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The Williamsburg Conference 1997

China's Future

Domestic developments in China, more than international ones, will probably be key in determining the country's future directionand by extension the future of Hong Kong. The conference heard that among those developments will be the way China addresses growing economic disparities, both among social classes and between the coastal and interior provinces. With central-government revenues having slipped to as low as 3 percent of gross domestic product (GDP), one academic estimated, decentralization may have gone too far. High politics will also play a role, with China facing another succession a few years down the road. Whereas late patriarch Deng Xiaoping had the stature to designate Communist Party General Secretary Jiang Zemin as the core of the new leadership, Jiang will not have that same authority when his term as president expires.

China's impressive economic growth continues at 910 percent a year, and from official figures at least, inflation appears to be under control. There is concern, though, about the massive debts of state-owned enterprises to state banks and other state-owned enterprises, which by one estimate total as much as $600 billion. China seems to be moving in the right direction on state-owned-enterprise reform: it plans to preserve the 1,000 largest and turn over the others to market forces, a step that will lead many to close, consolidate, or merge. But the behemoths still in state hands will continue to create a heavy drain on state resources for the foreseeable future. Participants recognized, though, that without a nationwide socioeconomic safety net it would be hard for China to move too much faster in its state-owned-enterprise reform. Developing such a safety net would also help limit the destabilizing effect of China's growing "floating population" of some 110 million migrant workers.