China Ready to Grant Property Rights

By Peter S. Goodman
Washington Post Foreign Service
Monday, December 22, 2003; 1:07 PM

SHANGHAI, Dec. 22 -- China's Communist Party leaders on Monday proposed amendments to the nation's constitution enshrining a legal right to private property while broadening the focus of the party to represent private businesses.

Virtually assured of adoption in the party-controlled National People's Congress, the amendments constitute a significant advance in China's ongoing transition from communism to capitalism. They also amount to recognition that the economic future of the world's most populous country rests with private enterprise -- a radical departure from the roots of this land still known as the People's Republic of China.

Not since the Communist Party swept to power in 1949 in a revolution built on antipathy toward landowners and industrialists have Chinese been legally permitted to own property. Under the leadership of the late party chairman Mao Zedong, millions suffered persecution for the taint of "bad" class backgrounds that linked them to land-owning pasts. But present-day China is far different. The profit motive has come to pervade near every area of life. The site in Shanghai where the party was founded is now a shopping and entertainment complex anchored by a Starbucks coffee shop. From the poor villages in which most Chinese still live to the cities now dominated by high-rises, the market determines the price of most goods and decisions about what to produce. Business is widely viewed as a favored, even noble undertaking.

The amendments submitted on Monday to the Standing Committee in Beijing, a sub-unit of the legislature, had been expected since the Communist Party's Central Committee wrapped up a plenum in October with pledges to protect private property. Party leaders have advanced property rights as part of a process of privatization that has been unfolding for years, but the movement has gained considerable momentum in recent months. The government has sold off millions of state-owned companies while encouraging the development of private companies, which now provide two out of every three jobs, according to Chinese researchers.

"We will unswervingly encourage, support and guide the development of the non-public sector," said Premier Wen Jiabao in an interview last month with The Washington Post. He singled out private property protection as something that would "give greater scope to the creativity and enterprising spirit of the Chinese population and will in the end help us achieve the goal of common prosperity."

The state-owned firms that once dominated China's economy have traditionally been sustained by credit from state banks, regardless of their balance sheets. Today, many are bankrupt, and banks are burdened by $500 billion in bad loans, according to private economists. The government has cast privatization as the prescription for turning them around, creating management incentives to make them profitable.

But the process has been messy and painful, eliminating jobs for tens of millions of workers at bankrupt firms at a time when the government is slashing the social benefits that were part and parcel of communism. After years of free housing, universal health care and education, most Chinese must now pay for these services. Many state-owned companies have landed in the hands of well-connected insiders at sweetheart prices. Entrepreneurs have gained control of once-collective farms, harnessing them for private benefit in real estate ventures while peasants go landless.

From the beginning of economic reforms in the early 1990s through the end of the decade, nearly $4 trillion in public assets were transferred from state-owned companies to insiders in such dubious deals, estimates Yang Fan, an economist at China University of Political Science and Law in Beijing.

Most Chinese scholars now portray privatization and China's larger embrace of the market as irreversible trends. Yet some intellectuals have criticized the move to protect private property as precipitous: Without first forging a modern legal system that affords aggrieved laborers and farmers the right to protect their own interests, they argue, the creation of property rights simply legitimates the looting of public assets.

"Ordinary people in China often say that 'privatization' really means power stealing wealth," said Kuang Xinnian, a literature professor at Qinghua University in Beijing, who has emerged as one of the more vocal critics.

The amendments steered clear of political reform, dashing the hopes of liberal intellectuals who earlier this year openly called for greater democracy within the Communist Party. Some penned essays advocating the open election of labor representatives and the revision of the official history of the demonstrations in Tiananmen Square in 1989, which ended in a bloody hail of bullets.

The amendment on property declares that "private property obtained legally shall not be violated" and will be placed "on an equal footing with public property," according to the official Xinhua News Agency. The other amendment enshrines in the constitution the so-called Three Represents theory of former president Jiang Zemin, which broadens the base of the Communist Party to include the economic elite and businesses.

At last year's 16th party congress, Jiang formally opened the ranks of party membership to entrepreneurs, a controversial step that provoked accusations from some scholars that the party's basic identity was being undermined. The move endorsed a long-entrenched reality: Many of China's entrepreneurs are former government officials who parlayed their party membership and connections to gain access to capital and assets.

The amendment introduced today establishes Jiang's theory as a guiding principle of the nation, along with the ideology of the party's founding father Mao and the late supreme leader Deng Xiaoping, who embarked China on its market-embracing reform, Xinhua reported. While that measure cements Jiang a place in the pantheon of China's great leaders, Xinhua did not note whether he would in fact be mentioned by name, a distinction that some party leaders reportedly oppose.