Xi Jin­ping’s pure party

Financial Mirror (Cyprus) - - FRONT PAGE - By George Mag­nus

China’s an­nual growth rate has re­cently in­creased from be­low 6% at the start of 2014 to around 7.5% in the sec­ond quar­ter, helped by a se­ries of stealth stim­u­lus mea­sures. But the growth spurt is un­likely to last – and may re­verse – as China seeks to con­trol ex­ces­sive credit ex­pan­sion. And achiev­ing longer-term sus­tain­able growth will also de­pend on po­lit­i­cal fac­tors – par­tic­u­larly the im­pact of Pres­i­dent Xi Jin­ping’s anti-cor­rup­tion cam­paign, aimed at “pu­ri­fy­ing” the Chi­nese Com­mu­nist Party (CCP).

Xi’s cam­paign is be­ing car­ried out on a scale rarely wit­nessed in China’s re­cent his­tory. So far, some 45 se­nior CCP of­fi­cials, or “tigers,” have been dis­ci­plined or are un­der in­ves­ti­ga­tion. Aside from for­mer Chongqing Party boss Bo Xi­lai, who is now serv­ing a life sen­tence, Zhou Yongkang, a for­mer head of in­ter­nal se­cu­rity and mem­ber of the Polit­buro Stand­ing Com­mit­tee, and Gen­eral Xu Cai­hou, a for­mer vice pres­i­dent of China’s Mil­i­tary Com­mis­sion, have also been tar­geted.

More high-pro­file heads almost cer­tainly will roll. The CCP’s Cen­tral Com­mis­sion for Dis­ci­pline In­spec­tion, whose sec­re­tary, Wang Qis­han, is a Xi ally, is now in­ves­ti­gat­ing for­mer Pres­i­dent Jiang Zemin’s Shang­hai net­work, whose pro­tégés in­clude Bo, Zhou, Xu, his suc­ces­sor Hu Jin­tao, and Xi him­self. Cor­rup­tion charges have al­ready been brought against peo­ple close to Jiang and Hu.

Xi’s cam­paign is aimed at com­bat­ing sys­tem­atic cor­rup­tion, which he claims is jeop­ar­dis­ing the CCP’s very sur­vival. Even be­fore be­com­ing Pres­i­dent, he spoke at length about the Marx­ist-Lenin­ist con­cept of “Party pu­rity” in an ad­dress to the Cen­tral Party School in Beijing in March 2012. The Party, he in­sisted, can com­mand re­spect and main­tain the le­git­i­macy of its rule only if cadres are obe­di­ent, set an ex­am­ple of in­cor­rupt­ibil­ity, and place the na­tion’s in­ter­ests above their own. With­out a “pure” Party, he said, China’s eco­nomic re­forms would not suc­ceed.

Two weeks later, Bo was re­moved from of­fice, mark­ing the start of Xi’s an­ticor­rup­tion cam­paign. After be­com­ing CCP leader later that year, Xi told a Party meet­ing in Guang­dong that China must heed the lessons of the Soviet Union’s col­lapse, par­tic­u­larly its fail­ure to main­tain Lenin­ist dis­ci­pline, which had al­lowed “po­lit­i­cal rot, ide­o­log­i­cal heresy, and mil­i­tary dis­loy­alty to un­der­mine the gov­ern­ing party.”

The anti-cor­rup­tion cam­paign re­flects the CCP’s ap­par­ent de­ter­mi­na­tion to rid it­self of vested in­ter­ests. At its 2013 Third Plenum, the CCP an­nounced 60 goals for eco­nomic and gov­er­nance re­forms. Many hope that th­ese changes will help the CCP be­come more ef­fec­tive, strengthen the role of the mar­ket, and avoid the so-called mid­dlein­come trap that has en­snared many emerg­ing coun­tries.

How­ever, the Party’s rhetoric re­veals lit­tle about how th­ese goals will be achieved. In­deed, there are wor­ry­ing signs that the prin­ci­pal ar­chi­tect of the re­form agenda, the re­spected free-mar­ket economist Li Ke­qiang, is al­ready be­ing side­lined. Xi has blocked or re­vised many of Li’s ini­tia­tives con­cern­ing debt man­age­ment, ur­ban­i­sa­tion, the Shang­hai Free-Trade Zone, and re­form of lo­cal gov­ern­ment.

The prob­lem fac­ing the gov­ern­ment is how to main­tain strong eco­nomic growth while pur­su­ing Xi’s anti-cor­rup­tion cam­paign. Wean­ing the econ­omy off state­dom­i­nated in­sti­tu­tions, shift­ing the econ­omy away from credit-fu­eled in­vest­ment growth, and fo­cus­ing more on ser­vices, in­no­va­tion, ed­u­ca­tion, and en­trepreneur­ship will take time – and will up­set many key peo­ple in the process. Given the dif­fi­culty of boost­ing eco­nomic ac­tiv­ity while con­fronting po­lit­i­cal ob­sta­cles, a more re­al­is­tic medium-term fore­cast for an­nual GDP growth is prob­a­bly around 4%. But the longer the Party shies away from tak­ing the tougher, re­formist road, the greater the risk of an even sharper down­turn.

Though Xi’s ef­forts to clean up the CCP are a wel­come de­vel­op­ment, the Party it­self is part of the prob­lem. Sub­sti­tut­ing one elite for another will do lit­tle to elim­i­nate sys­temic cor­rup­tion. The true test of change will be whether the CCP is pre­pared to sub­or­di­nate it­self to new, in­clu­sive in­sti­tu­tional ar­range­ments that are con­ducive to eco­nomic trans­for­ma­tion.

When the CCP’s Fourth Plenum meets in Oc­to­ber to dis­cuss le­gal re­forms, it will likely fo­cus on how to im­prove the ef­fi­ciency of the courts and weaken the power of ob­struc­tion­ist lo­cal party of­fi­cials. It will not, how­ever, seek to es­tab­lish a prop­erly func­tion­ing rule of law. No Party of­fi­cial se­ri­ously ques­tions the CCP’s au­thor­ity over the le­gal sys­tem. In­deed, last year, univer­sity lec­tur­ers were in­structed to avoid class­room dis­cus­sion of univer­sal val­ues, press free­dom, civil rights, the CCP’s er­rors, crony elites, and in­de­pen­dence.

Xi’s re­mark­able anti-cor­rup­tion cam­paign may en­hance the Party’s le­git­i­macy, es­pe­cially in the eyes of China’s ris­ing mid­dle class. The cam­paign may even im­prove some as­pects of eco­nomic and en­vi­ron­men­tal pol­icy. But so long as fun­da­men­tal weak­nesses and con­tra­dic­tions stem­ming from the CCP’s mo­nop­oly on power re­main un­chal­lenged, China’s econ­omy will not be able to achieve the long-term growth that its lead­ers and cit­i­zens de­sire. his­tor­i­cal


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