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30.04.2012Four Shocks That Could Change China

In the past four months, the Chinese Communist Party (CPC) has experienced four shocks that could materially affect, if not eventually end, its "leading role" in Chinese society.


Paul Roderick Gregory, Forbes.com

In the past four months, the Chinese Communist Party (CPC) has experienced four shocks that could materially affect, if not eventually end, its “leading role” in Chinese society.

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First, on December 13 of last year, a mob of villagers forced out local party leaders and the police and took control of the town of Wukan. Enraged by illegal land grabs and police brutality, the villagers installed their own representatives after gaining concessions from national authorities. The Wukan uprising is symbolic of the two hundred thousand mass protests reported for 2010.

Second, on February 27, a key government think tank issued its China 2030 report in conjunction with the World Bank. Rapid growth could only be sustained, the report argued, by giving free rein to the private sector and ending the preferential treatment of the state economy: The role of the government “needs to change fundamentally” from running the state sector to creating a rule of law and the other accoutrements of a market economy. A month later (on March 28), the state council approved a financial reform pilot experiment to legalize private financial institutions and allow private citizens to invest abroad.

China 2030 is an open warning that China’s vaunted state capitalism model cannot sustain growth and usher China to the next level. A faltering economy would pose an imminent threat to the CPC’s claim to its leading role.

Third, on April 10, charismatic regional party leader, Bo Xilai, was fired as party boss of Chongqing and expelled from the Politburo. Bo Xilai embodied the party faction favoring state-led economic development and Maoist ideology. Bo’s status as the son of one of China’s “Eight Immortals” did not save him from charges of political deviation and corruption. Bo’s influential wife was arrested under suspicion of murder of an English business associate.

Fourth, on April 27, blind dissident and noted civil rights lawyer, Chen Guangcheng, evaded the security guards guarding his house in his home village and made it to Beijing, where he gained refuge in the U.S. embassy. Guangcheng’s escape shows the sophistication, dedication, and coordination abilities of the dissident community and is an embarrassment to the CPC and its security forces.

From the relative safety of the U.S. Embassy, Guangcheng can inform the Chinese people of their constitutional rights and the world community of the beatings and torture he and his family suffered on orders from the CPC. The U.S. Embassy can express its concerns over his charges of human rights abuse without directly involving itself in internal Chinese politics.

These four shocks took place against the backdrop of the looming Eighteenth Party Congress. The Congress of 2270 delegates will elect the Central Committee and appoint the coveted standing committee of the Politburo and the party General Secretary, who also holds the title of President.

Party Congresses do not take place until their orchestration is complete. There is no exact date set for the Congress, other than late 2012. In the USSR, Stalin waited to hold party congresses until all his ducks were lined up in a row. The CPC apparently has some more finishing touches to complete.

USSR power struggles occurred when an aged leader died. Deng Xiaoping insisted on mandatory term limits to spare China geriatric and unstable leaders, bereft of new ideas and prone to irrationalities (such as Mao and his Cultural Revolution). Two of the four shocks show that regular turnover breeds regular power struggles. China 2030 and the Bo Xilai case are manifestations of the ongoing power struggle that is taking place amidst a background of civil unrest.

Public acceptance of the party’s leading role requires belief in the image of party harmony and unity. Why give all power to a monopoly party torn apart by competing factions?  Perhaps Bo Xilai has the answers, not Hu Jintao and Wen Jiabao? Stalin and his successors went to extraordinary lengths to conceal factional disputes. Bo Xilai’s public humiliation serves as a warning to his sympathizers but at the price of revealing the party’s confusion and disunity.

Bo Xilai’s demotion was not supposed to happen in this way. Bo Xilai’s assignment to the backwater Chongqing was intended to put him out to a quiet pasture. Term-limited leaders feared his ambition, his  “leftist Chongqing model.” Bo Xilai’s enforcer’s spectacular flight to the U.S. Consulate and Bo’s wife’s arrest on murder charges lent drama, but other excuses would have been found to get rid of him.

Bo Xilai’s removal on the eve of a party congress is nothing new. The party boss of Shanghai was sentenced to eighteen years in prison on charges of financial fraud and corruption to clear the way for the current leadership prior to the Seventeenth Party Congress. A similar fate awaits Bo Xilai and many of his followers – a worse fate perhaps awaits his wife.

The CPC’s social compact calls for the party to orchestrate rapid growth and rising living standards in return for public acceptance of its political monopoly and repression of doubters and dissidents. China 2030 and the Bo Xilai case make clear that the party’s factions disagree on how to fulfill this compact. Bo Xilai’s sinking forces stand for the “state advance, private sector retreat” policy of a close alliance between state enterprises and banks and the party. China 2030 and its “liberal” supporters propose to privatize or otherwise rationalize state enterprise, break the state banking monopoly, and place the private sector on an equal footing.

Dismantling or weakening China’s national “Chongqing model” is more easily said than done, as the expression goes. In an understated tone, China 2030 warns that it will “require strong leadership and commitment, steady implementation with a determined will… that will ensure public support…and oversight of the reform process.” In more direct language: Any attack on China’s state-party alliance will be met with the stiffest of resistance by vested-interest groups.

China 2030 requires a delicate balancing act by its “liberal” supporters. They, like their “conservative” opponents, have freely fed at the trough of China’s state capitalism. Even the most conscientious, such as the revered premier “Grandpa” Wen, have not restrained their children, friends, and relatives from amassing huge fortunes. Those less sensitive collect their tributes directly. Party connections have made poor China a land of 115 billionaires.

That the liberals are prepared to break with the state capitalism model so admired in the West suggests they know something we do not.

Few Western observers understand that China’s growth comes from the private sector, not from the national champions run by party-affiliated state capitalists.  Starting from virtually zero in 1980, private enterprise has grown to at least half of GDP. The private sector has grown at least three times faster than the state sector. Studies show that private enterprises are at least twice as productive as state enterprises despite enormous handicaps from Chinese officialdom.

The Wukan uprising helps explain why CPC liberals, who themselves have financially benefited from state capitalism,  embrace China 2030. They fear the backlash of ordinary people who experience the demands for bribes, arbitrary treatment, illegal land grabs, denials of licenses, and other demeaning harassment inflicted on them by indifferent officials, who appear to be immune from punishment.

Public outrage and a new inspiring voice speaking from the U.S. embassy create a tinderbox that a spark could ignite. For the CPC, dissident Guangcheng’s escape could not have come at a worse time.

The public revelations of the Bo Xilai case add fuel to China’s tinderbox. Earlier, ordinary Chinese believed that corruption was a local affair. Their mayor or police chief may be corrupt but at least the stalwart party leaders in Beijing want the best for the country. Just as the victims of Stalin’s Great Terror appealed to Stalin to save them, the villagers of Wukan placed their trust in higher party officials. Now they learn through the internet and even Politburo members are as crooked as the local officials who just shook them down.

The CPC leaders may simply be paying lip service to China 2030 to cement their power base.  But if they are serious, how in the world can they implement this “radical” change in course?

Mikhail Gorbachev’s USSR of 1987 commends itself as a historical parallel with the same ingredients. Gorbachev had warnings that the planning system had failed. He was pestered by dissidents such as Andrei Sakharov. He was aware of official corruption, albeit at a much lower scale than today’s China. His KGB brutally suppressed the occasional riot, but Gorbachev knew that higher bread prices could bring people to the street. As a reformer, he was opposed by conservative party heavy weights who wanted the system continued. Gorbachev succeeded in destroying state planning and inadvertently the party, but his economic reform failed and the USSR collapsed.

Clearly CPC leaders are not fighting for power to preside over collapse. They intend to strengthen their power by elevating the more-productive private sector while somehow convincing the party elite to sacrifice wealth “for the good of the country.” Such appeals usually fall flat.

We are inept at foreseeing big changes, such as the Soviet collapse or the Arab Spring.  Major changes often fail by narrow margins. China might be democratic today if Tiananmen Square had played out differently. Vladimir Putin might not be president of Russia today if the December weather had been warmer or if his police had killed demonstrators at Bolotnaya Square.

The leaders of the CPC are trying to avoid a constellation of events that increase the likelihood of dramatic change. The CPC leadership understands that it could happen, and they are afraid.



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