Awaiting China’s ‘Perestroika’

For those old enough to remember the Cold War, the idea of restructuring under communism brings to mind Mikhail Gorbachev’s “perestroika” reform initiative, along with its accompanying “glasnost,” or openness, policy.

The Soviet Union’s perestroika reforms were sweeping, and some historians (as well as Gorbachev himself) believe it led to the eventual dissolution of the U.S.S.R.

Thus it is tempting to look for parallels in the news that China’s government has announced a pair of policy changes that would, to some extent, ease the control the country exercises over its citizens’ lives. The changes were included in a broader announcement last week of the Chinese government’s program for economic restructuring, a collection of 60 initiatives total.

The ruling Communist Party said it intends to loosen the longstanding one-child family restrictions and to do away with “re-education” labor camps. These changes do not mean that the Chinese are embarking on their own perestroika – or as they would say, tǐ zhì gǎi gé. The country has certainly not endorsed glasnost. China’s government remains a system dominated by a self-elected, self-replicating elite, a system which remains closed and opaque to most residents of the world’s most populous nation. But the recent news does represent progress.

China’s family planning policy has restricted urban couples to one child since 1979 with few exceptions. Under the proposed change, if either parent was an only child, the couple is allowed two children. (Couples where both parents are only children, or rural couples whose first child was female, are allowed two children already. Members of some ethnic minorities are also allowed more than one child.)

The Communist Party long argued that without the one-child policy, the economy would face too much strain from an ever-expanding population. However, today China is the world’s second largest economy and its largest automotive market. Having a society that large grow old and gray, and potentially begin to depopulate as Japan has, would be a major problem for the global economy by the middle of this century. Though late, China’s leadership seems to have finally received the message that a country that forces its population to shrink, especially its population of well-educated and highly productive urban dwellers, might as well hang a “going out-of-business” sign in the window.

This change is unlikely the signal of further relaxation, at least in the immediate future. Wang Pei’an, a vice-minister of China’s National Health and Family Planning Commission, said in a question-and-answer session that “There will not be a uniform nationwide timetable for starting implementation” of the new policy. He emphasized that there were no plans for further altering the rule. The proposed change is an important step, but it is only a step all the same.

Meanwhile, the decision about “re-education” labor camps, along with a vague pledge to gradually reduce the number of crimes that can result in the death penalty, is an equally small step for a judicial system where prosecutions almost always lead to convictions. There has been a recent national crackdown on political dissent, and transparency is still hard to come by. But any genuine judicial system in China is better than none at all. The labor camps, first instituted by Mao Zedong to silence his political opponents, now serve largely as a convenient tool for local officials to dispose of anyone who gets in the way of their graft. They are often used extralegally to detain prisoners for up to four years without any charges being filed. Abolishing the camps would be a move toward fairer and more predictable treatment from the court system, even if the possibility of acquittal remains distant.

Nicholas Bequelin, a senior researcher with Human Rights Watch who specializes in China, told the New York Times that the change “doesn’t mean that China is going to be kinder to dissent and to its critics.” However, he added, “it’s an important step to do away with a system that not only profoundly violated human rights, but was also standing in the way of any further legal reform.”

Chinese leadership is making these policy changes in what it deems to be its own self-interest, as well as that of its country. There is scarcely a hint that international opinion has played a role in swaying the country’s internal politics. Yet, whatever the motivation for making them them, both changes signal movement toward slightly more self-determination for Chinese citizens.

China has a long way to go before it joins the ranks of nations that can truly be said to be governed by and for their people. But these changes, especially coming as they do at the start of the new Chinese administration, are a welcome start.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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