Wednesday, October 24, 2012

China's reformers hope for a game-changer

[This piece originally appeared at Asia Times Online on October 20, 2012.  It can be reposted if ATOl is credited and a link provided.]

Jaded China watchers observe the fall of Chongqing's "Red Leader" Bo Xilai and see little more than the disposal of another corrupt Communist sociopath who crossed multiple red lines - not of reckless criminality, but of naked ambition, of disobedience to the Center, and of unseemly and embarrassing behavior involving foreigners - and got slapped down by the party leadership.

Score one for the Chinese Communist Party, in other words, for the efficient use of party disciplinary functions, media operations, and kangaroo courts to wrap up the messy package without overt violence and organized public dissent or embarrassing private leaks from Bo's allies inside and outside the CCP, thereby maintaining the public veneer of leadership unity going into the transitional 18th party congress.

This interpretation is not satisfactory to China's reformers, who see the country lurching into crisis and hope to shoehorn the Bo Xilai affair into a narrative of national political, social and economic renaissance.

Their efforts have elicited a faint but unmistakable echo in state media, serving as an indication that the party leadership accepts the reality of crisis and the need for reform, if not the radical changes advocated by the reformers.

Sun Liping - who acted as Xi Jinping's PhD thesis adviser at Tsinghua University and therefore symbolizes the reformers' hopes for access and influence at the highest levels of the new party leadership - recently posted his thoughts on the Bo Xilai case, opining that it would have been better if the verdict had been delivered after, instead of before, the party congress:
If the verdict had come down after the congress, it would have diminished the political tinge of the case. Instead, it could have been part of an overall consideration of the rule of law for the next 10 years ... and even helped create a "force" for reform ... a wedge for further major reforms ... It could have served as the starting point for the political institutionalization of the reformist faction.[1]
Central to Sun's thesis is that Bo was an atypical representative of anti-reform forces, and his fall before the congress was not a decisive victory for reform that would secure the ascendancy of pro-reform forces in the new leadership.

Sun Liping believes that the main obstacle for China's reformers is not nostalgic Maoists trying to push back reforms; it is the inertia represented by the massive, entrenched interests that have corruptly benefited from the current, flawed reforms, and which oppose further, more thoroughgoing reforms that would threaten their advantages.

Sun characterizes this dilemma as the "political transition trap", the real trap, in his view, as opposed to the "income transition trap" (the difficulty of evolution beyond labor-intensive industries and thereby hoisting per capita income into the promised land of middle-class pay packets) that obsesses Chinese and international developmental economists.

A significant if unspoken corollary of Sun's persuasive analysis is that entrenched interests - maybe we should call them the "cadre-industrial complex" in a hat-tip to the late US president Dwight Eisenhower's prescient warnings about the "military-industrial complex" - hold the upper hand under normal circumstances.

In other words, an exceptional set of circumstances, if not a crisis, is necessary to break the inertia and get the reformist bandwagon rolling.

For Sun, a nice, thorough mastication of the Bo Xilai case by the powers that be after the party congress might have provided a suitable kick-start to the reformist movement.

Although the Bo Xilai ship has sailed (Bo has been expelled from the CCP by its disciplinary mechanism and now awaits his final, legal fate in the politically irrelevant civil courts), reformers are apparently still trying to make hay from the state of affairs in Chongqing.

On the serious-progressive end of the reformist spectrum, the financial news outlet Caixin editorialized:
Bo taught us all a painful lesson. Thirty years of reform and opening up has brought China tremendous success, but also created many problems in society. Its people are desperate for solutions. Chinese leaders should heed the call for change and deepen their reform efforts.

Their priority now is to continue fighting corruption and speed up the reform of the economic and political systems, particularly the legal system. "All people are equal before the law" must be more than a slogan, and the system of checks and balances strengthened.

Bo showed us that going backwards or standing still are not options for China; only by striking out can it thrive. [2]
An influential reformer, Han Zhiguo (previously on the staff of the State Planning Commission and then a big wheel at various economic and sociology journals; now head of a private university) tried to exploit the Chongqing issue from another angle by providing a jolt of old-fashioned Communist rabble-rousing.

Han posted an item on his weblog calling for a purge of extreme-left elements in Chongqing. Literally. As in:
The main harm of the Chongqing affair is a return of the Cultural Revolution and the reigniting of an extreme-left line ... Chongqing must completely purge [qingsuan] the extreme left line. [3]
The "Chongqing affair" is the matter of a hapless youth, Ren Jianying, who reposted content hostile to the Bo government on his webpage, was subsequently discovered by the local cops to possess a T-shirt with the inflammatory slogan "Live free or die," and received a sentence of two years' labor reform.

The post is illustrated by a pretty picture of clouds over a pasture intended to convey the image of a ferocious gathering storm.

Leaving aside the completely creepy reference to qingsuan - which literally means "a thoroughgoing settling of accounts" and, in particularly rough times for the CCP, referred to the execution of political enemies - and the question of whether Han is advocating the top-down, legalistic, and numerical quota purges imposed in the 1950s as opposed to the chaotic "bottom-up" assaults orchestrated by the Red Guards in the 1960s or something else - it is somewhat doubtful that Chongqing is groaning under the tyranny of extreme-left red terror.

Zhou Yongkang, an erstwhile political ally of Bo Xilai (and, in the overheated imagination of some bloggers, fomenter of an attempted coup d'etat to repair the fortunes of his buddy), recently made a publicized tour of Sichuan province. Zhou holds the security brief in the Standing Committee of the Politburo and his overweening emphasis on "stability maintenance" was seen as complementing Bo Xilai's public stance as hard-charging, crime-fighting mayor.

Reading between the lines, Zhou's visit was intended to reassure local security cadres that despite the discrediting of Zhou's law-and-order agenda by the exposure of rampant criminality in Bo's government, all would be well as long as Bo's disappointed neo-Maoist acolytes were not allowed to make trouble on the streets in the run-up to the 18th congress:
Zhou visited the procuratorial, judicial and police departments in the provincial capital of Chengdu.

When meeting with representatives from these departments, Zhou urged them to honestly carry out their legal responsibilities by enhancing law enforcement, providing better service for the people, dissolving disputes, and maintaining justice, social harmony and stability.

He asked for major achievements from them to mark the CCP's 18th National Congress, which is scheduled to start on November 8. [4]
It appears that residents of Chongqing fearing a reign of terror by Bo Xilai's red-bandanna diehards can rest easy.

As Sun Liping has asserted, the main problem in China is not maniacal neo-Maoists; it is cadres and businessman happy to suck up bank loans to line their pockets and prop up local governments even as the country slides off a cliff.

Anecdotal support for this view was provided by the blog post of another reformer, who recounted his experience in a Chengdu restaurant:
At the next table some party and government staff people were talking loudly, we couldn't help overhearing. They were discussing one of their friends: should he stay in the first cadre section of the organization department as the leader, or should he leave and act as a bureau chief in a local jurisdiction? They did a comparison: how much could he earn as section chief, and how much could he earn as a bureau chief? (The unit for their discussion was millions of yuan). I asked myself, how far can the country go with this kind of people? How far can they go?
Possibly, Han's provocative post was intended as a nudge in the ribs encouraging Xi Jinping and the new leadership to take advantage of Chongqing's political embarrassment to go in and make a bit of reformist hay, as in: Bo Xilai's fall provides a golden chance for the central government to clean house in Chongqing and put the fear of Marx (or at least Beijing) in the hearts of the local cadres.

It can certainly be argued that impunity of the local party/government regime from legal, administrative, and financial accountability is at the heart of China's inexorably unfolding crisis.
With tax reform, local governments were cut loose from the central government and encouraged to make their own financial way. Where they could, they did so by throwing themselves wholeheartedly into the business of real-estate development: expropriating suburban lands at bargain-basement prices, then reselling them to developers and speculators. When the central government unleashed the Great Stimulus of 2008-09, it was the local governments and state-owned enterprises (SOEs) that took the bank loans and plowed them into infrastructure and real-estate investments, many of dubious profitability.

Now the world and Chinese economies are slowing, and the financial chickens are coming home to roost. With international demand slumping, the Chinese economy is overbuilt and ill-equipped to receive another stimulus without fueling waste and igniting inflation. The real challenge - engineering a soft landing by properly unwinding the indebtedness and ending the addiction to overspending by local governments and SOEs - require central-government levers that, as yet, don't exist.

And the local governments and SOEs have little incentive to change a system in which they are the primary and indispensable conduits for the government to sluice money into the economy.

The discomfiture of central-government leaders, theorists and media can be seen in a spate of articles calling urgently but rather vaguely for reform. What is significant is that the call is for political reform, in a recognition that economic reform - or the neo-mercantilist version of it embedded in the People's Republic of China - does not provide clear solutions for the current problems.

Global Times posted an op-ed that looked as if it came from the Democratic Underground:
[A] limited government is dispensable. So far, China's reform is also a process of transformation from an unlimited government to a limited one. In other words, the central government delegates power to local authorities, and local governments give power to the public.

The building of a limited government does not lower government efficiency. Instead, it helps address problems like the abuse of power, corruption, and the lack of credibility of many government departments.

Building a limited government actually creates great potential for China's future development. At the moment, China must accelerate the establishment of a limited government through constitutional means, so as to ensure the success of its political reform.

In the future, China needs to expand trials in local political reform throughout the nation. Such reform should be gradually boosted in a transparent, open and rational manner. [5]
Under the attention-grabbing headline "Reform or perish, journal warns Communist Party", the South China Morning Post reported that the leading CPP theoretical journal, Qiushi, had published an essay on the eve of the party congress pushing the reform imperative:
Headlined "Sparing no effort in pushing ahead with reform and openness", the long article said China was standing on a historical threshold and "stagnation or turning back would be a dead end".

It called on the government to seize the moment to advance comprehensive reform in all areas, and "actively press ahead with restructuring of the political system and develop socialist democracy". [6]
No question that the leadership sees itself beset by ugly problems without easy solutions.

The status-quoers nibble around the edges of the problem - bailing out banks, cautiously deflating the real-estate bubble, doling out subsidies to the disadvantaged, and applying selective stimulus to industrial sectors that can use the money effectively - and hope that a global economic recovery will help China grow out of its problems.

Reformers appear to want something more: integrating local governments and SOEs into a coherent system of market, legal and public supervision that will reduce corruption and increase economic efficiency and rationality. In other words, democracy, rule of law, further empowerment of free-market forces.

That means taking confrontational, painful, and risky steps to strip the dead hand of local governments and SOEs from national civil and economic life.

That isn't easy.

To advance such a politically difficult and costly agenda, the reformers need a game changer, the existential shock to the system that the Bo Xilai case apparently did not provide to the CPP leadership.

Borrowing a concept from evolutionary biology, the reformists could be said to preoccupied with "catastrophism".

The idea behind catastrophism is that change is not necessarily smooth, incremental, and completely driven by internal forces. To achieve radical change, sometimes an external event - a catastrophe like the asteroid that wiped out the dinosaurs - is needed.

The reformist literature is now a ceaseless search for dark clouds in the local and international media: evidence of looming catastrophe, harbingers like reduced power generation, slowing economic growth, capital flight, and collapsing industrial sectors.

It also seems to manifest itself as Chicken-Littleism: heralding natural and man-made tragedies inside China, such as earthquakes, landslides, and exploding gas tankers, as damning evidence of the current regime's moral and political bankruptcy - especially if they involve the death of children, and can accommodate a blizzard of exclamation points, weeping and raging emoticons, and bathetic harangues.

So far, symbolic and limited calamities have failed to crystallize a conviction as to the compelling need for immediate and thoroughgoing reform, damn the political cost, in the minds of the Chinese leadership.

It remains to be seen whether such a game-changing event will occur - or if such an event can even be recognized in the restricted mental landscape of the insulated, privileged, and risk-averse Chinese national party cadre.

1. Click here for text (in Chinese).
2. The Dark Heart of the Bo Xilai Case, Caixin, Oct 10, 2012.
3. Click here for text (in Chinese).
4. Sr official stresses law enforcement ahead of congress, Xinhua, Oct 16, 2012.
5. Radical ideas mislead real path of reform, Global Times, Oct 16, 2012.
6. Reform or perish, journal warns Communist Party, South China Morning Post, Oct 17, 2012.

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