Platt Perspective on Business and Technology

China and its transition imperatives 35: rethinking China’s emerging trends in challenges faced and responses made, and in how each reinforces the other 4

Posted in macroeconomics by Timothy Platt on August 4, 2016

I wrote Part 34 of this series, with a combined economic and technological focus that stemmed from a set of recent news story puzzle pieces that I discussed there. And the core area of concern that I considered in all of that was the question of China’s long-term stability and its potential for regaining it, if it simply continues to follow its current status quo approach to one Party rule and governance and without any real structural change in how it actually carries that out. I wrote in Part 34 of how China and its government and Party and their overall economy are in effect approaching the edge of a cliff that they need to find a way to step back from. And I offered that as a continuation of a long-ongoing succession of postings and series in which I have developed a factual basis for these concerns.

• My overall assessment there was, and still is fairly bleak and certainly given China’s recent overt economic failures and their underlying causes,
• And both within China as it seeks to maintain societally stability,
• And as that country seeks to gain wider and more favorable global recognition
• And as it seeks to follow its same, business-as-usual course forward, and with even less tolerance than it has shown, for any views or perspectives that might be seen as constituting dissent or challenge.

Then at the end of that installment, I said that I would follow it here with the following:

• I am going to continue this discussion in a next series installment where I will discuss what this means. And I will at least begin to discuss how China’s leadership could use recent economic failures and their drive to achieve global economic systems recognition, as tools for affecting meaningful change and reform – and to perhaps help them to find a path forward that leads them away from that cliff edge and the precipice beyond, that their current policy and practice are bringing them towards.
• I will also discuss at least one likely consequence that China will face if it does not change course. And in that regard, I note here in advance that I will raise the specter of Tibetan and Uighur independence and the break-up of China as it is now. I will raise the specter of economic distress and public perception of inequality as leading to unrest, and increased efforts for have-not regions in China to break away, or to at least overtly struggle for independence. And I fully expect to add in new puzzle pieces in my next series installment too.

I will, in fact address these issues in this series and I will at least begin to do so here. But recent events, overtly emergent since I wrote Part 34, suggest that I should address a set of crucial balance of power issues first, where the one allowed political party in China: their Communist Party, controls all – but where it is not always immediately obvious as to who or what controls the Party. The friction – the functional inertia that this creates as a response to any possible calls for corrective change, is crucial to both understanding where China is now and where it is headed. And I begin that by citing four fundamental power bases in China and its Communist Party and system that each sees itself as the true holder of the flame of Party purity, and the one true wielder of overall power – even as they each have to bend to the wills of the other three in order to survive:

1. The official Communist Party of China national leadership as formally backed by their national Party Politburo and its supreme Standing Committee, and with that national level structure backed by local and provincial Party apparatus and with all of this led by the person of Xi Jinping.
2. The collectively powerful voices and forces of China’s Princelings: the hereditary members of its so called Crown Prince Party. Think of them as constituting China’s counterpart to what in the West, and in countries such as the United States, are called the “top 1%” and even the top 1% of that. But in China, their top 1%: their Princelings claim their status from familial connections to Mao Zedong’s most ardent, leading followers and supporters from when he first took power. They claim their power from their connections to Mao’s early days inner circle.
3. China’s local and provincial bureaucracy: a vast if largely seemingly-amorphous array of local power holders who both support and sustain their Communist Party at the grass roots and regional levels but who also use the power and authority that they wield in this for their own personal gain. Like the individually better known members of the Crown Prince Party, the members of this power group are averse to and resistant to any real change that might in any way challenge their personal prerogatives or their personal power bases.
4. And the People’s Liberation Army (PLA) with its overall troop strength, as of this writing estimated to be approximately 2.3 million strong (or just under 0.2% of China’s overall population.) But more than that, the PLA is also the single largest industrial and manufacturing power in China, with many more millions working on their payroll as civilian employees who have reason to hold allegiance to their employer and master. And as I have argued in recent postings to this series, it is likely that the PLA also has its own foreign currency reserves, under its own direct control that at least rival those officially and more openly held by China’s government as a whole – making them one of the leading powers in China’s economy as a whole and on many levels. (Note: to put the size of the PLA and its immediate supportive civilian community in perspective, the entire card carrying membership of the Communist Party of China only comprises some 6.1% of their overall population, as of this writing. And that includes all military members and PLA civilian employee members.)

Note that I did not include the formally placed, official government of China in this list; the Communist Party of China all but entirely officially owns their government, and Party holds all power in and over government there. Absent Party, government is a hollow shell of a power center in China: an empty hand puppet.

Each of the four power centers that I did list here, sees itself as the one true center of Communism in China and the one true determinant of what Communism functionally means there. I particularly note China’s local and provincial bureaucracy for how this plays out for that power group, in this context. Its members might acknowledge overall “big picture” dominance and control over the Party as a whole as coming from the center and overall Party leadership – but they still claim for themselves all real, overall control of what the Party actually does, day-to-day in dealing with and controlling individual citizens and their lives, their families and their local communities. So they claim real hands-on control and authority for themselves, even as they nod submissively to the power centers of Beijing and to Xi Jinping as a person.

5. And all four of these groups claim the historically grounded pedigrees and links to China’s founding as a communist country, and to Mao Zedong to justify their assumed roles in all of this.

I write of economic and business system friction in this blog, and in a variety of contexts. Here I write of what collectively can amount to an all but paralyzing inertia, where competing power groups can and do block changes that might in some way challenge them individually in this balance of power, as each seeks to preserve and even expand its particular voice and influence.

And with this, I explicitly turn to consider group number four from the above list: the PLA and its enormous holdings and resources. And I make note here of a few new puzzle pieces that I would add in this posting, to what I have been assembling in recent installments in this series.

I have explicitly been attempting to assemble a puzzle-formatted picture of China as it is now, in transition out of recent and emerging news story pieces, and for several months now in this blog, and certainly since its Part 31. I continue that here, with recent emerging consequences to how the PLA and particularly its PLA Navy have been flexing their muscles in the South China Sea and the East China Sea.

• I have been discussing for over a year now, how China has laid claim to most all of the waters and resources of both the South and East China Seas, and even when that puts them in direct territorial dispute and overt conflict with essentially all of their neighbors in that large region. And I have written of how they have obliterated coral reefs and atolls, building artificial islands on them with military air strips and naval base facilities and related resources for projecting their power and enforcing their claims. See earlier installments to this series for background references to that, and looking at this from the perspective of one of their so-affected neighbors, see my series: Vietnam, Đổi Mới and the Search for Business and Economic Strength and Global Relevance (at my directory: United Nations Global Alliance for ICT and Development (UN-GAID), postings 34 and following for its Parts 1-10.)
• This and similar action on China’s part, as carried out and protected by their PLA, does forcefully demonstrate China’s strength in this region but it does so at a cost of bringing essentially all of their neighboring countries of this region, closer into alliance with the United States and the West. The communist government of Viet Nam, as a case in point example has even begun to openly float a proposal that United States naval forces would be welcome in their waters, and that they might be supportive of the US establishing a naval base in one of their key deep water bays as part of an expanded alliance – and in direct response to China’s challenge.
• This action on the PLA’s part allows them to flex their muscles and assert their authority in support of Party and government in China. But it does this at the direct cost of confounding Beijing’s central government-led efforts to become an accepted and trusted leader in its region, among that same group of nations that it seeks to build economic and trade alliances with, and even as it threatens them territorially. And this brings me to a crucially important recent puzzle piece that I would add to China’s emerging current picture that I have expected to see happen eventually – but that I did not know the timing for:
• The government of the Philippines brought suit in the Hague against the People’s Republic of China over its territorial claims in international waters and in offshore waters that they have historically claimed as their own. And that international panel “delivered a sweeping rebuke of China’s behavior, deciding that its expansive claim to sovereignty over those waters had no legal basis”: Tribunal Rejects Beijing’s Claims in South China Sea.
• China has rejected this finding and refuses to acknowledge its legitimacy, and it is not legally binding insofar as the tribunal that issued it cannot impose binding legal sanctions in and of itself. But the fact of this happening, and the essential certainty that other nations of the region will follow suit with their own claims against China there, will have real impact – and both in those neighboring countries, and for other nations globally as they consider trade agreement and other cooperative associations with China.
• And this, of course, all comes at a time when China’s economy is strained and in ways that absolutely demand improved international relations and improved trade, if China is to recover.

I am writing here of how China is monolithically unified under one political Party and the centrally controlling and dominating government that it owns – on the surface. But I am also writing of the underlying fissures and fractures in that seeming uniform consistency of strength and purpose that underlies that surface – and how the differences that arise there, stymie any smooth, effective resolution to their systemic, structural problems. And this brings me to the two bullet points that I noted at the top of this posting where I repeated what I initially expected to address here. I will address them in my next installment to this series, and at least in part in terms of the issues and challenges that I have been discussing here.

I finish this posting, set to go live on August 4, 2016, on July 30. And I do so by adding two final notes. One of them is a point that I am sure would be fairly obvious and to anyone who follows China and its rapidly evolving story: none of the four power centers that I explicitly identified and wrote of here are actually monolithically stable or consistent either – and that, among other reasons is why Xi Jinping still holds show trials to help clear away potential dissent from supporters of his predecessor in supreme power, Hu Jintao, among others. And the second of these final notes picks up on a point that I made in passing towards the top of this posting where I noted that China now shows “even less tolerance than it has shown, for any views or perspectives that might be seen as constituting dissent or challenge.”

• “Several internet portals were ordered to halt much of their original news reporting, a move that could confine a larger share of China’s journalism to Communist-controlled mouthpieces.” See China Clamps Down on Online News Reporting.

I will continue this discussion in a next series installment, and probably in about a month, as noted above. Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too.

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