Beijing
— Nobody expected it to happen so fast. Less than two months into his
presidential term, Chinese leader Hu Jintao is facing both a
career-threatening crisis and a historic opportunity for reform.
The SARS epidemic, with its explosive
political implications and its life-and-death anxieties for millions of
Chinese, has become the biggest crisis in Beijing since the Tiananmen
Square protests of 1989.
The political fallout has already
destroyed the careers of a health minister and a Beijing mayor. Social
tensions are rising — at least one street riot has erupted because of
disease rumours — and now China's economy is suffering a drastic decline
that could see urban unemployment soar to dangerous heights.
"SARS has severely shaken people's
confidence in their government and calls the entire political system into
question," said Charles Burton, a China scholar at Brock University in
Canada.
"Chinese people realize that their
government only started to respond effectively to SARS under outside
pressure . . . and that China's national reputation has been damaged by
their government's mismanagement of the SARS outbreak.
"Hu Jintao and [Prime Minister] Wen
Jiabao will likely have to really adopt political reform as their policy
focus now, I believe, if they are to maintain the support of the
people."
The epidemic comes at a crucial moment
for political reform. It has allowed Mr. Hu to consolidate his power,
marginalize some of his old-guard rivals and advance a populist agenda that
responds to public demands and promotes new openness and transparency in
the secretive Chinese bureaucratic state.
Within the ruling Communist Party, the
new Hu Jintao faction is already thought to be feuding with the old-guard
loyalists of former president Jiang Zemin, who retains much power as the
head of the military commission.
Mr. Hu and Mr. Wen seem to be
outmanoeuvring Mr. Jiang in the crisis so far. While the former president
stayed out of sight, the new leaders visited hospitals and maintained their
high profile as champions of the battle against the outbreak of severe
acute respiratory syndrome.
Few thought Mr. Hu's political instincts
would be put to such a severe test so soon after he became Communist Party
chief in November and president in March.
So far, he has chosen openness. Chinese
state television gave another live broadcast of a news conference on the
SARS crisis yesterday, as it has almost daily for the past two weeks. At
each televised event, for perhaps the first time, ordinary Chinese people
have been allowed to see their political bosses admitting errors, promising
openness and transparency, and struggling with tough questions from
reporters.
"I've been very surprised and
impressed by it," said Hu Shuli, editor of an investigative financial
magazine in Beijing.
"It's very different from the past.
The new Beijing mayor isn't trying to pretend that everything is okay — he
is showing the positive and negative sides. I'm very encouraged by his
frankness. The Chinese media are more willing to report on this disease in
an objective manner. It's very significant."
Even the dismissals of health minister
Zhang Wenkang and Beijing mayor Meng Xuenong last month were shocking. The
Chinese have almost never seen their government forced to sack two senior
officials for incompetence and deceit.
The changes continued this week, as two
newspapers and a magazine published articles accusing the government of
mishandling the crisis and urged it to be more truthful and more responsive
to the public interest. One article said the crisis showed the need for
grassroots democracy and civil society.
For Mr. Hu, the biggest danger may stem
from the dramatic economic decline in the second quarter of this year.
Some sectors of the urban economy,
especially service-sector industries such as tourism and restaurants, have
been brought close to collapse. The entire retail sector is suffering
badly. The fragile banking industry is under greater threat, and the enormous
level of foreign investment China has enjoyed over the past decade is in
doubt.
If overall growth falls below 7 per cent
— for the first time since the 1980s — economists believe China would not
be able to create the 20 million new jobs it needs every year to keep pace
with a growing work force. Because of the SARS crisis, many analysts are
already predicting that China's growth will drop about two percentage
points from an expected 8 or 9 per cent this year.
This, in turn, would send the urban
unemployment rate increasing to a dangerously high level of 13 per cent —
almost five percentage points above its current level.
"If unemployment hits 13 or 14 per
cent, it will be quite scary for China," said Yiping Huang, an
economist at Citigroup in Hong Kong who specializes in mainland China.
"The pressures will get higher.
Social stability is probably the key risk that China faces. When you have a
crisis like this, people are already scared and angry and they feel
lost."
Analysts estimate that retail sales in
mainland China will drop by 10 per cent in the second quarter of this year.
Computers and cellphone purchases fell by as much as 20 per cent in April.
The crisis could also lead to a slowdown
of economic reform, including further delays in the long-overdue restructuring
of the banking system, which is heavily burdened with bad loans, and the
bloated state sector.
"It's a drastic slowdown,"
said Dong Tao, an economist at Credit Suisse First Boston. "The SARS
epidemic is changing consumer behaviour. People are shying away from
crowds. Shopping malls are emptier. The panic is devastating to the
consumer sector."
On the political front, China watchers
are still debating whether the temporary openness of the Hu government is a
harbinger of greater reforms to come. While some are optimistic, others
point to the government's blatant deceit at the beginning of the outbreak
and its willingness to impose heavy-handed measures in the later stages of
the crisis, including the arrest of "rumour-mongerers" who had
simply passed on e-mails to others.
"I don't see this crisis as a
catalyst for massive political change," said a Western diplomat in
Beijing.
"It depends on the lessons the
government draws from this, but I'm not optimistic yet. Its methods are
still old-fashioned. It didn't want to be open and honest — it was forced
into it."
