modernization, China still faces the problems and perils of a social revolution must be addressed. Some fear that China will revert to the Maoist-Marxist purges, rampaging youth culture and structural chaos of the Cultural Revolution. While nations of the Asian rim have rushed headlong into China, such particularly Western concerns have led to an investment tentativeness only now being overcome. Opportunities may abound, but only for companies fully aware of the real risks.
Despite vast and far-reaching political reforms, China remains an authoritarian and, as the world witnessed in Tiananmen, a sometimes ruthless and brutal dictatorship. Thus, because of the often volatile nature of China's political climate, establishing a pattern for market potential is based on recent, as well as historical perspectives.
The material effects of technological and scientific development can be distinguished from the prevailing social structure and values, which change more slowly. Technology may be instantaneous, while even revolutionary social upheaval may take years. Still, a policy and strategy for investment may be formulated. Market investors must realize that China may never adopt a Western-style democracy. Instead, a Singapore-style society, characterized by capitalist market systems and strict government controls on freedom of speech and culture, seems much more likely.
Through the 1970s, the Chinese bureaucracy was a poor carbon copy of the Soviet system. Then something happened. In the first dozen years of reform beginning in 1980, China attracted more than $20 billion in foreign investment (Overholt, 1993, p. 31).
What happened? Clearly, here is a case of profit motive superseding ideology. Only hard-line children of the first Cultural Revolution sought a return to the strict Marxist doctrine. Then Vice Premiere Deng, his own son a victim of the purges wrought by the Cultural Revolution of the 1960s, knew that a...