Despite its phenomenal economic achievements, China will not be able to make the transition from a state-socialist economy to the real market economy the world has been expecting it to become, says Minxin Pei, currently one of the best informed authors and scholars working in American universities on Chinese affairs. Pei spent three years researching materials for this book, guided by his insightful analytical mind on developments in China, a totalitarian political system headed by the communist party that is intent on keeping its power, no matter what. Its economic reforms, which began around 25 years ago, and which were launched by Deng Xiaoping, have transformed the nation of 1.3 billion people. The country's per capita gross domestic product (GDP) increased from US$ 151 in 1978 to US$ 769 in 1999.

But, Pei argues, based on various studies on democratic development in autocratic regimes, China's economic development is not sufficient to allow a transition to democracy. Samuel P. Huntington, a well-known scholar on the issue, says the per capita GDP must be above US$ 3,000 for a democratic transition and a liberalized political system. East Asian nations like South Korea, Taiwan and Thailand have demonstrated how the transition to market economy was done by democratizing the political system. Pei says China's transition is trapped because the Chinese Communist Party (CCP) and the authoritarian ruling elites have dominated the country's economic development to ensure their own survival. He says CCP senior leaders are concerned about political reform only when economic reform and growth appear to have stalled. But they drop that concern when the economy is working well. The communist leaders and ruling elites in China never leave the government, and use the economy to maintain their authority, Pei says. A successful democratic transition can occur only when a regime collapses. "Historically, no communist regime has ever completed the evolutionary process of democratic transition," he says.

In countries that have made a successful transition to democracy, economic progress was the key determinant in bringing about political liberalization. In China, the opening of the political system has been slow while its economic growth has been fast. Pei says that the ruling elites have made all the decisions, and that they were the real determinants for democratization. Rapid short-term economic growth sometimes provides no incentives for the ruling elites to seek political liberalization, Pei says.

China's economic reforms have evolved gradually, and those who led the reforms were known as gradualists. Deng Xiaoping urged cautious steps in reforming the economy while maintaining the ruling party's power, comparing it to a person crossing a river by feeling the stones. But Pei says that the gradualist way is unsustainable because of deep-seated problems and the mounting costs of an inefficient bureaucracy. China lacks the rule of law, civil liberties and political opposition to monitor economic reforms. The CCP is determined to maintain itself in power.

"Having seized political power through the barrel of a gun, a formerly revolutionary party such as the CCP is unlikely to seek its own demise through voluntary reform," the author says.

The author cites studies by the World Bank and international comparative data showing that China is lagging behind other former socialist regimes in Eastern Europe in liberalizing its economy. The gradualist approach may not be sustained because China has built up massive financial deficits in sectors that remain under state control, and it is dependent on the ruling elites that do not want to take risks in advancing reforms. The economic reforms launched by Deng Xiaoping may lose momentum, Pei says. He warns that unless economic reforms are fully carried out, democratic transition will stall and Chinese leaders will not be able to achieve their ambitions to become global players.

The situation has led to an erosion of the CCP's power, and to political cadres losing faith in the party. Corruption has become a major problem in China. Pei has assembled some well-known cases of corruption involving ranking officials. Li Zhen, the head of the provincial tax bureau in Hubei province, was executed in 2003 for amassing tens of millions of yuan. Li Zhen confessed during his trial that he was worried by the collapse of the Soviet Union and was trying to make money while he had power. Other officials accused of serious corruption charges said they grabbed as much money as they could for fear that their own government would collapse because of economic reforms.