China’s Struggle Sessions; A messy leadership transition suggests the return of ideology

September 3, 2013, 1:10 p.m. ET

China’s Struggle Sessions

A messy leadership transition suggests the return of ideology.

When the trial of Bo Xilai, the former Communist Party boss of Chongqing, ended last week, most observers assumed that Chinese politics would settle into its usual monotonous patterns. But the power plays continue. On Tuesday, Jiang Jiemin was removed as head of the State-Owned Assets Supervision and Administration Commission (SASAC), a post he had held for only a few months.That’s big news because Mr. Jiang is a protege of Zhou Yongkang, who retired last year as head of China’s security apparatus and was one of nine members of the Politburo Standing Committee. Rumors have swirled for more than a year that Mr. Zhou would be purged because of his support for Mr. Bo, and recent reports suggest his power base is under attack. Mr. Zhou is a former boss of the China National Petroleum Corporation, where Mr. Jiang was his successor until this March. Several other officials are also under investigation.

Officially this is all part of new Party Secretary Xi Jinping’s promise to cleanse the regime of corruption by catching both “flies” and “tigers”—minor cadres as well as top officials. Few Chinese take that pledge at face value. Leaders often use corruption charges to remove opponents and increase their own power.

The anticorruption drive also coincides with an ideological “rectification campaign” to stamp out malicious ideas such as Western democratic constitutionalism. Such political movements are another way for a leader to bend the Party to his will, going back to the 1940s. Some have interpreted this as a sign that Mr. Xi is more of a convinced leftist than previously thought. A likelier explanation is that he is tacking left, either due to currents within the Party or as a way to consolidate his power urgently.

The campaign first began in April with an internal letter known as Document No. 9, which identified threats to the Party and called for vigilance. Party members are required to study such materials and pledge their support. Some of the language appears publicly in newspaper editorials and in the current crackdown against prominent liberal thinkers. Yet the implementation of this campaign has been somewhat haphazard, suggesting some discord within the propaganda apparatus.

Each of these developments by itself might not be remarkable, but to see them happen all at once, so chaotically and so early in Mr. Xi’s tenure, is a reminder that authoritarian regimes can unravel quickly. Consider that 10 years ago, Hu Jintao became Party secretary with fewer allies in the Politburo Standing Committee, and he had to wait two years before he secured control over the military from his predecessor Jiang Zemin. Yet on the surface that transition went much more smoothly.

By contrast, Mr. Xi’s moves to consolidate his power are more reminiscent of the era of Mao Zedong and Deng Xiaoping. And that gives a clue of what may be going on in Beijing’s conclaves.

Since a Party split led to the 1989 Tiananmen Square massacre, China’s leaders have been careful to rule by consensus and settle differences by compromise rather than purges or mass campaigns. This favored the advancement of gray organization men like Messrs. Jiang and Hu, while technocrats like former Premier Zhu Rongji were given a relatively free hand to direct policy pragmatically. The competition within the Party was mainly between networks of patronage rather than cliques loyal to a particular flavor of Marxism.

The Central Committee plenary meeting in November should bring more indications of whether the post-Deng order can be maintained. Ideology is making a comeback as the Chinese public grows restless with the post-1989 social contract of rising standards of living in return for not questioning the Party’s monopoly on power. Mr. Bo was among the first to try to capitalize on the thirst for political alternatives. He won’t be the last.

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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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