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The Long, Long March: Civil Society in China

To the bloggers and anyone else who may have been offended by the "sweeping generalizations" in my book, Billions: Selling to the New Chinese Consumer, and other essays, I offer another pre-emptive apology. In this article, I intend to answer the question: "Is Chinese society 'civil'"?

Before starting, I should say I love China. The combination of ambition and warmth in the Middle Kingdom touched me from Day One. The "urge to surge" of even the lowest strata of society is inspiring. The PRC's economic strides over the past decade leave even this long-time China scene observer shocked and awed. On a human level, Westerners have a lot to learn from the fidelity children exhibit towards their parents and grandparents. (When I ask young Chinese to "prove" America is "selfish," 90 percent say, "You put your parents in retirement homes.") And only the coldest heart will not be charmed by the spicy, humor-filled scenes one witnesses walking down the street, filled with pajama-clad adults, the buzz of lively debates or the bionic click-clack of mahjong tiles.

Can a global definition of "civil" even exist? Most Americans are cultural and moral absolutists. Our nation has been shaped by geographic isolation and exceptionalism, a faith in our position atop "a shining city on a hill," as the destination of mankind. Many feel that if behavior is "American" -- or at least "Western" -- it is "civil." This, of course, is untrue. Culture is relative, as are value systems. Both are shaped by distinct topographical, environmental and economic circumstances. And any suggestion that Chinese, or any other, culture is "uncivilized" is, of course, ridiculous.

Cultural Relativism vs. Societal Observations

But back to the point.

With a bit of chutzpah, we aver whether mainland society is becoming "civil." Every society can be defined as the "system" of community life. Or as Aristotle put it, "Whosoever endeavors to establish wholesome laws in a state, attends to the virtues and vices of each individual who composes it; from whence it is evident, that the first care of him who would found a city, truly deserving that name, and not nominally so, must be to have his citizens virtuous." In other words, a properly functioning society is regulated by laws and institutions that apply to all individuals.

The Chinese government, of course, understands this; hence, one of its most ardent propaganda points concerns the "rule of law" and "construction of a harmonious society" in which the "rights gap" between the well-off and less well-off is narrowed. (Atop many urinals, signs are posted stating "a small step forward means a great leap towards a civil society.") So, in effect, this post is a "report card" graded against China's stated ambitions for its own society.

Mainland Society: Sorry, Not Yet "Civil"

Given this definition, it is fair to say that China is, indeed, not yet civil. There are few, if any, institutions designing to guarantee -- even protect -- the basic interests of individuals. The state has no internal checks and balances and, as has been the case throughout Chinese history, exists on a plane quite above daily life. Statutes are composed with intentional ambiguity so they may be interpreted in different ways in different circumstances, all in an effort to safeguard the authority -- and welfare -- of the Communist party. (After living here, it is hazardous to make moral judgments regarding this state of affairs, given the PRC's unique challenges; in fact, most individuals, middle class and below, believe that if the powers of government wane, chaos will erupt.)

How will we know when Chinese society is becoming more "civil?" We will know when the economic/human interests of individuals are accepted as not "good" or "bad" or "right" or "wrong" but inextricably linked with sustainable, rational economic growth. Such an ideological and bureaucratic sea change would manifest itself in many ways, both large and small. Here, in no particular order, are ten things to look for:

Fewer headlines of mining disasters, murders of children and tainted food. It seems that every month there's another round of hand ringing lamenting the unnecessary loss of dozens or even hundreds of lives in coal shafts, unguarded schools and hospitals receiving victims of poisoned milk. The immediate cause is obvious -- i.e., poor safety precautions. Lax standards, however, are a function of a system in which the central government lacks mechanisms to ensure enforcement of promulgated standards amongst local officials who manage the mines. Institutional accountability does not exist. The only way to bring errant cadres in line is fear. An oft-quoted maxim sums it up nicely: "In order to scare the monkeys, you have to kill some chickens."

Amnesty International Reports a Decrease in Capital Punishment Rates. No one knows precise figures but there are approximately 10,000 executions every year. The public supports rigorous meting out of death sentences because they are believed to maintain order in a country with "too many people." The "burden of proof" is an alien concept, a theoretical abstraction. Decisions regarding guilt or innocence are carried out indiscriminately, often by local officials pressured to fill punishment quotas. Courts are not independent from the government and exist largely to propagate party or state power. Rampant death sentences are both acknowledged and assailed by the central government but, to date, the only measures taken to control the phenomenon is an edict banning local governments from making the "final" decision.

Courts shed local commercial bias. The judiciary branch exists to safeguard the interests of the state. Although much progress has occurred in drafting statutes regarding intellectual property and consumer rights, laws do not bite. When a case is taken to court, it will be dead in the water unless tried in a disinterested jurisdiction. Property rights, let alone rural land reform, are not yet iron clad because eminent domain abuses exist on an epic scale. "Rule of law" is still more a checklist than an ethos.

Public bathrooms become less junky. It is churlish, perhaps snobbish, to complain about unhygienic, un-user-friendly, bathrooms in the PRC, given the dramatic leaps in quality that have been made the past several years. One no longer needs to avoid going to the toilet. However, what strikes visitors is not the absolute level of bathroom conditions but the discrepancy between the public vs. private spaces. The décor of restaurants, office buildings, theatres may be glorious, dripping with gold and marble. Lavatories, however, are fashioned with cardboard stalls, paper thin walls and paper mache pipes. Mainlanders still do not invest in private spaces as they do public ones. The needs, let alone sensitivities, of individuals are subordinated to those of the group. This is not a question of "Asian collectivism." Japan is much more focused on societal welfare than the PRC and their bathrooms are works of art, overflowing with detail (e.g., colored stones in sinks!).

China succeeds in marketing its first brand in Western markets. No local brand is anywhere near achieving real market share in either Europe or America. To crack developed markets, products must offer value-added to sophisticated consumers while commanding a price premium. Breakthroughs will be impossible without function marketing departments charged with balancing long-term intangible asset value and short-term revenue and empowered with budget control. The vast majority of local enterprises, on the other hand, are excessively sales-driven.

Most of the brands that have made real progress -- even within China -- are from small companies, usually food and beverage or personal care categories. Why have larger mainland brands - white goods, cars, mobile phones, telecom services, banks, etc. -- failed to take off? Poor (or non-existent) corporate governance that result in structural deficiencies chronic short-termism is pervasive. The absence of an impartial board of directors charged with ensuring long-term share-holder growth remains a huge hurdle, one erected by a government more focused on maintaining order than ensuring protection of individual economic and commercial interests.

The Communist Party leadership transitions are transparent. The CCP will never brook alternative power centers, nor should it; despite many illusions to the contrary, there is no bottom up push for representative democracy. Furthermore, the transfer from Jiang Zemin to Hu Jintao was, for the first time, bloodless but opaque factionalism still dominates the political scene. However, for steady growth and rational resource allocation to occur, a less corrupt, law-based government must emerge. This will require a far greater degree of transparency (i.e., accountable power structures as opposed to murky, back-room brokering) than currently exists. The Chinese, eminently pragmatic, recognize the reality of "inner-party democracy" which, in their own minds, will entail building up systems and institutions for rational administration as well as less secretive leadership transitions.

Foreign banks' business booms and private hospitals achieve critical mass. 21st century China has witnessed the biggest explosion of consumer choice in human history. A plethora of luxury fashion, automobile and fashion brands are lapped up by an ever-expanding middle class. However, despite nominal adherence to WTO timetables, the service sector -- most conspicuously, health care and financial services -- remains highly regulated. Even well-off individuals are not free to invest or care for family members as they wish. Quality standards within state-owned providers are, to put it charitably, mediocre; bureaucratic in-fighting trumps consumer choice every time. Surgeons are regularly bribed by patients' relatives to ensure adequate care. Medical equipment, occasionally state of the art, is manned by inadequately trained and poorly compensated staff. Local banks, while ubiquitous and dependable for low-end transactions, offer no investment alternatives beyond basic savings accounts The needs of young urban professionals planning for retirement or their child's education remain unmet. Why has the service sector failed to liberalize, despite the avowed imperative of stimulating consumer spending and minimizing export reliance? Why will foreign banks be unable to conduct RMB transactions for customers with less than $120,000 in deposits? Why does the state fail to promote the economic and medical needs of a cash-flush middle class? Yet again, in a bid to retain control of what the party labels "strategic interests," social and political stability outweighs the development of institutions -- in this case, a transparently regulated private sector -- that protect individuals.

Traffic, airline and elevator etiquette improves. Airline scheduling is more secretive than Politburo meetings. The authorities do not deign to announce delays until passengers have been herded onto planes like sheep, all in a bid to "have everyone ready" when the air traffic gods have spoken. (The ability to "mobilize" is one of the Communist party's greatest competitive advantages.) Crossing the street in Shanghai is a death trek. The concept of pedestrian right-of-way is a theoretical abstraction. Taxi drivers are kamikaze pilots, accelerating and decelerating like hyperactive children off lithium. In lifts, personal space simple does not exist, let alone queues. Resonant belches waft to the ceiling and cacophonous conversation pierces ear drums. Public life is a dog-eat-dog race to "get there first" in which the unfamiliar, unless proven otherwise, are considered adversaries. Civil society, even in the lead up to and during the PRC's Olympian debut on the world stage, did not exist, despite an authoritarian government's attempt to implement it by fiat.

Private companies have equal access to banking capital. Misallocation of resources is, by far, the most pressing economic problem in the PRC. Vibrant, resourceful small and medium-sized enterprises are starved for commercial loans while bloated, state-owned dinosaurs are flush with cash. Both central and local governments have one eye fixed on social stability (i.e., minimizing layoffs) and the other on profit, leading to irrational decision making. (One factor behind the ebullient growth of luxury goods: they are used as excess profit absorbers by SOE managers who are not accountable for the financials.) The heavy hand of the state trumps individual shareholder interests, leaving entrepreneurs hungry for impartially-allocated credit.

In conclusion, Chinese civil society - i.e., existence of institutions to protect individual interests -- has made strides from the ruthlessness of previous eras. However, gains have been incremental rather than qualitative. Until central leadership fully embraces advancement individual interests as tantamount to efficiency, gains will not be fundamental