The Party: The Secret World of China's Communist Rulers (40 page)

In large part, the Party’s legitimacy still depends on the economy. Economic growth is the single most important pillar supporting the Party at home and the force behind the power that China now projects around the world. Growth sustains living standards, policy flexibility, the internal patronage network and global leverage. The Chinese growth model has well-documented flaws and is unsustainable in its present form. Martin Wolf, the
Financial Times
economics commentator, summed up in late 2009 the deep distortions of a system that has suppressed personal consumption in favour of investment and exports with a devastatingly simple calculation. ‘In 2007, personal consumption was just 35 per cent of GDP. Meanwhile, China was investing 11 per cent of GDP in low-yielding foreign assets, via its current account surplus,’ he wrote. ‘Remember how poor hundreds of millions of Chinese still are. Then consider that the net transfer of resources abroad was equal to a third of personal consumption.’

The irony of this calculation is not that it shows how China’s economic miracle is unravelling. It is how much of an upside there is for ordinary Chinese once the Party has the courage to take on the vested interests now profiting from the distortions. The next stage of economic reform brings with it further political risk. How do you unpick the powerful financial interests within the Party that benefit from the state’s privileged position in the economy? Does unravelling the state’s economic interests irreparably damage the Party’s political clout? There is no easy way to chart a course through this thicket but the Party’s adaptive abilities should not be underestimated.

There is more to economic growth than just incomes. The success of the economy also buttresses the pride that many Chinese feel about the revival of a great civilization humiliated by the west. That pride, in turn, has become a powerful tool in the hands of party leaders, preordained as the natural and energetic defenders of the Chinese nation. Chinese pride in the country’s revival and the cultural confidence that comes with being part of a longstanding, highly developed and once pioneering civilization is an entirely natural thing. Look at the US. From the outside, the richer it has got, the more patriotic it has become. There is no reason China will be any different. Under the Party’s tutelage, however, patriotism and nationalism in China have mutated into much nastier phenomena in recent years.

China often feels like the USA in the immediate aftermath of 9/11, full of anger at outsiders and insistent on dividing the world down the middle into friends and enemies. Otherwise worldly and intelligent officials and friendly citizens become red with rage when topics such as Tibet and the Dalai Lama, Japan’s wartime record, the Xinjiang riots and Taiwan enter the conversation. In democracies like the USA, debates evolve and governments change. In all my time in China, it was very difficult to have even a civil exchange of views on these topics with anyone in an official position. Differences of opinion on issues such as Tibet and the anti-Japanese war can be transformed in a flash into deep slights against the nation. In the words of Joseph Fewsmith, the US Sinologist, speaking about a different issue: ‘If one part of “civil society” is civility, China has not yet reached it.’

But even here, the political system has adjusted. I once believed that nationalism had become so out of control as to be a threat to the Party itself. Whereas the people learn to fear the Party in China, the opposite seemed the case when patriotism came into play. The Party seemed to fear the people. The anti-Japanese protests of early 2005 were another lesson not to underestimate the Party’s adaptive powers. When riots broke out against the Japanese in cities across China, the police let them run long enough to send a message of anger and retribution to Tokyo, but not so long that they spilled out of control and turned into a forum for anti-Party grievances at home.

On the day of the largest demonstrations, the reach of the all-powerful state was on full display. In Beijing and elsewhere, the police commandeered the state-owned telecommunications network to flood the city’s mobile system with messages, to ensure the situation did not get out of control. In the words of Geremie Barmé, of the Australian National University, the messages provided ‘a glimpse of the fascinating yet unsettling face of China’s contemporary cheery authoritarianism’.

The Beijing Public Security Bureau would like to remind you of the following: don’t believe rumours, don’t spread rumours, express your patriotic fervour in rational ways. Don’t participate in illegal demonstrations.–Wangtong Telecommunications wishes you a happy Labour Day!

Don’t create trouble when all you want to do is help! Be patriotic, but don’t break the law. Be a solid, law-abiding citizen.

Usually you’re busy and exhausted, so let this be a happy Labour Day holiday week. We can only build a harmonious society if we are disciplined and respect the law.

At the end of the largest demonstration, outside the Japanese embassy in Beijing, the police wished the crowd well, complimented them on their restraint and patriotism–even after they had thrown bricks at the embassy–and asked them to go home, which by and large they did.

The handling of the anti-Japanese demonstrations was a reminder of how the Party doesn’t so much control public opinion on these hot-button issues as harness and channel it, in line with its prevailing political priorities. The moment that Japan changed prime ministers in September 2006, more than a year after the riots, Chinese policy-makers were able to switch stride. When Junichiro Koizumi was replaced by Shinzo Abe, a man Beijing considered more friendly than his predecessor, Hu Jintao instantly agreed to meet him. The state press immediately changed its tone, to focus on the ‘positive’ aspects of the relationship. The police quietly visited the leaders of the anti-Japanese protests, telling them to hold fire while Beijing tested out Tokyo’s new leader. The masses, intoxicated with rage at Japan only the year before, fell silent.

Much western commentary has long harped on about the coming collapse of China as though such an event would go on to destabilize the world around it. This misses the point. China will destabilize the world not only if it fails but if it succeeds as well. Any country of China’s size growing as quickly as it is is bound to unsettle the existing order. The rest of the world will have to adjust and compete, be it for dominance of the sea lanes in Asia, the search for oil in Africa, the writing of new norms for the World Bank and the International Monetary Fund or over the latest mobile phone standards. Name any global debate and China will inevitably be positioned at the heart of it.

China’s focus on economic development, however, is tying Beijing to global institutions in confronting these issues. China has become an increasingly active member of everything from the United Nations to the World Trade Organization to the Nuclear Suppliers Group. China has an interest in pressing its claims in these institutions but no desire to up-end the bodies altogether, since any ensuing instability could blow back on China itself. Equally, for all its rising global interests, the scale of China’s domestic problems, in their depth, multiplicity and variety, means that central government leaders will remain preoccupied at home. It is often hard to explain to outsiders that Hu Jintao does not wake up in the morning worried about what is happening in the US Senate, but by peasant riots in Henan, the choice of the new party secretary in Shandong, a corruption case in Shanghai, coal-mine disasters in Shanxi and so on. China has an ever-increasing outward focus but local problems have priority when they land on Hu’s desk in the morning.

Within China, the country’s distinctive system is not a source of concern. Rather, it is played up as a point of pride. The
Global Times
, the nationalistic tabloid owned by the
People’s Daily
, the Party’s mouthpiece, trumpets how China’s rise has ended the post-Cold-War ‘unilateral’ world lorded over by the USA. ‘The biggest contribution that China has made to world politics is that through revolution, reform and development China has shown the world that the Western model is not the only way to modernize,’ it said in an opinion piece in October 2009. ‘China has also demonstrated that the non-Western world does not necessarily follow the West’s footsteps.’

The editorial captured a longtime article of faith in China that is only now becoming evident in a western world still recuperating from the financial crisis. The end of the Cold War did not mean the end of history after all. The Chinese communist system is, in many ways, rotten, costly, corrupt and often dysfunctional. The financial crisis has added a dangerous dash of hubris to the mix. But the system has also proved to be flexible and protean enough to absorb everything that has been thrown at it, to the surprise and horror of many in the west.

In the absence of democratic elections and open debate, it is impossible to judge popular support for the Party with any degree of accuracy. But is is indisputable since Mao’s death that the twin foundations of the Party’s power–economic growth and resurgent nationalism–have been strengthened. China has long known something that many in developed countries are only now beginning to grasp, that the Chinese Communist Party and its leaders have never wanted to be the west when they grow up. For the foreseeable future, it looks as though their wish, to bestride the world as a colossus on their own implacable terms, will come true.

PROLOGUE

Barely two years after
…: Among the western banks which had invested in China’s big state lenders, the Royal Bank of Scotland was effectively nationalized; a near-bankrupt Merrill Lynch was swallowed by Bank of America, which needed a federal bailout to absorb the losses; Goldman Sachs was forced to convert into a mere bank to access federal aid and UBS in Zurich was rescued from insolvency by a capital injection from the Swiss government. Of the foreign companies which put money into their Chinese counterparts, only HSBC survived unscathed. But then, many Chinese thought of HSBC as a Chinese bank anyway.

The banner headline
…:
Renmin Ribao, People’s Daily
, 13 April 2009. Hereafter, I will just refer to the paper as the
People’s Daily
.

But alongside
…: According to Jim O’Neill, the chief economist for Goldman Sachs, at the end of 2008, the US dollar value of China’s GDP was about $4.3 trillion. As recently as 2001, it was around $1.3 trillion–in other words, China’s GDP has increased by about $3 trillion in just seven years.
Evening Standard
, 17 November 2009.

In the words of
…:
China Digital Times
, 29 July 2009. Dai was speaking at the annual US–China high-level dialogue. (The Chinese Foreign Minister–at the time of writing, it is Yang Jiechi–is not a powerful political player. Not only is he outranked by Dai, Yang is not a member of the Politburo. Since he is outside the Politburo, Yang, in terms of seniority, does not rank among the top thirty-five party members in the country.)

Like communism in its heyday
…: Robert Service,
Comrades. Communism: A World History
, Macmillan, 2007, p. 9.

More than that
…:
From Poor Areas to Poor People: China’s evolving poverty reduction agenda. An assessment of poverty and inequality in China.
Poverty Reduction and Economic Management Department, East Asia and Pacific Region, World Bank, March 2009. The bank’s definition of poverty is anyone living on less than $1.00 a day, a benchmark which admittedly many of the bank’s economists agree is out of date, and undercounts the number of poor people.

CHAPTER 1 THE RED MACHINE

Ahead of the congress
…: The information about the restrictions on petitioners refers to orders covering the cities of Nanjing and Shenzhen. See
Zuzhi gongzuo yanjiu wenxuan, 2005
[Selection of Studies on Organizational Work from 2005];
Zhonggong zhongyang zuzhibu yanjiushi
[Compiled by the Research Department of the CCP Central Organization Department]. Contained in
Zhiding tixian kexue fazhanguan he zhengque zhengjiguan yaoqiu de ganbu shiqi kaohe pingjia biaozhun yanjiu
[Studies on Cadres’ Actual Performance Evaluation Criteria in Order to Reflect the Theory of Scientific Development and the Correct Concept of Political Performance]. The documents say officials in the two cities will be benchmarked according to the number of local petitioners who lodge their complaints to ‘authorities higher than the municipal government’.

The tools to enforce
…: See
The Times
, 15 November 2002;
Financial Times
, 6–7 October 2007.

Hu had been careful
…: Hu did answer questions from Russian reporters before two visits to Moscow, but they were submitted, and replied to, in writing.

In the coming years
…: The Standing Committee did appear for a photo-op when China stopped for three minutes’ silence after the Sichuan earthquake in May 2008, as well as at a handful of other functions, including one to host overseas Chinese in July 2009, and to oversee the celebrations for the sixtieth anniversary of the founding of the republic on 1 October 2009.

Party membership is a
…: I am grateful to the late Jim Brock for the phrasing of this observation.

For the centre to
…: From
A Letter to a Comrade on Our Organisational Tasks
, V.I. Lenin. September 1902.

The Politburo’s overriding priorities
…: The Politburo selected in 2007 consists of the nine-member ‘Standing Committee’, the inner circle, and twenty-four other individuals, with broad portfolio responsibilities, such as agriculture, finance and trade, and the party secretaries of various large and important provinces and cities. The Standing Committee meets separately, and also together with the full Politburo. The Standing Committee’s individual members’ responsibilities are, in order, party affairs and the military (Hu Jintao); oversight of China’s managed parliament (Wu Bangguo); the economy (Wen Jiabao); relations with non-party members, Taiwan and civil organizations (Jia Qinglin); media and propaganda, which in China are one and the same thing (Li Changchun); the day-to-day running of party affairs and some diplomatic responsibilities (Xi Jinping): a back-up on the economy and budget, environment, health and central–regional issues (Li Keqiang); anti-corruption (He Guoqiang); and the police and state security (Zhou Yongkang.)

The Russians used
…: Thanks to Daniel Wolf for alerting me to this.

Mao unleashed
…: The documentary is
Morning Sun
(2003), produced by Carma Hinton, Geremie Barmé and Richard Gordon.

It is a huge
…: SARS stands for severe acute respiratory syndrome.

The sole experience
…: Needless to say, media is an important exception to this rule. China has little interest in allowing foreign media into the country to do business, unless they cede all control over content to their local partners.

That the media and academia
…: There are obvious exceptions to this, of course, a number of whom have been helpful in the writing of this book.

The State Department’s
…: Steven Mosher,
China Misperceived–American Illusions and Chinese Reality
, Basic Books, 1990, Chapter 7.

Democratic government is
…: See
Financial Times
, 20 October 2005.

In a country
…: The
People’s Daily
site does have a link to a webpage offering ‘news from the Communist Party of China’. Some provincial parties, such as Yunnan, have their own sites. In late 2009, the Party’s anti-graft body also established its own site. But the central party authorities do not have a stand-alone site.

The only instance
…: Alice Miller,
China Leadership Monitor
, 11 (2004).

The Party is very much
…: This is one of numerous interviews I conducted with bankers and lawyers in the twelve months from June 2008 about the process by which Chinese companies were listed overseas. In all cases, they insisted on anonymity. A good example is the prospectus for Sinopec Shanghai Petrochemical Ltd, one of the first Chinese state-owned enterprises to list overseas, dealt with in a later chapter.

In a country which
…: He Weifang’s comments here are from a personal interview. The information about the Central Committee debating his arrest is from legal sources in Beijing. The article criticizing He Weifang and the ‘west mountain meeting’ can be found at http://chinaps.cass.cn/readcontent.asp?id=7288.

But while it promotes
…: The figures about law firms come from the
People’s Daily
, 10 June 2009.

The Party regularly
…:
People’s Daily
, 18 March 2009.

This was hugely damaging
…: This quote is from a personal conversation. See also Reuters, ‘Ghosts of liberal past trail China contender Li’, 15 October 1997.

It is buttressed
…: Anne-Marie Brady also talks about this bargain in her book,
Marketing Dictatorship: Propaganda and Thought Work in Contemporary China
, Rowman & Littlefield, 2008.

when you started a family
…: One of the most contentious communist policies, the one-child policy, still remains on the books, although in practice it has long been flexible in some areas. The one-child policy was in fact introduced relatively late in the Party’s rule, in 1979.

The official name of the
…: The Chinese name, in pinyin, is Zhongguo Pudong Ganbu Xueyuan.

Amidst China’s successes
…: The measure used here is the Gini coefficient, a commonly used measure for income inequality.

In the two years to
…: Paper by Bert Hofman, World Bank China economist, presented to Bank of China forum, in Beijing, 2 November 2006. See also
Financial Times
and
Wall Street Journal
, 22 November 2006.

When I met
…: The names of the students have been changed at their request.

CHAPTER 2 CHINA INC.

Soon after the meeting
…: This section is based on interviews with organizers of the meeting and attendees, and also the document itself and critical commentary on it. See ‘Realistic Responses and Strategic Options after Dramatic Changes in the Soviet Union: An alternative CCP ideology and its critics’,
Chinese Law and Government
, 29 (2) (Spring–Summer, 1996). Translated by David Kelly. Thanks to Ben Hillman for digging it out for me.

They’ll be the people
…: This, and also the figure of 4 million members under investigation, is quoted in James Miles,
The Legacy of Tiananmen
, University of Michigan Press, 1996, which has an excellent account of this period.

Chen Yuan seems to have realized
…: This anecdote comes from Steven Levine, now of the University of Montana, who attended the lunch, at the Cosmos Club, in Washington, in–he says–about 1985.

The cage could be
…: It was Chen Snr., and not Deng, as is often claimed, who coined the phrase still used today to describe China’s method of reform by experimentation, of ‘crossing the river by feeling the stones’.

Along with a long-time party
…: See the critique by Su Wei, in ‘How the Princelings Launched Their “Political Platform”’,
Chinese Law and Government
, 29 (2) (Spring–Summer 1996).

The first wave
…: ‘Big Bros’ is a translation of
dageda
in Chinese.

The intellectuals and liberal
…: See Chen Kuide, ‘A Doomed Dynasty’s New Deal’,
Chinese Law and Government
, 29 (2) (Spring–Summer 1996).

Hu Angang, an outspoken
…: Hu made this comparison to numerous journalists, including the author, in the mid-nineties.

China’s myriad economic
…: See the footnotes to the paper by Steven N. S. Cheung, ‘The Economic System of China’, delivered at ‘Forum on Thirty Years of Marketization’, 30–31 August 2008, in Beijing.

The Party’s internal slogan
…: Quoted in Anne-Marie Brady,
Marketing Dictatorship
, Rowman & Littlefield, 2008, p. 49.

Over the next ten years
…: Andy Rothman,
Harmonious Society
, CLSA, May 2002.

Zhu Rongji, the blunt
…: Transcript of Zhu’s press conference at the close of the National People’s Congress, 15 March 2001.

Zhu faced legions of
…: A view apparently held by Jiang Zemin, quoted in the former president’s authorized biography: Robert Lawrence Kuhn,
The Man Who Changed China
, Crown Publishers, 2004, p. 354.

The legacy of years
…: Richard Podpiera, ‘Progress in China’s Banking Sector. Has Bank Behavior Changed?’ International Monetary Fund working paper, 06/71, March 2006.

The front stage of the
…: This account relies on Sebastian Heilmann, ‘Regulatory Innovation by Leninist Means’, in
China Quarterly
(March 2005). Thanks also to Victor Shih on this point.

Zhu and the Politburo
…: For further information about these two committees, and the bodies they covered, see http://magazine.caijing.com.cn/templates/inc/content.jsp?infoid=3322&type=1&ptime=20030405; and http://magazine.caijing.com.cn/20030305/2461.shtml.

The slick investment
…: This section relies on interviews with four advisers to the listing and also the prospectus.

But apart from
…: These directors held positions on the Party’s anti-graft body. In numerous prospectuses I have read, these seem to have been the only party positions declared.

The total cost to
…: Guonan Ma,
Who Pays China’s Bank Restructuring Bill?
, Bank for International Settlements, Asia and Pacific Office, Hong Kong. 2006. This was calculated in 2006, before the cost for fixing the balance sheets of ABC and a number of other state banks could be taken into account.