China was heralded as a leading civilization for centuries, outdistancing the rest of the world in the sciences and arts. But that changed in the first half of the 20th century. Famines, civil unrest, military defeats and foreign occupation took their toll. Following World War II, Mao Zedong (Tse-tung) established a communist dictatorship with strict controls on everyday life. Although China's sovereignty was ensured, there was a cost of millions of lives. Mao's successor, Deng Xiaoping, decentralized economic decision making after 1978. Within the two decades plus since, China has seen vast growth through a market-oriented economy. As economic controls in China continue to weaken, communist political controls remain strong under current party leader and president Jiang Zemin. In the fall of 2002, the Chinese Communist Party will convene for its 16th Party Congress, at which time a significant shift will occur as a new generation of Chinese leaders is selected.

Donald Ratajczak, professor emeritus and former director of the College's Economic Forecasting Center, recently made his first visit to the People's Republic of China, the controversial land he has so often studied and written about from an aspect of the global economy. Ratajczak, who is one of the world's most quoted economists and current chairman of the board and CEO of BrainWorks Ventures, talked candidly with The State of Business about China - its people, progress and politics.

The State of Business (TSOB): What was your main reason for going to China?

Donald Ratajczak (DR): I've had an interest in China for a long time. When I went to MIT, I took a major in economics, and we had to take a minor in an unrelated field. My unrelated field was traditional Chinese history. So I learned something about Buddhism, Confucianism, the social structure of China and the dynasties. The trip came about when my wife, Rosalinda, got a mailing from the University of California system about a Berkeley Continuing Education opportunity in China. At first my son David and I were going, then my wife and our daughter Karen decided to go. There were more than 30 people in the group for this trip, including Harvard's Phil Kuhn, a top U.S. expert on China.

TSOB: What major cities and attractions did you visit during the three-week trip this summer?

DR: The major points of interest were Beijing, Xi'an, Chongqing, Tunxi, Mt. Huang and Shanghai. We also took a Yangtze River cruise and went to the Great Wall, the Forbidden City and various lakes and parks. I'm very interested in the dramatic archeological discoveries of China that have been made over the last 25 years, and we saw the 2000-year-old terracotta soldiers at Xi'an, which was one of my favorite experiences on the trip.

SOB: What is your take on the reaction of Chinese people to Americans?

DR: The Chinese are generally hospitable and helpful, and they have a more positive feeling about Americans than they do about Europeans, Russians or Japanese. Americans fair well with the Chinese.

TSOB: While there has been considerable reform of China's economic model, the same can't be said for its political system. Just how influential is the ruling Chinese Communist Party?

DR: China is still an autocratic country. The government owns all the land, and they have total say over land use. If the Communist Party is united, you cannot fight it. People there can't say, "I have my rights." They violate human rights there all the time ... they don't know what that [human rights] means. I will say it is quite noticeable that the provinces are becoming more powerful than Beijing, and you can see signs of that in development in the provinces. We may be reading too much into it, but it does looks like there's some sort of evolution happening.

TSOB: Does China face a growing disconnect between the demands of its reforming economy and society and a political system that is, for the most part, not suited to meet its needs?

DR: It's a question of what you think the disconnect is. We get carried away by the name - the Communist Party. But in China it's not a Karl Marx party, although they are trying. All of the educated people in China recognized that Deng Xiaoping made a very important statement back in 1979. When he was asked how communists could engage in marketed activities, his comment was that he didn't care if a cat was black or white as long as it could catch mice. Everyone quotes that and the implication was quite clear - the party is going to be the party, but it's not going to be caught up in ideology. At that time their need was to feed the people, and whatever worked, that's what they were going to do. If a market-based capitalist incentive program worked, they would do that. Deng Xiaoping actually made that statement here in Atlanta. The current Chinese president Jiang just gave a speech in preparation for the Party Congress that's coming up there next year. He basically said there is a role for communism, and there is a reason why they are now pushing capitalistic procedures. He also recently said capitalists are almost as important as farmers if they work for the good of the country. The new leaders will be more lenient toward capitalists, but capitalists will have to find ways to get approval from the government. Things are rapidly changing there now, so it depends on the new leaders. Will they allow people to have their voices made loud? The Chinese people are getting more respect. In addition, the fact that Beijing was named the site for the 2008 Summer Olympics was huge - a major victory for the Chinese.

TSOB: To what extent did you see the disparity between urban and rural incomes in China?

DR: It is a disparity that won't naturally narrow. The rural areas of China already produce the most energy-efficient crops for the soil and the needs of the people, and they do it all by hand. They are not going to do more in rural areas, and that's the greatest problem because they only want the cities to grow. Since we were mainly in urban areas on our trip, we did not see the poorest China.

TSOB: Let's talk political relations between China and the U.S. What has been the impact of events such as the 1999 accidental bombing of the Chinese Embassy in Belgrade by the U.S. and the April standoff with the Chinese involving the detained U.S. reconnaissance plane? And has there been an effect on business relations?

DR: The embassy bombing still bothers a lot of the Chinese, but the spy plane incident didn't mean anything to them. That was more of a Beijing thing. The Chinese are incredibly confused about U.S. policies. We go from nice to nasty as far as they're concerned. Recently, Colin Powell referred to the Chinese as competitors, but they don't see the U.S. as competitors at all. That bewildered them. As far as business relations, these events have not been a major problem. The Chinese know they need outside capital to build their country. The Chinese government is not going to arbitrarily take advantage of its land ownership rights. They're going to allow people to build the factories and make money, because to stop doing that would be to stop getting the capital.

TSOB: In hindsight, what else do you wish you had been able to do while in China?

DR: I would have liked to spend more time with villagers for historical reasons ... talking to the common people who lived through the Cultural Revolution. I'd like to find out if they believe they are the freest they've ever been, with more choices and opportunities now.

TSOB: If you could only describe China today in one sentence, what would it be?

DR: China is changing significantly, especially in urban areas, and its people are willing to embrace the world ... but they want the world to recognize what their contributions have been, and that they are not backward.

- Peri Parks