In the heart of downtown Chongqing, a sprawling city-state in Western China on the banks of the Yangtze River, a six-story tower commemorates those who died in what the Chinese call “the anti-Japanese war.” After Japan invaded in 1937, the government moved the capital of China upriver from Nanjing to Chongqing. That decision brought with it Japanese bombs, and the city was destroyed during the war. A year after Mao Zedong founded the New China in 1949, he commemorated the fallen with the People’s Liberation Memorial Tower. I was told by a guide at the city’s exhibition center that just twenty years ago the memorial was the tallest building in the city. Today, the tower sits in the shadow of at least three mountainous skyscrapers in the central business district. Situated at the intersection of a pedestrian shopping mall, the tower looms about as large on the Chongqing skyline as a hotdog stand on Manhattan’s.

My first trip to China–sponsored by the China-United States Exchange Foundation–came just over a month after the People’s Republic celebrated its sixtieth anniversary. Those six decades can be cleaved in half: the first act, 1949-78, were the years of Mao, famine and the cultural revolution; the second, the three decades since then, the years of Deng, “reforms” and the “opening up,” as the Chinese call it. And yet as far as China has come in terms of wealth (and the concentration thereof), it remains a very poor country: it ranks 100 among the world’s nations in terms of per capita GDP, according to the IMF. “Our biggest challenge is not from without but from within,” Yang Jiemian, president of the Shanghai Institutes for International Studies, told us, citing (obliquely, as the Chinese we talked to were wont to do) the potential for instability as China continues on its trajectory. “It has become the consensus of the elites that China should stay on the right track: the past thirty years have resulted in remarkable achievements in all aspects of China. We hope that in the same vein, but in different emphasis, China could have another thirty years.”

But is another thirty years like the past thirty even possible? The third act of New China begins as a world financial crisis reveals the deep flaws of global neoliberal capitalism and as a diminishing fossil fuel supply and rising global temperatures escalate the competition for resources. Meanwhile, China is in the midst of the largest project of industrialization and urbanization in human history, one that requires massive amounts of capital and fossil fuel. It’s like watching a jeep race up a mountain road as an avalanche begins to cascade downward from above.

At a tour of a car factory in Chongqing, the guide from Chang’an Motors pointed to the boxy gray minivans rolling off the assembly line and, beaming, said, “There are 800 million Chinese peasants who need these cars!”

He’s right, of course. China “should not be expected to stay forever as a bicycle kingdom,” as Yu Qingtai, special representative for climate change negotiations, told us. But 800 million new cars–think about that for a moment.

What’s happening in China is at once awe-inspiring and monstrous. Its mixture of planning and markets, autocracy and federalism, competence and corruption both supports and refutes every argument one could make about models of political economy. There is a risk, after two weeks in a country of 1.3 billion people, of falling prey to false certainties: like a traveler airlifted onto the top of Mt. Kilimanjaro who returns home to tell everyone that Africa is covered in snow.

This danger was compounded by the fact that the trip was sponsored by an independent, Hong Kong-based nonprofit whose founder, Tung Chee Hwa, the first Chinese chief executive of Hong Kong, is very close to the Chinese leadership; and our hosts on the mainland side, who chaperoned us from interview to interview, were Communist Party members and former government officials. We had a few painfully staged interactions with “ordinary people” (including an elderly tangerine farmer who couldn’t remember the year of a specific agricultural reform but knew that it was during the “5th plenary of the 16th Central Committee”).

We did, however, have an opportunity to speak with dozens of members of the Chinese elite: officials, academics and businessmen. And China happens to be a country where the elites hold tremendous power. Indeed, they seem to have seamlessly melded Leninist vanguardism with American-style best-and-brightest meritocracy: “Let me put it simply,” said former Shanghai mayor and current president of the Chinese Academy of Engineering Xu Kuangdi. “Most successful businessmen or scholars or engineers–they have become party members of the CPC.”  

China’s New Deal

There is no formal social contract that regulates the relationship between members of this ruling class and the people they rule, but there does seem to be an implicit one. It is roughly this: we (the government) provide you (the citizens) with 8 to10 percent annual GDP growth, 24 million new jobs a year and the chance to win the capitalist lottery of sending your son or daughter off to a prestigious school with the promise of a life of industrialized luxury. In exchange: you don’t question the legitimacy of the Chinese Communist Party.

This is not the easiest contract for the government to uphold, and it has already shown some signs of fraying. As recently as 2007, there were 80,000 protests a year in China, and the Internet has given a platform to increasingly rambunctious critics of government policies. The most potent issue is corruption, which captured wide public attention in the wake of the 2008 Sichuan earthquake, when many blamed corruption for the fact that school buildings that collapsed had dodged building codes. Several Chinese officials told us corruption was the biggest threat the party faces, the “threat from within,” as one put it. Despite high-profile “crackdowns” (such as a trial currently under way in Chongqing involving 9,000 suspects), a recent China News Agency poll shows that corruption remains the number-one issue on the minds of Chinese citizens.

Corruption aside, there are also the raw economic challenges of maintaining hypergrowth, particularly at a moment of global contraction. Exports make up 35 percent of Chinese GDP; in the past year they fell by 25 percent. There are 6 million recent college graduates who need to find jobs. One Chinese hedge fund manager showed us an article for a newspaper about new graduates flooding a job fair, where the ratio of attendees to jobs was 7.5 to 1. What would happen, I asked one local party official in Yichang, a city near the infamous Three Gorges Dam, if unemployment in China went to 10 percent? Before he answered by saying that such a situation would be impossible under the current system, one of our chaperones, a very savvy diplomat who had served in the foreign ministry, leaned over to me and said, sotto voce, “The government would collapse.” He chuckled after he said it, but I think he was only half joking.

When you talk to Chinese officials, they seem competent, focused and obsessed with stability (if also, sometimes, arrogant and pedantic). But occasionally you can glimpse the dangers and threats to the established order that lurk just outside the frame. “Chinese government officials face a lot of pressures,” Wen Tianping, the spokesman for Chongqing’s municipal government, told us. “We work under extreme pressures and we have a lot of difficulties.”

The foremost difficulty is immigration. In English we’d call it “migration,” but our translators unfailingly used the word “immigration,” and I began to see that it was the more accurate description of what was happening. Just as developed countries like the United States and members of the European Union face an influx of workers from the developing world, so does China: it’s just that China contains both the developed and developing worlds within its borders.

The way China regulates this flow is not that different from the way nation states do. There is a residence permit called a hukou that anchors people to their home region by tying social services (healthcare, pension and, most important, schooling) to that area. But just as walls and laws have a hard time restricting human traffic from Mexico to the United States when the economic incentives are so extreme, so do the internal regulations of the Chinese state.

“They can be migrant workers forever,” said Paul Mak, a Chinese-American businessman in Shanghai who has worked for the American company Mary Kay in Shanghai for twelve years. “A migrant worker cannot become a resident of Shanghai. Now if you have a college degree you can come but not without education. You have a class of people in this limbo.”

This marginal population freaks out the Chinese authorities because they desperately wish to avoid the experience of so many other developing countries, from Brazil to India, which have seen the growth of massive, ungovernable miserable slums in their largest cities. “We have learned many lessons from other countries, including the so-called Latin American trap during the urbanization process,” said Wen. “The governments didn’t think thoroughly about urbanization. Huge numbers of villagers came to the cities and they couldn’t find a job. That’s why there are so many slums.” In a concession to its inability to control the migrant flow, the government in Shanghai recently announced reforms that allow migrant workers to send their children to public school in the city where they are working. As important as it is to keep unauthorized migrants at bay, creating a vast migrant underclass of uneducated children is an outcome the government decided to avoid.

Atop the urban-rural divide is a stark class divide as well. Peasants are the original Chinese revolutionary class, hundreds of millions of whom remain chained to a life of crushing preindustrial penury while oligarchs in Shanghai and Beijing live lives that would make even a Goldman Sachs banker blush. One night in Shanghai we dined at a glass-enclosed restaurant on the roof of an art museum where entrees went for upward of $40. In 2007 per capita net income for China’s approximately 800 million farmers was just $50 a month. Managing the flow and settlement of people from country to town is also a means of managing the potentially most explosive source of social tensions.

Making No Small Plans

This is where Chongqing comes in. “Chongqing is a miniature of the whole of China,” said municipal spokesman Wen. Roughly the size of Maine, it contains 31 million people, one major city (Chongqing, population 5 million) and a number of satellite cities. In 1997 it was elevated to provincial status so that the municipal government could focus on the internal migration from rural to urban areas, all within its municipal boundaries. “The central government hopes to have an experiment here to explore ways to address the problems we are facing: where should the 20 million people go on such a large scale?”

The key, in the eyes of the government that runs Chongqing, is planning. “We have plans, timetables and goals in our minds whenever we do anything,” said Qian Lee, who works in the local government’s foreign economic outreach bureau.

“We as a government give guidance and sort of categorize those who want to come to the cities,” Wen said. “There are several tiers…. The first group of villagers will go to the downtown center. The second group will go to six regional centers we are building. And the third group will go to the urban places that are closest to their home villages, such as the country towns and townships…. We have thirty-one district centers and 103 towns.” For each of these three tiers–downtown Chongqing, the six satellites and the thirty-one district centers–the government has annual targeted population levels for the next three years.

Chongqing is so proud of this planned vision it has constructed a $50 million exhibition hall on the banks of the Yangtze that showcases its past, present and future. Its centerpiece is an 892-square-meter scale model of the city. The tour guide flips a switch, and a comic-book night descends on the model; the rivers glow indigo. She flips another switch and lights up several dozen clusters of buildings, future projections of structures that will be completed in the next five years, then the next ten. Finally she puts all the lights on to reveal the future of Chongqing in all its miniature glory.

The tour ends in a room with a 360-degree, full-screen projection of a computer-rendered flyover of the future metropolis. Unlike the real smogbound and dreary Chongqing, it is bathed in piercing sunlight, and because of software limitations or of an oversight by the creators, not one of the humans who populate this new world–its expensive waterside condos, outdoor stadium and grand office building lobbies–is Chinese.

The ethos that animates this exhibition hall, a High Modernist faith in progress brought about by “scientific” planning, is so distant from the demoralized America of 2009 that my time in the city felt like a visit to Chicago in 1890 on the eve of the World’s Fair. (Shanghai will be hosting the World Expo next year.) There’s no larger representation of this animating faith than the Three Gorges Dam, which we toured one afternoon. The project took fifteen years and cost $30 billion. It will eventually provide up to 4 percent of China’s electricity (the equivalent of about 500 coal-fired power plants). In order to build it, 1.25 million people were forced out of their homes on the banks of the Yangzte, and 1,500 archaeological sites, including ancient temples, were drowned.

To the Chinese elites we talked with, though, the future is everything. Although Chinese civilization (and administrative bureaucracy) is 5,000 years old, no one seemed interested in talking about anything that occurred before 1978. Such intense futurism is easy to lampoon, but it also seems the only worldview one could hold on to in the face of the challenges Chinese planners must overcome. Pick any major city in America and start adding 500,000 people a year. It wouldn’t be long before it broke under the strain. It is no small thing to design a sewer system for a city growing at that pace. Just ask the 10 million residents of Mumbai’s slums, whose lives are literally mired in shit because there is no access to a sewage system. So if the dark side of Chongqing is the triumph of Robert Moses’s vision over that of Jane Jacobs, the silver lining is that–at a technical level, at least–this vision is pursued and executed with what seemed like an impressive degree of mastery.

Capitalism with Chinese Characteristics

The Chinese affection for urban planning is closely connected to their belief in the virtues of economic planning. The fable we are told about China, particularly by neoliberals, who hold it up as a model of how capitalism has delivered millions from poverty, is that the market reforms have produced growth and prosperity by throwing off the shackles of state intervention. It’s a deeply incomplete story: the commanding heights of the economy (telecom, energy, transportation and, most important, finance) remain in state control. There are four major state-owned banks in China, which together have an 80 percent market share.

Planning of the sort undertaken by the central government is viewed in the United States as a disastrous and discredited anachronism, as if the Chinese national weather service were relying on astrology. But whatever inefficiencies the heavy state footprint introduces, the largely government-run financial sector has protected China not only from the ravages of the financial crisis but also the kind of massive misallocation of capital that the global financial system has produced in the West over the past ten years. In fact, Qian Lee, who works for the municipal government in Chongqing, couldn’t help but gloat about the benefits of the Chinese approach: “This has been discussed by Internet users in China who say when Obama comes to China that he can discuss with Hu Jintao about the importance of plans. This is something I think we can present to our American friend.”

In dealing with the effects of the downturn, the state has devoted itself with impressive vigor to making sure growth is maintained and unemployment doesn’t spike: the central government passed a 4 trillion RMB stimulus program (70 percent of its annual budget), the state-owned banks flooded the economy with investment capital and state-owned enterprises were directed not to lay anyone off. The result is that most, if not nearly all of the growth China experienced this year almost certainly came from state-led investment. Weighed down by the collapse of American consumption and the worst global recession since China began its reforms, the state was able to drag the economy over the 8 percent finish line, holding up its part of the unwritten social contract. This is no small accomplishment, but it is an open question whether it can replicate this feat next year, should global demand continue to be depressed.

Like the Death Star, the corporatist behemoth that is the Chinese economy is intimidating to behold, but it is not without its vulnerabilities. The abominable lack of a social safety net helps produce the high savings rate that most economists say stands as the single biggest obstacle to making the necessary transition to an economy driven more by domestic consumption (not to mention basic justice and security for hundreds of millions of people). This is connected to the much deeper problem of distribution, which presents economic and political challenges, although those two categories bear a strange, sometimes mysterious relationship to each other. “We do worry about equality,” says Shanghai Institutes for International Studies president Yang Jiemian. “We do need to focus on distribution, allocation of rights, taxes, hospitals, healthcare.”

When you raise the issue of distribution with other Chinese officials, they acknowledge the problem (they are nothing if not vigilant about emerging threats to their managerial order) but caution that achieving a more equal society will take time. Xu Kuangdi, former Shanghai mayor and party bigwig, was just one of several men we spoke with who cited Deng Xiaoping’s exhortation to members of the party when he launched his reforms: “Let some people get rich first.”

The question is, Just how many is “some,” how rich is “rich,” and how long does “first” last?

China has undoubtedly made some progress on this front: improving rural healthcare, ending taxes on farmers and even passing a labor law with a minimum wage, overtime and other protections (over the objections, I hasten to point out, of the US Chamber of Commerce). But while everything in China on the business side seems to move as fast as Shanghai’s Maglev train, which goes 430 kilometers an hour, the project of equality, justice and social welfare proceeds much more slowly.

Xu argued that this is all part of the plan: “Let’s look at our neighboring Asian countries,” he said. “South Korea: its peak developing speed was reached using military rule…. Indonesia was successful during the reign of Suharto but recently it faces stalemate and difficulties.” The reason that democracy is an obstacle to economic progress, Xu said, is that “the poor people want to divide the property of the rich people…. If we Chinese copied the directly elected situation today, people will say, ‘I want everyone to have a good job.’ Someone will say, ‘I will divide the property of the rich people to poor people,’ and he will be elected. It is useless: parity will not solve the problem of economic development. That is why we are taking a gradual and step-by-step approach in reform. As Mr. Deng said, we will cross the river by touching the stones. We will not get ourselves drowned, and we will cross the river.”

While Xu, as a party leader, had the latitude to speak in explicit terms, almost no one else discussed politics so frankly. In China, economics stands in for politics as the substance of public debate and conversation. You cannot call for elections or for a free Tibet, but you can publish heated polemics about the government’s decisions to continue to purchase US treasury bonds.

Where and When East Meets West

But Wang Hui, the lone dissident we spoke with during our time in China, says the state’s attempts to maintain a strong and stark dividing line between legitimate critiques of its economic policy-making and illegitimate critiques of its very foundation doesn’t always work. China’s nominally socialist orientation, Wang argued, has provided many of its citizens with a vocabulary with which to criticize the state. “The paradoxical situation is that many ordinary people can use [Marxism] to defend their own interest because there is a real contradiction between the theoretical claim and what happens in reality.”

A participant in the Tiananmen uprising, Wang spent time in re-education camps before going on to edit an independent journal that criticized the government from, for lack of a better word, the left. We met for lunch in a restaurant on the campus of Beijing’s Tsinghua University, and as Wang spoke about politics in China, our two chaperones grew more and more uncomfortable, staring down at their plates in silence as if Wang were sharing graphic details of his sex life. It was a reminder that explicitly political debates are taboo. But Wang’s point is that there is a public sphere in China, cramped though it may be, and it’s beginning to have an effect: if an issue seizes the public’s attention, the government now finds itself forced to respond. “It’s really up to whether or not you have the capacity to break through that certain kind of barrier and create some kind of space” for public debate, he said.

A few days earlier, over dinner in Chongqing, Zhang Haiqing, a local municipal official, complained to me at length about the uncivil and vicious attacks that local bloggers were incessantly launching toward the government over this or that proposal. He almost sounded like an American politician.

We tend to view China as posing an alternative and threatening model for the future, one that’s by turns seductive and repulsive, the source of envy and contempt. But after a while I wondered if we aren’t in some way converging with our supposed rival. China has managed the transition from a repressive, authoritarian, impoverished country to an industrial, corporatist oligarchy by allowing a loud and raucous debate while also holding tightly onto power. Perhaps we are moving toward the same end from a democratic direction, the roiling public debate and political polarization obscuring the fact that power and money continue to collect and pool among an elite that increasingly views itself as besieged on all sides by a restive and ungrateful populace.

On one of my last mornings in Beijing, I stumbled upon the “Better English” section of China Daily, which offers readers chances to learn new English phrases. One of them was, “Maybe I’m going out on a limb, but I think we still have to invest in it.”

I may be going out on a limb, but I don’t think either country is going to be able to make this system work.