In Part 1, I described how a transfer of power and social unrest resulted in a willingness to publicly discuss extreme income inequality within Chinese society. Now, there are indications that Hu Jintao, having consolidated the power of the party and the state in his hands, intends to implement policies to confront the problem. But can he do so without abandoning the neoliberal program by which Chinese economic development has proceeded since 1978?

Again, as observed in Part 1, it is difficult to differentiate between the personal and the political. As reported by Asia Times Online on September 1st:

Beijing is waging a whirlwind anti-corruption campaign in Shanghai to shake up the so-called Shanghai Club or Shanghai Gang, headed by former president Jiang Zemin. The group dominated China's political power scene for more than a decade until Jiang began to fade from active political life in late 2002.

The anti-graft campaign has been launched one year ahead of the all-important 17th Congress of the Chinese Communist Party (CCP) and thus is seen as President Hu Jintao's maneuver to gain full control by eliminating all Jiang's influence.

The latest target was Qin Yu, chief of Shanghai's Baoshan district, who has been linked to a severe breach of party discipline and laws and is now under investigation by the CCP's central commission for disciplinary inspection.

What is striking about Qin's arrest is that before taking up his present position, he had worked for years as the personal secretary of Shanghai Communist Party chief Chen Liangyu. Chen is a local-level affiliate of the Shanghai Gang and also a member of the all-powerful politburo in Beijing.

Qin's arrest clearly serves as a warning that Chen himself might be next on the hit-list. This would take the power rivalry between Jiang and Hu into its final stages, marked by the crackdown on corruption in Shanghai.

Unlike the rest of China, the Shanghai party leadership had successfully avoided the seasonal anti-corruption campaigns that have been so prominent since the adoption of neoliberal economic policies, and there was an explanation:

So what was it that allowed all those Shanghai officials to remain so clean in the face of so much temptation in the booming city? Was it because they were all saints, or that the municipality had created a perfect environment to immunize officials against graft-prone temptations? Neither, is the answer.

As with other parts of mainland China, Shanghai is ruled in the so-called socialistic system with Chinese characteristics under which bureaucrats wield vast power. The evidence points to their using this influence to line their pockets, and the pockets of business associates.

Two former Shanghai party chiefs were said to have been hand-in-glove with disgraced Shanghai property tycoon Zhou Zhengyi. That Zhou was able to obtain multibillion-yuan bank loans and valuable downtown land can only be attributed to close ties with municipal authorities.

Zhou, who was suspected of a huge loan swindle, was finally brought to justice in 2003, but he was only found guilty of "manipulating stock prices and misreporting registered capital", for which he received a three-year jail sentence. By contrast, the former president of the Bank of China (Hong Kong), Liu Jinbao, implicated in the same case, was eventually given a suspended death sentence by a court in Changchun, the provincial capital of Jilin province in northeastern China.

Quite simply, for many years Shanghai officials had been able to escape scot-free because of the protection given to them by the most powerful man in China - Jiang Zemin. This was especially true after 1989, when Jiang was promoted to CCP general secretary from his post as Shanghai's party chief.

Under the umbrella of Jiang's administration, corruption scandals involving the Shanghai Gang were swept under the carpet.

All that has changed. In recent months, the central government has mobilized more than 100 commissioners in Shanghai to rake out the filth.

Already they have found some. Zhu Junyi, chief of Shanghai's Labor and Social Security Bureau, was found to have been bribed into illegally lending 3.2 billion yuan (US$405 million) from the city's social-security funds to a private enterprise, China Fuxi Group. The Fuxi group had participated in the restructuring of Shanghai Electric Corp. As the snowball kept rolling, senior officials of many companies and government departments associated with the business of these companies were detained for investigation.

Most important, Baoshan district chief Qin has been implicated in the same case. As mentioned, Qin was Chen Liangyu's secretary and assistant. In February 2002, Chen was made Shanghai mayor. In October of that year, Chen took over the position as Shanghai's party chief, and Qin was promoted to deputy director of both the general offices of the Shanghai Communist Party Committee and the Shanghai municipal government.

The Qin case shows that Chen, a local shepherd of the Shanghai Gang, is no longer powerful enough to protect his cronies, nor can he depend on his chief mentor, Jiang Zemin.

The implication of the Asia Times Online article was clear: Chen Liangyu was a political corpse. On September 25, he was sacked, described as someone who had created malign political effects. One report described his removal as a classic instance of killing one to scare a hundred, except that Gan Yisheng, general secretary of the party's Discipline Inspection Commission, chillingly stated that the inquiry was far from concluded:

Eight auditing teams are looking for misconduct by senior government officials and leaders of large financial institutions in areas across the country, Gan said.

Inspections of officials in 30 provinces and cities as well as nine state banks have been carried out, and the insurance industry and major state companies are next, Gan said.

Is there a broader context beyond criminality? Invariably, as the resolution of political conflict and momentum towards a significant change in policy are inseparable. Last week, the Central Committee of the Chinese Communist Party conducted it annual plenary policymaking session, and addressed social inequality for the first time in 25 years. On Thursday, October 12th, the Washington Post reported:

China's Communist Party on Wednesday formally endorsed a political doctrine laid out by President Hu Jintao that calls for the creation of a "harmonious society," a move that further signaled a shift in the party's focus from promoting all-out economic growth to solving worsening social tensions.

The endorsement, made at a closed-door plenary session held by the party's Central Committee, underlined Hu's increasing power. It effectively enshrined his doctrine in the same pantheon as those of Mao Zedong and other predecessors.

China's leaders have become concerned in recent years about problems tied to the country's blistering economic growth. Anger over a growing gap between rich and poor and an inadequate social security system is feared to threaten the party's stability. Retirees increasingly cannot live on their pensions, crime and divorce rates have escalated, and clashes have broken out between security forces and farmers whose fields and villages have been swallowed by development.

And, for once, the New York Times got it right:

Hand-in-hand with the “harmonious society” drive, Mr. Hu and Zeng Qinghong, the vice president and the leader of the party’s secretariat, have undertaken the most sustained crackdown on official corruption since the party first embraced market-oriented economic measures nearly three decades ago.

The anticorruption sweep has already resulted in the detention of Chen Liangyu, the powerful party boss of Shanghai, as well as senior officials in Beijing, Tianjin, Fujian, Hunan and other places.

On the following day, Friday, October 13th, China quickly began to put the theory into practice, as it announced plans to radically reform its labor laws:

China is planning to adopt a new law that seeks to crack down on sweatshops and protect workers’ rights by giving labor unions real power for the first time since it introduced market forces in the 1980’s.

The move, which underscores the government’s growing concern about the widening income gap and threats of social unrest, is setting off a battle with American and other foreign corporations that have lobbied against it by hinting that they may build fewer factories here.

Yes, foreign corporations are quite alarmed at the prospect that they can no longer ruthlessly exploit the Chinese workforce with the support of a Marxist-Leninist government:

“This is really two steps backward after three steps forward,” said Kenneth Tung, Asia-Pacific director of legal affairs at the Goodyear Tire and Rubber Company in Hong Kong and a legal adviser to the American Chamber of Commerce here.

The proposed law is being debated after Wal-Mart Stores, the world’s biggest retailer, was forced to accept unions in its Chinese outlets.

State-controlled unions here have not wielded much power in the past, but after years of reports of worker abuse, the government seems determined to give its union new powers to negotiate worker contracts, safety protection and workplace ground rules.

Hoping to head off some of the rules, representatives of some American companies are waging an intense lobbying campaign to persuade the Chinese government to revise or abandon the proposed law.

The skirmish has pitted the American Chamber of Commerce — which represents corporations including Dell, Ford, General Electric, Microsoft and Nike — against labor activists and the All-China Federation of Trade Unions, the Communist Party’s official union organization

. . . If approved and strictly enforced, specialists say the new laws would strikingly alter the country’s vast labor market and significantly push up the wages of everyday workers.

“If you really abide by the Chinese labor laws,” said Anita Chan, an expert on labor issues in this country and a visiting fellow at the Australian National University, “migrant-worker wages would go up by 50 percent or more.”

Certainly, as the New York Times article notes, there is good reason to be skeptical about the extent to which the law will be enforced, as regional party figures have been adept at ignoring directives from Beijing when it suits them do so. But the anti-corruption campaign that brought down Chen Liangyu suggests, strangely enough, that this time, it will be different.

One of the primary features of this campaign is that it targets party and business figures (frequently indistinquishable from one another) that have exploited regional autonomy:

Although China's economy has become relatively market-oriented, many resources are still in the firm grip of the government. Hence for a private business person, the shortcut to becoming rich is to collude with officials. A private businessman in Shenzhen said: "If one relies on his own hard work, one may in practice make a living by running a small business, but if one wants to become rich, one must gang up with officials."

Therefore collusion between entrepreneurs and officials is running wild. One of the most notorious shortcuts for some to become rich quickly has been to collude with officials to speculate on land lots for construction. The parcels are taken away from farmers with minimal compensations and then sold at high prices. Land acquisition has become such a problem that most of the nearly 90,000 mass demonstrations (those involving more than 100 protesters) in 2004 were triggered by unjust land requisition.

Entrepreneur-official collusion has also been rampant in coal-mining. With the protection of local officials, private coal-mine owners simply ignored safety regulations to cut production costs. As a result, thousands of miners are killed in accidents.

If Deng Xiaping presided over the peculiar marriage of neoliberalism and a state governed according to the principles of democratic centralism, it now appears the Hu Jintao believes, unlike his predecessors, that it can be ameliorated to accomodate European style social welfare. But can it be done? I recall the recent remarks of another political figure, one who, interestingly enough, just visited China about a month and a half ago:

When I was released from prison [in 1994] and began my political life, I naively took as a reference point Tony Blair's proposal for a "third way" between capitalism and socialism--capitalism with a human face. Not anymore. After seeing the failure of Washington-backed capitalist reforms in Latin America, I no longer think a third way is possible. Capitalism is the way of the devil and exploitation, of the kind of misery and inequality that destroys social values. If you really look at things through the eyes of Jesus Christ--who I think was the first socialist--only socialism can really create a genuine society.

Perhaps, Hu Jintao and Hugo Chavez had an animated conversation on just this very subject in August.

Labels: China, Hu jintao, Hugo Chavez, Neoliberalism, Tony Blair, Unions