Platt Perspective on Business and Technology

China and its transition imperatives 5: considering challenges faced 4

Posted in macroeconomics by Timothy Platt on March 19, 2014

This is my fifth installment to a new series on China and its recent Party and government leadership transition, looking back over the past year since that formally and officially took place and to now and China’s current situation, and forward (see Macroeconomics and Business, postings 154 and loosely following for Parts 1-4.)

I began this discussion with a brief balance sheet discussion of China’s monetary reserves: its cash liquidity, there focusing primarily on its foreign currency holdings, and its governmental debt as accrued at local and provincial levels. In China’s centrally controlled one party system, ultimately both these accounting positives and these accounting negatives are all national-government owned. I then proceeded to discuss what the many trillions of renmimbi worth of debt expenditures in this, have been spent on.

Ultimately, and particularly for a centrally controlled system as is in place in China, this is all about Who: the question of who makes what decisions, and with what supporting power bases and with what approval and authority. I briefly touched upon the faulty government-led building construction boom that took place in Sichuan, leading up to the disaster of its building collapses from their May 12, 2008 earthquake. This earthquake only forced direct public attention on one small part of a much wider phenomenon in which much of China’s new infrastructure has been built without regard to quality or long-term viability – or even to basic public safety. I began this series on a strictly monetary note, and in terms of overall monetary policy, not as formally stated and claimed but as day-to-day practiced. But ultimately this is all about the question of Who. And I add that Xi Jinping’s success in what he seeks to do as China’s new leader and his long-term legacy from that both depend entirely on this vast network of the politically connected and at least locally powerful Who, too.

And ultimately, this does and will all depend upon Mao Zedong’s: the Great Helmsman’s ongoing dead hand’s grip on the tiller of China’s ship of state. Mao set up this system of tightly controlled one Party-only central control and authority with the Communist Party of China ultimately owning and controlling everything and with Mao himself in effect owning and controlling the Party. Mao overthrew the emperors and their dynasties. Then he became China’s new emperor in his own right. And he set a course that China still follows as legions of Party officials at all levels in their Party hierarchy and from across all of China see it as in their personal interest to maintain this system.

Mao himself at least briefly and tentatively experimented with openness and diversity, if only within his one Party system, and to cite his best known foray in that direction I cite his Hundred Flowers Campaign: a disastrous episode in 1956 in which China’s citizens where openly encouraged to express their opinions of the Party and its practices, and to propose new approaches and ways that might be pursued. The Party and governmental response to the resulting outflowing of ideas and opinions from this was swift and brutal, as those who did speak out were crushed for doing so. And Mao is also known, of course for the excesses and brutalities of his subsequent Great Leap Forward of 1958 to 1961 and his Cultural Revolution of 1966 through 1969.

Many simply see the Hundred Flowers Campaign as having been a cynical exercise intended to help the state identify and root out dissenters so they could be more easily and effectively dealt with. My thinking on this is that Mao and his senior Party leadership subordinates genuinely began this program thinking that any thoughts, any opinions, and any experiential evidence brought forth in their support, would be fully supportive of Mao’s voice and vision and of his Party. And their response to the outpouring of voices that did develop, was one of anger at what Mao saw as personal betrayal.

• Mao lived and died and when he died his system lived on, with his deified memory serving as patina and glue for all that has followed.

It can be readily and I add reasonably argued that much of the positive change that has taken place in China has come from more successful efforts to at least chip away at the edges of Mao’s legacy. The first voice of real power and authority to do so, who is revered for his successes at modernization, was Deng Xiaoping. And much of what he was able to do in facing and attempting to change away from Mao’s legacy was at most cosmetic. No one has ever seriously challenged the one party absolute rule of China’s Communist Party in China, except to face massive retribution and from the founding of the People’s Republic of China on to today.

I have written this as background to a discussion of the Who challenge that Xi Jinping faces as Mao’s successor as leader of the Party in China and of their overall national government and military. I will continue this discussion in a next series installment where I will delve into some of the news events and news stories of the past year and more as Xi has begun charting his course forward. And I will also discuss the basic nature of the challenges that he faces here. Meanwhile, you can find this and related postings at Macroeconomics and Business.

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