October 17, 2001

Chang '76 Predicts Fall of China's Communist Power

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If the calculations of Gordon G. Chang J.D. ’76 are correct, the Communist Party of China will fall from power within a decade.

Chang, the author of The Coming Collapse of China, presented his theory yesterday to a filled G-08 Uris Hall. The East Asia Program and the history department sponsored the lecture.

Chang said the collapse will happen because China won’t be sufficiently prepared when it join the World Trade Organization (WTO) in the next few months.

Chang, who has lived and worked in China and Hong Kong for almost two decades as a partner in the international law firm of Baker and McKenzie as well as counsel to the American law firm Paul Weiss, believes that “most state-owned enterprises can’t compete on their own.”

The state government has postponed structural reform, which would have helped to protect state-owned enterprises when tariffs and other trade barriers fall.

However, “the WTO limits the government’s ability to defer solutions to the future,” Chang said, noting that China will have to follow the WTO rules and it will no longer be in sole control of its economy.

The state-owned banks, “which include among them some of the weakest financial institutions in the world,” also aren’t prepared for the increased competition, Chang said. Thus, he believes that after a few years many state-owned enterprises and some banks may fail.

“The shake out will be horrendous,” Chang said.

Chang gave counter arguments to critics who say joining the WTO won’t be bad because China will cheat, foreign investment will boom and the gross domestic product (GDP) will rise.

Chang predicts that it will be local government officials — not senior Chinese leaders — who will try to cheat to protect local industry. In the end, though, WTO rules will be enforced, according to Chang.

Furthermore, foreign investment won’t boom because China suffers from overcapacity, as does most of the world. Instead of investing, Chang believes foreign companies will want to take advantage of the new open market by exporting to China.

Finally, Chang doesn’t believe the GDP will grow. “After Sept. 11 we have seen the largest downturn in the world economy possibly since the great depression,” Chang said. “Where will China export to?”

If the economy slips, the government will have a difficult time maintaining order among the peasants, who are restless and already protest in the tens of thousands, according to Chang.

“Today we see barehanded peasants take on armed forces,” Chang said.

The government’s ability to maintain order will be complicated because beginning next year all the top government posts will change.

“When the challenges to China will be the greatest, the regime will be the weakest,” Chang said. Then, “all it takes to start a prairie fire is just a single spark.”

The lecture was attended by students, historians and economists.

“I’m not in politics,” said audience member Bill Wykoff. “I just came because of general interest.”

David Maisel ’68 found the lecture “provocative and stimulating.”

“[Chang] brings up arguments that you might not hear in the major news venues,” Maisel said.

“It makes some people think and question ideas. It’s very valuable,” he added.

Archived article by Luke Hejnar