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06/12/2015

Grinding to a Halt

Writing in the May/June issue of Foreign Affairs, “Youwei,” a pseudonym for a scholar based in China, talked of the loss of momentum in reforms in recent years. It was different earlier.

“Under Deng Xiaoping, this meant reforming agriculture and unleashing entrepreneurship. Under Jiang Zemin, it meant officially enshrining a market economy, reforming state-owned enterprises, and joining the World Trade Organization. Under Hu Jintao and Wen Jiabao, it meant reforming social security. Many expect yet another round of sweeping reforms under Xi Jinping – but they may be disappointed....

“One reason for the loss of steam is that most easy reforms have already been launched. Revamping agriculture, encouraging entrepreneurship, promoting trade, tweaking social security – all these have created new benefits and beneficiaries while imposing few costs on established interests. What is left are the harder changes, such as removing state monopolies in critical sectors of the economy, privatizing land, giving the National People’s Congress power over fiscal issues, and establishing an independent court system. Moving forward with these could begin to threaten the hold of the Chinese Communist Party on power, something that the regime is unwilling to tolerate.

“Another reason for the loss of steam is the formation of an increasingly strong antireform bloc. Few want to reverse the reforms that have already taken place, since these have grown the pie dramatically. But many in the bureaucracy and the elite more generally would be happy with the perpetuation of the status quo, because partial reform is the best friend of crony capitalism....

“In China, as elsewhere, economic development has led to contention: peasants are demanding lower taxes, workers want more labor protections, students are forming activist groups, entrepreneurs are starting charities, media organizations have begun muckraking, and lawyers are defending human rights. Collective action has soared, and the country now has more than a million grass-roots nongovernmental organizations. And the Internet poses a big challenge for the regime, by linking ordinary people to one another – and to intellectuals.

“However, it takes organizational skills and ideological articulation for practical pursuits to mature into political demands. These require at least some political space to develop, and such space is almost nonexistent in China. If the Chinese Communist Party has learned anything from the 1989 democracy movement and the Soviet experience, it is the lesson that ‘a single spark can start a prairie fire,’ as the Chinese saying goes. Equipped with tremendous resources, the regime gradually developed an omnipresent, sophisticated, and extremely efficient apparatus of ‘stability maintenance,’ which has successfully prevented the second half of modernization theory’s logic from being realized. This system for ensuring domestic security is designed to nip any sign of opposition, real or imagined, in the bud. Prevention is even more important than repression – in fact, violent suppression of protests is seen as a sign of failure. China’s strong state is reflected not so much in its sharp teeth as in its nimble fingers.

“Speech is censored, in the press and on the Internet, to prevent the publication of anything deemed ‘troublesome.’ Actions are watched even more closely. Even seemingly nonpolitical actions can be considered dangerous; in 2014, Xu Zhiyong, a legal activist who had led a campaign for equal educational opportunities for the children of rural migrants, was sentenced to four years in prison for ‘disturbing public order.’ Public gatherings are restricted, and even private gatherings can be problematic. In May 2014, several scholars and lawyers were detained after attending a memorial meeting for the 1989 movement in a private home. Even the signing of petitions can bring retribution.

“Just as important is the emerging mass line – that is, official public guidance – about China’s critical need to maintain stability. A grid of security management has been put in place across the entire country, including extensive security bureaucracies and an extra-bureaucratic network of patrol forces, traffic assistants, and population monitors. Hundreds of thousands of ‘security volunteers,’ or ‘security informants,’ have been recruited among taxi drivers, sanitation workers, parking-lot attendants, and street peddlers to report on ‘suspicious people or activity.’ One Beijing neighborhood reportedly boasts 2,400 ‘building unit leaders’ who can note any irregularity in minutes, with the going rate for pieces of information set at two yuan (about 30 cents). This system tracks criminal and terrorist threats along with political troublemakers, but dissenters are certainly among its prime targets.”

This all works its way into the economy in one way or another...none of it being positive. China’s stock market has been soaring. This is going to end very badly.

Part II in two weeks.

Brian Trumbore



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Wall Street History

06/12/2015

Grinding to a Halt

Writing in the May/June issue of Foreign Affairs, “Youwei,” a pseudonym for a scholar based in China, talked of the loss of momentum in reforms in recent years. It was different earlier.

“Under Deng Xiaoping, this meant reforming agriculture and unleashing entrepreneurship. Under Jiang Zemin, it meant officially enshrining a market economy, reforming state-owned enterprises, and joining the World Trade Organization. Under Hu Jintao and Wen Jiabao, it meant reforming social security. Many expect yet another round of sweeping reforms under Xi Jinping – but they may be disappointed....

“One reason for the loss of steam is that most easy reforms have already been launched. Revamping agriculture, encouraging entrepreneurship, promoting trade, tweaking social security – all these have created new benefits and beneficiaries while imposing few costs on established interests. What is left are the harder changes, such as removing state monopolies in critical sectors of the economy, privatizing land, giving the National People’s Congress power over fiscal issues, and establishing an independent court system. Moving forward with these could begin to threaten the hold of the Chinese Communist Party on power, something that the regime is unwilling to tolerate.

“Another reason for the loss of steam is the formation of an increasingly strong antireform bloc. Few want to reverse the reforms that have already taken place, since these have grown the pie dramatically. But many in the bureaucracy and the elite more generally would be happy with the perpetuation of the status quo, because partial reform is the best friend of crony capitalism....

“In China, as elsewhere, economic development has led to contention: peasants are demanding lower taxes, workers want more labor protections, students are forming activist groups, entrepreneurs are starting charities, media organizations have begun muckraking, and lawyers are defending human rights. Collective action has soared, and the country now has more than a million grass-roots nongovernmental organizations. And the Internet poses a big challenge for the regime, by linking ordinary people to one another – and to intellectuals.

“However, it takes organizational skills and ideological articulation for practical pursuits to mature into political demands. These require at least some political space to develop, and such space is almost nonexistent in China. If the Chinese Communist Party has learned anything from the 1989 democracy movement and the Soviet experience, it is the lesson that ‘a single spark can start a prairie fire,’ as the Chinese saying goes. Equipped with tremendous resources, the regime gradually developed an omnipresent, sophisticated, and extremely efficient apparatus of ‘stability maintenance,’ which has successfully prevented the second half of modernization theory’s logic from being realized. This system for ensuring domestic security is designed to nip any sign of opposition, real or imagined, in the bud. Prevention is even more important than repression – in fact, violent suppression of protests is seen as a sign of failure. China’s strong state is reflected not so much in its sharp teeth as in its nimble fingers.

“Speech is censored, in the press and on the Internet, to prevent the publication of anything deemed ‘troublesome.’ Actions are watched even more closely. Even seemingly nonpolitical actions can be considered dangerous; in 2014, Xu Zhiyong, a legal activist who had led a campaign for equal educational opportunities for the children of rural migrants, was sentenced to four years in prison for ‘disturbing public order.’ Public gatherings are restricted, and even private gatherings can be problematic. In May 2014, several scholars and lawyers were detained after attending a memorial meeting for the 1989 movement in a private home. Even the signing of petitions can bring retribution.

“Just as important is the emerging mass line – that is, official public guidance – about China’s critical need to maintain stability. A grid of security management has been put in place across the entire country, including extensive security bureaucracies and an extra-bureaucratic network of patrol forces, traffic assistants, and population monitors. Hundreds of thousands of ‘security volunteers,’ or ‘security informants,’ have been recruited among taxi drivers, sanitation workers, parking-lot attendants, and street peddlers to report on ‘suspicious people or activity.’ One Beijing neighborhood reportedly boasts 2,400 ‘building unit leaders’ who can note any irregularity in minutes, with the going rate for pieces of information set at two yuan (about 30 cents). This system tracks criminal and terrorist threats along with political troublemakers, but dissenters are certainly among its prime targets.”

This all works its way into the economy in one way or another...none of it being positive. China’s stock market has been soaring. This is going to end very badly.

Part II in two weeks.

Brian Trumbore