Why some think China is approaching a political tipping point

The old regime and the revolution

Why some think China is approaching a political tipping point

Mar 16th 2013 |From the print edition


FOR some of China’s more than 500m internet users the big news story of the week has not been the long-scheduled one that their country has a new president, Xi Jinping, who already has more important jobs running the Communist Party and chairing its military commission. Rather it was the unscheduled, unwelcome and unexplained arrival down a river into Shanghai of the putrescent carcasses of thousands of dead pigs, apparently dumped there by farmers upstream. The latest in an endless series of public-health, pollution and corruption scandals, it is hard to think of a more potent (and disgusting) symbol of the view, common among internet users, that, for all its astonishing economic advance, there is something rotten in the state of China, and that change will have to come.

Many think it will. According to Andrew Nathan, an American scholar, “the consensus is stronger than at any time since the 1989 Tiananmen crisis that the resilience of the authoritarian regime in…China is approaching its limits.” Mr Nathan, who a decade ago coined the term “authoritarian resilience” to describe the Chinese Communist Party’s ability to adapt and survive, was contributing, in the Journal of Democracy, an American academic quarterly, to a collection of essays with the titillating title: “China at the tipping point?”

Ever since the death of Mao Zedong in 1976, foreigners have been predicting the demise of one-party rule. Surely a political system designed for a centrally planned economy with virtually no private sector cannot indefinitely survive more or less intact in the vibrant, open new China. In 1989 China went to the brink of revolution. When reform came to the Soviet Union and its satellites, for a while China seemed like the next domino, waiting to topple. But the party proved far more durable—and popular—than seemed possible in 1989. And as China’s economy soared and the Western democracies floundered, authoritarianism proved more resilient than ever. With China booming, few tried to emulate the Arab spring of 2011. They were easily dealt with by the pervasive “stability-maintenance” machinery.

No single change explains why China might be nearer to a tipping point now. But the evolution of Chinese society is eroding some of the bases of party rule. Fear may be diminishing. Nearly 500m Chinese are under 25 and have no direct memory of the bloody suppression of the Tiananmen protests: the government has done its best to keep them in the dark about it. A few public dissidents still write open letters and court harassment and jail sentences. But millions join in subversive chatter online, mocking the party when not ignoring it.

“Mass incidents”—protests and demonstrations—proliferate. Farmers resent land-grabs by greedy local officials. The second generation of workers staffing the world’s workshop in eastern China are more ambitious and less docile than their parents. And the urban middle class is growing fast. Elsewhere, the emergence of this group has brought down authoritarian regimes, through people-power (in South Korea, for example) or negotiation (Taiwan). And much of China’s middle-class seems discontented, furious at the corruption and inequality the party has allowed to flourish, and fed up with poison in their food, asphyxiating filth in their air and dead pigs in their water-supply.

The internet and mobile telephony provide tools for spreading news and anger nationally. The party has to work hard to make sure that they do not also help unite all these atomised grievances into a concerted movement. It has a lot of hammers and a lot of nails. But it is still hard to pin jelly to the wall.

The other reason for expecting change is that Mr Xi and his colleagues profess to know all this and to be serious about political reform. It has been a recurrent theme at the annual session of the National People’s Congress (NPC), China’s Potemkin parliament, under way this week. What looks like a serious purge on conspicuous consumption by freeloading officials suggests the party begins to get it. The “streamlining” of government by merging ministries shows a new willingness to take on powerful vested interests. Mr Xi has urged the party to be brave in tackling reform: “like gnawing at a hard bone and wading through a dangerous shoal” (chewing gum while walking is for wimps).

Reform, however, does not mean tampering with one-party rule. Rather, as Fu Ying, spokeswoman for the NPC, put it: political reform is “the self-improvement and development of the socialist system with Chinese characteristics”. Put another way, it is about strengthening party rule, not diluting it. Mr Xi seems to agree. A New York-based website,Beijing Spring, has published extracts of a speech he made on a tour of southern China late last year. He affirmed his belief in “the realisation of Communism”.

Democracy in China

Mr Xi also spelled out the lesson his party should draw from the failure of its Soviet counterpart: “we have to strengthen the grip of the party on the military.” He is right to pinpoint the willingness or not of the army to shoot people as the crucial difference between the Chinese and Soviet experiences. It is hard to think of a sobriquet Mr Xi would find more insulting than “China’s Gorbachev”. From where he sits, the career of Mikhail Gorbachev is an object lesson in failure.

There is a vogue in Chinese intellectual circles for reading Alexis de Tocqueville’s 1856 book on the French Revolution, “The Old Regime and the Revolution”. The argument that most resonates in China is that old regimes fall to revolutions not when they resist change, but when they attempt reform yet dash the raised expectations they have evoked. If de Tocqueville was right, Mr Xi faces an impossible dilemma: to survive, the party needs to reform; but reform itself may be the biggest danger. Perhaps he will see more fundamental political change as the solution. But then pigs will no longer rot in rivers. They will fly.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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