After SARS: China's Challenge – Creating a Gentler Capitalism

Christopher McNally (Research Fellow, East-West Centre, Honolulu)

(This article originally appeared in the June 12, 2003 issue of South China Morning Post in Hong Kong and is reproduced here with permission from the publisher)

China's initial news blackout and cover-up of the Sars outbreak, followed by the subsequent mass mobilisation of society to fight the disease, paint an intriguing picture of the nature and logic of China's contemporary party-state.

Mainland China has moved from being a highly centralised, coercive and authoritarian state in the Mao Zedong era to a more diffuse entity. The reform period has unleashed several waves of decentralisation, further fragmenting structures of authority.

What has emerged is an amalgam of old and new, imported and indigenous. Maoist mass mobilisation coexists with modern management techniques and public relations exercises. This relationship, however, is an uneasy one. It must be gradually resolved by the Chinese party-state's continuous adaptation to new social and economic circumstances.

The government's U-turn in the Sars crisis was stunning. In essence the country was put on a war footing. Airwaves rapidly filled with advice about hygiene and pleas to remain calm. Media outlets also portrayed the battle against Sars as a test of the whole nation, exhorting people to rally around the communist leadership to overcome the country's hardship.

In classic Maoist mobilisation, central government authorities flattened an old Communist Party resort to build a thousand-bed hospital to house Sars patients. In just over a week, a crew of 4,000 construction workers labouring around the clock realised what must be the world's fastest construction of a major health facility.

Looking ahead, China's inherent political and institutional obstacles remain, but the Sars crisis might serve as an impetus for gradual positive change. Sars clearly has exposed the country's social inequalities. At a minimum, the crisis will accelerate plans to establish a bare-bones public health-care system for rural residents. It will also lead to reforms of the country's disease reporting and response mechanisms.

A much more consolidated and better co-ordinated public-health surveillance system is a necessity, since at present the regulatory functions of China's health system are in chaos. Vice-Premier Wu Yi announced in late April that the government plans to spend 3.5 billion yuan (HK$3.3 billion) to set up a nationwide health network to fight Sars and other medical emergencies.

If the effectiveness of these measures declines and the Sars outbreak persists beyond this summer or erupts again in the winter, major political repercussions cannot be ruled out. But, from the vantage point of early June, the measures taken by the Chinese government seem to have produced considerable success in reigning in the outbreak. And if the present measures are successful in containing Sars, the Chinese government will not face, as some have argued, its "Chernobyl". (The Chernobyl nuclear accident of 1986 was a catalyst for political change in the former Soviet Union.)

Rather, the Sars crisis is likely to generate some momentum among fundamental trends already present in China. At first, the successful handling of the crisis is likely to strengthen the hands of the core leaders of China's new leadership - President Hu Jintao and Premier Wen Jiabao.

Some commentators have pointed fingers at former president Jiang Zemin, noting that he had supreme power during the months of the initial Sars outbreak, but chose to do nothing. Regardless of how Mr Jiang's role will be judged, Mr Hu's and Mr Wen's candour and highly visible management of Sars has improved their legitimacy within the party and among the public.

To what degree new policy initiatives will emerge is still uncertain. The Sars crisis might pass and mainland China's politics return to its usual modus vivendi. Nonetheless, the mainland's middle classes are disillusioned with how the system handled the outbreak, and foreign investors have lost a degree of confidence in China. Most importantly, the crisis cost China dearly in diplomatic terms and undermined the internal legitimacy of the regime more than at any time since the 1989 Tiananmen Square incident. As a result, the shock created by Sars is liable to cause a reorientation of the new leadership's policies.

As an initial response, Mr Hu and Mr Wen have undergone an image makeover. In particular, they are trying to present a more humane and kind face to China's public. At the end of the day, of course, they must follow through on their words. Likely to appear are more resources for health care, efforts to narrow the gap between rich and poor, and a general movement away from the single-minded pursuit of economic growth to focus more on issues of social welfare and justice.

However, health-care reform would require the provision of widely available health insurance and the establishment of sustainable financing mechanisms for this insurance. This requires far-reaching institutional reforms and large financial contributions by all levels of government. To what extent such funds can be marshalled is questionable, since governments at local levels are already facing severe budgetary constraints.

Moreover, the Communist Party's commitment to use taxation as a tool for social redistribution is unlikely to be strong, since this will require much higher taxes for the mainland's rich. The dilemma is that most of the rich people are private entrepreneurs, a segment of the population on which the party is relying more and more for economic growth and political support.

Perhaps most difficult will be a continuation of the recent trend towards greater government transparency, more open press reporting and the establishment of a more pronounced culture of governmental accountability. Some back-tracking in these arenas is likely. Despite these obstacles, the battle against Sars and the handling of its aftermath is about shoring up the credibility of China's party-state.

The legitimate rule of Mr Hu and Mr Wen rests on putting their newfound touch of humanity to work. China will remain an authoritarian and repressive state, but it will need to shift its political economy from a raw and brutal form of capitalism to a more humane and compassionate form.