In 2002 there were three, in 2005 ten, in 2014 over 150, and in 2016 China had some 568 US$ billionaires, overtaking the USA which had “only” 535 (BBC News, 25 Feb. 2016). Hu cites this as a success of the so-called ‘Princeling Party’, a grouping within the CCP consisting of the offspring of the older generation of leaders appointed to top political positions to protect the material interests of Party members (Hu, R. China’s Paradoxical Reforms, Global Business and Economics Review, 2011, 8(3)11-21). The familial ties linking Party tops to the super rich are very direct. In 2005, the richest of all was Larry Rong Zhijian – son of a former Vice President of the PRC – and leading “red capitalist” – Rong Yiren, who served in key state positions, most notably as the country’s vice president (1993-98) without being a member of the CCP, but who did a great deal to open China to the global market (Obituary, The Guardian, 18. Nov. 2005).
Because in China there is no significant divide between Party and state there are few, if any, effective checks and/or balances on top officials so corruption is absolutely rampant. It is true that the government makes a lot of noise about its policy of “killing the chicken to frighten the monkey” and occasionally demotes, imprisons or even executes an official as a warning to others, but the money to be made is so fantastic and the chances of being caught so small that these measures are generally ineffective. An accidentally leaked People’s Bank of China report revealed that between 16-18,000 CCP officials who had fled China in the last 20 years, took a total of about US$160 billion with them, indicating the wealth that is flowing into the hands of Party members.
Many Party members began to acquire their wealth when they gained control of a successful TVE. The ownership of these nominally collective enterprises was gradually consolidated in the hands of their managers or local Party officials, often the same person (Hart-Landsberg, M., and Burkett, P., China and Socialism, Monthly Review, 56(3) 2004). In towns, many Party and government officials were able to translate their managerial positions into ownership of privatised small and medium SOEs, either by sleight of hand or paying peanuts for a going concern. Party cadres, generally, found the property sector a particularly fertile ground for amassing quick riches. Permission for construction projects valued at billions of dollars depended on the say-so of local Party tops who, not surprisingly, soon acquired extensive property holdings. On 12 September 2014, CNBC News claimed the number of dollar millionaires in China had reached more than 1 million. Many of these, if not the majority, are CCP members who use the loophole of a lack of central land records to salt away their ill-gotten gains from bribery and corruption, buying the leases of prime city-centre apartments under pseudonyms (Chong-En Bai, et al., Crony Capitalism with Chinese Characteristics Tsinghua University, School of Economics and Management, May 2014).
A good example of how crony capitalism and the end of central planning combined to enable the meteoric rise of those with good Party connections is Liu Yongxing. In the early 2000s, the China Aluminium Corporation (Chinalco, an SOE), had a 98% share of the aluminium market in China. The central government gave Chinalco exclusive rights over all national bauxite deposits. Yet, by 2008, the market share of Chinalco had dropped to less than 50%, due to the entry of large private firms into the aluminium market.
Liu Yongxing, the moving spirit of the East Hope Group understood the Achilles heel of Chinalco; that its exclusive right to purchase Chinese bauxite was given by central government and not the local governments that had actual physical control over the minerals. With the end of central planning, the East Hope Group went to the local government of Sanmenxia, a mid-size city in Henan Province with large deposits of bauxite, and effected a deal with the local Party secretary who had strong links with Li Keqiang, Chinese Premier. The East Hope Group started to produce aluminium in 2005 and today Liu claims to be worth US$5 billion (Chong-En Bai, et al., Crony Capitalism with Chinese Characteristics, Tsinghua University, School of Economics and Management, May 2014).
The restoration of capitalism slowed and accelerated as the different groups within the CCP leadership argued out their differences. Added unevenness occurred in the process due to the specific conditions in the different regions of this enormous country and in the different sectors of the economy. China has a long history of dispersed power, with considerable provincial, county and even city autonomy. In fact, an integral part of the transition to capitalism was encouragement and greater decentralization of state powers (Jae Ho Chung and Tao-Chiu Lam, China’s “City System” in Flux, The China Quarterly, No 180 (2004), pp945-64). To accelerate the process, the revenues of local governments throughout China were made dependant on local business taxes and taxes on sales. The promotion of Party cadres came to depend on their ability to deliver economic growth, employment and foreign investment (Ibid). Many local Party members served as brokers and deal-makers between the public and private sectors, others greased the wheels through black-market deals, bribes and informal networking. It was only natural that these came to have stakes in the ownership of private businesses or took posts as advisors on company boards or senior management positions in private companies.
It is clear that in China even that section of the bureaucracy which is “defending” state industry against privatisation is not doing so in the interests of the working class but to protect its own interests. Like the rest of the highest levels of the bureaucracy Zhou Yongkang was a corrupt capitalist, but wanted to proceed to capitalism by a different route to President Xi. The struggle between Zhou and Xi was not over whether or not to maintain capitalist development in China it was over which route to take. One can say the struggle between the groups within the CCP has parallels to the struggle in the UK between that section of the bourgeoisie that wishes to be outside the EU and that section which wishes to continue within the EU.
John Peter Roberts 21-07-2016