China’s Four Ocracies

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The path to power in China is still dominated by revolutionary political divisions

Op-Ed Commentary: Chris Devonshire-Ellis

May 2 – Recent events in China, ranging from the jostling of power for seats on the Central Commission for the CCP, the downfall of Bo Xilai, and the recent escape of activist Chen Guangcheng from house detention in Shandong have all displayed to varying degrees the changing faces of China’s evolution. In fact, in over 20 years in China I have never personally seen anything quite like the vying for influence being acted out in today’s contemporary political scene. The fact that they are observable at all says perhaps rather more for certain factions that are involved in the path for reform than the oft-lauded “freedom via internet” that many believe is behind an unprecedented media coverage of the struggles and power plays currently underway.

Yet the fact remains that the politics surrounding the change in China’s leadership and the extension of political knowledge to the Chinese masses and into mainstream media coverage for the first time are part of the same evolutionary path. This is the third leadership transition I have witnessed in China; from an elderly Deng Xiaoping to Jiang Zemin (it’s laughable to recall how Jiang was regarded as “little known” and “mysterious” at the time), from Jiang to Hu Jintao, and now of course from Hu to the apparent incumbent-in-waiting, Xi Jinping. Flicking back through a 10-year-old issue of Time Magazine recently, I uncovered an article ushering in a new generation of world leaders. Even then, Hu Jintao was reported as being “an unknown quantity.” Amid the current media circus surrounding China’s leadership changes, one might find comparisons as to quite how far China has come in terms of openness, regardless of being driven by the Internet or by policy as perhaps the most unusual feature of today’s coverage.

To the inexperienced eye, much of what has been going on recently may seem an unwelcome blend of unscripted events or that the portrayals of certain leaders are classic examples of “western meddling.” Many more are simply looking on in sheer bemusement as we are now all able to observe the downfall of senior figures like Bo Xilai played out and splashed across media channels globally. Yet all are related, and can be identified as the logical result of a Chinese ideology changing irrevocably and in ways intended to prepare the nation for the rest of the 21st Century. The doomsayers and conspiracy theorists may attack the keyboard with angst-ridden prose, but let us instead examine the situation more closely and deconstruct the hype. China is in fact becoming more like the United States in its political structures, albeit not yet in such obvious party factions. Merely quoting “The Communist Party” does no justice to the varying revolutionary aspects within the CCP.

The Communist Hierarchy
Born from the proletarian revolution, the conquering revolutionaries rapidly became ideological heroes, with none more so than Mao, whose portrait of course still beams down from Tiananmen Gate just as emperors once looked down upon their imperial subjects. Mao consequently developed a personality cult, still strongly extant in many parts of China today. His ultimate survivor, Deng Xiaoping, chose instead a rather lower key passage – his death, while mourned, was muted partly due to his insistence not to render his leadership legacy (one of opening up China to reform) as a personality cult. Deng has obtained his wish. Yet his choice has not been heeded by others quick to make their mark upon contemporary China and to use their own illustrious ancestors as a pathway to contemporary power.

One hesitates to use the word “aristocracy” as the Imperial system was one that the communists always sought (and fought) to overthrow. However, despite the best efforts of the CCP, a faction composed of Chinese aristocracy has evolved. Even the term “princeling” – oft used when now describing Bo Xilai – has obvious Imperial connotations. It’s not a new phrase either – the term was coined in the early 1900s referring to the son of Yuan Shikai (a self-declared emperor) and his cronies. It was later used to describe the relatives of the top four nationalist families (those of Chiang Kai Shek, Soong May Ling, Chen Lifu and Kong Xiangxi) and was subsequently adopted by the Chinese communists to ridicule the leaders of the defeated Kuomintang in Taiwan.

When understanding Bo Xilai’s position and the shockwaves surrounding his downfall, it pays to remember his father. Bo Yibo (1908 – 2007) was a member of the Chinese Politburo, also serving as deputy prime minister, chairman of the State Economic Commission and vice-chairman of the Central Advisory Commission of the CCP. He had previously served in the military in the fight against Chiang Kai Shek (being captured at one point) and was a member of the Long March alongside Mao during the Chinese revolution. That’s some CV. Although the CCP has often made high-powered attempts to limit the rise of the princelings, success has been limited. It is estimated that some 226 “crown princes” are in positions of power in China. These include Xi Jinping, as well as numerous high-level positions scattered throughout China’s military, banking, financial and reform sectors. In light of the strength of such integration, one cannot help but wonder if part of Bo’s downfall may be the occasional trend by the CCP to throw one of their own to the lions. Deng Xiaoping’s own son and many others have fallen by the wayside over the years, but there seems no doubt that the establishment of a political hierarchy, based upon a system of inherited influence, has developed in China.

The Provincial Revolutionaries
Pretty much all of the above factions fit into the revolutionary category by default, however much of their power is centered on the senior leadership. By “provincial revolutionaries” I refer to the die-hard guards that prospered locally, entered into government in the aftermath of the Cultural Revolution, and who again have been able to pass on local influence to their children. Twenty years ago I recall meeting much of the Communist leadership in Harbin, where the majority of the government wore blue Mao suits and only a limited handful either wore a tie or spoke English.

Most smoked, even during important speeches, and the obligatory Maotai toasts, and while personally charming as individuals, collectively appeared tough men, unsophisticated, and as hard as nails. I wouldn’t have wanted to have met any of them on a dark night and I suspect many had “previous,” as British 1960s gangsters used to describe the likes of the Kray Twins or as Marlon Brando might refer to one of his Sicilian associates. However, like the princelings, these original children of revolutionaries who rose to local power simply because they were the most demanding during the Cultural Revolution, now also have offspring. That social creed of power through intimidation has been handed down to the next generation and we still see this today – not least in the case of Chen Guangcheng who was imprisoned locally in Shandong due to upsetting and then embarrassing the local government. It’s a direct throwback to the days of parading teachers as dunces and replacing the intellects with proletarians. China’s Cultural Revolution is still being played out, and the style that got them there is not about to be overthrown, at least not by the likes of the government and guards that have treated Chen so badly.

Meritocracy
The decision by the CCP to admit businessmen (capitalists) into the Communist Party was only taken 10 years ago, in 2002. To many, this remains a highly contentious point. The inclusion of capitalists into the Party could be seen either as an attempt by the CCP to learn the best techniques of capitalist leadership and to establish whether these can be adopted into what remains a communist manifesto, or it could be seen either as a way to encourage capitalism, the development of a meritocracy, or as a backward step. Regardless, the concept of a capitalist rising to a prominent position of power within Mainland China remains slim. Although much has been made of the importance of getting capitalist methods into the Chinese system, much of the hype refers to the fact that the private sector now accounts for over 50 percent of the value added in the industrial sector and employs about double the number of workers than those employed in state-owned enterprises.

However, recent studies (prepared for U.S. Congressional Committee reports) have shown that the assets of state-owned enterprises actually grew from the equivalent of 60 percent of GDP in mid-2003 to 62 percent of GDP in mid-2010. The sectors which SOEs dominate accounted for 80 percent of the capitalization of China’s stock exchanges at the end of 2010. Similarly, tax revenues from private domestic firms are less than 15 percent of the total. Of 42 Mainland Chinese companies in the Fortune 500 list of the world’s biggest firms in 2010, all but three were owned by the government. The rise of a capitalist meritocracy in China, it appears, is still some way off in terms of being able to muster financial influence to any great degree.

Democracy
Given the scenarios explained above, the capabilities for contemporary China to enter into any meaningful exercise in democracy on a national basis apparently remain slim. It is unlikely that China, both at a national and provincial level, is either prepared or even willing to permit such reforms to take place. The struggle then remains essentially between three sets of princelings, those concentrated on national power (where ideological differences do seem to be emerging), and, more importantly, the provincial princelings (children of the Cultural Revolution, who seem able to carry on the ideological upheavals of those dark days of the 1960s when it suits them to do so).

Given the two factions, it would appear that the Beijing power base – which crucially controls national security – is the place to look for signs of reform. Just as his predecessors before him, little is known of Xi Jinping other than he is a princeling. Yet his family background appears rather different to that of the Bo Xilai. Whereas Bo Yibo was regarded as a hardliner, Xi’s father, Xi Zhongxun (1913 – 2002), was known for political moderation and for the setbacks he endured in his career. He was imprisoned and purged several times. Xi Zhongxun was more a logistics and infrastructure man, making well-regarded contributions to the communist revolution and the development of the PRC, from the founding of Communist guerilla bases in Northwest China in the 1930s to initiation of economic liberalization in southern China in the 1980s following the footsteps of Deng Xiaoping who introduced these reforms. Xi Jinping, then, may possibly turn out to be a reformer, much in the mold and style of the current Premier Wen Jiabao. Much of course remains to unfold, however faced with the rippling effects of both national and cultural revolution, it seems apparent that the best way forward for China at this present moment is continuing reform.

Of this, the struggle for China’s future must take place at the very top, and this appears to be a campaign being won by the likes of Wen moving away from hardline ideology. Further reforms concerning both merit and democracy will continue to take time, especially in what can often be regarded as a provincial level of government and the survival of power policies derived from a far bloodier and more damaging set of social circumstances in the Cultural Revolution. That will take a steady hand from Beijing to manage, and Xi appears at first glance to possess the credentials and the family history to know firsthand what lies in store when Chinese politics becomes unstable.

Footnote
It is of relevance to note that with over 200 Chinese families in positions of influence, the intelligence, education and upbringing of their offspring will dictate which sides win the hearts and minds of the people. Bo Guagua may or may not drive a Ferrari, yet the circumstances surrounding his lifestyle appear to demonstrate those of a playboy. In contrast, the circumstances and modesty surrounding the children of Xi Jinping could not be in greater contrast, and this is for China’s good. Used properly, China’s leaders may also start to appreciate the use of a greater freedom among the media, and I believe that the wealth of information concerning the current leadership is indicative of a move in this direction, although much remains to be done. I would go so far as to describe most of the national-level of censorship as benign, albeit often irritating, yet this is still an improvement from 20 years ago.

Regardless, one thing is becoming apparent. With power in China apparently being linked more closely to specific families, and the democratic vote still to be taken concerning the makeup of the new Central Committee of the CCP, China’s politics are becoming more aligned to the type of high level horse trading and political influences wielded in contemporary Europe and in Washington than the closed door examples that used to announce themselves, curiously Vatican-like, with puffs of white smoke and mirrors. In France, Marine Le Pen is now a presidential maker or breaker, as her father was before her. And with second terms for the Bush and Clinton families and the continuing Kennedy dynasty still influential in the United States, are Chinese contemporary politics really remaining so different?

Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates. The firm was founded in 1992 in China, and now has 11 China offices, 5 in India, 2 in Vietnam and one each in Hong Kong and Singapore. The practice provides regulatory investment, legal and tax advice and planning across Asia, in addition to due diligence, strategic and ongoing tax, accounting and compliance services to foreign investors in the region. He can be contacted at chris@dezshira.com The firm’s website is at www.dezshira.com and their brochure is here.