Posts Tagged ‘corruption’

Will Zhou Stay or Will He Go?

Posted: September 1, 2013 in Politics
Tags: ,

For the last several days I’ve been keeping an eye on rumors that China’s former security czar Zhou Yongkang might be in the crosshairs of the anti-corruption authorities. If Zhou were charged, it Zhou Yongkangwould be BIG. Until last year, he was on the Politburo Standing Committee (PBSC) – China’s most powerful body – where current and former leaders have been safe for the past four decades.

Unreliable overseas Chinese rumor mills like Boxun have been reporting that Zhou’s downfall is imminent for more than a year-and-a-half, so I don’t tend to give much weight to these rumors. But now there’s good reason to suspect he really is in danger. He seems to be getting painted into a corner, as his allies are being placed under investigation for corruption one-by-one. It’s just been reported that Jiang Jiemin, head of the State Assets Supervision and Administration Commission (SASAC) and previous chairman of the China National Petroleum Company (CNPC), is on the chopping block. This is a very high official and a very close ally of Zhou’s. Before him several other officials from CNPC – China’s biggest oil producer – were placed under investigation.

I remain skeptical that Zhou himself will be taken down. The government is just beginning to breathe a sigh of relief now that the whole Bo Xilai affair is over. Taking down Zhou would be unprecedented and would risk stirring up the pot again. However, it would make sense in a lot of ways.

Xi Jinping has claimed he intends to go after both the “flies” and the “tigers” in his corruption crackdown. Contrary to what state media would have you believe with cases like Liu Zhijun and Bo Xilai, I would argue that a tiger has yet to fall. Bo Xilai was close, but he was a mere member of the 25-person Politburo. Its members have proven expendable for the past 15 years.

Taking down a former PBSC member though would be a strong signal that indeed nobody is above the law (that signal wouldn’t reflect reality, but that’s irrelevant). Xi and his campaign would be given serious legitimacy.

But more important, I think, is that taking down Zhou could actually have some practical effects. U.S. Embassy cables released by Wikileaks in 2010 appeared to confirm what many had long suspected: that some of China’s highest level leaders have extreme vested interests in certain monopoly industries. Li Peng’s family reportedly controls electricity, Wen Jiabao’s family the precious stones trade and Zhou Yongkang China’s oil monopoly (he used to head CNPC).

Xi Jinping has made it pretty clear that he has little intention of launching serious political reforms. In lieu of that, he appears to be pushing some fairly serious economic reforms. But even that’s fraught with landmines.

Serious economic reform requires breaking up, or at least dramatically overhauling these state-owned monopoly juggernauts that are controlled by some very powerful vested interests.  Going after any of these industries is politically risky, but now that Xi has more-or-less consolidated his power, Zhou and his oil cronies offer a good first target.

In March, after People’s Daily ran an attack piece on Apple called “Smash Apple’s Incomparable Arrogance” Caijing asked Chinese consumers in an online survey which arrogant company they’d like to smash. China’s big three oil companies were all voted among the top.

The big oil companies have been very slow to invest in cleaner technologies because they haven’t really had to. In practice, they’ve had more power than the Environmental Ministry that’s theoretically supposed to regulate them. This no doubt comes in part from the industry’s powerful patrons.

Many see the oil companies as largely responsible for the horrible air pollution in cities like Beijing. Indeed, more of Beijing’s local PM2.5 pollutants come from vehicle emissions than any other source. Then on the other side, you have people who despise the inefficient and highly-corrupt oil monopolies for making gas prices higher than they need to be.

Going after one of China’s top oil companies and its patrons sends a message that business as usual for vested interests won’t be tolerated like it has been in the past; and that if reform comes a knockin’, these vested interests better not stand in the way. That message might already be working. As all these CNPC executives started being placed under investigation, Sinopec, one of China’s other big three oil companies, announced it would be upgrading its fuel standards three months ahead of schedule.

Then there’s Zhou Yongkang himself. South China Morning Post said taking down Zhou “could send even bigger political shockwaves through Beijing than the trial of Bo Xilai,” but I don’t think so. You’d be hard-pressed to find a more hated leader than Zhou – the man who was at the heart of China’s violent and frequently law-breaking “stability maintenance” apparatus. Bo Xilai was a high-profile populist leader who had a lot of detractors, but also a lot of fans. Zhou Yongkang on the other hand quietly and ruthlessly ran China’s security apparatus with an iron fist. If someone in China knows enough about Zhou to have an opinion about him, that opinion is almost certainly negative.

Zhou probably doesn’t have many supporters within the government either. Allegedly, because he supported Bo Xilai and had overseen the security apparatus so recklessly (and incompetently. See Chen Guangcheng), Zhou was forced to informally give up most of his powers months before he formally retired. If this is true, it’s unlikely he has many high-level friends left that would stick their neck out to protect him. The writing has been on the wall for some time now that Zhou could be a political pariah. It’s doubtful that Xi would face too much resistance in taking him down.

Again though, as many good reasons as there are for targeting Zhou, I’m still pretty skeptical that it will actually happen. The Communist Party is very risk-averse and Xi could still accomplish a lot just by dismembering Zhou through his allies rather than beheading the man himself.

If it does happen though, don’t get your hopes up for any other high leaders to follow. Nobody else at the top is nearly as vulnerable as Zhou. And if Xi starts picking off multiple officials who were thought to be above reproach, it’ll spook a lot of powerful people. Xi could then become the one with a target on his head, and not necessarily a figurative one.

Every few months China has some kind of territorial spat with one of its neighbors – be it Japan, the Philippines or Vietnam – that gets everybody worried about war. As I was standing amidst the unusually vitriolic  anti-Japanese demonstrations recently, it felt like those worries had reached a fever pitch and that the government might actually cave to public calls for military action. Sometimes it feels like a miracle that it hasn’t already happened.

There are plenty of good reasons why China hasn’t invoked its military: The economic implications, the possibility of US military involvement, being perceived internationally as a belligerent bully. But there may be an even more compelling reason than any of these: The People’s Liberation Army (PLA) might not be up to the task.

There seems to be a widespread assumption that without US-backing, militaries from Japan, Vietnam or Taiwan would fall swiftly to the overwhelming might of the world’s largest army. China’s military spending routinely increases by the double-digits, far outpacing its GDP growth. Last year that spending amounted to $91 billion – a 12.7% increase over the previous year. It’s expected to be $106 billion this year.

Now I’m not a military expert by any means, but I have seen how major government monopolies tend to function in China. This might give us a better idea of the PLA’s capabilities than the raw numbers do. So let’s look at another major state monopoly: The Ministry of Railways.

This is a fiefdom if there ever was one. The opaque ministry has its hand in everything vaguely related to or surrounding railways, from construction and manufacturing to hospitals and schools. Corruption and nepotism thrive. There was the $2.9 million promotional film where funds were funneled away, the SINGLE official who was able to embezzle $121 million, and the series of photos showing absurdly marked up bullet train items that resulted from government procurement.

This week the ministry is back in the news as its $52 million online ticketing system continues to be worthless on the eve of another busy holiday. Netizens have demanded to know why the system cost so much, yet is worse than actually standing in line at the train station.

If I may throw out some wild speculation (based on overwhelming precedent): Perhaps a chain of railway officials outsourced the site design to increasingly cheaper (AKA – decreasingly qualified) designers while pocketing the difference and/or gave contracts to personal connections for wildly inflated prices.

Now shift back to the PLA, which is larger, more powerful and more secretive than the Ministry of Railways. So powerful and secret in fact that it operates as an entirely separate entity from civilian government and laws.

People tend to see the huge annual PLA budget increases as a threat to China’s neighbors, but to a large extent it’s a way to quell the PLA’s danger to the Communist Party.  Fear of a military coup has always weighed heavy on the party leadership and big budgets are one way of buying the military’s continued loyalty. It doesn’t take a big leap of faith to guess that a lot of that money is lost to corruption.

In spite of its many scandals, the Ministry of Railways gets its job done for the most part…horrible inefficiency and occasional disasters aside. The public can see many of its failings, which keeps it a bit more honest and efficient than it otherwise might be. And if Hu Jintao decides to seriously clean house of corrupt railways officials, he doesn’t need to worry about tanks rolling up to his office the next day.

With the PLA though, these things are all question marks.

John Garnaut did a great article earlier this year based on inside sources trying to explain how pervasive and destructive corruption is in the PLA. The problem is that because of its enormous power and complete secrecy, it’s impossible for outsiders (and insiders for that matter) to appreciate the true scale and what it means for battle capability.

With a naval/aerial engagement – which is what most potential conflicts would entail – victory would be decided more by hardware than troop numbers. It’s possible that even in the absence of US involvement, China’s military apparatus could falter when facing a presumably weaker opponent like Japan, or even Taiwan (See this in-depth analysis of a possible Sino-Japanese naval war).

If that were to happen, the Chinese government would have a tough choice. It could try to convince people that the US military was actually secretly involved and mitigate its failing, or it could try to answer directly as to why, in spite of a much better funded and staffed military, China got beaten by “little Japan.”

Neither option is very palatable, and the mere possibility of having to make that choice might be a major hedge against an all-out war.

On this blog I often write about the systematic nature of corruption in China and how it’s become something that people now just take for granted. To be clear, the lion’s share of the responsibility lies with the system. But to be fair, there are certain aspects of Chinese culture that make corruption much easier. And they’re unlikely to disappear anytime soon, even with significant reform.

Let’s say for instance that Mr. Li runs a widget factory. One day he receives an invitation to the wedding of Mr. Guo’s daughter. “How nice,” you might think. Mr. Li hardly knows Mr. Guo and he’s never met the daughter. But Mr. Li isn’t too pleased. It so happens that Mr. Guo is one of the official regulators responsible for Mr. Li’s factory.

When he arrives at the wedding, Mr. Li brings a hongbao (red envelope) full of cash, as is the custom at Chinese weddings. Normally for a casual acquaintance Like Mr. Guo’s daughter, the amount could be as low as 100-200 yuan ($16-$31). If it were a close friend, several hundred. If it were immediate family, maybe one or two thousand.

But Mr. Li’s hongbao contains 10,000 yuan, maybe more. When he enters the wedding hall he hands it off to someone specially designated to collect them along with dozens of other guests doing the same. Later, after the ceremony, Mr. Guo comes to Mr. Li’s table, gives him a cheery drunken pat on the back and toasts him. Mr. Li’s factory continues to churn out widgets without problem – regardless of what regulations he might be breaking. Not a single word was explicitly spoken about the transaction that just occurred.

Nobody besides Mr. Li and the Guo family will ever know how much was in the hongbao. Even if they did, what could they do? It was a simply a “wedding gift” that Mr. Guo never even asked for.

Perhaps it wasn’t his daughter’s wedding. Maybe Mr. Guo had a party celebrating the hundredth day since his nephew was born, or a birthday party for his mother.  And perhaps it wasn’t so high level. Maybe Mr. Li just runs a small shop and instead of giving Mr. Guo a pile of cash, it was a 500 yuan pack of cigarettes (which Mr. Guo won’t actually smoke, but use later as a gift for his superiors).

Whatever the “special occasion” and whatever the amount involved, from the moment Mr. Guo made the announcement and Mr. Li received it, both sides knew what it was about.

When we think of corruption in China we tend to think of handing over huge briefcases of cash in tense, shady backroom deals. But this is what’s far more common and far harder to do anything about. As much as genuine systematic reform would accomplish in stamping out the major corruption cases, these low-level “understandings” are much more engrained in the culture and will take much longer to get rid of.

First they gave us anti-corruption lapel pins and statues. Then they gave us ethics classes. Now the CCP is throwing out another bone to pacify public impatience with corruption while craftily avoiding anything that might check its absolute power…or actually do anything to curb corruption.

In this case, China is starting a new five-year plan to tackle corruption, Bloomberg reports.

It isn’t immediately clear what this new plan will include, but it sounds awfully familiar to an earlier pronouncement (via Austin Ramsey) entitled “China to Rein in Corruption within 5 Years,” which said:

An official from China’s top discipline watchdog reiterated in Beijing that the country will effectively curb corruption cases within 5 years as effective legal and structural measures become more perfect.

China’s heavier clampdown on corrupt officials during the past several years, including the execution of deputy legislative speaker Cheng Kejie, is preventing officials from thinking of corruption.

That was from January 2001. In case you haven’t noticed, more than a handful of officials have thought about corruption since that five year deadline expired.

So why does corruption persist in spite of all these measures? In my affinity for dumbing things down to very crude analogies, this is China’s anti-corruption apparatus:

 

“We admit that the whole thing doesn’t quite fly and there are still problems to address,” the government says. “But we’re initiating some bold new reforms over the next five years to effectively curb these problems once and for all”:

Trying to stop corruption but refusing to allow for the rule of law through truly independent police, courts AND real public oversight through a free media is like trying to build a functional airplane but refusing to entertain the concept of lift.

Bloomberg quoted Zheng Yongnian, director of the East Asian Institute at the National University of Singapore saying, “In the past ten years, the more they fight corruption, the more plans and agencies they set up, the worse the corruption gets.”

By now this should be patently obvious. Anti-corruption initiatives usually consist of two things: parading harsh punishments of the few that are caught and touting greater oversight through some new anti-corruption authority. But the basic systematic framework is still in place, so these agencies just get in on the corruption themselves. The problem now involves more people and more money.

So this looks like the latest in a long long line of nearly identical initiatives meant to appease the public and quell calls for real reform.

He Guoqiang, head of the CCP’s Central Commission for Discipline Inspection and #8 man on the Politburo said, “The work of constructing a system of punishing and preventing corruption has shown to be effective.”

The day that ranking officials up to and including himself can be criticized, investigated and indicted by the public is the day we can believe him.

One of the great misconceptions from people who’ve never been to China is that Chinese long for western-style freedoms. More often than not, when I talk with Chinese friends about the enormous problems facing China and the desperate need for political reform, I get a similar response:

“Most Chinese people don’t care about things like freedom of speech. They just want stability and food in their stomach. Things have gotten so much better in the past 20 years, so these chaotic freedoms would be a stupid risk.”

To them, “freedoms” are totally abstract and irrelevant to their lives. I counter by saying, “You’ve never been totally screwed with absolutely no recourse.”

Imagine your town’s party secretary said your home would be demolished to make way for a public water park. You have the option of accepting cash worth far less than the market value of your home or taking a worse apartment several miles out in the boonies.

After demolition, it’s announced that the water park plan will be scrapped and expensive luxury apartments will be built instead. You and the residents cry foul and seek help from local courts and media only to find they’re under the thumb of the same person who took your home.

So some people try contacting Hong Kong’s Phoenix TV, where they’d seen corruption exposés before. Days later, Phoenix TV’s service is cut from the whole city. You consider going to the provincial capital or Beijing to petition. You seek advice from friends in other cities but they retell stories of people getting fired, harassed, detained or even killed for trying to do this. You decide giving up is probably the smartest choice.

For all the attention we foreigners call to instances like this, relatively few Chinese actually experience them. Most go on normally with steadily growing incomes, so it’s understandable that they don’t want a political shake up. I recently talked about this with my girlfriend’s father – an admitted laobaixing (commoner) – who agreed that freedoms and political reforms are luxuries too risky to trifle with.

This wouldn’t be surprising except that a few years ago he and his neighbors went through the exact situation I just described.

I asked how he of all people could still be averse to political reform. He replied that he had indeed been screwed, but if the kinds of freedoms I was talking about were allowed, the Communist Party would collapse and there would be chaos. If things ever do get really terrible, THEN the government can make reforms. But for now, it’d be a pointless risk.

This attitude is pretty common among laobaixing and, it seems, the government too. I’d compare it to saying global warming isn’t worth addressing until there’s some sort of major environmental catastrophe. It’s already hurting a small minority, but most are living the best quality lives anyone ever has. So why slow down this rocket ship before its engine blows? That’s exactly what’s happening right now in China economically and politically. Let’s look at some ways how:

The Stability Bicycle

 

Scenario 1: Local party cadre takes bribes, levies illegal taxes and uses his power to favor businessmen he has guanxi with. Everyone below him knows this but he doesn’t care. He’s elected from above and has control over the town’s police, courts and media. He knows that less than 3% of corrupt officials go to jail, because even if his superiors catch wind of his transgressions, they’d just assume not dirty their hands unless they’re backed against a wall. Indicting him could be an indictment on themselves and the system that feeds them.

Other government workers see this cadre getting rich and it makes them envious. The local factory inspector decides he too will take bribes. Now those who aren’t getting rich are losing face and opportunities to attract good wives. So everyone starts seeking out and abusing any kind of authority so they don’t get left behind. Those at the very bottom bear the heaviest burden of all this corruption and become increasingly resentful. Eventually, even honest business owners have to cut serious corners just to stay afloat. This leads to…

Scenario 2: Local factory poisons a river. Local party secretary (who has perhaps been bribed by the factory) prevents local media from reporting it in order to keep his job and city stability. Stability is indeed maintained and, operating on the precedent of impunity, the factory continues to pollute the river. Commoners are getting sick and some are dying. Perhaps they connect the dots and take to the streets. Perhaps they don’t.

True story

Very plausible ending to the story: The national government lets some egregious cases get reported, but they bury most small scale incidents like this (if they even find out) in order maintain public confidence and stability. People therefore see very few examples that might help them connect the dots in their own local situations.

This happens repeatedly up and down the river and many others for several years to the point that the water is now unsafe to even touch; much less drink. China’s Ministry of Environmental Protection has acknowledged this is already the case with HALF China’s lakes and rivers. Similar circumstances unfold with medicine, food, infrastructure safety, air pollution, and deforestation. Try as they might to stop it with their “iron fist,” the central government’s internal policing is about as effective as fighting a cornfield mouse infestation with a baseball bat.

Cases like Sanlu that are patently obvious to the whole country get wide attention, but most situations fester slowly out of the public view until they’re well beyond the point of no return. Eventually these things compound and millions get screwed, thirsty, hungry or poisoned. As people often do when they’re screwed, thirsty, hungry or poisoned, they revolt and the government’s attempt to keep social stability has backfired tremendously.

Scenario 3: In the wake of the 2008 financial crisis, the national government wanted to ensure social stability by keeping high investment and GDP growth, so it pushed down interest rates and engineered a lending boom that expanded the country’s money supply by two-thirds. Keeping money in the bank became pointless for the rich since interest rates are below inflation rates. Many people (especially those who’ve come into their money illegally) stash their money by buying multiple apartments. Thus there is huge demand for high-value real estate.

So we return to local party secretary who needs some quick money; maybe for himself, but maybe just to achieve the kind of raw economic growth demanded of him by national leaders who see 8% annual growth – no matter what – as the key to keeping stability. So he does this the easiest way he knows how: tearing down old cheap apartments and selling the land to developers to build luxury apartments nobody will ever actually live in.

Very plausible ending to the story: local party bosses across the country do the same thing until there are more luxury apartments than people can possibly buy. Prices crash and people who’ve already bought these homes lose their massive investments. Developers who haven’t yet sold their new buildings default on their loans en masse. This has a domino effect which causes much of the other $2.7 trillion in recent loans to go bad.

Rumors spread on the internet that banks are running out of money. Official channels deny this but people have long since stopped believing the stability-maintaining cheery propaganda. So commoners swarm to withdraw their savings and start hording goods. This causes even greater inflation and regular Chinese suffer worse than at any point during the 2008 financial crisis. The government’s attempt to keep social stability has backfired tremendously.

Scenario 4: In order to keep social stability and firm support, the government bases its education system on making students obedient. It teaches them to accept the material without challenging it. This material often includes subjective nonsense, so students are trained to think in a way to find the safe answer rather than the true or innovative answer. This begins with politics and history classes but spills over into other subjects. Students are afraid to express ideas beyond the status quo and teachers are afraid to teach them.

Meanwhile, international collaborative platforms like Twitter are blocked or heavily censored (in order to preserve social stability), so Chinese researchers are kept in a virtual cocoon. Manufacturing wages are starting to rise, so China’s economy needs to move up the value chain like Japan’s, Taiwan’s and Korea’s did before it. But because of the education deficit and lack of intellectual freedom, China isn’t equipped to do this.

Very plausible ending to this story: As this decade nears an end, demographic shifts put huge pressure on the young working generation as they must support aging parents. China’s best and brightest see the writing on the wall so they go overseas to get educated – where they mostly stay after graduation.

China’s “Indigenous Innovation” initiative relied more on protectionism and siphoning last year’s IP from foreign companies than it did on creating the right conditions to innovate at home. Under the standard policy of throwing money at a problem, several of the most brilliant Chinese minds manage impressive accomplishments in spite of the anti-intellectual atmosphere, but those exceptions are indeed exceptions. For the most part, Chinese companies stay perpetually one step behind their foreign competitors.

Scores graduate from universities to find their education was useless. Manufacturing positions are now fewer because of rising wages and technological improvement; and bosses don’t want factory workers with degrees anyways.

Like unemployed youth in the Middle-East did in 2011, young Chinese take to the streets. The government tried to avoid another Tiananmen by making sure universities didn’t become independent hotbeds for radical thinking. But their attempts to maintain social stability have backfired tremendously.

Conclusion

These scenarios aren’t just possible, they’re already happening. Many I speak to say these endings won’t happen because the central government will step in and prevent the worst. But in spite of what many Chinese and most foreigners seem to think, China has one of the weakest central governments in the world. It must oversee tens of thousands of local fiefdoms, so even when the top leaders try to do the right thing, their orders get diluted, reinterpreted or ignored through multiple levels of corrupted bureaucracy.

Like most groups throughout history though, the party is reluctant to give up any of its absolute power. It clings to the notion that it can use its power to launch internal crackdowns and scare corrupt officials straight. But this approach has been failing for decades. For every situation it rectifies, dozens more pop up.

Only by outsourcing its supervisory role to commoners and media empowered by a rule of law enforced from the top can China’s model become sustainable.  China is the frog in heating water and time is running out. Hopefully the laobaixing will realize stability at all costs is usually the most potent recipe for chaos.

When I first moved to Beijing from Nanjing, I hit a snag at the police bureau. I’d just returned from a trip back home and had two days to get a student visa before my old working one expired. But it turned out my school had given me one wrong document (which was nearly identical to the correct one). I asked if they could let it slide but obviously that was out of the question. So I asked if I could pay to extend my current visa; something I’d done before and knew I could still do. Here’s how that went:

Visa woman: You think this is a game? You can just get whatever visa you feel like?

Me: No, there was just a mix-up with the school so I want to extend my current visa until I can get it straightened out with them. I’ve done it before.

Visa woman: No, you’ll just need to go back to the US and apply through the Chinese embassy.

Me: Are you fucking kidding me?! I just got back from the US. I’ve extended my visa before, I know I can do it.

Visa woman:  (Shakes head dismissively, waves me off and refuses to say another word)

I began to understand why there was a bulletproof glass barrier between her and me. I made some calls and got my school to hash it out, but I later learned I was totally right about extending my current visa.  The visa woman was ready to make me go thousands of dollars and a few weeks out of my way just so she could avoid two minutes of extra work.

She’s the disinterested bureaucrat who’s paid to sit there and she’ll be damned if she’s going to do anything more. She’ll abuse her miniscule authority to create shortcuts for fixers and anyone else willing to make it worth her while, but those expecting her to just do her job are about to get their day ruined. If you’ve ever tried to get something done in one of China’s infinite state-run monopolies, you’ve met her.

But I went to open a bank account a few days later and discovered a little invention that could revolutionize China in the most profound way since Reform & Opening Up:

It’s a customer service rating machine. After your interaction, you simply press your level of satisfaction and the total results affect the employee’s job. By no coincidence, the service at the bank was fantastic.

I had similar results when I called to get my internet hooked up. The first two reps I called talked to me like I was a moron for wasting their time in trying to patronize their company. But the third couldn’t have been more helpful. I found out why when, after the conversation, there was an automated feature that asked me to hit a number corresponding with my satisfaction level.

Imagine if every bureaucrat, secretary, doctor, police officer, petitions office worker, train ticket clerk, inspector, etc. had incentives tied to meeting a certain quota on one of these machines. Customer service and efficiency would skyrocket and petty malfeasance would drop precipitously.

After the scheme’s success is proven, who knows, maybe these machines could even be put in little booths every 4 or 5 years and be tied to people in even higher positions of power.

I call on the government to begin immediate production on tens of millions of these machines. I can’t imagine a better investment for the country’s continued development.

 

When haphazard attempts to start a Jasmine Revolution failed comically in Beijing early this year, discussion over whether or not China is ripe for revolution was popular. The conclusion by most was that it’s not. But it seems that in just a few short months the situation has changed somewhat. While an uprising doesn’t look to be imminent, there seems to be many similarities between circumstances unfolding today and those that preceded the Tiananmen Square rebellion of 1989. So I want to look at some key parallels between then and now:

Corruption

Then: There was always corruption in the PRC, but Reform & Opening Up made it much easier and much more visible. In the 80’s, many price controls were lifted, but not all. The shortages of some goods allowed people with the right connections to buy at the artificially low prices and sell at market rates for huge windfalls. So naturally, the already-powerful became even more powerful. The inequality of opportunity and obvious abuse of power were two things immediately visible to those affected and were direct causes the Tiananmen protests.[1]

Now: You can click here to see a visual approximation of China’s Gini Coefficient wealth inequality over time (0 means perfect equality, 1.0 means one person has all the wealth).  In 1989 it was hovering around 0.36. It took a dip that year but has since soared to over 0.47 – well past the 0.40 danger level. China’s crony one-party capitalism and massive economic growth since Tiananmen have only increased the amount of capital involved with corruption and allowed the powerful to get exponentially wealthier.  This is perhaps best felt when local officials make illegal, undercompensated land grabs to raise capital for their city (and often take kickbacks from developers). A recent survey found the number of disputes over these land grabs is at an all-time high. Favoritism, graft and inequality of opportunity are in some ways better than the Tiananmen era, but in many ways much worse.

The Media

Then: The Chinese media of the 1980’s covered issues that had never been touched in the PRC previously; even dabbling in corruption cases. Single essays or TV programs could stir up fiery political discussion on college campuses. A documentary called River Elegy played on CCTV in 1988, which subtly criticized Chinese culture and sparked nationwide debate. When the protests themselves started, the press covered them extensively and even portrayed the student protestors sympathetically. These factors shined a light on many issues intellectuals were concerned about and brought together like-minded activists.

Now: Though the official press was reigned in after 1989 – where it’s more or less stayed ever since – new avenues of disseminating information have sprung up. Mobile phones, blogs and microblogs have put reporting in the hands of those directly affected – shining a light on things never before seen by most common people. Shrewd online political commentary on these issues by bloggers like Han Han may be playing a role similar to programs like River Elegy in the 80’s.

Education Failure

Then: After the Cultural Revolution, universities re-opened and were a sure ticket to a better life. However, with further reform and opening of the markets in the mid-to-late 80’s, many college students graduated to find their education gave them no real advantage in the new business landscape. In 1988, the system that assigned college graduates jobs was also amended to where private companies could reject those top students assigned to them in favor of those who had connections inside the company.[1]

Now: Educational prospects improved after Tiananmen, but now the situation is coming to resemble 1989 again. An overabundance of college graduates has left one-fourth of them unemployed without any better prospects than those who didn’t go to college. Many have also criticized the university system as useless, largely focusing on theory and failing to give students useful practical guidance. With labor wages rising China needs to move up the value chain in order to keep its people employed. Some think the innovation and collaboration needed to achieve this won’t be possible under the current intellectually repressive atmosphere.

Inflation

Then: Inflation was at an astounding 18.5% in 1988 because of panic withdrawling and buying on rumors of what relaxing price controls would mean. [2]

Now: Inflation is sitting at about 5.5%, down from a high of 6.5% in July. Not nearly as bad as pre-Tiananmen, but food is getting less affordable and housing is off the charts. With a roughly 32 million surplus of marrying age men, great pressure is being put on those who need to buy a house (and often a car) to compete for potential wives. And the poorest of the poor are having to cut food from their diet in order to stay on top of their finances.

Competing Party factions

Then: In the lead up to Tiananmen there was an obvious rift in the party between progressives like Zhao Ziyang and Hu Yaobang and hardliners like Li Peng. This rift was absolutely apparent in the days leading up to the crackdown. The protestors saw this split and sniffed weakness; which emboldened them further.

Now: After Tiananmen the party learned to present a united front in public and keep disputes between factions – or even the existence of factions – behind closed doors. That era seems to have ended now though with Bo Xilai’s left wing and Wang Yang’s right wing both making very public criticisms of each other’s models. The bulk of the Chinese public has yet to express an interest  (or knowledge) in this feud, but that could change as factions push harder for influence and citizens begin to take sides.

Banking System Cracks

Then: In the late 80’s Chinese banks flooded the market with loans. As could be expected, a great deal of them went bad and an estimated 1/3 of factories were unprofitable.[1] The government brought this to an abrupt halt in 1988 by cutting the cash flow – a kind of austerity measure many didn’t take too kindly to.

Now: Take that same situation and multiply the figures involved to equal more than seven times China’s entire 1989 GDP. In the wake of the 2008 financial crisis, China pumped $586 billion into the economy as a stimulus. This is part of an overall $2.7 trillion Chinese banks have extended in loans over 2009 and 2010. Up to now that stimulus has looked pretty good in economic recovery terms, as it always does…until the loans start going bad.

The Street recently had a piece that said, “Economic-related news coming from China is a page-turning thriller. Ponzi schemes, zombies, off-balance-sheet reporting, subprime and mafia-style lending; rising inflation, declining asset values, slowing growth — it’s all there. Add in government meddling in market mechanisms and official denials and China sounds like it has the makings of a perfect economic storm.”

Wenzhou has recently had dozens of bosses flee bad debts – something that’s being read as a preview of larger things to come. Tsinghua economist Patrick Chovanec has said he’s not sure if China can make it through next year’s power transition before a major banking crisis hits.

Key differences between Tiananmen era and now

Nationalism and affluence

Since Tiananmen the government has pretty successfully educated nationalism into the youth and trained them to regard any talk of democracy or human rights as a western ploy to make China implode. The relatively well-off youth of today also seem far more interested in video games and pop stars than politics anyways. And the population as a whole is undeniably better off than they were in 1989 (though some studies suggest they’re not any happier). Most have a lot more to lose than they did at that time.

A paranoid and highly technological government

The technological improvements may work to the Party’s advantage more than any would-be revolutionaries. The government has the capability to monitor and immediately clamp down on dissent – a capability that improves by the day. If they were truly threatened by a spontaneous movement, they could temporarily shut down cellphone service, microblogs like Weibo, or even the entire internet – as they did in Xinjiang in 2009. And as the Beijing attempt at a Jasmine Revolution earlier this year demonstrated, the government will come down hard on any threat – real or imagined. And they’re very careful not to allow any large gatherings that they can’t fully control; as the turnout for Hu Yaobang’s funeral in 1989 was the final spark for the Tiananmen Protests.

Conclusion

Given the vast similarities between now and 1989, another go at a revolution seems possible. If history is any indicator, an iron fist can’t succeed by itself if grievances are too great and you have the right catalyst to bring the disenfranchised together quickly.

Probably the only leader popular enough to create this Hu Yaobang-like catalyst in death would be Wen Jiabao. But again, if that happened the party would be overly cautious; and it probably wouldn’t be enough anyways. It would have to be something big that directly affected a huge number of people.

A large scale disaster that could be linked to corruption or official incompetence might do it. The Wenzhou train crash earlier this year and Shanghai fire last year made a lot of people angry and concerned for their safety. They weren’t big enough to spark an uprising, but they were two of many small aggravators that are slowly ebbing away people’s patience with corruption and government cover-ups. If something like a nuclear meltdown, a mass public health incident or a large dam collapse happened, that just might break the camel’s back. In 1975, the Banqiao Dam in Henan collapsed killing 171,000 people. And if you think that’s something relegated to the incompetence of the Mao-era, an average of 68 dams still collapse every year in China, according to one official.

But an even more likely scenario would be a poorly timed financial crisis; one like the aforementioned banking crisis that many are predicating. Life is already getting rough for the post-80’s/post-90’s kids who grew up spoiled taking economic security for granted. The job market is shrinking, their time/money intensive education is often useless and the gender imbalance is leaving many men hopelessly single. To make matters worse, the 2010 ratio of five workers for every elderly person will drop to 3-to-1 by 2020 in what Time Magazine has called “China’s Demographic Time Bomb.” For many only children that means completely supporting two parents financially and physically amid some of the least affordable housing prices in the world.

If a housing bubble burst robs these people of the investments they’ve become slaves to, they might all-of-a-sudden take a very keen interest in politics. And if there’s a banking crisis, it would likely cause a run on banks and panic buying similar to what caused the massive inflation of 1988. Fitch has estimated there’s a 60% chance of such a crisis by mid-2013. If it comes any earlier than that, it would be right during the leadership transition when the party is at its most vulnerable.

I’ll give my standard disclaimer for any internet police or fenqing that might be reading: An uprising isn’t something I’m hoping for. It’s not even something I’d venture to predict. Predications of a CCP collapse have a way of making you look like a fool (See: Gordon Chang).  And even if an uprising did happen, it doesn’t mean the party wouldn’t survive it. But there are many cracks beginning to show – financial, political and social; figurative and literal. The Beijing Consensus of authoritarian led economic growth has delayed the Party’s need to address their legitimacy shortfall for a solid 22 years, but one way or another that growth eventually has to slow and the legitimacy issue has to be addressed. If I were in charge I’d focus a bit less on the iron fist and a bit more on the root problems distressing and disenfranchising those without financial and political influence.

Non-linked sources

[1] Silenced Scream: a Visual History of the 1989 Tiananmen Protests. Donna Rouviere Anderson, Forrest Anderson. p. 1

[2] Dingxin Zhao. ‘’The Power of Tiananmen: State-Society Relations and the 1989 Beijing Student Movement’’. Chicago: University of Chiacgo Press, 2001. ISBN 0-226-982600-2. pp.127.