The Party: The Secret World of China's Communist Rulers (17 page)

At first, not all the Chinese executives learned their lines properly about the options that had been granted to them. A foreign investment banker recalled taking a client from Shanghai Industrial to see Fidelity, the global funds manager, when the city-government-owned firm was issuing new shares in Hong Kong. The Shanghai Industrial shares had listed at about $HK7 in May 1996, and had risen nearly sixfold, landing the Chinese executive a potentially huge windfall at the time, should he exercise his existing options. Weren’t his colleagues who didn’t have options jealous, the Fidelity broker asked? The executive replied that the options were meaningless, as they weren’t really his. The Fidelity broker erupted in anger, the banker recalled, demanding to know if all of the other information attached to the new issue was equally fake. The executive quickly realized his mistake and backpedalled, saying he had donated the money to the state, so as not to cause divisions with his colleagues.

Top executives in large state firms, many of them sitting on potential windfalls of millions of dollars through options granted to them after offshore listings, had little choice but to publicly observe the directive not to cash them in. The executives who were one rung in the hierarchy below the
nomenklatura
level, whose positions were not under direct party control, had other ideas. As stock markets soared in the early years of this century, these executives began to quietly take their profits. By 2008, a small group of executives at China Mobile had cashed in options worth US$1.53 billion.

The controversy over options was fused with another touchy internal debate, about the paltry formal pay structure for the executives of senior state enterprises. The executives themselves looked on with envy at the million-dollar pay packets of their western CEO counterparts. ‘It is common knowledge that the CEOs of state enterprises in Hong Kong didn’t make as much as their secretaries at the time,’ said a Chinese banker. With small formal salaries, they began to find other ways to pad their pay, through bonuses, expenses, unofficial slush funds and extra wages paid through subsidiary companies.

Executives of Chinese state companies posted abroad were keen to emulate the China Mobile example. Ji Haisheng, president of the Singapore operations of COSCO, China’s state-owned overseas shipping line, found himself sitting on millions of dollars’ worth of options. COSCO’s share price in Singapore had soared along with the country’s sharply rising foreign trade volume. Like many business executives around the world in similar positions, Ji naturally thought he should get the credit, and the personal reward, for the share price rise. ‘COSCO Investments performed miracles in Singapore because our share value grew from less than SG$100 million to today’s SG$10 billion,’ he said. ‘The Singaporean media call me “superstar” because I created numerous millionaires, even billionaires.’ Ji airily said he did not ‘understand’ the Beijing government’s rules restricting the exercise of options and felt bound to ‘abide by local regulations’. In other words, he could sell his options–which he promptly did.

People like Ji made a conscious trade-off. They could either obey the rules and keep themselves eligible for promotion into the top ranks of the Party; or remain in senior middle management and make money. ‘If someone doesn’t intend to climb into the official ranks, then the restraints on them will not be effective,’ said Li Liming, the journalist. A seemingly arcane financial matter, stock options became a highly charged political issue. It was about more than just money. It was about a new generation of officials declining promotions because of the financial benefits. ‘These executives say, I have added value, so I should be rewarded,’ said a Chinese banker. ‘The Party says, you have added value because we put you there.’

By late 2008, the government had managed to reassert some control over the issue. Formal pay of state executives was lifted, and then capped during the subsequent economic downturn. The rules surrounding options were codified, to limit the amount of money any single executive could make. Ji Haisheng of COSCO was quietly forced out of the company. The declining stock market, exacerbated by the global economic slowdown, gave the system some breathing space as well.

But the fundamental problem had been left unsolved. ‘The government does not want the companies to be wholly market-oriented. Otherwise they would lose control and they are afraid of losing control,’ said Li. ‘They are afraid if they give the executives huge remuneration, they will not want to come back into the party system.’

The controversy over stock options in Beijing, and the seamy Ma De scandal in the north-east, were two sides of the same coin. In the case of Ma De, officials saw value in buying their way into the system, even at the risk of arrest. In state enterprises, officials had been able to make their fortunes by cashing out of the system altogether. From both ends, the Party was getting squeezed.

The Party has worked overtime to make sure that such displays of disloyalty never bubble to the surface in the institution which acts as the ultimate guarantor of its rule, the People’s Liberation Army.

The Party and the Gun

On nights before he was due to review troops at military parades, Jiang Zemin used to practise his moves before a mirror. Much like teenagers ape performing pop songs in front of the bathroom mirror, Jiang carefully rehearsed his marching drills, pumping his limbs with the precision of a parade before coming to attention opposite his reflection–according to a tale recounted by his approved biographer–his posture erect and his face grim.

The quest for commander-in-chief gravitas has eluded aspirants for high office in many countries. An attempt by the Democrat candidate in the 1988 US presidential election, Michael Dukakis, to project an armour-plated military image by riding helmeted in a tank famously turned him into an object of ridicule. In Jiang’s case, the task was more serious than simply overcoming the lightweight reputation he brought to office in 1989, and the buffoonish image he had gained in his early years as party secretary. On his appointment as General Secretary of the Chinese Communist Party, he inherited not just a country and its government. but an army into the bargain as well.

The Red Army, later renamed the People’s Liberation Army, was founded in 1927 as the military wing of a revolutionary party. Since taking power, the Party has worked overtime to ensure it stayed that way. The Party has loosened central planning since the late seventies, freed up private business and begun extracting itself from the private lives of well-behaved citizens–reforms that have made the country unrecognizable from the Maoist dystopia inherited by Deng Xiaoping. The founding principle of the People’s Liberation Army, however, ‘the Party commands the gun’, has never been up for negotiation. For all the recent focus on its growing global capabilities, the PLA’s primary mission has always started at home–to keep the Party in power. Just after Jiang took over the leadership, he was given a salutary reminder of the military’s existential value to the Party. Confronted by demonstrators over two months in the centre of Beijing, Deng called in the troops to blast the Party’s critics off the streets, killing hundreds or perhaps thousands of defenceless citizens in the process. Jiang had been appointed party secretary days ahead of the 1989 crackdown, but had been peripheral to the decision to send in the troops. Deng only passed formal leadership of the military to him five months later, once the Party’s ascendancy over the state and the capital had been restored.

Jiang and Hu Jintao after him always had greater reason to worry about their ability to rely on the loyalty of the military than their predecessors ever had. Mao and Deng were as much professional revolutionaries and military men as they were political leaders. Before the communists came to power in 1949, China had been governed by quasi-military regimes for decades. Jiang and Hu broke the mould. They were the first civilian leaders with control over both the country’s political and military hierarchies in nearly 100 years. The advice Deng gave Jiang when he came to office is not surprising. ‘Out of five working days,’ Deng told Jiang, ‘spend four with the top brass.’ From all appearances, Deng’s successors took his words to heart. Jiang in the two years alone after he took over the military made personal visits to more than 100 military installations.

No constituency has been courted with such care under Jiang’s and Hu’s leadership in the past two decades. At the Party’s direction, the Finance Ministry has increased the PLA’s formal budget at double-digit rates every year since the early nineties and spent many billions of dollars more under the line on buying arms and investing in weapons systems. The pace and scope of China’s military modernization has accelerated under their leadership, as the PLA develops capabilities to extend China’s global reach beyond its immediate territorial interests, into the Indian and Pacific oceans. Jiang and Hu, in succession, regularly attended PLA ceremonies, visited its universities, dropped by the mess for meals on provincial trips and always dressed respectfully in the olive-green Mao jackets for formal troop reviews.

Both leaders gained the measure of the military apparatus during their terms, but in very different ways. Jiang cultivated the hardliners by adopting a hawkish stance on Taiwan. When he came to power, Hu was forced to ease Jiang’s Taiwan policy and pull China back from the brink of a dangerous military confrontation across the straits. Most writings about civil–military relations in China focus on the potential fraying of relations between the Party and the PLA. During the new era of civilian leadership of the military, however, the most dangerous division was between Jiang and Hu–in other words, within the party leadership itself.

Jiang’s adventurism frightened many in the political establishment, because it threatened the basic tenet of party policy, to provide a stable domestic and international environment for economic development. In repudiating Jiang’s line, Hu was emulating the policy pursued by Deng when he returned to the leadership in 1978. Deng convinced the generals to give priority to the economy at the start of the reform period, because that was the only way to stabilize the country and fund a full-scale modernization of the PLA into the future. China adopted the Soviet model of the Red Army, but under Deng it explicitly rejected the other defining policy of Moscow’s Cold War rulers–military competition with the west. Ultimately, the Chinese judged, the arms race had brought communism in Moscow down. The theory of China’s ‘peaceful rise’, articulated by Zheng Bijian, a confidant of Hu in 2005, was based on a similar foundation, of avoiding military confrontation with the west. ‘The Chinese Communist Party is not like the Communist Party of the Soviet Union,’ Zheng said. ‘Hence, our confidence in future prosperity.’

In changing tack on Taiwan, Hu envisaged a broader role for the PLA, to match the country’s expanding global interests. The key to the success of his policy, as it was with the populace at large, was continued economic growth. As long as he had more money for the military budget, Hu calculated he could keep his hardline critics at bay. Hu’s retreat on Taiwan left a bitter after-taste nonetheless among the hawks in defence and diplomatic circles. Privately, the hardliners fumed that Hu had given up on reunification with Taiwan in all but name.

‘The Taiwan issue is over. No one is talking about reunification any more,’ said Yan Xuetong, one of the best-known hawks. Yan, who gained a PhD at the University of California in Berkeley, holds the chair in international relations at Tsinghua University in Beijing, one of the country’s top three educational institutions. Yan almost spat his words out when I visited him in mid-2009, at a time when relations with Taiwan were warming rapidly.

I think the government has heavily rested its legitimacy on economic development. They think that as long as the people believe they can make more money, they have the right to rule this country, no matter how much territory they might concede. This is the mainstream ideology in this country, but I think this position will lead to disaster.

Yan’s incendiary comments were the kind of charge that could be devastating to a Chinese leader’s standing within the Party, and within the military as well, if it was made to stick. Needless to say, it was given little airtime within China itself.

When China was at peace in early 2009 and relations with the US, Taiwan and Japan were as placid as they had been for years, a key party journal cleared space for an article by one of the country’s most senior generals. The commentary by General Li Jinai, a member of the Central Military Commission, the peak body governing the PLA, bubbled with an urgency associated with grave crises, not periods of stability. ‘We must resolutely resist wrongful thinking such as the de-politicization of the military and nationalization of the military,’ Li wrote in the magazine
Seeking Truth
. ‘And make the whole PLA always hold the Party’s flag as its own flag, and the Party’s will as its own will.’

The signal editorial published on an important anniversary in the
Liberation Army Daily
in 2005 contained the same message, only much more forcibly. The editorial was the first to be published in the paper’s annual Army Day issue following Jiang’s formal relinquishing of the military leadership to Hu late the previous year. In a short commentary, according to the count made by James Mulvenon, an expert on the Chinese military, the phrase, ‘the absolute loyalty [of the military] to the Party’, or variations on it, was repeated seventeen times. The previous year’s Army Day editorial had only mentioned loyalty to the Party six times. The 2005 commentary marked a shrill high-water mark for propaganda, with the party ideologues in full flight:

Our army has the strong leadership of the party, takes actions based on the party’s command, always upholds the party’s banner as our banner, follows the party’s direction as our direction, and makes the party’s will our will. Our army’s history is a history of upholding the party’s absolute leadership over the army; our army’s victories are victories won under the party’s absolute leadership; and our army’s glory is founded with the party’s absolute leadership. The party’s absolute leadership over the army, wherein our party’s life is linked and our party’s strength lies, is the core of the nature and basis of the tradition of the PLA.

As when Chinese leaders talk about democracy, readers need their Leninist dictionaries close at hand to crack the code of these military commentaries. According to the predominant western model, the army is apolitical, serving the nation at the direction of the duly elected government of the day, no matter what its colour. In China, where a single political party has control of the military, the language of the debate is turned upside down. The gravest sin in the Chinese system, akin to treason within the Party, is not to politicize the army but to de-politicize it, with the aim of creating a national military force.

In Chinese staff colleges, up-and-coming military officers have it drummed into them that the failure of Soviet communists to keep control of the military rendered the state defenceless against ideological subversion from the west. ‘After the upheavals in eastern Europe, imperialism was like a bolting mustang running wild on the fields of the world, putting developing socialist countries on a weak footing for a relatively long period of time,’ wrote a senior professor at the PLA’s Political College in Nanjing. ‘Western hostile forces will spare no money and resort to all means to “westernize” and “divide” the PLA, and propagate the idea of “de-partying the military”.’

The 2009 commentary by Major General Gu Mingzhi in the in-house journal of the Chinese Academy of Social Sciences, the country’s most powerful think-tank, said the Party needed to control the military ‘in thoughts, politics and organization’. To drive the point home, a lengthy diatribe on the adjoining page attacked the propagation of ‘freedom, equality and human rights as the universal values of humankind’ as the ‘fantasy and hegemony of the western capitalist classes’. The article’s anti-western message was buttressed by an accompanying illustration, a collage of the gruesome pictures of US soldiers torturing Iraqi prisoners at the Abu Ghraib prison.

The leadership’s assiduous cultivation of the PLA has run in parallel with ceaseless, almost hysterical campaigns in the official media that, year after year, hammer home the principle of the ‘absolute loyalty’ of the military to the Party. On the surface, the rationale for these campaigns is a mystery. There has been no revolt in the barracks or any public battles setting the Party against the PLA for well over a decade. The proverbial Martian arriving in twenty-first-century China, however, could easily conclude after a quick scan of the press that Jiang and Hu’s concerted wooing of the military had foundered, and that the institution was slipping out of the Party’s control. The interminable restatements of the military’s fealty to the Party recall the counter-intuitive mindset required for reading Maoist-era newspapers. The only reliable way to calibrate the dimensions of a problem in Mao’s day was to track the intensity of assertions that no problem existed. Viewed through that prism, the commentaries in the official press are evidence first and foremost that the Party never takes the military’s loyalty for granted. Any passivity that did exist in the Party was erased by the brutal resolution of the occupation of Tiananmen Square in 1989 and its aftermath.

The huge size of the 1989 protests, the way they spread to cities throughout the country, the broad base of support they generated among students, workers and the intelligentsia, and the split they forged at the top of the Party over how to handle them–all reverberate profoundly within the Party to this day. Less well known, but seared just as deeply into the Party’s psyche, is how some PLA commanders and soldiers refused to obey when they were ordered to clear the protesters out of Beijing with military force.

When his first mobilization orders arrived in mid-May, the commander of the storied 38th Army, Lieutenant-General Xu Qinxian, prepared his troops to enter the city, planning routes, rendezvous points and places to congregate for units that might be beaten back. But after the final order arrived from the political commissar of the Beijing military region, Xu baulked, according to numerous accounts of his behaviour during this period. Stationed in the province adjacent to Beijing, the 38th Army carried with it a pioneering tradition within the PLA. It was one of the first Chinese units to enter into the Korean war; it was the first to be mechanized; the first to have an air wing; and the first to incorporate an electronic warfare unit. The unit was also among the first readied to restore order in the capital.

Xu had spent the weeks ahead of 4 June sitting in hospital with an injured leg. As he watched the demonstrations unfold, he found himself increasingly sympathetic with the students’ cause. Xu initially pleaded to be left out of leading his army into the city because of his injury. When pressed, he refused his orders outright: ‘No matter what kind of charges are laid against me,’ he replied. ‘I will absolutely not lead the troops myself.’ Xu was then relieved of his post. Some of Xu’s former colleagues now dispute this account, saying that the commander did not resist orders until he had led his unit into the battle in Beijing. What is not in dispute is that Xu was court-martialled after 4 June, and sentenced to five years in prison for his actions in this period.