Deng Xiaoping’s Lessons for Today’s China

Deng Xiaoping’s Lessons for Today’s China

What would Deng Xiaoping make of Charles Xue?

It’s a surprisingly edifying question. In the past few weeks, Chinese authorities have been eager to show their allegiance to the rule of law. They have gone after Western pharmaceutical companies for bribery, milk-powder suppliers for price-fixing and a well-known British investigator for illegally obtaining information about Chinese citizens. The most riveting spectacle — the often salacious testimony in the trial of Bo Xilai, a former Politburo member — had hardly ended when reports emerged that the next target might be Bo’s mentor, Zhou Yongkang, who would be the highest-ranking party member brought down for corruption since the Cultural Revolution.That this flurry of activity doesn’t reflect merely the workings of blind justice became clear when police rounded up the 60-year-old Xue, a U.S. citizen and one of the most influential online commentators in China. He was charged with “group licentiousness” for allegedly taking part in festivities with multiple prostitutes, like some Chinese Dominique Strauss-Kahn. The arrest came just days after authorities had warned China’s top bloggers to watch their step.

The earthy Deng, father of reform-era China, favored a Chinese phrase to describe this kind of legal maneuver: killing a chicken to scare the monkeys.

Deng’s heir, Chinese President Xi Jinping, has reason to kill a few chickens right now. At a major Communist Party meeting in November, he and Prime Minister Li Keqiang are expected to introduce a series of potentially far-reaching economic reforms. These are vital if China is to make the transition from its current growth model — in which a flood of artificially cheap money has poured into ghost cities and unneeded factories — to one focused on consumption. Cadres and cronies, who have gotten fabulously rich off the current system, are sure to resist any changes.

The show trials are meant in part to scare these officials, as is Xi’s new Maoist-style “mass line” campaign to cleanse the party of “feudalism” and other dire-sounding ills. Officials have been instructed to study an Orwellian “Document No. 9,” which blasts ideas such as Western constitutionalism as insidious threats.

Xi may believe he’s emulating Deng, who famously refused to relax his grip politically even as he overturned decades of Maoist economic dogma. A more careful student of Deng might recall that he always intended for political reforms to follow his economic transformation. A true heir would today be working to build independent political institutions and the rule of law. Rather than try to intimidate potential opponents, he would challenge them by allowing citizens and journalists to expose details of their corruption. He would strengthen the judiciary, not exploit it to stage shakily credible trials.

Although he defended the party fiercely, Deng, at least for most of the decade before Tiananmen, also commanded genuine popular support. Chinese were grateful for the prosperity and stability that his reforms produced; they admired him even more for the boldness with which he challenged the vested interests of the day. Their support in turn emboldened him to go further.

No one would argue that the Xi regime enjoys a similar goodwill today. Even if Chinese appreciate their rising fortunes, they are fed up with corruption and in-your-face inequality; dismayed by the devastation of their air, water and food supply; and anxious about jobs and wages. Yes, the party has transformed China into a global economic powerhouse, just as Deng promised. Unfortunately for Xi, Chinese now want more.

If he were alive, the pragmatic Deng would probably be working hard to make society an ally once again. Xi seems intent on doing the opposite. Xue’s arrest has chilled discussion among top Chinese bloggers, who reach tens of millions of people (Xue alone has 12 million followers on the blogging service Sina Weibo). These voices have earned the kind of legitimacy among ordinary Chinese that the regime lost long ago, and would be powerful weapons in the war against vested interests.

The short-term stability Xi is buying inevitably comes at the price of his long-term goals. Xi might worry less about chickens and remember Deng’s more famous barnyard quote, the one about how the color of the cat matters less than whether it catches mice. If China’s new leaders want their reforms to work, they should be working with, not against, the popular forces that can bring about change.

To contact the Bloomberg View editorial board: view@bloomberg.net.

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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