China’s war of the oligarchs

By Nader Mousavizadeh
April 23, 2012

The death of an Englishman in Chongqing has acquired all the intrigue of a John le Carré novel with none of its charms. Despite the occasionally romantic descriptions of the disgraced leader Bo Xilai as a charismatic man of the people challenging the prerogatives of Beijing’s bureaucratic leadership, this is a story without heroes, in which no one’s hands are clean. For all the elements of murder, mystery and missing fortunes occupying the Western press, in China today the focus of the country’s political and economic leaders is on the cascading power struggle that is in progress and what it holds for the future management of the world’s second-largest economy.

A year of leadership change that should have been defined by a smooth, almost seamless transition is instead shaping up to be a turning point in the direction – and ownership – of the political economy of China. Two years of plotting, positioning and maneuvering on the part of tens of thousands of party officials have been thrown into disarray by Bo’s fall, with few now confident of where their allies and masters will find themselves at the conclusion of this upheaval. Combine this with the unresolved elite debate about the cause of China’s economic miracle – the process of reform and liberalization, on the one hand; or, on the other, the still-powerful grip of the state on the means of production – and what you have are all the elements of a perfect storm for the Chinese Communist Party.

Beneath the past month’s surface impression of a resilient party able to manage with speed – and unprecedented candor – the exit of one of its princelings, two visions of China’s future are battling it out more fiercely than ever, in Beijing and throughout the provincial capitals. On one side is a movement, often but inaccurately described as “neo-Maoist,” led by Bo Xilai’s faction and dedicated to maintaining the dominance of the party in the service of the masses left behind by the rapid growth in the major cities. On the other, closely identified with outgoing Premier Wen Jiabao, is the faction dedicated to accelerating economic and political reform designed to ensure long-term sustainable growth. What they share, rhetorically, is a commitment to addressing rapidly widening income inequality. What the factions share, equally, is a reputation for corruption and family privilege of immense proportions at their leadership levels.

What to date has distinguished China’s rise from, say, Russia’s, has been a generation-long elite social compact where the wider interests of the state enjoyed at least equal priority with the personal financial interests of those guiding it. The danger is that an oligarchy – however discreet, distinctive and still grounded in the party’s program – will tip the balance of decision making decisively toward an irreversibly corrupted political economy. It is one thing for technocratic managers faced with the immense challenge of guiding China toward a consumption-based economy to make errors of capital allocation in good faith. It is quite another if, for example, the 10th commercial airport in Shanghai is built because a princeling member of the leadership stands to gain a personal fortune from the investment.

To this pivotal question, the answer does not lie in which faction of the Politburo – Wen’s or Bo’s – prevails. Yes, China must continue to integrate itself carefully into the global economy. What will matter far more, however, is to prevent the capture of the state by leaders devoted more to their own and their families’ interests than those of the hundreds of millions of Chinese still living in poverty. In the meantime, the struggle for power is paralyzing decision making across a vast range of centers – even to the extent that some observers now believe it to be contributing to the economic slowdown in ways that are outside central control.

China’s leaders know what they don’t want – Western-style liberal democracy. They remain profoundly unresolved about they do want by way of a central organizing principle for their state. In the absence of decisive leadership, the vacuum is in danger of being filled by the acquisition of oligarchical power that will be extremely difficult to reverse.

A deeply consequential reordering of Chinese politics has begun – and the path to a new equilibrium will be defined by a struggle for personal power and privilege as the vision of the ultimate destination. For investors, diplomats and analysts accustomed to weighing endlessly the quantitative evidence of a hard or soft landing for China’s growth story, this is the “landing” that ultimately will matter.

PHOTO: China’s former Chongqing Municipality Communist Party Secretary Bo Xilai (C) stands with students as they pose for group photographs during an award ceremony for Chongqing primary and secondary schools speech contests in Chongqing, December 26, 2009. REUTERS/Stringer

6 comments

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In 2 words: deja vu. China has been here before, repeatedly over the past couple of centuries. Now we call them oligarchs, in the past they were called mandarins.
Plus ca change.

Posted by jbeekman | Report as abusive

Bo’s downfall should be a very good thing all in all.
More than one news coverage I’ve read described him
as somebody who’ ultra-leftist, having strated some movement to revive neo-maoism ideological movement.
Frankly, I don’t see how any clear-minded person can
wrap one’s brain around reconciling Maoism and China’s current economic success. Mao is the antithesis every
economic success in China. If Mao had lived a decade or two longer, China would probably still be in the back waters in terms of economic growth.

Bo and his deputy Wang, who had tried to defect, were both reported to have cracked down heavily on human rights activists — quite consistent with their ultra-left ideological stand.

I also saw a news report showing a Capitol Hill congresswoman questioning why we didn’t accept Wang’s request for asylum because she thought that’s a good way to garnish valuable intelligence. I thought that woman was nuts! We have nothing ideological in common with this guy Wang, who is reputed to be a Gestapo-like figure. I’m glas we didn’t give the guy aslum. On the other hand, this guy disappeared. So, just like whistleblowers in the West, he is probably suffering from doing the right thing and not side with a murder coverup. Therefore, I have sympathy for him also.

If China is serious about giving an impression of transparency, reassuring business investors that murders and coverups won’t recur, then China needs to do more than punishing the murderers. China must allow the whistleblower to speak his side of the story. If whistleblowers are to be placed in a “psychiatric hospital”, then future whistleblowers will be deterred. In turn, similar transgressions, though technically against the law, will not come to light, or come to the attention of the ruling oligarchy, and any assurance of safety for businessmen lacks credibility.

If Chinese oligarchy doesn’t want to do it for justice, they should do it for the purpose of maintaining their business edge in attracting investment. Set up an independent anti-corruption unit, so that any reporting whistleblowers will be guaranteed safety and protection from retaliation. If they can do that, however challenging it may be, and it may even have to involve some kind of amnesty for the past corruption for such a unit to enable a jumpstart to fresh morale, China’s economy and international reputation will certainly soar.

On the other hand, without effective anti-corruption reform, and an independent unit free from special interest, China’s development will be greatly handicapped from achieving its full potential. And its bad reputation is unlikely to make the drastic progress it needs to support healthy growth in all sectors. Corruption eats at everything aspect in any society, but even more so in a developing country.

Posted by Janeallen | Report as abusive

This guy has no credibility, nor the experience or background to really know what he’s talking about. And while we’re at it, let’s get someone without the obvious agendas that come from working for the likes of Goldman Sachs and Kofi Annan. Of course, the business version of political science and geopolitics is always entertaining.

Posted by Thucydides | Report as abusive

@Nader Mousavizadeh;
I do not believe that you have lived in China long enough, if any, to know what you are talking about. I’ve lived in China for most of the last 9 yrs & I do have a good understanding of what is going on here. Here are the facts as I see them.

The CCP’s top priority is economic growth which they know is not sustainable unless they address the following.
1- Breaking up the state owned monopolies.
2- Addressing the widening gap between the rich & the poor.
3- Cracking down on corruption at the highest levels.
4- Shifting to a domestic market driven economy.
Of course all of these are inter-related & inter-depended.

In attaining these goals the most powerful impediment they face is the Chinese culture itself. For thousands of years oligarchy has dominated their political system, and it is the norm, even today, in all social levels and economic classes, as though it is in their genes.
It will take a long time, reorganization, creative thinking & effective action for the CCP to move forward with their goals. Some blundering is natural & to be expected.
The Chinese leadership, despite its many shortcomings, has done a miraculous job with their economy and we all hope that they will do equally well with the upcoming restructuring.

Posted by GMavros | Report as abusive

To Thucydides: at least he clearly states his background and profession. You do not. He seems quite qualified to have an opinion on this.

To GMavros: living in China for x number of years is not always of great value. I have also lived here for 9 years now and I agree with you that those are the party’s priorities but as the title of the article suggests, that is another topic altogether. Also, the Communist Party of China is known by the acronym CPC, not CCP.

Posted by Algothia | Report as abusive

Article should have been called China’s Unrestricted Warfare. US better wake up and take it’s industries back from this monster before it’s too late. If you need a wake up call read Unrestricted Warfare by Qiao Liang and Wang Xiangsui. The book was written by two Peoples Liberation Army senior colonels who were regarded as heroes after this publication. It lays out the plan that they’re using to conquer the US without a shot being fired. Here’s a link to it. http://www.cryptome.org/cuw.htm I haven’t bought a single thing made in China since I read this

Posted by speez | Report as abusive