IHT

Mar. 6 1997

China Masks the Bigger Problem

By William Greider

First of two articles.

WASHINGTON - Prevailing wisdom, promoted by multinational conglomerates and embraced by President Bill Clinton, holds that China's middle-class consumers will lift all boats. The Cassandra school foresees a flood of low-wage exports that will swamp the global system.

The problem with making China the focus of the globalization debate is that glorifying or demonizing what Communist leaders call "market socialism with Chinese characteristics" misses the larger point. The real issue should be the flawed nature of the global system itself.

If China succeeds in becoming a world economic leader, its scale may push the manic logic of global capitalism to predictably dangerous conclusions: increased loss of jobs from higher-paying developed countries to the Third World, and overproduction of goods relative to demand.

China will do exactly what global capitalism permits and even encourages. Beijing is following the Japanese model of developing sophisticated manufacturing but "with Chinese characteristics." It intends to build a world-class industrial base and become a major exporter of technological goods - cars, chemicals, steel, electronics, even commercial aircraft.

Multinationals from Boeing to Volvo, from Airbus to Mitsubishi, are trading elements of production in order to sell aircraft or cars to the Chinese. China, like many others before it, demands jobs and technology as the price of entry.

At the huge assembly halls of Xian Aircraft, I saw machinists who earn $50 a month assembling Volvo buses and the tail sections of Boeing 737s. The workers are supervised by Communist Party cadres. "If you want something done," Boeing's plant manager told me, "you go to the party member and it's done - like that."

Rigid control over the work force has always been part of what economists call , the "comparative advantage" of manufacturing in very poor countries. In Indonesia, the ruling ideology is right-wing rather than Marxist, but the suppression of workers' rights is nearly as harsh as in China.

Malaysia's burgeoning electronics industry is based on an explicit promise to American semiconductor companies that workers will be barred from unionizing. When it considered lifting this ban, American companies threatened to move to China or Vietnam.

China's industrial strategy is not secret. It publishes blueprints, industry by industry, elaborating how it intends tofocus on. certain export markets. Party bureaucrats envisage a car industry as large as North America's within 15 years, with a capacity way beyond the potential demand at home, The shoddier cars can be sold domestically; higher-qual-. ity models will be exported.

China's vision is not as improbable as many assume. Volvo now ships assembly kits made in Sweden to its Xian plant, but accepts that its buses will soon be made of at least 90 percent Chinese parts. A manager of the Xian Aircraft Co., which is run by the military, boasted that it "already has almost the manufacturing level to produce one whole aircraft at the level of the Boeing 737."

Boeing's strategists do not scoff at this claim. China hopes that with the help of international partners it can launch its own "Asian Airbus," modeled after the government-subsidized aircraft consortium in Europe. Why denounce Beijing for copying Bonn and Paris?

Boeing wants a piece of the new venture - a smart strategy for the company, if not for machinists and engineers in Seattle.

The writer is author most recently. of "One World, Ready or Not: The Manic Logic of Global Capitalism." I contributed this comment The New York Times.