A race to modernize

CHONGQING, CHINA - From this teeming industrial city in central China, the country's past is furiously racing to catch up with its future.

Construction cranes and massive shells of new buildings peer through the smog-choked skyline as millions of cars jam the streets, a collision of noise and smells that overloads the senses of even the most hardened urbanite.

Yet just a few miles away, poor farmers quietly toil the land just as their ancestors have done for centuries, evidence that in China, everything has changed for some, while for others, nothing has changed.

When the Summer Olympics opens in Beijing next month, it will unquestionably be a moment of triumph and pride for this country of more than a billion people, a reflection that China has become a global power.

"Never before has the world seen such an important political economy rise within such a short time span with such global influence," said Christopher McNally, a fellow at the East-West Center in Honolulu.

Yet China's success is fragile: Most of the country is still rural and poor. The country's economic growth has greatly widened the income gap between the mostly poor 330 million people who inhabit the central and the western provinces and the rich cities on the eastern coast.

And economic inequality breeds political unrest. According to the Chinese government the number of "public order disturbances" jumped nearly 50 percent from 58,000 in 2003 to 87,000 in 2005, the last year statistics were kept.

So far, the protests have been local in nature: the planned construction of a petrochemical plant near Chengdu; forced land seizures in Dongzhou, cultural and religious strife in Tibet. But the disturbances have unnerved the central government and Chinese Communist Party officials who religiously preach the idea of a "harmonious society."

Fearing unrest as China's economy grows, the Communist Party in 2000 launched an ambitious program, dubbed Go West, to bring jobs and prosperity to the countryside.

Chongqing is literally and figuratively central to the government's Go West campaign. Once the capital of China during World War II, the city is located strategically near the Three Gorges Dam, the largest hydroelectric dam in the world. Unlike most provinces, Chongqing municipality, which includes the city and surrounding rural areas, answers directly to Beijing. It has a population of more than 31 million.

To combat poverty and create a deep pool of labor for industry, Chongqing is trying to move 4 million rural people, mainly from the overcrowded Three Gorges area in the east, to within an hour's drive of the city.

"Rural-urban migration has been a key driving force of China's economic growth and poverty reduction," said David Dollar, a top World Bank official based in Beijing who estimates 30 percent of rural income comes from money sent by urban migrants. "Urban productivity and wages are far higher than" in the countryside.

By some estimates, China needs to create 50,000 jobs a day to maintain political stability. And yet there are already trouble signs in China's economy. The World Bank estimates economic growth will hit 9.8 percent this year, about 2 percentage points less than China's performance in 2007. Food and commodity prices are soaring. And some economists worry that China's low interest rates have encouraged a bad mix of loose credit, bad loans and rampant speculation.

A delicate balance

From the perspective of Chongqing's mayor, Wang Hongju, the biggest challenge for his city is to maintain the order of the development.

"We don't encourage all of the rural laborers to move to a big metropolis like Chongqing,'' he said in an interview through a translator. "We will not allow the labor force to leave the rural areas not in order. We need to secure the food. We will not allow slums to occur in Chongqing like [what] happened in many other countries, and also serious crime."

Another major problem facing Chongqing is finding employment for the millions of workers who lost their jobs when the government began to shut down unprofitable, state-owned companies.

For more than a decade, Hu Yunping worked at the same job the government gave him after he completed high school in the 1980s. But when the state-owned company went bankrupt, Yunping borrowed 3,500 yuan ($513) from family and friends in 1995 and started his own business.

Yunping struggled at first, but thanks to some economic assistance and encouragement from the government, he says, the budding entrepreneur was able to expand.

Today, the Chongqing Yuxin Pingrui Electronic Co. employs 600 people and makes electronic parts for clients such as Black & Decker. Yunping hopes sales this year will hit 200 million yuan ($29.3 million) compared with 120 million yuan ($17.3 million) in 2007.

The factory runs 24 hours a day, seven days a week. The biggest problem is finding skilled workers, Yunping says.

Vocational training

Knowing this, Chongqing has invested heavily in vocational education. In 2004, the government created "the Chongqing Vocational Education Base," a collection of both public and private vocational schools in Yongchuan, a sprawling university town located about an hour outside of Chongqing.

Students train to be everything from bank tellers and fashion designers to mechanics and factory workers. About 360 companies have signed cooperation agreements with the schools. Although the 104,000 students come from across China, special preferences are given to poor rural residents. Last year, the schools provided financial aid to 6,000 students, including displaced villagers from the Three Gorges Dam project and poor people from the city and countryside.

To create jobs for the rural migrants, the government hopes to attract a mix of foreign investment and local entrepreneurship. At the Changan Ford Mazda automobile factory, 7,000 workers assemble models including Volvo and the S Max that are sold to Chinese consumers. The factory, a joint venture between Changan, a local carmaker, and the Ford Motor Co., opened in 2003 and now produces about 260,000 cars a year.

For a relatively modest investment ($98 million) in the plant, Ford has done well, thanks to an ample supply of low-cost labor and a thriving domestic market, said Keint Huang, a government affairs specialist for Changan Ford.

"The Chinese people get real rich, they are very eager," he said. "They want a house to themselves. After they have their own house, the next step is to buy a car. We have many, many people in the countryside. We give them jobs and they will be very, very happy."

Stability is at stake

But is the Go West strategy working? Results are mixed, experts say. Chongqing is attracting significant time and resources from Beijing, but it's not clear whether the municipality can wean itself off government money and develop a self-sufficient economy, Lijian Hong, a senior lecturer at Monash University in Australia, wrote in a paper called "Chongqing: Opportunities and Risks."

The Go West campaign "has not been wildly successful," Hong writes. "However, it is equally clear that increased government investment in west China ... may be more concerned with political and social implications than economic impact."

If China's economy sours, the government and the party would lose credibility with the people who are already angered by inequality, environmental damage and corruption, he said.

"There is a deadline mentality [among government officals], a kind of manic sense that if we don't create the jobs, we will be potential" targets, said Richard Bohr, former director of the Minnesota Trade Office who now teaches Asian Studies at the College of St. Benedict and St. John's University.

"It gives [the government] a lot of sleepless nights."

Thomas Lee • 612-673-7744