Platt Perspective on Business and Technology

Perceiving China – East and West 3

Posted in in the News, macroeconomics by Timothy Platt on May 19, 2012

This is my third installment to a series in which I discuss China as that country is perceived, and both from within and by the outside world (see Part 1 and Part2 .) And I write this as the People’s Republic of China approaches a pivotal transition in power, authority and leadership that with extend through both Party and Government, and that will reach to the top of the hierarchy for both (see my series China in Transition at Macroeconomics and Business, postings 63, 65, 68, 71, 73 and 75.)

At the end of Part2 of this series I stated that while countries and nation states are not businesses, some of the basic organizational principles that go into making an effective business also go into making a country both responsive to the needs of its citizens and effective as an organization. I am going to delve into that set of issues in this series, but before I do so I want to more fully discuss the implications and message of a still-breaking news story from within China – the public humiliation and repudiation of Bo Xilai and his wife Gu Kailai, and their Party backed and supported operations in Chongqing. I do this for several reasons but first and foremost in in how this ongoing series of events opens a window into decision making processes, and into the internal disagreements and alliances that shape them, that normally would go on entirely behind closed doors.

I first noted this story in this blog when writing my April 19, 2012 posting: China in Transition 4 – putting a change of leadership in context – 2 which I had actually written about a month earlier. I first started thinking about this puzzle when it was first brought up in Xinhua, the official news agency and public voice of the People’s Republic of China. And this story involved a developing scandal with a member of China’s Crown Prince Party at its center: Bo Xilai.

Bo is the son of one of the Eight Elders of China’s Communist Party, Bo Yibo and as such a natural member of China’s aristocracy and a prince of the realm. But more than that, he is a man who used his power and influence to root out and challenge corruption in local and provincial government and in the Party at those levels – from the inside and as a quintessential Party and Government insider. He showed that the system works and that it can and does respond and not just to the personal interests of those in authority. He was elevated to a seat on the Politburo of the Communist Party of China, and was on track for being elevated to a position on its Standing Committee, bringing him to a position of supreme leadership in China as one of their nine most senior and powerful leaders. He had powerful backers in this, who saw him as a face of success that while there is corruption at lower levels, their system is self-policing and self-correcting for it. And then everything began to unravel.

• The first intimations came out that Bo’s crusade against organized crime and the government and party collusion that supported it – his da hei, or “smash black (market)” campaign, was really more a systematic attempt to clear out competition to his cronies and allies.
• This pulled in his police chief, Wang Lijun, who had served as the principle enforcer of Bo’s own corrupt practices with its lopsided pursuit of corruption from others. And he tore any potential cover off of this news story by going to the United States Consulate office at Chengdu to seek asylum in exchange for information on the inner workings of China’s government, and in Chongqing and in general.
• More and more people were drawn into the global spotlight that this unfolding new story was aiming at Chongqing and upon China in general. And more and more embarrassing details and issues came to light. My goal here is not to recount the full range and scope of the details and the innuendo that have developed out of this story to date, so I will simply note one more detail here – the now very public accusations that Bo Xilai’s wife, Gu Kailai murdered a British national, Neil Heywood over a dispute involving profits sharing from corrupt business dealings that Bo and his group were running, or at the very least supporting and protecting.
• This story keeps getting more complicated, more embarrassing and more far-reaching in scope. And that is where this series of events have become most serious for their direct consequences, and for their implications for China’s leadership. This has brought intense embarrassment and challenge to the Party and perhaps even more importantly to the most senior Party officers who has until recently supported and even championed Bo Xilai as a rising star, and perhaps even as a future chief executive officer, and of Party and Government. Here, public embarrassment and humiliation are the gravest of all possible sins, and this story was already well on its way to causing that for some of the most powerful people in China, and even before Wang Lijun walked into that US Consulate office to share a treasure trove of previously confidential and secret information.

And at this point I freely admit I am at a loss for words – or rather that I have plenty to say but that what would follow from here splits into at least two very different possible scenarios.

• Is this simply shaping up to be a show trial of the type that China’s Party and Government have traditionally and recurringly held as a tool for maintaining business as usual? In this case, I could even cite the trials and tribulations that Xi Jinping’s father, Xi Zhongxun faced – and Xi Jinping is all but certain to attain ultimate position of individual power in China’s Party and Government later this year, replacing Hu Jintao as he steps down for reaching mandatory retirement age. Xi Zhongxun was rehabilitated back into the Party and went on to develop key areas of China’s economic infrastructure that have led to their current global strengths and in the marketplace and for their economy as a whole.
• Or alternative, is the news story crisis that is developing around Bo Xilai, Gu Kailai, their police chief enforcer Wang Lijun and an increasing range of others developing into a this-generation take on the Gang of Four trials? I note here that the direct outcome of those trials, if not their initial source of impetus was the unraveling and cutting away of a massive piece of Mao Zedong’s legacy with an opening up of China to what for that country was a radical new vision of economic reform and opportunity for individual, private sector advancement.

My guess, and I admit that this is only a guess, is that there are factions within China’s leadership that see this as opportunity for both approaches and that see grave peril if the wrong path is followed:

• One or more factions seeking to publically renounce Bo and his “gang” as proof that the system works and so everyone can simply forget about this and move on, and
• One or more factions seeking to use this unfolding story as a lever for breaking away from the past and from the inertia of outmoded practices and policies – and with a new Deng Xiaoping in the form of Xi Jinping leading the way.

I have to add that I have no idea as to whether Xi himself would seek out or even condone that approach or whether he is in fact more a supporter of the first of those visions of what might come next. If he takes the later of these two approaches, or at least favors it then:

• Hu Jintao’s decisions and actions in moving forward on this investigation might best be seen as clearing the way for him to bring more fundamental change
• By establishing its need and publically, and before Xi takes office at the helm.
• Then Xi could present and move forward on fundamental reform as simply carrying through on a pattern established by his immediate predecessors and consistent with China’s already ongoing response to challenges to national stability and security.

Six months and a year from now I might very well find myself looking back at this posting as an example of wistful thinking. Right now I just do not know, and I add that I am fairly sure that many in China’s Politburo and even in its Standing Committee are still uncertain too and both for its outgoing members and for its soon to join future members.

I am going to finish this posting by noting an obvious truth. All of this is playing out in an increasingly online and interactive context where social media and cell phones are battling China’s Golden Shield Project – their Great Firewall and open communications and the sharing of news, opinions and insight are not being stopped. The story I have touched upon here may be seen in coming years as a turning point event in China’s history, depending on how their leadership rises to this challenge or fails to, and in what lessons they learn from their people increasingly joining in on the online conversation. And this brings me to the set of issues that I was initially thinking of addressing here in Part 3 to this series, but that I will now turn to in a next installment, Part 4. And I quote from the end of Part 2:

• I would propose taking a more business-like operational and hands-on practical approach and look at China and its challenges much as if nations were businesses. What are the policies taken and what are their practical implications and consequences?
• I would argue and with much less general disagreement perhaps, that there are more universally applicable business best practices and that decisions made and actions taken can have predictable consequences and results – in a business setting and even across industries and marketplaces.
• The same applies here, and certainly where a country – here China, is developing and enforcing socioeconomic and business policies.

You can find this and related postings at Macroeconomics and Business and also see Ubiquitous Computing and Communications – everywhere all the time.

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