Last month, I posted a four part series about how intensifying social unrest may have persuaded President Hu Jintao to attack neoliberalism at its roots. John Ng reports on the current status of Hu's anti-corruption campaign:

An intensified campaign to crack down on official corruption is sweeping across China, with public attention focused on which big fish will be netted next after the Communist Party's announcement last month of the dismissal of Chen Liangyu as its Shanghai chief. . .

The anti-corruption drive has won the wholehearted support of the general public, with the growing expectation that President Hu Jintao will restore some social justice by fighting corrupt officials. . .

Speculation is rife that Hu's next targets will be two of the nine members of the Standing Committee of the politburo: Jia Qinglin and Huang Ju.

The ill Huang, who is also vice premier and ranks as No 6 in the official hierarchy, was Chen's predecessor. Investigations into Chen's case have so far implicated more than 50 Shanghai officials and entrepreneurs. It is suspected that Huang could have been involved in some of the scandals that are being exposed as this investigation continues.

Jia is also chairman of the Chinese People's Political Consultative Conference and ranks as China's No 4 leader. Though not a member of the Shanghai Gang, Jia is close to Jiang, having worked under him.

Jia was based in Fujian province from 1985 to 1996 as deputy CCP chief, governor and then party chief. It has been noted that rampant smuggling by the notorious Yuanhua Group of Lai Changxing, who is now in exile in Canada, took place in Fujian when the southeastern province was under Jia's control.

Many Fujian officials have been implicated and jailed for their involvement in this, but Jia has appeared to be immune. Two years before Beijing launched an investigation into the Yuanhua smuggling case, Jia was promoted by Jiang as Beijing's party chief, replacing Chen Xitong, who had just been purged by Jiang for corruption. The Beijing post enabled Jia to become a politburo member.

Ng notes the conventional wisdom that Hu cannot push this drive too far by going after Jia and Huang, because the removal of two Politburo members for criminal activity would be unprecedented, and risks irreparable damage to the legitimacy of the CCP. But Ng recognizes an alternative perspective, examined here at length last month, that the CCP cannot survive unless it restores public confidence in its ability to govern for the benefit of more than a privileged, connected group of party officials, entrepreneurs and their families.

Accordingly, the attainment of Hu's goal of a harmonious society is not an ideal, it is an imperative:

Hence Hu's decision to build a harmonious society means that society now is not harmonious. Indeed, there are far too many unharmonious factors: an ever-widening wealth gap; unbalanced development between regions and industries; street protests every day; deadly coal-mine accidents; local officials' abuse of power in bullying ordinary people, such as taking away land from farmers with little compensation - the list could go on.

Almost all such "unharmonious" problems could be blamed on social injustice stemming from official corruption. Hence the key to building an harmonious society is to restore social justice. But social justice cannot be restored without getting rid of official corruption.

This goes to the heart of the legitimacy of the rule of the CCP. Hu is fully aware of this. He once said at a party meeting that the CCP and the communist state would cease to exist if rampant official corruption were not effectively curbed.

While speculation about big fish being netted grabs most attention, China's anti-graft campaign is going deep into every corner of the country. Almost every day there are reports of local officials being caught.

From this point of view, by putting forward the idea of building a harmonious society, Hu aims to preserve communist rule in China. For him, this is a war he must win. If he succeeds, he will be remembered by the Chinese people. But if he fails, official corruption could provide the ultimately threat to the CCP.

Of course, the great unmentionable is the rising tide of protest that threatens to engulf the country. For now, it appears that Hu may be having some success in channeling public discontent into the safe harbor of enthusiastic support for the anti-corruption campaign. But will the public accept the limitation of this campaign to the achievement of Hu's political goals of consolidating power within himself and his supporters?

It sounds dubious, inconsistent with a recent decision to promote the unionization of much of China's manufacturing and migrant workforce. Furthermore, one wonders to what extent Hu will dictate the ultimate outcome of this campaign, given that it has been launched partially in response to riotous public displeasure with the government. Is Hu already discovering that he must learn to ride the tiger of public demands for radical change, something that even Gorbachev found impossible?

Neoliberalism has left China with a sinister, covert network of developers, business owners, investors and Marxist-Leninist bureaucrats, a network that has not only displayed a callous disregard for the well being of the populace, but, quite literally, substituted itself for the government and the CCP. It remains to be seen whether Hu can destroy it without destroying the party as well, as the extent to which the party independently exists separate from these neoliberal social and economic structures is uncertain.

Labels: China, Hu jintao, Neoliberalism

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

In 1978, China repudiated the egalitarian policies of the Gang of Four, and moved down the path of incorporating neoliberal market economics and deregulation into a repressive political system as a means of pursuing economic development. In 1992, Deng Xiaoping toured the Special Economic Zones of southern China, and declared to get rich is glorious, initiating a period of unprecedented entrepreneurial activity, corrupton and the creation and expansion of the manufacture of computer and electronics equipment that has persisted to this day.

The features of this system are so unique that there is no agreement on how to characterize it, although one favorite is High-tech feudalism with Chinese characteristics. But there are signs that this era has some to an end, much as, in it is own way, there are indications that neoconservatism has been globally repudiated. While the latter is visible, with the implications frequently discussed, the former is equally significant, and yet, as with many subjects related to China, goes unremarked, unless it has some tangential relationship to an event like the North Korean nuclear test.

Predictably, the initial signs were submerged within the confines of a political power struggle. Hu Jintao supplanted Jiang Zemin, the man who subsequently presided over Deng's Marxist-Leninist neoliberalism after his death, as Communist Party chief in 2002 and President in 2003. By July 2004, there were reports of conflict between the two men, with Jiang clinging to his control over the military to preserve his influence:

. . . the Hu-Jiang power struggle began earlier this year. In April, Premier Wen Jiabao, the incumbent president's ally and part of the one-year-old Hu-Wen administration, launched a series of macro-control policies to cool down the country's red-hot economy, to no avail in quarters such as real estate, steel and cement. Some measures encountered powerful resistance, overtly and covertly, by obstinate Jiang officials who preferred massive, showy, high-cost projects while the economy was still rising at an amazing speed. In the first quarter, China's gross domestic product grew at a rate of 9.7% and the investment in fixed assets surged by 43% to 879.9 billion yuan (US$106 billion); the rate in January and February was even higher at 53%.

. . . President Hu is expected to come up with new, pragmatic reform measures to "enhance the Chinese Communist Party's governance", which surely will compromise the vested interests of the pro-Jiang faction. Presumably, Jiang will not acquiesce to Hu's efforts.

In a few months, public attention will focus on Jiang to determine whether he will relinquish his current position as the country’s commander-in-chief in the party's upcoming plenum scheduled for this autumn.

Judging from his recent military promotions, most political pundits believe Jiang will not make the final but inevitable handover to Hu any time soon.

The pundits were proven wrong just over two months later:

BEIJING, Sept. 19 - China's president, Hu Jintao, replaced Jiang Zemin as the country's military chief and de facto top leader on Sunday, state media announced, completing the first orderly transfer of power in the history of China's Communist Party.

Mr. Hu, who became Communist Party chief in 2002 and president in 2003, now commands the state, the military and the ruling party. He will set both foreign and domestic policy in the world's most populous country, which now has the world's seventh-largest economy and is rapidly emerging as a great power.

The transition is a significant victory for Mr. Hu, a relatively unknown product of the Communist Party machine. He has solidified control of China's most powerful posts at a younger age - he is 61 - than any Chinese leader since Mao Zedong, and is now likely to be able govern relatively unimpeded by powerful elders.

Mr. Jiang's resignation, which surprised many party officials who expected the tenacious elder leader to cling to power for several more years, came after tensions between Mr. Jiang and Mr. Hu began to affect policy making in the one-party state, some officials and political analysts said.

Mr. Jiang, 78, may be suffering from health problems, several people informed about leadership debates said. But he appeared robust in recent public appearances and was widely described as determined to keep his job - and even expand his authority - until he submitted a letter of resignation this month.

The leadership transition was announced Sunday in a terse dispatch by the New China News Agency, followed by a 45-minute broadcast on China Central Television. Mr. Jiang and Mr. Hu appeared side by side, smiling, shaking hands and praising each other profusely in front of applauding members of the Central Committee of the Communist Party, which formally accepted Mr. Jiang's resignation and Mr. Hu's promotion at the conclusion of its four-day annual session.

Mr. Jiang's offer to retire, which was first reported by The New York Times earlier this month, was given no advance publicity in state media. China Central Television read the text of Mr. Jiang's resignation letter on its evening broadcast, emphasizing that his resignation was voluntary. The letter was dated Sept. 1.

. . . Even by the strict standards of secrecy within the party, the decision about Mr. Jiang's fate was closely held. For a vast majority of the 70 million party members, not to mention the general public, there had been no indication that he was planning to retire, and his abrupt departure seems likely to increase the sense that the most important personnel decisions are made without broad consultation.

Inside baseball for sinophiles? Not quite, as the macroeconomic policy disagreement implied a more fundamental divergence between the two men. Jiang has promoted a controversial doctrine entitled The Three Represents:

The formal statement of the theory is:

Reviewing the course of struggle and the basic experience over the past 80 years and looking ahead to the arduous tasks and bright future in the new century, our Party should continue to stand in the forefront of the times and lead the people in marching toward victory. In a word, the Party must always represent the requirements of the development of China's advanced productive forces, the orientation of the development of China's advanced culture, and the fundamental interests of the overwhelming majority of the people in China.

The . . theory . . legitimizes the inclusion of capitalists and private entrepreneurs within the Communist Party, and as a result has been the subject of quiet but heated opposition within the party. . .

. . . Although open criticism of the Theory of the Three Represents is taboo, there have been reports of private unease at this theory from within the Communist Party of China for a number of reasons. Many dislike the focus of the theory on the advanced social productive forces, meaning businessmen, since it ignores the widening social gap between the rich and poor.

And Hu is clearly one of the many. As reported by the official Xinhua news agency last May:

The Political Bureau of the Central Committee of the Communist Party of China (CPC) met here Friday to look at ways to more fairly distribute incomes in society.

Chinese President Hu Jintao presided over the meeting.

A news release from the meeting said that China should uphold and improve the system in which distribution according to work is dominant and coexists with other modes of distribution.

The release said future reforms should concentrate on increasing incomes of poorer people, expanding the moderate-income population, effectively taxing high-income earners and banning illegal income.

What has provoked such a change in attitude? Perhaps, it is, as described here previously, that the populace is on the verge on open revolt. Here's one example from July 2005:

Social tensions in China are taking on an increasingly explosive form. A riot by 10,000 people triggered by a car accident in the city of Chizhou in Anhui province is the latest case to be reported. Around 3 p.m. on June 26, a Toyota sedan hit a teenage student as he was riding a bike. As the student and driver began to argue, three men emerged from the car and along with the driver began to beat up the student.

A group of taxi drivers tried to help the injured student, insisting on compensation from the driver, who is the owner of a local private hospital. In response, the driver ordered his thugs to attack the taxi drivers with knives. He openly boasted that, even if someone was killed, he would get away with the crime by paying a bribe of 300,000 yuan ($US36,000).

Police arrived on the scene but only escorted the driver and his thugs away. Onlookers were left stunned and angry. Many were outraged at the arrogance of the driver and the indifference of the police to ordinary working people. The incident reinforced their daily experience of the contempt of the newly rich and officialdom towards the lives of the poor.Word of the incident soon spread to the working class suburbs of the city and by 6 p.m. thousands of people surrounded the local police station. They demanded the police hand over the driver and his thugs, who at that stage had not been charged with any offence, and then flipped over, smashed and torched the Toyota sedan and three police cars.

Firefighters who arrived on the scene quickly fled when confronted by the angry crowd. Police stepped in but were beaten back by the protesters hurling rocks and firecrackers. Power was cut off to the police station, windows broken and firecrackers were thrown inside. The protesters looted a nearby supermarket, partly owned by the Toyota driver. Around midnight, the provincial police chief arrived along with 700 paramilitary police officers in full riot gear and dispersed the protest.

Power was cut off to the police station? Clearly, something had to be done, and one of the responses was that May 2006 meeting of the Political Bureau of the Central Committee to look at ways to more fairly distribute incomes in society, a meeting considered so important that Hu himself presided. But that was only the beginning. For the rest of the story, please return for Part 2.

Labels: China, Hu jintao, Neoliberalism, Police, Political Violence