The compelling dramaS of former Chongqing Chinese Communist Party (CCP) boss Bo Xilai’s (薄熙來) ouster amid allegations of corruption and murder and of blind Chinese human rights advocate Chen Guangcheng’s (陳光誠) dash to safety in the US embassy in Beijing are more than just fascinating narratives of venality and courage. Unless China can purge the thousands of corrupt CCP leaders like Bo, and empower people — like those Chen represents — who have been left behind or harmed by its rapid growth, its economy will increasingly suffer.
Like the Asian Tiger economies before it, China has excelled in the first phase of capitalist economic growth, benefiting from massive infusions of capital, low-cost labor, intellectual-property theft and centralized planning. However, like many of them, China is now facing a “middle-income trap”: As wages rise, its low-end manufacturing is losing its global competitiveness, while government policies, endemic corruption and dominant state-owned enterprises are stifling the type of private-sector innovation that China needs most to generate products and services with higher added value.
China’s leaders understand this, which is why the government’s 12th Five-Year Plan calls for a gradual opening up of the Chinese economy.
A Chinese government think tank which worked with the World Bank to produce the China 2030 report outlines the structural reforms needed to strengthen the foundations of the country’s market-based economy and create a climate of open innovation.
However, if China’s national imperative today is reform, the greatest threat to that goal is the massive influence and institutionalized corruption of the country’s entrenched elites. For years, senior officials and their families have received a cut of countless major investments throughout China. They and their families have become multimillionaires by exploiting the close association of business and politics, as well their strong links with the country’s state-owned enterprises.
The resulting rise in inequality has been exacerbated by China’s capital controls and mandated low interest rates on savings. For lack of other options, poor people put their money in banks, which then lend to more privileged people to fund state-owned enterprises or much higher-yielding real-estate investments.
This system worked to drive overall economic growth and provided financial rewards in the first phase of China’s post-reform growth, but the incomes of ordinary Chinese have stagnated over the past decade. Their interests have been neglected, capital has been misallocated and major negative environmental and social side effects have emerged. Now those who have benefited most from the current system are blocking badly needed reforms.
For example, years of imbalanced incentives have led China to overbuild premium residential real estate which should cause prices to fall dramatically. However, although the government is trying to suck some of the air out of the market, the authorities cannot easily take the more aggressive action that is required because Chinese officials and other elites store so much of their wealth in real estate which also comprises much of the collateral of state-connected banks. Similarly, although state-owned enterprises are pulling too much oxygen out of China’s economy, reforming them would require taking on the country’s most powerful business and government leaders.
This is why the Chinese government’s dance around the Bo scandal has been so complicated. Bo might have lost an internal political struggle, and might have crossed a key line after the murder of British businessman Neil Heywood, for which Bo’s wife is under arrest, but vilifying him is a double-edged sword for the government. On one hand, the authorities need to pursue him aggressively to justify the purge of someone who was so recently lauded. On the other hand, many of the accusations against Bo could be levelled at an extremely large number of senior officials who, like Bo, have amassed multimillion-dollar family fortunes.
In highlighting Bo’s misdeeds, the CCP is trying to demonstrate that it alone can and should be responsible for addressing official corruption. However, given that the people who have benefited so much from the system are unlikely to clean it up, the only other way to generate reform would be to empower the people getting the short end of the stick — people like Chen and those he has helped.
The crackdown on Chen for representing villagers who have been abused by the authorities follows the same pattern as the silencing of parents who protested shoddy school construction following the 2008 earthquake in Sichuan Province and of opponents of the environmentally damaging Three Gorges Dam. If China is serious about reform, it will need armies of people like these, fighting for their rights, to balance the overwhelming political power of its entrenched elites.
China’s reform process can succeed only if it is pushed from the top and the bottom. The CCP needs to find every possible way to get rid of the Bos in its midst. Instead of threatening people like Chen, the CCP should give them recognition and support. None of this will be easy, but the future of China’s economy depends on it.
Jamie Metzl served on the National Security Council in the administration of former US president Bill Clinton, is co-chairman of the Partnership for a Secure America and a former executive vice president of the Asia Society.
Copyright: Project Syndicate
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
The military is conducting its annual Han Kuang exercises in phases. The minister of national defense recently said that this year’s scenarios would simulate defending the nation against possible actions the Chinese People’s Liberation Army (PLA) might take in an invasion of Taiwan, making the threat of a speculated Chinese invasion in 2027 a heated agenda item again. That year, also referred to as the “Davidson window,” is named after then-US Indo-Pacific Command Admiral Philip Davidson, who in 2021 warned that Chinese President Xi Jinping (習近平) had instructed the PLA to be ready to invade Taiwan by 2027. Xi in 2017
RSS