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Monday, Nov. 5, 2012

Elite wrinkles in China's changing of the guard


LONDON — By the end of Tuesday, we will know who will be the president of the United States for the next four years. We already know who will be the leader of China for the next 10 years, although Xi Jinping will not be officially installed in power until a few days later. Some would argue that that is the more important event.

The U.S., after all, is a rich country with a stable and democratic political system. American politics has suffered a severe case of gridlock in recent years, but nobody believes that it should be solved by radical changes in the U.S. Constitution. Any changes that result from the outcome of Tuesday's election will be marginal, because that's the way that most Americans want it.

China, by contrast, has had 30 years of high-speed economic growth that has created huge inequality. There are a million Chinese millionaires, most of them closely linked to the ruling party, while most people get by on around $250 a month. Yet there has been no perceptible change in the Chinese political system in all these years, and the new guy's family is stinking rich.

Bloomberg revealed last June that Xi Jinping's elder sister, his brother-in-law and their daughter had property and investments worth at least $300 million. There is no evidence that Xi himself, who gets a ministerial salary of about $1,000 a month, is directly involved in these enterprises, but his family's rise to great wealth is typical of what has been happening in the senior cadres of the Chinese Communist Party.

Indeed, the outgoing prime minister, Wen Jiabao, has an even bigger family problem. Wikipedia published a U.S. diplomatic cable dated 2007 that quoted a business executive in Shanghai who said: "Wen is disgusted with his family's activities, but is either unable or unwilling to curtail them." A New York Times investigation published this month estimated the Wen family's wealth at $2.7 billion.

Both of these men's wealth problems were dwarfed by those of the now-disgraced Bo Xilai, until recently the Communist Party chief in the city of Chongqing. The family's wealth was only in the low hundreds of millions, but when Bo's wife Gu Kailai fell out with a British businessman who helped them to transfer money abroad, she had him killed.

Even among the Chinese elite, this is seen as excessive, and Gu is on trial for murder. Bo has been stripped of his offices and expelled from the Party. But everybody knows that the families of senior officials mysteriously often end up very rich.

Not all of the 2,987 members of the National People's Congress, China's rubber-stamp legislature, are rich — but the richest 70 of them, according to the Hurun Report, a magazine best known for its "China Rich List", have a combined net worth of $85 billion.

Virtually nobody believes in the old Communist ideology any more: "Socialism with Chinese characteristics" is only another way of saying "capitalism plus authoritarianism." The Party's power survives because it has been able to deliver steadily rising living standards for most people, and because it has been fairly successful in persuading them that the only alternative to its rule is chaos.

This is not a stable situation. No capitalist economy can avoid an occasional recession, but that kind of cyclical decline in jobs and incomes is dangerous for a system whose credibility depends on providing continuous growth. The Chinese regime has been very good at postponing the inevitable — it escaped the 2008 recession by massive public spending — but at some point in the relatively near future, there will be a major recession in China.

The resemblance between the current Chinese economic bubble and the great Japanese bubble of the 1980s is close enough to suggest that the hangover may be just as great in China when the bubble finally bursts. Two decades later Japan is still unable to get its economy growing again, but its political system has survived because it is democratic, and because the level of corruption is relatively low.

The Chinese regime's lack of democratic legitimacy and its manifest corruption make it very vulnerable in such a situation. The economic misery would be compounded by massive civil unrest, and it might even end Communist rule.

Most of the senior people in the Party will be well aware of this, but they seem incapable of doing anything about it. Part of the problem is that they remember all too clearly what happened to the old Soviet Communist Party when it started trying to reform itself under Mikhail Gorbachev. It disintegrated instead.

An even bigger obstacle to change is the degree to which the economic interests of the elite are linked to the present, deeply corrupt system. If apparently honest men like Wen Jiabao and Xi Jinping are unable to control the reckless greed of their own relatives, what hope is there that the Party can change its behavior in time to avert disaster?

The coronation of Xi Jinping probably won't make any difference at all. You might as well watch the American election. At least there is some uncertainty about the outcome.

Gwynne Dyer is an independent journalist whose articles are published in 45 countries.


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