economics

May 17, 2010

China’s Private Party The Communist Party has made strenuous efforts to keep signs of its enduring power out of sight to the Chinese public and the rest of the world. Richard McGregor on the secrets of the world’s largest political machine and its role in Beijing’s growing clout.

Filed under: Uncategorized — ktetaichinh @ 4:57 am
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The Party in China has teetered on the verge of self-destruction numerous times, in the wake of Mao Zedong’s
brutal campaigns over three decades from the 1950s, and then again in 1989, after the army’s suppression of
demonstrations in Beijing and elsewhere. The Party itself suffered an existential crisis after the collapse of the
Soviet Union and its satellite states in 1992, an event that resonates to this day in the corridors of power in
Beijing. After each catastrophe, the Party has picked itself off the ground, reconstituted its armor and reinforced
its flanks. Somehow, it has outlasted, outsmarted, outperformed or simply outlawed its critics.
Few events symbolized the advance of China and the retreat of the West during the financial crisis more than the
touchdown in Beijing of Secretary of State Hillary Clinton in February 2009. Previous U.S. administrations,
under Bill Clinton and George W. Bush, had arrived in office with an aggressive, competitive posture towards
China. Before she landed, Ms. Clinton publicly downplayed the importance of human rights. At a press
conference before leaving, she beamingly implored the Chinese government to keep buying U.S. debt, like a
traveling saleswoman hawking a bill of goods.
Deng Xiaoping’s crafty stratagem, laid down two decades earlier, about how China should advance stealthily into
the world—”hide your brightness; bide your time”—had been honored in the breach long before Ms. Clinton’s
arrival. China’s high-profile tours through Africa, South America and Australia in search of resources, the billiondollar
listings of its state companies (including PetroChina and the Industrial & Commercial Bank of China) on
overseas stock markets, its rising profile in the United Nations and its sheer economic firepower had made China
the new focus of global business and finance since the turn of the century. China’s star was shining more brightly
than ever before, even as its diplomats protested they were battling to be heard on behalf of a relatively poor,
developing economy.
The implosion of the Western financial system, along with an evaporation of confidence in the U.S., Europe and
Japan, overnight pushed China’s global standing several notches higher. In the space of a few months in early
2009, the Chinese state committed $50 billion in extra funding for the International Monetary Fund and $38
billion with Hong Kong for an Asian monetary fund; extended a $25 billion loan to cash-strapped Russian oil
companies; set aside $30 billion for Australian resource companies; offered tens of billions more to various
countries or companies in South America, central and Southeast Asia, to lock up commodities and lay down its
marker for future purchases. In September, China readied lines of credit of up to $60 to $70 billion for resource
and infrastructure deals in Nigeria, Ghana and Kenya.
Beijing’s ambition and clout were being lit up in ways that would have been unthinkable a few years previously.
The Chinese central bank called for an alternative to the U.S. dollar as a global reserve currency in early 2009,
and reiterated its policy as the year went on. France obediently recommitted to Chinese sovereignty over Tibet to
placate Beijing’s anger over the issue, after Beijing had canceled an E.U. summit in protest at Paris’s welcome for
the Dalai Lama. On its navy’s 60th anniversary, China invited the world to view its new fleet of nuclear-powered
submarines off the port of Qingdao.
The giant Chinese market had become more important than ever. Just ahead of the Shanghai auto show in April
2009, monthly passenger car sales in China were the highest of any market in the world, surpassing the U.S. A
month later, Wang Qishan and a team of Chinese ministers met Catherine Ashton, then the E.U. trade
commissioner, and about 15 of Europe’s most senior business executives in Brussels to hear their complaints
about Chinese market access. Sure, Mr. Wang conceded after listening to their problems over a working lunch,
there are “irregularities” in the market. “I know you have complaints,” he replied. “But the charm of the Chinese
market is irresistible.” In other words, according to astonished executives in the meeting, whatever your
complaints, the market is so big, you are going to come anyway. Even worse, many of the executives realized that
Mr. Wang was right.
The rise of China is a genuine mega-trend, a phenomenon with the ability to remake the world economy, sector
by sector. That it is presided over by a communist party makes it even more jarring for a Western world which,
only a few years previously, was feasting on notions of the end of history and the triumph of liberal democracy.
In just a single generation, the party elite has been transformed from a mirthless band of Mao-suited, ideological
thugs to a wealthy, business-friendly ruling class. Today’s Party is all about joining the highways of globalization,
which in turn translates into greater economic efficiencies, higher rates of return and greater political security.
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