Many analysts say China is disproving a long-standing assumption in the West that democracy follows economic liberalization.  They say China?s rapid economic growth has helped its communist regime bolster its political legitimacy and stalled much-needed democratic reforms in China.  

Ever since Deng Xiaoping launched major economic liberalization in the late 1970s, inaugurating an era of extraordinary economic growth in China, many Western observers argued that political reform would follow.

Bruce Bueno de Mesquita, Chairman of the Department of Politics at New York University says the assumption that economic growth produces an educated, capitalist middle class that demands control over its own fate has not been the case in China.  He points out, ?When Deng announced his economic reforms, the standard view in the West was that China was quickly going to become a different, democratic kind of country.  It?s now 27 years since those reforms were put into place.  And there is no evidence of any meaningful change in the way governance is done in China.?

Professor Bueno de Mesquita adds that authoritarian governments around the world, including China?s, are showing that they can reap the benefits of economic development while resisting any pressure to relax their power.   He notes, ?What a lot of autocrats have figured out is that prosperity can be a substitute for freedom and democracy, and that the big threat to them is not promoting economic growth, promoting good health care, having reasonably good literacy rates, because all of those things are beneficial to productivity.  What is harmful to them is people having the right to freely assemble, a transparent government, a free press.  It is very cheap to suppress those freedoms while promoting economic progress, so that people are fed and happy and don?t worry so much about turning their governments out of power.?

Stifling the Internet

According to some estimates, China is the world?s second-largest economy, after the United States.  Its robust economic expansion has been fueled mainly by foreign investment.  An increasing number of foreign businesses are operating in China, which is often called the ?workshop of the world.?   More than 44,000 foreign operations, worth about $60 billion, were set up last year alone.  

U.S. businesses are especially attracted to China?s technology market, the fastest growing in the world.  There are an estimated 110 million Chinese Internet users and that number will likely skyrocket to 250 million by the end of the decade.

But China monitors its citizens? Internet activity, blocks information from websites and frequently jails those who are accused of what it deems subversive cyber-action.  And, high-tech giants like Microsoft, Google, Yahoo and Cisco Systems have to comply with Chinese censorship laws in order to do business there.  They have been vociferously accused of aiding Beijing?s crackdown on dissent.  

Clyde Prestowitz, President of the Economic Strategy Institute in Washington and author of the book: Three Billion New Capitalist: The Great Shift of Wealth and Power to the East, says American corporations often are caught in situations beyond their control.

He argues,  ?When Congress passed legislation to bring China into the World Trade Organization and when Congress agreed to give China most favored nation treatment [i.e. most favored nation trading status], it was taking steps to encourage U.S. companies to do business with China.  Everybody knew that we were not dealing with a democracy.  Everybody knew that the Chinese leadership had different views about handling information than we did.  The companies obviously see China as a big opportunity.  And if they are not there, other competitors will be.  But it does call into question the extent to which global companies can be co-opted by authoritarian governments.?

The Globalization Game

After years of complaints by free speech and human rights advocates, the United States Congress is considering new rules to govern overseas operations of American Internet companies.  But trade expert Clyde Prestowitz contends that loosening Beijing?s grip on the way foreign corporations do business in China requires an international effort.  He adds that pressure is building within China itself and notes that a number of high-level former Chinese officials recently urged President Hu Jintao to ease censorship.  

Analyst Clyde Prestowitz says, ?Because there are important people in China who understand the significance of freedom of speech, there is a lot of room for the U.S. and other Western and Asian figures -- Koreans, Japanese and others  -- to play a role as well.  They can sit down and talk to the Chinese and say, ?We are playing this globalization game and here is how the game really has to be played?.?

Many observers argue that despite the regime?s efforts to gain more legitimacy through economic success, pressure for democratic reform will only grow in China.  

Minxin Pei, Director of the China Program at the Carnegie Endowment for International Peace in Washington, says there are powerful transformational trends underway.  He contends, ?Rapid economic growth is producing two things: enormous social strain and instability that will build up pressure for reform; and secondly, economic growth is creating the right conditions -- a middle class, private property and interconnectedness with the international community -- that will, in the long-run, be good for democracy.?

Foreign companies, says analyst Minxin Pei, are further diminishing communist control in China. ?They compete?, he says, ?against a state-owned company, so they are reducing the strength of the state-owned economy.  And that will weaken, in the long-run, the Communist Party?s monopoly over economic power. Second, they are bringing the best managerial practices, which emphasizes competition, open-mindedness and meritocracy that again will increase pressure on the system to reform and create a much more liberal culture.?

Many critics and defenders of the role Western business interests play in China agree that the country?s eventual democratization is inevitable. They add that with China?s joining of the global democratic movement, roughly two-thirds of the world?s population could, for the first time, live in free societies grounded in universal democratic norms.

This story was first broadcast on the English news program,VOA News Now. For other Focus reports click here.