China’s easy credit tsunami will likely take the form of new special zones, new types of financial institutions, and new types of investment products, all of which will be called “reform” and packaged as responsible monetary policy by the State media. Perhaps the new urbanisation plan will finally be promulgated, promoting the establishment of “metropolises” that bring the mega cities that already absorb the majority of China’s resources to the next stage.

Corruption as the Symptom

President Xi has identified his campaign with his flagship fight against corruption. Corruption at all levels of the Party, from the “tigers” to the “flies,” is very much on the minds of the disenfranchised and the privileged alike. In the early days of reform, some analysts cited literature on emerging economies, arguing that, in the early stages of transition of a state-dominated economy to a market one, corruption needed to be tolerated. The argument noted that corruption itself was a kind of market forerunner, and anyway, bureaucrats who were set to lose in the marketisation process needed to be bought into the program by reaping some short-term personal benefits.

Whether you accept the argument for tolerance or not, it is self-evident that, as structural change occurs, as market forces take over and bureaucrats surrender control, the potential for corruption declines. In China, corruption and the growing concern about it are not the causes of China’s current plight. They are symptoms of China’s failure to have made the structural reforms promised by the “socialist-market economy” model and the parallel reforms of the governance model.

Self-Criticism

Launched in July, the Rectification Campaign threatens to remove from position any Communist Party cadre who fails to rid him or herself of “formalism, bureaucracy, hedonism and extravagance,” and news outlets boast that more than 73,000 party members have been prosecuted for crimes of corruption. The campaign has been supplemented by a wide-ranging effort to bring public thought and comment into line with officially sanctioned ideology. High- profile arrests of people like Wang Gongquan, the founder of CDH Investments, and televised “confessions,” including by internationalized figures like Soho founder Pan Shiyi, suggest that the “campaign to cleanse the internet and media of bourgeois liberal tendencies” has real bite.

It is worth quoting at length from Xi’s ideology address August 19 to gathered cadres at Beidaihe:

“The political purpose of some people advocating ‘universal values’ is to make people think that . . . Western freedom, democracy and human rights are universal, eternal. . . saying that ‘only if China accepts Western values has it got a future’, ‘reform and opening up is in fact a process of gradually accepting universal values.’

“. . .[T]heir purpose is to obscure the difference between the Western value system and the value system we espouse and finally to substitute the core value system of socialism with Western values.” Much of Xi’s recent thought was distilled into a document called Document 9. It argues, among other things, that it is a seditious Western notion that the public has a right to know anything about the assets and activities of the Party leaders. The degree to which this and other policy statements represent a hardening of both political and economic stance, an “anti-reform” position, has been poorly appreciated by China analysts, who cling to the hope generated by Xi’s more forthright style that a more Westernised and open China is in the offing.

Coming in November

The party’s internal political dialogue has always had a hermetic vocabulary whose resonance in social and economic policy is not obvious. Xi is called China’s “president” only in English; in Chinese, he is called “chairman of the country,” a sort of euphemism for General Secretary of the Party, and the term “president” is viewed as incorrect, because his principal role is Party governance. The “premier,” Li Keqiang, would seem to have the governance portfolio, which in many ways seems to operate independently of the party’s campaigns. A closer look, however, indicates how much in sync the two really are.

Many Chinese academics have been publishing analyses of “Likenomics,” the economic views of Premier Li and the program he is undertaking. These views tend to emphasise more populist values of reducing income inequality and providing more social benefits across society, increasing consumption and calibrating investment. This economic language, however, is as much encoded as the political language of Xi. “Consumption” in the Chinese code means giving a few more consumer goods to the common people: cars, electronics. The method of stimulating consumption is simply to distribute goods at subsidised prices or sometimes for free. Methods of promoting income equality are strictly Old School: they include investing in “indigenous innovation,” pushing out state investment in housing as somehow more appropriate to China’s real needs than is commercial housing investment, and funding state investment in hospital and educational facilities and equipment but not liberalising the content or delivery methods of education or medical care.

This view of consumption involves a paternalistic notion that the Party must ramp up fixed asset investment for the benefit of, and on behalf of, Chinese citizens. The Party knows better how to spend the nation’s growing wealth than the households, who get a world- lagging distribution of GDP of around 35%. But to pursue the Party’s model is expensive, because it is inherently inefficient and corruptible. So how is it affordable?

What is important to recall is how well the Li policies, favouring populist capital investment, and the Xi ideology of stifling opposition to the CPC are actually in harmony. The rhetoric of Li Keqiang in some ways resonates more with liberals, who retain some sympathy for at least a few of the socially progressive values of old-line Communists and therefore take a long view of CPC political repression as possibly required for the continuing benefit of the poor. Li is seen sometimes as a potential “Chinese Gorbachev,” someone who can effectively work from within the system to upend it.

This represents a misunderstanding of what the Chinese Communist system actually represents and why the reforms of 1979 fit well within its theoretical framework. East Asian communism throughout the 20th century has differed from its Marxist-Leninist cousin in its more nationalistic emphasis. Chinese Communist aspirational ideology focuses less on lifting the masses from poverty than on creating a shortcut to modernity and providing an easy exit from the shameful backwardness and dependency that had kept China under the Qing and then the Nationalists enslaved to an alien dynasty in the former case and to foreign nations in the latter. That was a long period when China was mired in an “earlier stage of historical development.” Communism, in other words, was a recipe for shaking off the yoke of foreign nations and becoming urban and industrialised. That was the theme of Mao’s ambitious and unsentimental reconstruction of Beijing throughout the 1950s, replacing magnificent imperial gates with coal-fired power plants, steel factories, and auto plants right in or near the city centres. The Deng revolution of 1989 fit right in, with the intention of restarting the industrial march forward after the fractious and destructive political and cultural campaigns of the previous decades.

The Blooded Elite

In June, a remarkable article in PLA Daily, highlighted by Willy Wo-Lap Lam in The China Brief on July 12, called on army members to nurture “red genes.” The Xi regime has also promoted children of top leaders to political positions that would formerly have been discouraged. Xi himself, of course, comes from the red nobility, being the son of Xi Zhongxun, who established the Shenzhen Special Economic Zone. The emphasis on red blood under Xi may evince an internal power struggle, but it also suggests what is important in modern China: the survival of the current ruling class. The shift of power between leading factions in the CCP that occurred over the last three years is a clear ascent of those born into the manor over those who climbed from poverty into positions of Party power.

Indeed, in the last few weeks, a strange pall seems to have fallen over the academic class in Beijing. In meetings on the new Shanghai zone or upcoming economic policy, academics I know to be thoughtful and public-spirited have defaulted to glib and simplistic responses to complex problems, apparently shutting down the debates that would have ensued a year earlier. This is reminiscent of the early days of Hu Jintao’s ascendance, when highly placed officials talked about how they had to say nothing and maintain a low profile for fear of being targeted.

Liberal measures to promote economic development have always been viewed as intermediate steps toward the more egalitarian and urbanised society that communism is building for China and as such are instrumental, not integral parts of governance. In theory, the temporary utilisation of capitalist means, such as freer markets, would subside, as their relevance and utility for the future prosperity of the Chinese people declined. We have indeed reached the point of change, but for different reasons. For the last few years, as evinced in the official slogan of 2008, “the state enters, the private sector withdraws,” the embrace of these liberal measures has waned, as their success increasingly impinged on the prerogatives of the red ruling class.

Debt of a More Personal Nature

The Dengist reforms that started in 1979 have been described, with little exaggeration, as a “management buyout.” Deng Xiaoping exhorted the red elite to distinguish themselves in commerce rather than in government, and he blessed the sometimes-covert transition of bureaucrats and military into business. The nomenklatura of the time had much to gain from the shift to market-driven reforms.

In 2013, the situation has changed. The top leaders in China have reached a level of wealth that surpasses any of the most notorious African and East Asian dictators of past legend. Richard McGregor’s excellent book, The Party, chronicles the pressure on party officials in today’s system to participate in corruption in order to advance and to repay the debts incurred while securing one’s position in the first place. The Party system operates as a massive network organized around patronage. The cost of maintenance of that patronage has risen dramatically, and continues to rise with the growth of the economy and the availability of extractable wealth. Bureaucratic corruption has reached beyond opportunism and has become an imperative for a successful Party career.