The Party
The Secret World of China’s Communist Rulers
Richard McGregor
To Kath, Angus and Cate, and in memory of Gwen
Contents
The Party
Prologue
1. The Red Machine: The Party and the State
2. China Inc.: The Party and Business
3. The Keeper of the Files: The Party and Personnel
4. Why We Fight: The Party and the Gun
5. The Shanghai Gang: The Party and Corruption
6. The Emperor is Far Away: The Party and the Regions
7. Deng Perfects Socialism: The Party and Capitalism
8. Tombstone: The Party and History
Afterword
Notes
Searchable Terms
Acknowledgements
About the Author
Credits
Copyright
About the Publisher
THE PARTY
* Party Central is commonly used to refer to the Central Committe of CPC. Therefore, in theory, all the departments at the central level come under the management of the Central Committee. In reality, they all come under the command of the Politburo Standing Committee. Indeed, many of them are directly led by Standing Committee members.
** The other leading groups include the Central Leading Group on Taiwan Affairs, the Central Leading Group on Foreign Affairs and the central Leading Group on National Security.
Prologue
It was the summer of 2008, one year into the banking crisis in the west. A small group of foreigners, called to China to give financial advice, were ushered into the walled leadership compound astride the Forbidden City in central Beijing. Once in the meeting room, the visitors perched on the edges of the overstuffed armchairs, draped with antimacassars and laid out in a U-shape to create the effect of a space split perfectly down the middle, dividing the visitors from the Chinese. The decorative flowers, the steaming mugs of tea, the warm words of welcome for friends from afar–all the ingredients of the time-honoured template for respectful encounters with foreigners were on display.
For the attentive listener, the only part of the meeting that didn’t follow the script was their host sitting opposite, Wang Qishan, the vice-premier in charge of China’s financial sector. Tall, with flat, wide cheekbones and a sharp, imposing manner, the new Politburo member had never been one of those officials whose delphic utterances left interlocutors trying to decipher their meaning afterwards. The Chinese had once used such encounters to solicit foreign views, like bower birds eager to stock up on fresh policy ideas. But Wang quickly made it clear that China had little to learn from the visitors about its financial system. ‘Mr Wang said: “This is what you do, and this is what we do”, which is what the Chinese always say,’ one of the participants recalled. ‘But his message was different. It was: “You have your way. We have our way. And our way is right!”’
When China staged its first Davos-style event in 2001, global financiers started travelling there as keenly as they did to the annual conference in the Swiss alps it was styled after. The limousines whisking the financial elite from the airport in tropical Hainan in April 2009 to the seaside conference centre sped through a landscape unlike the usual venues for power meetings in China. The wide, imperious avenues and stiffly guarded marbled buildings of Beijing with their vast entrance portals and stylized meeting rooms were a world away. Unlike the bone-dry northern capital, dusted brown by sands blown in from the nearby desert, the Boao Forum, named after the balmy bay where it is held, was designed to match the message of warm friendship a rising China was determined to convey.
In the early years of the meeting, the courtship had been mutual. Beijing wanted western skills to overhaul their bankrupt state banks. The foreign bankers eyed access to the Chinese market in return. The down payment was delivered in a frenzy of deals in late 2005 and early 2006, when foreign financial institutions invested tens of billions of dollars in Chinese state lenders. The money came with a promise from the foreigners to the laggard locals to teach them the secrets of risk management and financial innovation. The western banks approached the exercise almost as adult education, which is why what happened subsequently was so shocking.
Barely two years after the big Chinese banking deals, the humbled Visigoths of global finance were back. This time, battered by the unfolding credit crisis, they returned, humiliated, cap-in-hand, seeking Chinese cash to shore up their balance sheets or selling their newly acquired shares to take money home. Rather than displaying their wares in Boao and Beijing, the bankers and their advisers slunk in and out of town with barely a peep. One by one, at the 2009 Boao forum, senior Chinese officials tossed aside the soothing messages of past conferences to drive this reversal of fortune home. The first, a financial regulator, lambasted a recent meeting of global leaders as ‘lip service’. Another tore into the role of international ratings agencies in the financial crisis. A retired Politburo member ominously suggested the US needed to make sure it ‘protected the interests of Asian countries’ if it wanted China to keep buying its debt.
When it was his turn at the mike at the session in the resort’s Oriental Room, the man anointed as the global face of China Inc. dropped his polite façade as well. Lou Jiwei, as the first head of the China Investment Corporation, the country’s sovereign wealth fund, had been careful to project a conciliatory image since the body’s establishment in 2007. The first difficult years in the job had slowly soured Lou’s good cheer. The fund’s bold initial investments offshore had lost money, attracting vitriolic criticism at home. Abroad, Lou became bitter at the opposition he faced to investing in the US and Germany.
Lou recounted to the Boao dignitaries how a delegation from the European Union had demanded after the fund’s establishment that he cap any stakes he bought in their companies and not ask for voting rights in return for shares purchased. Lou reckoned he was lucky in retrospect to meet such patronizing intransigence, because he would have lost a ton of money if he had been allowed into the market. ‘So, I want to thank these financial protectionists, because, as a result, we didn’t invest a single cent in Europe.’ Now, he noted sardonically, to a mixture of stifled guffaws and startled gasps in the audience, Europeans had sheepishly returned to tell him his money was welcome, with no strings attached. ‘People suddenly think we are lovable.’
The same mood of brittle triumphalism on display at Boao had begun to course through government pronouncements, official debates, the state media and bilateral meetings at home and abroad from early 2009. Behind the scenes, in ways not easily visible from the outside, the official propaganda machine had clicked into overdrive as well. The People’s Daily, the mouthpiece of the Chinese Communist Party, usually reserved its front page for the daily diaries of top leaders, their foreign guests and the latest political campaigns. The paper, which acts as a kind of internal bulletin board for officials, relegated finance stories to the back pages, if they were reported at all. The announcement in March 2009 of healthy profits by the big Chinese banks, once derided in the west as financial zombies, made for an irresistible exception. The banner headline on the paper’s front page screamed: ‘China’s Banking System Hands in a Fabulous Exam Paper–Stands out After Being Tested by the International Financial Storm’.
For a decade, Beijing had resisted pressure from Washington, led latterly by the former Goldman Sachs boss, Hank Paulson, as Treasury Secretary, for wholesale financial liberalization. In the seven years to 2008, the Chinese economy had more than tripled in size. But alongside China’s rise, the patience with which Beijing li
stened to advice from foreigners had been dwindling. It wasn’t until the western financial crisis that the confidence of the likes of Wang Qishan spread through the system and burst to the surface like never before. Many Chinese leaders were beginning to voice out loud the sentiments expressed privately by Wang: what on earth have we to learn from the west?
China’s post-Maoist governing model, launched by Deng Xiaoping in the late seventies, has endured many attempts to explain it. Is it a benevolent, Singapore-style autocracy? A capitalist development state, as many described Japan? Neo-Confucianism mixed with market economics? A slow-motion version of post-Soviet Russia, in which the elite grabbed productive public assets for private gain? Robber-baron socialism? Or is it something different altogether, an entirely new model, a ‘Beijing Consensus’, according to the fashionable phrase, built around practical, problem-solving policies and technological innovation?
Few described the model as communist any more, often not even the ruling Chinese Communist Party itself.
How communism came to be airbrushed out of the rise of the world’s greatest communist state is no mystery on one level. The multiple, head-spinning contradictions about modern China can throw anyone off the scent. What was once a revolutionary party is now firmly the establishment. The communists rode to power on popular revulsion against corruption but have become riddled by the same cancer themselves. Top leaders adhere to Marxism in their public statements, even as they depend on a ruthless private sector to create jobs. The Party preaches equality, while presiding over incomes as unequal as anywhere in Asia. The communists also once despised the pre-revolutionary comprador class of Chinese businessmen, but rushed without shame into an alliance with Hong Kong tycoons when taking back the British colony in 1997.
The gap between the fiction of the Party’s rhetoric (‘China is a socialist country’) and the reality of everyday life grows larger every year. But the Party must defend the fiction nonetheless, because it represents the political status quo. ‘Their ideology is an ideology of power and therefore a defence of power,’ said Richard Baum, a China scholar. The Party’s defence of power is also, by extension, a defence of the existing system. In the words of Dai Bingguo, China’s most senior foreign policy official, China’s ‘number one core interest is to maintain its fundamental system and state security’. State sovereignty, territorial integrity and economic development, the priorities of any state, all are subordinate to the need to keep the Party in power.
The Party has made strenuous efforts to keep the sinews of its enduring power off the front stage of public life in China and out of sight of the rest of the world. For many in the west, it has been convenient to keep the Party backstage too, and pretend that China has an evolving governmental system with strengths and weaknesses, quirks and foibles, like any other. China’s flourishing commercial life and embrace of globalization is enough for many to dismiss the idea that communism still has traction, as if a Starbucks on every corner is a marker of political progress.
Peek under the hood of the Chinese model, however, and China looks much more communist than it does on the open road. Vladimir Lenin, who designed the prototype used to run communist countries around the world, would recognize the model immediately. The Chinese Communist Party’s enduring grip on power is based on a simple formula straight out of the Leninist playbook. For all the reforms of the past three decades, the Party has made sure it keeps a lock-hold on the state and three pillars of its survival strategy: control of personnel, propaganda and the People’s Liberation Army.
Since installing itself as the sole legitimate governing authority of a unified China in 1949, the Party and its leaders have placed its members in key positions in every arm, and at each level, of the state. All the Chinese media come under the control of the propaganda department, even if its denizens have had to gallop to keep up in the internet age. And if anyone decides to challenge the system, the Party has kept ample power in reserve, making sure it maintains a tight grip on the military and the security services, the ultimate guarantors of its rule. The police forces at every level of government, from large cities to small villages, have within them a ‘domestic security department’, the role of which is to protect the Party’s rule and weed out dissenting political voices before they can gain a broad audience.
China long ago dispensed with old-style communist central planning for a sleeker hybrid market economy, the Party’s greatest innovation. But measure China against a definitional checklist authored by Robert Service, the veteran historian of Soviet Russia, and Beijing retains a surprising number of the qualities that characterized communist regimes of the twentieth century.
Like communism in its heyday elsewhere, the Party in China has eradicated or emasculated political rivals; eliminated the autonomy of the courts and press; restricted religion and civil society; denigrated rival versions of nationhood; centralized political power; established extensive networks of security police; and dispatched dissidents to labour camps. Over much of its life, although less so now, party leaders in China have mimicked old-style communists by claiming ‘infallibility in doctrine, while proclaiming themselves to be faultless scientists of human affairs’.
The Party in China has teetered on the verge of self-destruction numerous times, in the wake of Mao Zedong’s brutal campaigns over three decades from the fifties, and then again in 1989, after the army’s suppression of demonstrations in Beijing and elsewhere. The Party itself suffered an existential crisis after the collapse of the Soviet Union and its satellite states in the three years to 1992, an event that resonates to this day in the corridors of power in Beijing. After each catastrophe, the Party has picked itself off the ground, reconstituted its armour and reinforced its flanks. Somehow, it has outlasted, outsmarted, outperformed or simply outlawed its critics, flummoxing the pundits who have predicted its demise at numerous junctures. As a political machine alone, the Party is a phenomenon of awesome and unique dimensions. By mid-2009, its membership stood at 75 million, equal to about one in twelve adult Chinese.
The Party’s marginalization of all political opponents makes it somewhat like the Iraqi army after the second Gulf war. Even if it were disbanded or fell apart, it would have to be put back together again, because its members alone have the skills, experience and networks to run the country. As a prominent Shanghai professor told me, the Party’s attitude is: ‘I can do it and you can’t. And because you can’t, I will.’ The Party’s logic is circular. There can be no alternative, because none is allowed to exist.
Few events symbolized the advance of China and the retreat of the west during the financial crisis more than the touchdown in Beijing of Hillary Clinton, the new US Secretary of State, in February 2009. Previous US administrations, under Bill Clinton and George W. Bush, had arrived in office with an aggressive, competitive posture towards China. Before she landed, Ms Clinton publicly downplayed the importance of human rights. At a press conference ahead of leaving, she beamingly implored the Chinese government to keep buying US debt, like a travelling saleswoman hawking a bill of goods.
Deng Xiaoping’s crafty stratagem, laid down two decades before, about how China should advance stealthily into the world–‘hide your brightness; bide your time’–had been honoured in the breach long before Ms Clinton’s arrival. China’s high-profile tours through Africa, South America and Australia in search of resources, the billion-dollar listings of its state companies on overseas stock markets, its rising profile in the United Nations and its sheer economic firepower had made China the new focus of global business and finance since the turn of the century. China’s star was shining more brightly than ever before, even as its diplomats protested they were battling to be heard on behalf of a relatively poor, developing economy.
The implosion of the western financial system, along with an evaporation of confidence in the US, Europe and Japan, overnight pushed China’s global standing several notches higher. In the space of a few months in early 2009, unconstrained by any seri
ous public debate at home, the Chinese state committed $50 billion in extra funding for the International Monetary Fund and $38 billion with Hong Kong for an Asian monetary fund; extended a $25 billion loan to cash-strapped Russian oil companies; set aside $30 billion for Australian resource companies; offered tens of billions more to various countries or companies in South America, central and Southeast Asia, to lock up commodities and lay down its marker for future purchases.
In September that year, with western governments and companies still on the back foot, China readied lines of credit of up to $60–70 billion for resource and infrastructure deals in Africa–in Nigeria, Ghana and Kenya. In Guinea, just days after the army had shot citizens and raped women on the streets of the capital, the military-backed government, a pariah on the continent and around the world, announced it was in talks with China on a billion-dollar resources and infrastructure deal.
Beijing’s ambition and clout was being lit up by flashing lights in ways that would have been unthinkable a few years previously. The Chinese central bank called for an alternative to the US dollar as a global reserve currency in early 2009, and reiterated its policy as the year went on. France obediently re-committed to Chinese sovereignty over Tibet to placate Beijing’s anger over the issue, after Beijing had cancelled an EU summit in protest at Paris’s welcome for the Dalai Lama. Barack Obama spurned meeting the Tibetan spiritual leader in late 2009, to sweeten the atmosphere for his first visit to Beijing in November that year, although he did agree to meet him in early 2010. On its navy’s sixtieth anniversary, China invited the world to view its new fleet of nuclear-powered submarines off the port of Qingdao.
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