform in China, it was only in the mid and late eighties that there were traces of an embryonic social movement. To solve China’s problems today, what we need is an entirely new social movement—one capable of aiming at a complete reform of both ideas and institutions. 
  

    FOOTNOTES 
    ----------------------------------------------------- 
    1 Sun Liping et al, ‘Trends and Risks of Changes in China’s Social Structure in the Near Future’, Strategy and Management, no. 5, Beijing 1998.
    2 Southern Weekend, Guangzhou, 24 April 1998.
    3 Yang Haipeng, ‘A Rural Shaman Commanding a Whole Town’, Shenzhen Legal Daily, 16 December 1999.
    4 Yang Jisheng, ‘An Overall Analysis of Current Social Stratification in China’, Chinese Social Sciences Quarterly, no. 3, Hong Kong 1999.
    5 Hu Yuemin and Zhu Ya, ‘The Development of the Private Economy and Structural Changes in Chinese Society’, Changbai Forum, no. 6, Changchun 1996.
    6 See ‘On the Four Social Elites in Today’s China’, Minzhu Zhougguo, no. 10, 1999, www.chinamz.org
    7 See Yang Jisheng, ‘An Overall Analysis of Current Social Stratification in China’, for this estimate and that in the next paragraph.
    8 Sources for the following section are: Chang Ping and Yu Liuwen, ‘Zhou Litai Lodges Law-suits for Contracted Workers—Almost a Hundred Cases of Workplace Injury Go to Court’, Southern Weekend, Guangzhou, 26 November 1999; Zhao Yunsheng and Liu Rumin, ‘ The General Situation and Potential Measures against Work-Place Disaster in China’, Labour Safety and Health, no. 1, 1996; Xiao Xikang, ‘A Blood-Tainted Report from a Coal Town on Labour Safety Legal Practice’, Jiangxi Labour, no. 2, 1995; Ji Wensheng and Li Junchuang, ‘A Brief Discussion of the Violation of Employees’ Rights in Privately-Owned Firms: Major Manifestations, Causes and Counter-Measures’, Internal Reference on Labour Issues, no. 4, 1997; ‘A Motion to Protect the Labour Safety Rights of Female Employees in Three-Capital, Township-and-Village, and Collective Firms’, Labour Safety, no. 5, 1997; ‘National Production Safety Briefings for 1996’, Labour Safety, no. 6, 1997; Tang Can, ‘The Dual Identity and Discrimination against Female Migrant Workers in the Metropolis’, Sociological Studies, no. 4, Beijing 1996; Liu Yuanyuan, ‘Black Curtains Multiply in Zhanyu factory—Migrant Workers’ Crises Multiply’, Yangcheng Evening News—Weekly Supplement, 22–28 October 1998; ‘Seven Female Workers Forced to Strip for Examinations—a Taiwanese-Financed Firm Infringes Employees’ Human Rights’, Shanghai Legal News, 22 July 1998; ‘Where are Laws, Where is Justice?’, Newspaper and Periodicals Digest, 27 July 1998.
    9 Worker’s Daily, Beijing, 24 February 1997.
    10 Yang Jisheng, ‘An Overall Analysis’.
    11 Ibid.
    12 Liu Zhongfu and Zhang Qinghong, ‘A Preliminary Analysis of 197 Criminal Cases Involving ‘Off-Post’ Workers’, Studies of Crime and Re-education, no. 5, 1997.
    13 Shi Xiugui, ‘An Investigation of Crimes Committed by Rural Youth Arrested during the Crack-Down Campaign’, Studies of Crime and Re-education, no. 7, 1997.
    14 Lei Dongwen, ‘Organizational Features of Mafia-Style Underground Social Groups’, Zhanjiang Normal College Research Journal in Philosophy and Social Sciences, no. 4, 1996.
    15 Wu Zhongze and Chen Jinluo, Managing Social Organizations, Beijing 1996.
    16 ‘One Hundred Registered Accounting Offices and Nearly a Thousand Branch Offices Closed Nationwide—Bringing the “Economic Police” to Book’, Beijing Youth Daily: Weekend Supplement, 14 August 1998.