Don't expect China to return anytime soon to the radical economic reforms that seemed to be steering the country into the market mainstream during the 1980s, says Hang-Sheng Cheng. That experiment in democracy ended for the foreseeable future when the tanks rolled into Tiananmen Square in the summer of 1989.
In fact, said Hang-Sheng, vice president for International Studies and director of the Pacific Basin Studies of the Federal Reserve Bank of San Francisco, the collapse of China's experiment in capitalism had actually begun a year earlier, in 1988, when China's rising inflation, set in motion by the attempts to move to a market economy, impelled the government to once again revert to price controls.Hang-Sheng was in Salt Lake City Thursday to address the Salt Lake Federal Reserve Branch board of directors on the past, present and future of China's economic reform. He spoke at a luncheon in the Fed's downtown offices.
Since last summer, the world has watched to see if China's ruthless crushing of the student demonstrations and its subsequent return to a police state, were merely potholes in the road to democracy that China seemed to be traveling - much like the Soviet Union and Eastern Europe seem to be now - through most of the '80s.
Not so, said Hang-Sheng, who said he can't envision a return to the bold reforms of that decade anytime soon.
"I don't believe anyone thinks that will happen," he said. "So the best thing may be to retain the status quo and muddle on. China had its turn in the '80s and now it's the turn of the Soviet Union and Eastern Europe to be in the limelight."
Hang-Sheng said the Chinese government will be watching closely the developments in other communist and formerly communist countries and the future direction it will take in its own economic affairs will likely be guided by what happens to those nations.
For now, though, China's economic reforms are "stopped in their tracks."
True, runaway inflation has been curbed with the re-institution of price controls, said Hang-Sheng, but at high cost. The 9.5 percent annual GNP growth and the quickly rising standard of living it generated for the Chinese people are no more.
Unemployment is high and the spirit of enterprise that had been gaining a toehold has been crushed under the bureaucratic boot.
It is said that once the genie has been let out of the bottle, he can't be put back, but China has proven that proverb wrong, said Hang-Sheng. The free enterprise Genie has been successfully stuffed back in the bottle in China and the cork is, once again, firmly in place.