Preface xi

Introduction xii



1. People's Daily Editorial Hails New Year. 1 January 1997 1

2. Li Peng, Speech at Spring Festival Gathering. 6 February 1997 3

3. Editorial, In-Depth Reform and the Working Class: Celebrating "1 May"

Labor Day. 1 May 1997 5

4. Editorial, The Force at the Core of Reunifying the Motherland and

Revitalizing the Chinese Nation: Celebrating the Seventy-sixth Founding

Anniversary of the CPC. 30 June 1997 7

5. Jiang Zemin, Speech at the Beijing Rally Celebrating the Seventieth

Anniversary of the Founding of the People's Liberation Army. 31 July 1997 10

6. Editorial, Forge Ahead with Full Confidence and Pioneering Spirit.

1 October 1997 15



1. CPC to Enforce More Rigorous Party Discipline on Members. 11 April 1997 18

2. Communiqué of the Seventh Plenary Session of the Fourteenth Central

Committee of the Communist Party of China (CPC). 9 September 1997 18

3. Jiang Zemin, Hold High the Great Banner of Deng Xiaoping Theory for an

All-Round Advancement of the Cause of Building Socialism with Chinese Characteristics to the Twenty-first Century: Report Delivered at the

Fifteenth National Congress of the Communist Party of China (CPC).

12 September 1997 19

4. The Constitution of the Communist Party of China (Partly Amended by

the Fifteenth CPC National Congress and Adopted on 18 September 1997). 51

5. Members of Fifteenth Central Committee, CPC. 18 September 1997 67

6. Central Commission for Discipline Inspection Members List.

18 September 1997 70

7. Communiqué of CPC Central Committee First Plenum. 19 September 1997 71

8. Work Report Delivered by the CPC Central Commission for Discipline

Inspection to the Fifteenth CPC National Congress, Approved at the Ninth

Plenary Session of the Central Commission for Discipline Inspection.

24 September 1997 72

9. Jiang Zemin on the Education of Leading Cadres. 22 December 1997 85






1. Jiang Zemin, Speech at the New Year Tea Party Sponsored by the Chinese

People's Political Consultative Conference [CPPCC] National Committee.

1 January 1997 87

2. People's Daily Hails Congress of Non-Communist Parties. 4 December 1997 90



1. Communiqué of the Eighth Plenary Session of the CPC Central Discipline Inspection Commission. 29 January 1997 92

2. Li Peng, Report on the Work of the Government at the Fifth Session of the

Eighth National People's Congress. 1 March 1997 96

3. CPC, State Council Regulations on Personal Matters. 24 March 1997 116

4. Editorial, Making Great Efforts to Accelerate the Process of Governing

by Law. 17 October 1997 117

5. PRC Spokesman Denies Wei Release Due to US Pressure. 20 November 1997 118

6. Zeng Kun, Li Tao, Liu Siyang, Jiang Speaks at Science Law Forum.

23 December 1997 119



1. Plans to Eliminate Rural Poverty. 7 January 1997 122

2. State Statistical Office, Obvious Results of Macroscopic Adjustment; It Is

Necessary to Continue Work for Structural Improvement. 23 January 1997 124

3. Li Peng, China's Policy on Energy Resources. 15 May 1997 134

4. Zhang Tiegang, An International Grand Meeting for Mapping Out an

Economic Blueprint. 25 September 1997 148

5. Commentary, Adhere to an Appropriately Tight Monetary Policy and

Exercise Proper Economic Macro-Control. 22 October 1997 150

6. Zhou Jialu, Xu Shijie, A Milestone in Advancing Toward the New Century.

5 November 1997 151

7. Editorial, Push the Work of Using Foreign Capital to a New Stage.

25 December 1997 153

8. Exchange Rates of Renminbi Yuan to Remain Stable. 26 December 1997 157



1. Central Committee, Communist Party of China; State Council: Document

Number 1 of 1997, Concerning Further Steps in Maintaining Political

Development and Social Stability and the Investigation and Elimination

of Elements of Instability. 6 January 1997 159

2. Liu Yuzhi, Cai Wenmei, The Effect of One-Child Families Upon Urban

Population Structures. March 1997 160

3. Zheng Qingdong, The Burden Is Heavy and the Road Is Long, Seek

Practical Results: Vice Premier Jiang Chunyun on Alleviating Peasants'

Burdens. 2 April 1997 162




4. Wu Jing, Jia Fenyong, Commission Calls for National Antidrug Campaign.

21 April 1997 167

5. "A Leading Official of the State Council's Religious Affairs Bureau,"

Speech on Religious Affairs in China. 9 June 1997 169

6. Beijing Calls for Guarding Against Seven Unstable Factors. 14 June 1997 174

7. China Religious Groups Condemn US Report. 6 August 1997 176

8. White Paper on Relationship Between PRC, Vatican (Summary).

16 October 1997 179



1. Qing Shi, Behind the Curtain on How the 1950 Plan to Liberate Taiwan

Came to Nothing. January 1997 180

2. PLA to Rally Around Central Committee, Jiang Zemin. 5 March 1997 190

3. National Defense Law of the PRC (Excerpts). 7 March 1997 191

4. Sun Maoqing, Luo Yuwen, Jiang Zemin Addresses Air Force Party

Delegates. 11 June 1997 193

5. Xinhua and Renmin Ribao reporters, Chapter on Being Politically Qualified:

The People's Army Is Loyal to the Party: The Whole Army Implements the

Five-Point Demand Put Forward by Chairman Jiang Zemin. 29 July 1997 194

6. Jiang Issues Order to Implement Revised Army Regulations. 8 October 1997 198

7. Zhang Rongdian, The Developing Sino-US Friendly Military Relations.

13 October 1997 198

8. Chu Shan, How to Assess International Campaign to Ban Landmines.

24 October 1997 200



1. Several Opinions of the CPC Central Committee on Doing an Ever Better

Job of Literature and Art Work. 11 January 1997 203

2. Commentator, The Press Should Stand in the Front Row of Spiritual

Civilization Building. 24 January 1997 207

3. Jiang Zemin Speaks to Senior Chinese Officials at Party School.

29 May 1997 209



1. Zhao Ziyang, Letter to Jiang Zemin and the Preparatory Group for the

Fifteenth CPC National Congress. 5 March 1997 213

2. Qiao Shi, Speech at the Closure of the Fifth Session of the Eighth National People's Congress in Beijing. 14 March 1997 217

3. Qiao Shi Addresses SAR Preparatory Committee Meeting. 11 July 1997 220

4. Party Election Procedures. 18 September 1997 221

5. Hebei Village Elections Attract Foreigners. 21 November 1997 223






1. Deng Funeral Committee Releases Family Letter. 15 February 1997 224

2. Letter from the CPC Central Committee, the PRC National People's

Congress Standing Committee, the PRC State Council, the National

Committee of the Chinese People's Political Consultative Conference,

and the CPC and PRC Central Military Commissions to the Entire Party,

the Entire Army, and People of All Ethnic Groups Across the Country.

19 February 1997 225

3. Deng Xiaoping's Funeral Committee Formed. 19 February 1997 231

4. Deng Xiaoping Funeral Committee Issues Announcement. 19 February 1997 232

5. Song Renqiong, Comrade Xiaoping Lives Forever. 20 February 1997 233

6. Deng Xiaoping's Great, Brilliant Life. 21 February 1997 237

7. Jiang Zemin, Speech at Comrade Deng Xiaoping's Memorial Meeting.

25 February 1997 251



1. Commentator, Insisting on Confrontation on the Human Rights Issue is

Unpopular. 15 April 1997 260

2. Sino-Russian Joint Statement. 23 April 1997 263

3. Beijing-Paris Joint Declaration. 16 May 1997 265

4. Li Peng Meets with Vietnam's Do Muoi. 15 July 1997 270

5. Commentator, A Grave Development Harmful to Sino-Japanese Relations.

22 August 1997 271

6. Qian Qichen, Speech at the Fifty-second UN General Assembly.

24 September 1997 273

7. Jiang Zemin Congratulates Kim Chong-Il on Election as WPK Chief.

8 October 1997 277

8. Sino-US Joint Statement. 29 October 1997 278

9. Jiang Zemin, Enhance Mutual Understanding and Build Stronger Ties of

Friendship and Cooperation. 1 November 1997 282

10. Sino-Russia Joint Statement. 10 November 1997 287

11. People's Daily Editorial on Li Peng's Visit to Japan. 16 November 1997 289

12. Jiang Zemin, We Should Strive to Strengthen Cooperation Among

Enterprises in the Asia-Pacific Region. 24 November 1997 291

13. Jiang Zemin, Join Hands in Cooperation and Build a Future Together.

15 December 1997 293

14. Editorial, Greeting the Establishment of Diplomatic Relations Between

China and South Africa. 31 December 1997 296



1. Xinjiang Secretary Says Security "Guaranteed." 14 March 1997 298




2. Qiao Shi Stresses Efforts Against Separatism in Xinjiang. 13 April 1997 298

3. Commentator, The Dalai Lama Encourages Separatism Under the Guise of Negotiations. 17 April 1997 299

4. Raidi, Han Cadres and Staff Members Entering Tibet: Important Force for Stabilizing and Developing Tibet. 21 May 1997 302

5. Editorial, Congratulating the Inner Mongolian Autonomous Region on the

Fiftieth Anniversary of Its Founding. 20 July 1997 305

6. Wang Zenghai, Zhang Zhaocheng, Tana, Li Lanqing Visits Inner Mongolia

13-17 October. 18 October 1997 305

7. "Seven Years in Tibet" Vilifies Asian People. 21 November 1997 309




1. Peng Weixue, Simple Discussion of Measures Taken by the Taiwan

Authorities in Response to Hong Kong's Return to the Motherland.

February 1997 311

2. Commentator, Commemorating the Fiftieth Anniversary of Taiwan's 28

February Uprising. 28 February 1997 315

3. Wu Jianfan, "One Country, Two Systems" and Hong Kong's Basic Law:

Speech Delivered at "One Country, Two Systems" Law Forum Held by

the CPC Central Committee. 6 May 1997 317

4. Namelist of Chinese Delegation to Handover Ceremony. 17 June 1997 330

5. Qian Qichen, Persist in Following the Policy of "One Country, Two

Systems" Without Change for a Long Time. 18 June 1997 331

6. Editorial, A Great Centennial Event for the Chinese Nation. 1 July 1997 335

7. Jiang Zemin, Speech at the Public Gathering Today in Beijing in Celebration

of the Return of Hong Kong to the Motherland. 1 July 1997 337

8. Guo Weifeng, Pressure on Taiwan Authorities Resulting from Hong Kong's

Return. 7 July 1997 341

9. Qin Hua, Splitting the Motherland Under the Guise of a "Referendum"

Must Never Be Permitted. 26 August 1997 343

10. Tung Chee-hwa Underscores Importance of Peg. 7 November 1997 346



1. Biographical Sketch of Chi Haotian. 19 September 1997 347

2. Former Vice Premier Fang Yi Dies in Beijing. 19 October 1997 348

3. Biographical Sketch of Jia Qinglin. 19 September 1997 349

4. Biographical Sketch of Luo Gan. 19 September 1997 350

5. The Glorious Life of Comrade Peng Zhen. 2 May 1997 350

6. Liu Huaqing and Zhang Zhen, Noted General of Our Times Whose Merits

Go Down to Annals of History: Deeply Cherishing the Memory of Comrade

Qin Jiwei. 8 April 1997 359





7. Biographical Sketch of Wu Guanzheng. 19 September 1997 366

8. Funeral for Former Deputy Chief of PLA General Staff Wu Xiuquan.

20 November 1997 367

9. Biographical Sketch of Wu Yi. 19 September 1997 368

10. Biographical Sketch of Zeng Qinghong. 19 September 1997 368

11. Biographical Sketch of Zhang Wannian. 19 September 1997 369


Terms and Abbreviations 371

Chronological List of Documents 375

Indexes 380










The volumes in this series cover political, economic, cultural, and social developments in China for the appropriate year. The coverage cannot hope to be complete as each of the topics treated in this volume could be itself the subject of a book equally large. The objective is to provide the user with a general idea of developments.

The coverage is limited to official documents. While serious scholarly work on China can no longer confine itself solely to these, official documents remain the major primary sources on Chinese affairs. At the broadest, official documents include those appearing in the Party- or state-affiliated media; official pronouncements by the Party, the state, or their agencies; speeches, especially those identified as programmatic pronouncements, by authoritative spokesmen; and editorials and commentaries in the official media, particularly those promoted for general study by the population at large. Some documents reveal the official policy or view on things; others help the user assess how a particular problem or theme developed during the course of the year, or delineate some of the diversity of opinion on particular issues. Most of the documents appear in the open press, but some are "internal," in principle restricted to particular audiences but leaked to the outside, usually by the Hong Kong or Taiwan press.

The basic editorial policy is to let the documents speak for themselves. The introductions to the chapters give general background on the topic, while headnotes to the particular documents give some idea of the general contents and possible significance of the statement. Annotations are appended where necessary at the end of the documents; they explain what for some readers may be obscure references, note differences between official translations and the Chinese text, and point to what may be of special interest or curiosity in the text. Headnotes and footnotes also refer the reader to additional material not included in this volume. The editor has no intention of imposing his own judgment on the texts, although it is not completely possible to explain without interpreting.

The first chapter of this collection covers pronouncements on major public holidays, generally occasions for regime stock-taking. Successive chapters treat the Communist Party, the united front, law and government, ideology, the economy, society, military affairs, the political struggle, minorities, the problem of Taiwan and Hong Kong, and foreign affairs. In some years there are topics or events which demand special consideration. One chapter in this volume treats the death of Deng Xiaoping and the subsequent obsequies. The last chapter treats details of personalities, living and dead, having relevance to the overall situation in 1997.

Most of the documents included in this volume are taken from the translations in the Foreign Broadcast Information Service's China series, now available only on line, through the World News Connection. Some translations are from other sources, and some of the documents were translated specially for this collection. The FBIS translations and those from other sources were corrected, where appropriate, against the Chinese original. The general policy is to use entire documents rather than selections or excerpts, so the reader may decide for himself what is important and what is not. Exceptions may include situations where the English translation used here is itself only part of a document or, more commonly, when the original Chinese source was published only as excerpts or selections.

Within the various chapters the documents are arranged in chronological order. The date given at the head of each document is normally the day it was, in theory, actually issued, or the day on which the speech was delivered. If appropriate, documents from years prior to 1997 which were not published until that year may be placed chronologically in this






volume according to their time of first publication, since this is when they had their political impact. In all cases, the date of publication is given at the end of the document, along with the source. A great disparity between the supposed date a document was issued or compiled and its actual publication may often be important in the interpretation of the document.

The final chapter, that on necrology and personalities, does not follow the strict chronological order of the other chapters. In that chapter the various personalities are treated in alphabetical order. If a particular individual is the subject of more than one document, those documents are arranged chronologically.

The editor appreciates any suggestions on how this series might be made more useful to those interested in Chinese affairs.








Changes dominated 1997. In February Deng Xiaoping, the "architect" of the reform movement and, after Mao Zedong, the second most impressive Chinese statesman of the twentieth centurythe most impressive, if measured by constructive achievement rather than overall glamourfinally died, at age 93. In July China recovered the colony of Hong Kong from Great Britain, and Beijing's control of Hong Kong would become a test of Deng Xiaoping's "theory" of one country, two systems. In September the Fifteenth National Party Congress of the Communist Party of China consolidated the primacy of Jiang Zemin as head of regime, further institutionalized the line of liberal economic reform, and hinted at further somewhat conservative but still genuine steps toward political reform. In the latter half of the year currency and stock markets in Asia fell into turmoil, bringing into question, whether for good or bad, the new conventional wisdom that Asia was to be the world's center of growth for the foreseeable future. China remained sheltered from the general Asian storm but did not escape all of its effects.

Throughout the history of the People's Republic periods of strict control have alternated with times of looser rule. In 1997 China was in one of its looser modes. The Communist Party's Fifteenth Congress emphasized anew an ideological concept developed by those around Jiang Zemin's more liberal, then purged and disgraced, predecessor Zhao Ziyang, the notion that China was in the "primary stage of socialism." In the scholastic Marxist-Leninist interpretation of historical materialism, history progresses through stages. Socialism is built upon the achievements of capitalism. It requires a sound, prosperous material base; and it is not possible, without the certainty of disaster, to skip the phase of capitalism. According to the old Zhao line, Mao and his disciples, not taking seriously enough China's lack of a true developed capitalist phase, tried to build socialism on the basis of poverty. The result was perpetual poverty combined with political and cultural repressiona compound of the worst aspects of traditional China with a political and social order akin to fascism. The primary stage of socialism was a functional equivalent of capitalism. It was, somehow, truly socialist, but embodied the economic freedoms of "bourgeois" society along with cultural and personal liberty. According to the Fifteenth Congress, this primary stage would last a long, long time.

In his speech to the Congress, Jiang Zemin several times reiterated the intention to yi fa zhi guo, to rule the state through law. This, too, was an aspect of the primary stage of socialism. In Chinese there are two slightly different terms, both romanized and pronounced





fazhi. The zhi in each is written with a different character. One zhi can be roughly translated as regulate; the other (the one in yi fa zhi guo) means to govern or rule. Since the onset of the post-Mao reforms the Chinese authorities have spoken of fazhi in the first sense. This might be translated as legality, rule by means of law. The second term, the rule of law, was not used much. Each term has its own implication. To speak of legality was a break with Maoist arbitrariness. Thus, courts wereand perhaps still aresupposed to take into account Communist Party policy in reaching their decisions. But if the courts and other governing institutions are subject to legality, Communist Party policy figures in the decisions only insofar as it was embodied in law. Rule by law means that law in the end is an instrument of rule, a tool of the rulers. Rule of law, on the other hand, implies, in its ancient western and modern Chinese usage the supremacy of law itself, even over those who enact the law.

Mostly Jiang spoke more of legality than of rule of law, but in 1997 there were some assertions for a true rule of law as well. Even without any abstract commitment to constitutional rule, this stress is the product of economic reform. In a genuine market economy, firms and individuals must have confidence that contracts will be enforced rather than subjected to the whims of those with political clout seeking to evade them; and if the country were to open to the outside, foreign investors and business partners needed similar assurances. A stable rule of law would also provide security and predictability for the ordinary person, restricting arbitrary power. In the short and even medium term this was a more realistic aspiration than for a fully functioning democracy.

The key event of the year was probably the death of Deng Xiaoping, and this volume devotes a special chapter to it. Deng was fading away for a long time and, to use a financial metaphor, the effects of his death were already discounted. His personal office was closed well before his demise and his ambitious children brought to heel. During 1997 Deng's various observations and policy pronouncements became formally enshrined as "Deng Xiaoping Theory," joining the canon along with Marxism, Leninism, and the Thought of Mao. Another elderly titan, Peng Zhen, also died in 1997, bringing the surviving number of the "eight elders who rule the state" (ba lao zhi guo) down to a pitiful few. Jiang Zemin and the "third generation" leadership finally took complete control.

Jiang was chosen by Deng and presented himself as Deng's authoritative disciple and interpreter. There is a little easy irony in Jiang's position, since one element of Deng's Theory, at least in early reform times, particularly before 1989, was that leaders, specifically Mao, should not designate their own successors. Jiang's line did not always adhere completely to Deng'sDeng stressed the primacy of economic development as an ultimate policy goal, while for Jiang "stability overrides everything." This difference was muted in 1997 more so than it was before or would be after. Within a few years Jiang's appanages sought to raise his various dicta to the level of theory. A trait of twentieth century Chinese political culture was a propensity by the ranking political boss to present himself as a philosopher king.

China's foreign policy was muted in 1997, especially compared to the hectic and dangerous 1996. Both China and the United States drew back from their confrontation over Taiwan during the previous two years, perhaps at the expense of Taiwan's long-term security. State Chairman Jiang Zemin visited the United States in the fall, and he and US President Bill Clinton agreed that their two countries should enter into a vague "strategic partnership." Earlier in the year China and Russia also initiated a strategic partnership, of probably of greater substance than the initiative with America. China also signed joint agreements with Russia and the Central Asian former Soviet Republics as China sought to contain national separatist sentiment among the Mongol and Turkic minorities along its own northwestern borders. China worried about intensified military cooperation between






the United States and Japan. The most immediate cause for this cooperation was an erratically threatening North Korea, but a deeper concern may have been China's growing military, especially naval, capabilities. The Chinese, for their part, stressed their perennial theme of a revival of Japanese militarism.

The boom economy of the 1990s, a product of liberal economic reform, was hobbled in recent years by inflation. Despite lip service paid to "the market," the economy remained subject to political influence, allowing the politically connected access to benefits such as easy credit or import licenses. The state-owned enterprises (SOEs), once the backbone of China's industrial sector, were unproductive and overstaffed, but they provided not only wages for their workers but also worker welfare benefits. As long as China lacked a regular system of social insurance, workers could be thrown on the mercy of the market only at the risk of social turmoil. A radical reform of the SOEs would impose hardship on many workers; and the existence of the SOEs gave workers an opportunity to seek personal advantages at some expense to the public good. Some families began practicing what was called, in a parody of the official policy toward Hong Kong and Taiwan, "one family, two systems"one spouse, usually the husband, would seek his fortune in the potentially lucrative but highly risky free economy, while the other would remain, usually unproductively, in the state-owned sector for the sake of the small but secure income and the medical, housing, education, and other benefits for the family that state employment entailed.

In 1997 the tough economic administrator Zhu Rongji was still in charge of economic policy. Zhu's heart probably pined for increased economic liberalization, but circumstances required retrenchment. By 1997 inflation was under controlindeed, China was beginning to lurch into deflation, a tendency exacerbated by the general Asian economic crisis. Moves to reform the SOEs and the consequent threats to worker security provoked massive labor unrest, especially in the huge western province of Sichuana fact not widely publicized in available official documents.

In 1997 there was considerable political maneuvering among the elite, but most of that, too, was subterranean. In the preceding years Jiang Zemin, faced with rear-guard criticism of economic reform and its consequences for ideological purity, moved toward a standardly orthodox ideological line. In 1997 he redefined orthodoxy (at least for the meantime) as support for economic liberalizationDeng's Theory; the primary stage of socialism; so forth. At the apex of the political system, the Politburo Standing Committee, the liberal opposition to Jiang was represented by Li Ruihuan and Qiao Shi, Qiao Shi being the more subtle, thoughtful, and, probably, generally more competent of the two.

The story of what happened in 1997 remained unrevealed at the time. Amidst the gist of various unofficial accounts, it seems that at the Fifteenth Party Congress Jiang Zemin proposed (in the spirit of Deng's Theory, but not completely of Deng's practice) that leading cadres aged 70 and over should retire from active service. After this proposal was adopted, the Party genro Bo Yibo spoke up, proposing that an exception be made for Comrade Jiang Zemin; and this, too, of course, was adopted. The effect of all this was to deprive Qiao Shi of all his positions in the Party and the statealthough the changes in the state lineup did not come into effect until the spring of 1998, with the convening of the annual full meeting of the National People's Congress. The Communist Party Congress also decided that Zhu Rongji should replace Li Peng as Premier, head of government, with Li taking Qiao's job as chairman of the National People's Congress standing committee. Jiang still seemed unlikely to dominate the political system in the manner of Mao or Deng; but by the end of 1997 he was without any effective rivals.

From the regime's point of view the most significant event of 1997 was the retrocession of Hong Kong to Chinese sovereignty, under the formula of one country, two systems. One role for the newly acquired Hong Kong was that it would demonstrate to Taiwan the viablity of that formula. The manner of Hong Kong's recovery drove home that one country





meant one country, regardless of the number of systems, and that the central government would intervene whenever it found it necessary or expedient to protect its interests.

During the last months of the transition there was minimal cooperation with Great Britain. After the events of 1989 the population of Hong Kong had obvious cause for misgivings about reversion to Chinese overlordship. The last colonial governor, Chris Patten, instituted a set of democratizing reforms designed to allay those fears, hoping to put into place a routinized system of self-government in Hong Kong. The Chinese complained, not without reason, that Patten was unilaterally changing the manner of Hong Kong's governance in violation of the agreement concerning the reversion. The Chinese concluded that Patten was simply trying to make trouble for China, and for most of his term he was became the target of vulgar vituperation by the Chinese authorities and especially the communist-financed local Hong Kong press. Patten's reforms even somewhat alienated their intended beneficiaries, the ordinary citizens of Hong Kongthey wanted a more democratic government, but the attempt to establish one had antagonized Beijing and they, the citizens, would have to live with the consequences long after Patten was back on the other side of the world.

The Chinese authorities ignored Patten's institutional changes, other than to denounce them. In late 1996 they engineered, through a transparently rigged indirect election, Jiang Zemin's choice for the first chief executive of the Hong Kong SAR, the equivalent of the old British colonial governor. This was Tung Chee-hwa, a Hong Kong business tycoon. Under the British Hong Kong was ruledin effectby a professional civil service under the London-appointed governor, in consultation with local capitalist tycoons. From the Chinese point of view, with Beijing replacing London, this was an ideal arrangement, and by 1997 the coziness between communists and capitalists was no longer a matter even for irony. China could justifiably complain of the hypocrisy of the British commitment to democracy, as there was little practical concern for it until the colony was about to revert to China. But England governed not democratically, but through rule of law, and there was genuine concern about the intensity of the Chinese commitment to that ideal.

The predominant fear of the pessimists was that Hong Kong would continue economically prosperous while becoming a political despotism. There was tension over the scope of authority of Hong Kong and the central authorities, more between the Hong Kong courts and the central government than between the Hong Kong government and the Center (thus, Hong Kong has no death penalty, so the mainland authorities arrested, tried, and shot a notorious Hong Kong gangster while that gentleman was on a trip to the mainland; and the Hong Kong courts disagreed with the government of SAR and Beijing over whether children born on the mainland to Hong Kong parents had the right of abode in Hong Kong, a dispute eventually resolved by the NPC's making a new law to govern the decision of the Hong Kong courts in this case). Generally speaking the political change was not felt much by the ordinary person. But almost immediately after reversion, partly by coincidence, Hong Kong's economy fell into the doldrums, caught up in the wider Asian crisis.

The mainland weathered that crisis fairly well, although it brought a definite end to the Deng Xiaoping economic boom of the 1990s. In some ways the relationship between the state, the SOEs, state or Party functionaries and favored private entrepreneurs, resembled what was elsewhere called crony capitalism. China's banks, acting under political direction, had accumulated massive amounts of unrepayable debt. But China's size made its overall economy less dependent upon foreign trade and, with "globalization," foreign financing, than were the smaller Asian states. And the defects in the whole process of reform and opening, especially, the continued politicization of the economy, meant the economy could continue to enjoy the protection of a political shelter. Even so, by 1998 the Chinese economy was plagued by declining demand and by deflation.





China's response to the Asian crisis was statesmanlike and constructive. China did not, for example, devalue its own currency to match the devaluations by its trade rivals, something which might have provoked an uncontrolled downward spiral. There was justice as well as wisdom in China's restraint, in that a 1994 Chinese devaluation, bringing the official exchange rate into line with the black market rate, was among the many factors behind the 1997 crisis. The devaluation had made China's exports more competitive and reduced the import of goods from its rival neighbors.