Introduction
To be the last to speak at a Conference which has heard so many important people–Premiers, Ministers, Central Bankers, Chief Executives of great corporations–talk about issues so crucial to China's future is no mean challenge. What is there left to say? But I am not famous for remaining silent. Nor has the International Herald Tribune invited me here to do so.
So I shall give my own perspective on China's future. If now and again I am forthright it is my style rather than any disrespect for our hosts. I speak as a great admirer of the Chinese people and their achievements.
The Prizes and Penalties of China's History
We are privileged to have at the British Museum in London a superb exhibition–one of the most remarkable most of us have ever seen–of the Mysteries of Ancient China. There could not be a more graphic way to remind us that no other nation in history has ever created such a distinctive and culturally rich society, spread across such an immense area, and over such a length of time. China is the only country in the world whose writings of 3,000 years ago are still readable in the language of today. That tells us the enormous strength which modern China draws from the continuity of its culture and tradition. Contrary to accepted wisdom, China's culture has also been remarkably inventive. Many of its discoveries–the technique of casting iron, the rudder for steering ships, the compass and of course gun-powder–pre-date Europe's assimilation of those techniques by many centuries.
But brilliant though China's civilisation has been, it has also had a darker side represented by the unshakeable conviction that China is sufficient unto itself and can afford to shut out the world beyond its borders. Only in the lifetime of many of us here has that belief begun to crumble. It was Mr Deng Xiaoping's vision and energy which finally set China on a course of opening up to the outside world, a course now being continued by his successors.
China has paid a price for its centuries of self-imposed exclusion from the great currents of change which have flowed so strongly elsewhere in the world. The western countries have to take some share of the blame for that, because of the humiliations which they inflicted on China in the last century–and Japan for its savage treatment of China in the first part of the present century.
But there has also been a consistent thread running throughout China's own history of guarding against outside intrusion, whether it be trade or ideas or people. It runs from the burning of books in the Qin dynasty over two thousand years ago right up to the death of Chairman Mao. Imperial China scorned progress, scorned science and scorned the spirit of enterprise, the very qualities which allowed western societies to advance so rapidly over the past two hundred years. China lost much as a result.
With the next millennium almost upon us, the years of introspection and self-absorption lie in the past. The future is a place in which markets are world-wide and politics and finance know no frontiers. That new world is propelling China to look outward and become much more closely integrated into the world trading system, into the multilateral financial institutions and into regional defence and security relationships.
The question is: how can this seismic shift in China's historic vocation be accomplished in ways which benefit both China and the rest of us? The world has to make room for China to play a role appropriate to its size, its history and its economic weight, as a major world power with important strategic interests. But what does that require from China? How can we avoid the collisions which have been so much a feature of past encounters between China and the western world? Those are the questions I shall explore.
The Market Economy as a Spur to Progress...
A term which we very frequently hear nowadays is globalisation. It means in essence that a country's economy is no longer influenced just by national or regional conditions, but that all economies–save those like North Korea–are exposed to the same influences and market forces in a world-wide market place. That has happened first because of the opening of markets through the GATT negotiations, with the considerable reduction of tariffs and other barriers to trade and investment: and second because of the extraordinary power and speed of modern communications which link the world's economies instantaneously, in ways which we would never have imagined even a few years ago. The result is that we are all exposed to the same competitive pressures, driving us to produce ever more efficiently.
This process is not merely unstoppable: it is highly desirable, because it provides an unrivalled stimulus to growth and prosperity. It should be doubly welcome to China with her highly talented people, her inexhaustible reserves of labour and her ambition to raise living standards and catch up with other countries in the region.
The question is not whether China is a beneficiary of globalisation: it quite clearly is. The evidence for that lies in the impressive growth rates achieved over the last few years. The question is rather whether China can benefit even more, and my answer to that is “yes, if she pursues the right policies” .
China is at the heart of the fastest growing area of the world, where success has come from allowing markets to operate freely within the framework of a rule of law. The overseas Chinese diaspora in Hong Kong, in Singapore and elsewhere in the region have shown what can be achieved. Indeed there is no better example than Hong Kong. There the natural entrepreneurship of Chinese people operating within a framework of the rule of law and high standards of public administration provided by Britain, has created extraordinary wealth and prosperity on barren and unpromising terrain–indeed a higher GNP per capita than Britain itself enjoys.
A great deal has already been done by Mr. Deng Xiaoping and his successors to reform and liberalise China's economy, and increase the role of the private sector. Indeed, today China is a very different place than the China I first visited [in April 1977] almost twenty years ago. But reform is not a process which can be turned on and off at will. If China is to meet the expectations of her people and to go on attracting the foreign investment which is crucial to its future growth, the lessons are clear:
the work being done to introduce a system of law which is fair and equal for all, and is applied fairly and equally to all, must be carried forward;
there must also be a fair and equitable system for upholding contracts and for adjudicating commercial disputes;
the reforms of China's financial system, and the development of capital markets need to be taken further. A sound financial system is essential in China to derive full benefit from growing trade and investment;
the private sector needs to be continuously expanded, and as far as possible the disciplines of private sector businesses applied to the state-owned enterprises which are the main drag on China's economic advance. Reform of these state enterprises is surely one of the most urgent tasks for China's leaders. We faced a not dissimilar problem with the nationalised industries in Britain in the 1980s and solved it with the policy of privatisation which is now widely copied round the world;
business must have direct and instant access to the information available through the Internet and other systems. It is absolutely right to prevent misuse of these channels for disseminating pornography and violence. But countries which deny or delay access to information will find they miss opportunities and stunt their growth. Speed of decision is vital in the modern business world;
international rules on intellectual property must be strictly observed, because that goes to the heart of a country's reputation as a reliable and dependable trade partner with whom other countries want to do business.
In other words if China is to benefit to the fullest extent from the rising tide of Asia's prosperity, she will need to go further and faster in releasing market forces and creating a dependable framework for business. And by taking those steps China will make its case for early entry into the World Trade Organisation irresistible, thus taking the final step towards its full involvement in the world economy–a huge step forward from the situation less than 20 years ago when Mr. Deng Xiaoping embarked on his bold crusade of opening up China.
.....and as an agent of Political Change
That is bound to lead in time to change in the way in which China is governed. It is for the people of China to decide for themselves on their political system, not for any of us to dictate to them. Indeed it would be counter-productive to attempt to do so.
But as one looks round the Asia-Pacific region, it is striking how economic growth and greater prosperity have consistently brought political change in their wake, with governments becoming steadily more accountable in fully democratic elections. Indeed it's not just Asia's experience: in Europe, the Industrial Revolution was followed by new constitutions and new legal systems. I do not find that surprising, because as people achieve higher living standards and accumulate more wealth, they want a greater say in running their own lives, they want a rule of law and a system of government which is fair and equitable. China has its own distinctive history of strong and highly centralised government, but I do not believe that in the long term it will be immune from the same processes which have affected its neighbours.
Indeed much has changed already. If one compares the China of today with the China of twenty years ago, let alone with the Soviet Union of Brezhnev and Andropov, it is plain that there have been many improvements in freedom of speech, of information, of movement, of choice of occupation. Government has loosened its control over the lives of individual citizens. We see elections at village level which are genuinely contested, in a way which we in the western world recognise, with a choice of candidates and much greater information to enable people to exercise that choice. Perhaps it is only a small step, but it is starting from below at the grass-roots rather than being imposed from above.
The same gradual progress is visible with the introduction of a rule of law, which enhances civil, corporate and property rights. That is in good part a response to the spread of the market economy and foreign investment. A market cannot operate properly without a fair, transparent and impartial legal system, nor will foreigners invest. At the same time the criminal law is being revised, and the rights of defendants strengthened. And the number of lawyers is growing rapidly–though I am not certain whether that is an unmixed blessing.
But I do not want to paint an overly rosy picture. There are still the laogai. There are still many practices–both in China itself and in Tibet–which are repugnant to those of us fortunate enough to live in democracies and under a full rule of law. And I have to say the recent harsh sentences imposed on Mr Wei and Mr Wang have caused dismay in the wider world.
But there is some better news. We are seeing the beginnings of a system of elections which will I believe move steadily up the scale from the village to the province and ultimately to the highest national level. That will not be brought about by outsiders. But by expanding the channels which link China to the outside world–through trade, through investment, through the tens of thousands of Chinese students who now study abroad and through the influence of the overseas Chinese–we indirectly encourage this growing constitutionalism. It is what is commonly known as a policy of engagement and, at the end of the day, that will be far more effective and more positive than sanctions or other attempts at compulsion.
I am not so rash as to predict a precise time-scale for political change in China. I would only observe that it took countries like South Korea and Taiwan at least 20 years of economic progress from the levels at which China finds itself now, before they had more open and democratic political systems. That may seem a long time, but in the scale of China's history, it is the blink of an eye.
China and Hong Kong: Happy Ending, Fresh Start
The event which will have the most direct and immediate bearing on China's reputation in the world is Hong Kong's return to Chinese sovereignty next year–indeed now only just over six months away.
Hong Kong is a creation of which both China and Britain can be enormously proud: China because the vast majority of Hong Kong's people are of Chinese origin and Britain because it's good stewardship has provided the basis for Hong Kong's success.
Hong Kong has achieved for its people one of the highest standards of living in the world. It ranks as one of the three or four most important and sophisticated financial centres. Its soaring sky-line is a testimony to the boldness, energy and appetite for risk of its businessmen. The suspension bridge and new airport are simply the latest in a string of remarkable building projects. The whole story of Hong Kong is yet another example of how so often in history it has been the small countries and City States–Athens, Venice, Elizabethan England–which have been the most lively and adventurous and which have put mankind and posterity most in their debt.
But what makes Hong Kong unique is its spirit: that spark of life which comes from freedom under a rule of law. Extinguish the spark and Hong Kong would rapidly become humdrum, a shell of its former self.
Recognition that Hong Kong is, and for many many years will remain very different from China, lies behind Mr. Deng Xiaoping's creative and subtle concept of one country two systems. I remember him explaining that to me in 1984. He reasoned that Hong Kong's continued success and prosperity are important for China, and could only be achieved by preserving the system which created Hong Kong's success and by allowing Hong Kong's people to run their own affairs in their own way.
That is the only basis on which I agreed–or could have agreed–to sign the Joint Declaration on Hong Kong's future in 1984. And despite the doubts that have sometimes been cast in the intervening twelve years on whether one country two systems will really preserve Hong Kong's way of life, I still profoundly believe in Mr. Deng Xiaoping's commitment and that of his successors to honouring his pledges in China's name.
On my own visits to Hong Kong I find people increasingly confident about 1997. It is clear too that they are proud of being Chinese and of what is being achieved in China.
So I am optimistic about Hong Kong's future, despite the bureaucratic battles which have ebbed and flowed since 1984, despite the harsh words exchanged in negotiations and despite the gloomy predictions that China will seek to interfere in how Hong Kong people run their own affairs. I believe the essentials of what makes Hong Kong unique are still intact and will continue after 1997.
But China will need to show great understanding for Hong Kong's traditions, above all its tradition of free speech. Every signal from Beijing will be scrutinised with great care. Statements by Chinese officials which suggest that free speech will be qualified after 1997 risk undermining the foundations on which Hong Kong's enterprise society is built. The best possible start for China in 1997 would be to keep the present members of the elected legislature unchanged until the due time of the next elections. But if this is not the case, then I hope that China will take the earliest steps to organise free and fair elections to the new legislative body. As Winston Churchill often quoted: “magnanimity in politics is not seldom the truest wisdom” .
Be under no illusion: next year's transition will take place amid unprecedented international interest and unprecedented media attention. The world will be watching for any sign that China is not honouring its obligations. It's not a case of foreign governments interfering in Hong Kong: it is a simple fact of life in the modern world that events are subject to the most detailed scrutiny by television and a free press.
I hope that China's response to this challenge will be to strain every sinew to ensure that the transition is a success–not only for Hong Kong but for China itself. A smooth and peaceful transition, in which the transfer of sovereignty has virtually no perceptible effect on Hong Kong's everyday life, would earn China untold credit with the rest of the world. 1997 is a year of opportunity for China and I hope the opportunity will be grasped.
The fact is that the success of the transition is now in China's hands, and in China's hands alone. Britain will do its duty so long as the Union Jack flies over Hong Kong and interest in what happens will last far beyond that. But the future is China's to determine in conjunction with the people of Hong Kong.
Because I am confident that China will get it right, I intend to be in Hong Kong, among its exceptional and brave-hearted people, to experience next year's events at first hand and to witness the undertakings so solemnly given by China in 1984 being put into practice.
China on the World's Stage
In parallel with the great changes going on within China, we have the immensely difficult but important task of integrating an emerging China into the systems, rules and values of a world which, because of its self-imposed seclusion, it did not have a hand in shaping.
Our starting point should be unequivocal: it is in our western interest that China should be open, stable and prosperous, and a full partner in the international community. That is the only rational policy for the West to pursue with a country which has the world's largest population, a veto in the United Nations, nuclear weapons and is an enormous market.
The opposite policy–a policy of containing China rather than working with it–would forfeit China's cooperation on a whole range of international issues, including arms control, the environment and UN matters. Containment would be a self-fulfilling prophecy, turning China into an enemy when we want a friend.
China has legitimate strategic interests just as the rest of us do, and is entitled to be treated with respect and consistency, in accordance with its status. In recent years the consistency has too often been lacking, as the United States in particular has given China a bewildering mixture of signals rather than a clear and consistent statement of its intentions.
So our–western–policy must be to build relations with an evolving China and find ways to manage differences.
But China cannot sit and wait for the world to come to her. The international community is built on a balance of interest and on readiness to accept constraints. The most important of these constraints is that countries accept that in no circumstances should they use or threaten force to extend their power. Problems including those in China's relations with Taiwan must be settled peacefully.
Equally it is in all our interests to see China play an active part in regional affairs. That is already happening in APEC and in the Asia-Europe Summit. It has been visible too in China's constructive approach to solving Cambodia's problems and the discreet influence which it has exerted on North Korea.
There are important issues in the South China Sea involving both natural resources and sovereignty, where China also has a perfectly legitimate interest in being involved when they are discussed and negotiated. But many other countries have interests as well, both those bordering the South China Sea and trading nations all round the world who have a major interest in seeing the sea-lanes kept open.
Given the scale of her exports, China should also be present in the World Trade Organisation once she brings her trading practices fully into line with international standards.
And I hope China will follow its acceptance of the Non-Proliferation Treaty and the Nuclear Test Ban Treaty by also becoming a member of Missile Technology Control Regime, thus joining the international effort to stop the export of weapons of great destructive power to countries which would have no scruples about their use.
The most sensitive area of all is defence and national security. There are no great Alliances in the Asia-Pacific to match the role of NATO in Europe. But the American presence in the Pacific is a major contribution to the stability of the area, reassuring countries which might otherwise feel threatened and ensuring that no single power can aspire to dominate militarily.
A regular dialogue between China and the United States on strategic issues, as well as regional security and arms control, would be a way of avoiding misunderstandings about each other's intentions and lead on to other confidence-building measures of the type which have proved to be effective in Europe. The most vital task of all is to avoid a gratuitous second Cold War. It will require great efforts both by China and by the West, but the prize for both is too great to let slip.
Thankfully the days when China and the West snarled at each other in mutual incomprehension and suspicion are behind us. We should no longer dwell on the indignities of the past but should both look to the opportunities of the future.
And the key to that future?
As Winston Churchill put it:
“Trust the people, the mass of the people in almost any country” .
Trust the people.