Saturday, April 11, 2009

Will it be hot economics and cold politics domestically in China too?

April 9th, 2009  -  Author: Ryan Manuel

A recent article by Sun Liping has attracted considerable attention on the blogosphere (thanks to China Digital Times for the link, and initial translation. I have retranslated the text).

CDT highlighted the piece as interesting because of Sun Liping’s links with current rising star Xi Jinping: as an aside, I am somewhat sceptical about this, given that Dr. Sun is a sociology professor and Xi an engineer.

But it is the content of Sun’s article that makes it explosive. In particular, he argues that:

It is difficult to achieve the double goals of maximizing vested interests and keeping the society operating steadily…we will pay a high price in the long-term for safeguarding vested interests.

This part of his argument is a common one, and is interlinked with Sun’s broader point on the lack of social cohesion and ’society’ within China.

But it is his conclusion that is fascinating:

The fundamental cause of social decay is the form of the interaction between powerful individuals and capitalism. In the past, many believed there was a sharply defined contrast between the market and power - yet in modern day China, these two things are now seen as being fused together, like two people fundamentally unsuitable for each other not only marrying but flourishing together.

In the past, it was believed that power was limited when market conditions were present, yet today it is the emergence of the market that provides an arena to exercise even greater power. The greater the marketisation, the higher the price vested interests can seek. Today, at the very centre of the market is power, and vice versa.

Sun’s argument is that the very thing that is meant to encourage greater autonomy and free choice - the market - has become synonymous in Chinese eyes with the ‘powers that be’ and, specifically, local vested interests.

It is important here to note that Sun is not using this to argue for a return to collectivist governance, nor that he is pushing an anti-reform agenda. Quite the opposite. His article outlines clearly his belief in universal rights and political reform.

Rather, he is pointing out a falsehood often spouted in discussions of contemporary Chinese politics: the idea of a dichotomy between ‘local vested interests’ and ‘forces of reform’. This idea generally puts forth that the market (a globalised force, and one embraced by ‘reformers’) is fighting against ‘local vested interests’. Sun argues that this concept is incorrect. The local vested interests are the very forces that have co-opted market principles.

There are two points to take away from this. The first is that loosely floated models of western-oriented, liberal reformers versus insular vested interests may not match the reality in China. If marketisation is seen as aiding vested interests, then we have a conundrum whereby politically liberal reformers (such as Xi Jinping) may find economically more ‘open’ policies counter-productive.

The second is that a downturn in growth may have different repercussions to those imagined. At the moment there is a school of thought arguing that, should the economy tank, the (central) Government will suffer a loss of legitimacy.

Accepting Sun’s argument means this is not necessarily the case. Should there be a downturn in growth, expect much of the blame to be placed on local government officials and not the centre. As with labour market disputes today, the centre will argue that it is holding China together, but that, as the mountains are high and far away, any blame for inefficiency can be put on local cadres.

There is, of course, an international stake in this. A Chinese state open to trade and ‘western influence’ is generally considered a Chinese state likely to also adopt more liberal political values. This may not be true.

Moreover, if, in an economic downturn, the centre is forced to place the blame on local interests, we may see a turn away from free market principles. This, particularly given the need to bring China into the tent as much as possible, would be harmful to the global community.