// archives

Chinese Communist Party

This tag is associated with 5 posts

The People’s Republic of Amnesia

Another of the five-yearly anniversaries has rolled around, and it’s time to write another think-piece about the long-term meaning of the massacre on Beijing’s Tienanmen Square on 4 June 1989. But 30 years later, what is there left to say?

Great changes were already underway in the Communist-ruled parts of Europe in 1989. Mikhail Gorbachev, the reformist Soviet leader, visited Beijing after the students had taken over the square in late April, and he obviously thought that the same process was underway in China. Maybe it was, but it was violently aborted – and it has still not recovered.

That’s not what people thought at the time. Hundreds, perhaps thousands of students
were killed on the square – the soldiers burned the bodies in a massive pyre right on the square, so there was never an accurate count. Hundreds or thousands more died elsewhere, because similar demonstrations were put down in every major Chinese city. And we all thought: this will never be forgotten.

The students weren’t counter-revolutionaries. Their hero, the man whose death they were honouring when they occupied the square, was Hu Yaobang, a lifelong Communist, a veteran of the Long March, who simply believed that it was high time to ease up on the controls four decades after the Communists took power in China.

For that Hu, then General Secretary of the Chinese Communist Party, had been forced into retirement by the Party’s hard-liners in 1987. But everybody knew what he wanted, and when he died two years later the students came out to demand it again: government accountability, freedom of the press, freedom of speech, and free trade unions.

The dominant conservative faction in the Chinese Communist Party responded by killing them, and then set out to erase all popular memory of what had happened. It can’t be done, said all the journalists outside China: they will never be forgiven. The crowds will be back on the streets one of these days, and there will be a great reckoning and radical change.

Well, not. Thirty years later, most Chinese millennials are ignorant of exactly what happened in 1989. The older generation remember, but they dare not mention it in public and they are a dwindling minority. Journalist Louisa Lim has accurately described contemporary China as the ‘People’s Republic of Amnesia’.

Why did this happen, and has the notion of a freer future really gone down the memory hole in China? Start with the fact that the Soviet Union was 72 years old in 1989, whereas the Chinese People’s Republic was only 40.

That extra generation meant that there was nobody still in power in Russia who had actually ordered the deaths of thousands of people. Not only the revolutionary generation but also the Stalinist generation were gone, and by the 1980s the career Communists who had climbed the greasy pole of power were mere bureaucrats.

They thought they were hard men too, but in fact they weren’t anything of the sort. A few of them tried to carry out a coup and restore Communist rule in 1991, but they were actually trembling with fear as they spoke on TV, and they were seen off in a couple of days. Whereas China’s rulers in 1989 still had lots of hands-on experience with killing people.

Some of them, like Hu Yaobang and his successor Zhao Ziyang, were genuine idealists who felt that the Party’s controls must be loosened now that the revolution was an accomplished fact. Zhao actually went to the square at dawn on 19 May and addressed the students, urging them to hold fast to their demands.

“We are already old, we do not matter anymore,” he told them – but Zhao already knew that he had lost the argument, and that the Communist Party leadership had decided to clear the square by force. He had also been stripped of his own position, and would live the last 15 years of his life under house-arrest.

The actual massacre was delayed for a further two weeks because the soldiers in Beijing had been fraternising with the students and could no longer be trusted to kill them. It took two weeks to replace them with fresh troops who knew nothing about what was happening in Beijing and would obediently kill the ‘counter-revolutionaries.’

So Communist dictatorship survived in China while it peacefully expired in Russia. It still looks solid today: the current leader, Xi Jinping, has just effectively declared himself president-for-life. But Communist rule in China has now reached the magic age of 70. Is it immortal? Probably not.

Communist rule in the Soviet Union would probably have survived if the economy had been growing strongly. What brought it down was the insolence of absolute power combined with an abject failure to deliver the goods economically. The Chinese Communist regime is very insolent, but it will probably survive as long as it delivers the goods .

However, China has a market economy now, and market economies have recessions. The official Chinese growth rate is still 6%, but the real rate of growth has already fallen to somewhere between 3% and zero. The next five or ten years should be quite interesting.
____________________________________________

To shorten to 725 words, omit paragraphs 11, 12 and 13. (“Some…counter-revolutionaries”)

Xi Forever

On Monday the Chinese Communist Party’s Central Committee approved a proposal that the country’s president no longer be limited to two five-year terms of office. On Thursday the National People’s Congress will rubber-stamp the change. And that will be the end of three decades of consensus-seeking collective leadership in the CCP. The god-king model is back.

President Xi Jinping has spent his first five-year term eliminating all his powerful rivals (generally on corruption charges), and now his victory is being enshrined by a change in the constitution.

The change does not mean “that the Chinese president will have a lifelong tenure,” said an editorial in the state-owned Global Times. But the paper also quoted Su Wei, a prominent Communist Party intellectual, who said that China needed a “stable, strong and consistent leadership” from 2020-2035. No need to wonder who that might be, although Xi Jinping would be 82 by 2035.

Shades of Mugabe, I hear you thinking, although Xi commands a country around a thousand times richer than Zimbabwe. He is now effectively president-for-life, or at least until things get so bad that the people around him decide they have to overthrow him, as Mugabe’s cronies eventually did. And although Xi obviously thinks being president-for-life is a good idea, it is not.

Being president-for-life certainly wasn’t a good idea for former Soviet leader Leonid Brezhnev, who was also effectively in power for life. In his case that was eighteen years. It became known as the ‘era of stagnation’, and only seven years after Brezhnev died in 1982 the whole Communist empire in eastern Europe collapsed.

Alerted to the danger of leaving somebody in power too long by the collapse of the Soviet Union, the Chinese Communist Party has kept its leaders on a short leash since the early 1990s. They got two five-year terms, no more, and they had to keep the support of other members of the Central Committee or it might even be just one term.

It has worked pretty well, as dictatorships go. There have been no more maniacs in power like Mao Zedong with his crazy Great Leap Forward and Cultural Revolution, which killed millions and cost the country two decades of economic growth. During the past quarter-century of cautious, consensus-based politics, China’s economy has grown about tenfold.

That pace of growth cannot continue no matter who is in power, but it is very important for the Party’s survival that the economy does continue to grow. There is certainly no evidence that one-man rule will provide that growth better than the existing system, so why (presuming that he is a loyal Communist) has Xi decided to overthrow it?

Mere personal ambition is one obvious possibility, but there is probably more to it than that. Xi’s father was Communist royalty – one of the founders of the Party, and at one time its General Secretary – and he himself was a ‘princeling’ who spent his early years in very comfortable circumstances. Then in 1966, Mao launched the Cultural Revolution.

Xi’s father was expelled from the Party and publicly humiliated. He himself was sent to the countryside at the age of 15 to “learn from the peasants”, and ended up in a work camp digging ditches. For some years he actually lived in a cave (although it had a door). But he survived, and he was eventually to allowed to join the Party, move back to the city, and go to university.

It all left a lasting impression on the young Xi. He knew that working hard, keeping your nose clean, and even rising to high rank cannot protect you in an essentially lawless one-party state if Party politics takes the wrong turn. So he really only had two choices: work to change the Party into a law-abiding entity (which is probably impossible), or take control of the Party and keep it forever.

He has chosen the latter course, and in terms of protecting himself it is probably the right choice. “I think he will become emperor for life and the Mao Zedong of the 21st century,” said Willy Lam, former Hong Kong democratic politician and now politics professor at the Chinese University of Hong Kong. And that is precisely the problem.

Xi no doubt justifies his actions to himself by believing that he is the indispensable man for China’s modernisation, but the cemeteries are full of indispensable men. The longer you are in power, the more poor or at least sub-optimal decisions you make – and when the passage of time makes the mistakes obvious, you are obliged to defend them although a successor could just drop them and move on.

Xi is not likely to “do a Mao” and unleash chaos in China. He is intelligent and he works hard. But the mistakes will accumulate nevertheless, and stagnation awaits.
_________________________________
To shorten to 725 words, omit paragraph 4. (“Shades…not”).

China: Another Chairman Mao?

Opening the National People’s Congress in Beijing last Saturday, Prime Minister Li Keqiang set China’s growth target for the coming year at 6.5-7 percent, the lowest in decades. Only two years ago, he said that 7 percent was the lowest acceptable growth rate, but he has had to eat his words. He really isn’t in charge of very much any more.

The man who is taking charge of everything, President Xi Jinping, is now turning into the first one-man regime since Deng Xiaoping in the 1980s. The “collective leadership” of recent decades has become a fiction, and Xi’s personality cult is being vigorously promoted in the state-controlled media.

Xi has also broken the truce between the two major factions in the Chinese Communist Party, who might be called the “princelings” and the “populists”. Xi, as the son of a Communist Party revolutionary hero who ended up as vice-premier, is princeling to the core. His centralising, authoritarian style is typical of this privileged breed.

The populists, like Li Keqiang, are generally people who grew up poor, usually in the interior, not in the prosperous coastal cities. They rose to prominence more by merit than by their connections, and they are more alert to the needs of vulnerable social groups like farmers, migrant workers and the urban poor. Most of them have come up through the Communist Youth League, and are known in Chinese as tuanpai (“the League faction”).

Frightened by the non-violent demonstrations that challenged the Communist Party’s monopoly of power in 1989, for almost three decades these two factions have carefully shared power and never attacked each other in public. Xi has now broken that non-aggression pact, authorising open attacks on the “mentality” of the Communist Youth League in the media.

The friction between the factions has grown so great mainly because the Chinese economy is stumbling towards a crisis. Neither faction has a convincing strategy for avoiding the crisis, but each has come to believe that the other’s political style – authoritarian for the princelings, populist for the tuanpai – will make matters worse.

The Communist Party’s dictatorship is founded on an unspoken contract with the population: we will provide constantly rising living standards, and in return you will not question our authority. But no economy can grow at 10 percent a year forever, or even at the currently advertised rate of 6.5-7 percent.

In fact, China’s growth rate actually collapsed about seven years ago, but it has so far been hidden by a binge of debt-fuelled investment. When most of the world went into a deep recession after the financial crisis of 2008, the Chinese regime artificially kept the country’s growth rate up by raising the proportion of GDP devoted to investment in infrastructure to an incredible 50 percent.

In the following five years, China was building a new skyscraper every five days. It built more than 30 new airports, subway systems in 25 cities, the three longest bridges in the world, more than 10,000 km (6,000 miles) of high-speed railway lines, and 40,000 km. (26,000) miles of freeways. Tens of thousands of high-rise residential towers went up around every city.

But the new towers remain largely empty, as do many of the freeways. These are investments that produced jobs at the time, but will not produce an adequate return on investment for many years, if ever. And to finance all this, the government let the country’s debt burden explode, from around 125 percent of GDP in 2009 to 220 percent now.

All of this investment has been counted in the GDP figures, but up to half of it, or maybe even more, is bad debts that will eventually have to be written off. If only half of it is bad debts, then China’s GDP growth in the past five years has really been around 2 percent, not 7-8 percent.

The crisis can be disguised for a while longer by printing more money, which the regime is doing. But that is putting downward pressure on China’s currency, the yuan, which is currently over-valued by around 15-20 percent. Devaluation would give a temporary boost to China’s exports, but it could also trigger an international trade war that would drag everybody’s economy down.

So at the moment China is spending $90 billion in foreign exchange each month to keep the value of the yuan up, but even with its immense foreign exchange reserves that is an unsustainable long-term policy. Sooner or later there is going to be a “hard landing”, and the regime’s very survival may be at risk.

There is no evidence that President Xi Jinping has a better strategy for mastering this crisis than the rival faction, but the storm is obviously approaching and he is battening down the hatches.

In his view, that means taking absolute power and building a personality cult of a sort that has not been seen in China since the demise of Mao Tse-tung. He is certainly not a vicious megalomaniac like Mao, but he clearly believes that he will need total control to get through the storm without a shipwreck.
___________________________________
To shorten to 725 words, omit paragraphs 9 and 10. (“In the…now”)

China: the Dead Cat Bounce?

A few weeks ago, at the height of the panic in the Chinese stock markets, a sour joke was doing the rounds: “Last month, the dog was eating what I eat. Last week, I was eating what the dog eats. This week, I think I’ll eat the dog.” A lot of people have lost a lot of money.

The Chinese governent is permanently terrified. It is terrified of climate change, of slowing economic growth, even of a fall in the stock market – of anything that might cause the population to turn decisively against it. When you are running a 66-year-old dictatorship, and your only remaining credibility in the public’s eyes is your ability to keep living standards rising, any kind of change is frightening.

How terrified is it? Consider its reaction to the recent sharp fall in the two main Chinese stock markets. China has a capitalist economy, albeit a highly distorted one, and stock markets are a normal part of such economies. They go up, they go down, and normally governments do not intervene in the process.

The Chinese stock markets have recently been on a roller-coaster ride. After treading water for years, prices exploded in June 2014. Over the next year, there was a 150 percent average rise in prices on the Shanghai Composite exchange, and almost 200 percent on the Shenzhen. Obviously this was not sustainable, especially since growth in the real economy has been falling for years. A “correction” was inevitable.

It came with a bang, on 12 June of this year. Since then prices have fallen 30 percent on the Shanghai market, 40 percent on the Shenzhen. Around $4 trillion in paper values have been wiped out – but so what? Chinese stock prices are still far higher than they were a year ago. Indeed, at an average of 20 times earnings they are still overvalued by real-world standards.

Why would any government intervene over this? Some investors will win, some will lose, and it will all work itself out. But the Chinese government intervened in a very big way. First it cut interest rates to the lowest level ever. When that didn’t stop the slide in prices, it banned large investors (holding more than 5 percent of a listed company’s shares) and all foreign investors from selling their shares for six months.

It encouraged around 1,300 Chinese companies – half the stock market – to suspend trading in their stocks. It forbade any new listings (IPOs) on the markets. It even ordered a state-backed finance company to make new loans to people who want to make bigger bets on the stock market than they can afford.

Anything and everything to stop the prices from falling, and lo! They did stop. Last week, prices even rose a bit.

This may just be what traders call a “dead cat bounce” – if the price falls from high enough, there is bound to be a little bit of a bounce at the bottom – but that is mainly of interest to Chinese investors. The interesting question for the rest of us is: why did the Chinese Communist regime do all this?

Because there are 90 million private investors in the Chinese stock markets. They tend to be older (two-thirds of them didn’t finish high school), they have been betting their savings on the market – and according to state media they have lost, on average, 420,000 yuan ($67,000) in the past six weeks.

That would be no problem if you were already in the market a year ago: you would still be well into the black. But a great many of the private investors piled in very late in the game – 12 million new accounts were opened as recently as last May – and they have already lost their shirts. They would have lost their skirts and trousers too if the government did not stop the collapse in prices.

So the regime intervened. This may be because the Chinese Communist Party loves the citizens so much that it cannot bear to see them lose. It is more likely to be because it is frightened that those tens of millions of stock-market losers (who were officially encouraged to invest) will start protesting in the streets. Whether the Chinese regime’s power is secure or not, it certainly does not FEEL secure.

This latest government action is part of a pattern that extends back to the global bank crisis of 2008, after which China was the only major country to avoid a recession. It did so by flooding the economy with cheap money. So few people lost their jobs, but the artificial investment boom created a bubble in the housing market that is now starting to deflate: millions of properties lie empty, and millions of mortgages are “under water”.

Sooner or later, this game is going to run out of road. The risk is that China’s road ends where Japan’s thirty years of high-speed growth ended in the late 1980s, with a collapse to 2 percent growth or less and a quarter-century of economic stagnation. China is around the thirty-year point now, and its regime is doing all the same things that the Japanese government did just before the collapse there.
________________________________
To shorten to 725 words, omit paragraphs 7 and 11. (“It encouraged…afford”; and “That would…prices”)