Peking's ruling passion tempers Chinese hopes of becoming the new Asian tiger

SHANGHAI IS humming: with its new highways and shiny skyscrapers, this financial hub of China is catching up fast on Asia's other hi-tech cities. Hundreds of the world's top business people are here to mark, somewhat ironically, the 50th anniversary of the People's Republic of China and salivate over opportunities in the next five decades.

As Shanghai is the showcase for China's future, even President Jiang Zemin turned up to pitch his nation to the 300 delegates from some of the world's largest multinationals, including Coca-Cola, Toshiba, Nokia and General Motors.

"China's modernisation needs your participation, and China's economic development will also offer you tremendous opportunities. We will offer good terms and create a better environment for foreign enterprises investing here," the President said at a gala dinner.

But the question on everybody's lips was why the head of the world's biggest Communist state was addressing the cream of Western capitalism days before presiding over a Soviet-style parade in Peking to mark 50 years in power.

Under its thick veneer of modernity, China remains a one-party state and is quick to crack down on anyone who might challenge its authority. Even the conference was unable to sidestep these conflicting faces when the "China at 50" edition of Time was banned. The reason? It contained articles by political dissidents and the Tibetan leader-in-exile, the Dalai Lama.

In 1976, when Peking emerged from 27 years of perpetual revolution unleashed by Mao Tse-tung, the new leaders promised - and have largely delivered - better living standards and economic freedoms: witness the skyscrapers and increases in income, both in rural and urban areas; witness the huge variety of goods for sale and the leap from ration coupons to a burgeoning domestic stock market.

But new China has come at a price. When the architect of reform, Deng Xiaoping, pushed forward economic liberalisation with the call "To get rich is glorious", the underpinning of his position was the continuing political control of the Communist Party.

Alexander Chen, a Shanghai businessman who quit his lucrative job with a foreign company to set up on his own, said: "We basically have a contract with our leadership. They allow us economic freedoms and they keep political control. China is huge ... and different areas have different agendas. Unless there is a strong government, there will be chaos and chaos brings poverty, which wouldn't help any of us."

If recent examples are anything to go by, both Russia and Indonesia illustrate the downside of fast political liberalisation. But China's tiny band of political dissidents and international rights groups do not see it that way.

They say more political freedoms are essential to keep China moving forward, and accuse the party of stifling the emergence of a democratic nation and violating basic rights. They also accuse Western business of coddling dictators.

In 1989 the Chinese army fired on and killed hundreds of pro-democracy demonstrators in Tiananmen Square. Last year Peking handed down lengthy jail terms to a group of activists who tried to set up a political opposition, the China Democracy Party. Religious figures who speak out against the government are routinely harassed and often imprisoned. Even an apparently innocuous quasi-religious sect, the Falun Gong, felt the strong hand of Peking earlier this year when it was outlawed on national security grounds.

Perhaps understandably, delegates to the Fortune 500 conference - with one eye on the opportunities in China - are unwilling openly to express reservations about Communist Party rule. But Chung Si Ahn, professor of political sciences at Seoul National University in South Korea, was more forthcoming. "Whether the Communist Party will continue to rule China for the next 20 years will depend on how the party is able to transform itself to suit new challenges and changing requirements," he said. "In spite of 20 years of boastful economic prosperity, Chinese Communism is still vulnerable and breeds internal contradictions. The strict security precautions along the route of the parade for China's 50th national birthday are in itself an indication of the fragility of the Chinese system."

Security for the parade in Peking tomorrow has been so tight that thousands of migrant workers have been expelled from the city, and Chinese from other parts of the nation are not permitted to enter until the celebrations have passed.

On the day itself, a huge exclusion zone will be imposed around Tiananmen Square to ensure there is no trouble, and residents along the route have been ordered to keep their windows closed and sit quietly at home.

With snipers on the rooftops and missiles and tanks trundling past, they have little option but to follow instructions.