R. Thomas Berner: Let China in, then work to reform it

Monday, Oct. 7, 1996 | 11:59 a.m.

R. THOMAS BERNER is a professor of journalism and American studies at Pennsylvania State University. He taught journalism in China on a Fulbright lectureship and last visited China in August.

Imagine that you belong to a group that wants to change the behavior of a powerful but erratic individual outside the group. What's the best way? Most would agree that letting the individual join the group and gradually socializing him or her would be the best way.

But when it comes to China's membership in the World Trade Organization, some members aren't sure. And with the next vote on the issue coming later this year, media accounts indicate that China is still fighting an uphill battle. Many WTO members, especially the United States, see China as a developed country. But China considers itself a developing country and therefore seeks a gradual, rather than an immediate, end to its trade barriers as a condition of membership.

To consider China anything but a developing country is to misunderstand China. For while it is a vast country and is headed down the capitalist road, China is hardly the developed market some in the U.S. see it as.

Westerners look at China's population -- 20 percent of the world's population -- and see a market of 1.2 billion people. But the size of the Chinese market is exaggerated, and its potential is uncertain and unclear. The exaggeration comes about because most assume that the 1.2 billion people in China are automatically consumers.

What's the first thing a consumer market needs? Money. The Chinese are not wealthy, or even close. The average per capita income is $500 a year, and 73 percent of the 1.2 billion Chinese live in generally poor rural areas. The population of cities is hardly representative of the country, and there is a growing economic gap between rural and city residents.

How do consumers learn about consumer goods? Word of mouth, of course, plays an important role. But so do newspapers, radio, and television. In fact TV, more than anything, created a mass market in the U.S. and could do the same in China.

Government control

With the news media controlled by the government, its value is immediately discounted as an advertising outlet. Who would believe an advertisement in the People's Daily, knowing that the "news" in the paper is determined by the Communist Party?

Besides building credibility for the news media, the Chinese need to have more media outlets. China is a country of 1.2 billion people but only 2,200 newspapers, 274 AM radio stations, and 202 TV stations. China is a country of 1.2 billion people but only 215 million radios. It's a country of 1.2 billion people but only 75 million television sets. China is a country of 1.2 billion people who are not allowed to own satellite dishes to receive foreign television signals.

On the legal side, the government must not only pass laws that protect businesses, it must actively enforce them. The fact that Beijing tried to renege on its lease with the world's largest McDonald's in favor of someone who wanted to raze the two-story building to build a high rise suggests that anyone doing business in China needs to be extra cautious. And this is, in fact, one area where the U.S. is rightly pressing China to speed up reform, almost as much for China's own good as for outside investors'.

A not-so-big market

China definitely represents a market, but it is not 1.2-billion-people strong. The true market is much smaller, and because of historical behavior and an uncertain legal system, it will take longer to develop and prosper than some expect. The population size itself, rather than representing a ripe market, could be a burden to China's developing economy.

China believes it has come a long way in the past decade in abolishing protectionist practices so it could join the WTO. But when that nation is a developing one, and has a large rural population and a mandate to develop a market economy, lowering trade barriers does not sit well with everyone inside.

The Chinese not only want to protect or stabilize industries that have been started in the past 35 years, they also want to develop more. They want cars made in China driving on roads built by the Chinese. They want Chinese using computers made in China.

China's membership in the World Trade Organization could imperil that. A wholesale opening of Chinese markets might destroy budding Chinese industries and destabilize the political situation. China could implode.

China promises to continue reforming, albeit on its own timetable. This is a welcome sign. The government knows that the country can't develop in a vacuum, and the fact is that once in the WTO, China would have to act consistently in the world market to succeed.

Western nations need to keep the pressure on as a way of helping China develop, but they must recognize that it will be easier to keep the pressure on with China inside the group, not outside.