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Splits in the Chinese ruling class

the road of Chinese capitalism

Splits in the Chinese ruling class

Written by Daniel Morley

Friday, 23 March 2012

*"For a revolution to take place it is not enough for the exploited and
oppressed masses to realise the impossibility of living in the old way, and
demand changes; for a revolution to take place it is essential that the
exploiters should not be able to live and rule in the old way. It is only
when the 'lower classes' do not want to live in the old way and the 'upper
classes' cannot carry on in the old way that the revolution can triumph"
(Lenin, 'Left-Wing' Communism, an Infantile Disorder).*

[image: Bo Xilai] < http://www.marxist.com/images/stories/china/Bo-Xilai.jpg>Bo
XilaiThe cliché that 'a week is a long time in politics' can sometimes seem
inapplicable to China, with the Chinese Communist Party's (CCP) vice-like
grip on the political life of the country. But the truth is that such a
system is, for all its appearance of serenity, actually more like a
pressure cooker. Dramatic political events and factional turmoil can spring
up as if from nowhere and in these moments the stage-managed consensus can
suddenly unravel.

One such week has been the last one, with the twin events of Bo Xilai's
sacking and the leadership's announcement of a mass campaign of
privatisation. Bo Xilai was the leader of the populous Chongqing
municipality, famed for his populism and attacks on the rich, who as a
result became the most famous politician in China after Hu Jintao and Wen

Both events reveal underlying instability in Chinese society and the state.
All the factors which have led to the past thirty years of economic boom
are facing exhaustion and are now leading to an unavoidable crisis,
especially in the context of the intractable global crisis of capitalism.

The 'successful' fiscal stimulus of the past three years is coming to an
end. This stimulus represented the final push of the tried and tested, but
worn out, method of state capitalism/Keynesianism which has reigned here
recently. The 'pump-priming' of Keynesianism is actually like a drug, like
steroids that are taken to temporarily allow for a miraculous
transformation, keeping the athlete not only alive but going stronger than
ever. When used recently in the West to avoid an all-out depression by
flooding the stricken banks with cheap credit, this method resembled a
last-ditch defibrillation to keep a patient alive after a cardiac arrest;
in China the situation was less desperate, reflecting the superior health
of the economy.

Either way nothing can hide the fact that capitalism in both China and the
West was in desperate need of a Keynesian bail-out. However, Keynesianism
has a limited shelf-life and an inner tendency to destroy its very basis.
The more state money is pumped into the economy through deficit-financing,
and the more state-owned firms attempt to hoover up unemployment on that
basis, the less effective the method is, until it collapses under its own
contradictions. Hence the massive inflation in the UK in the 1970s that led
to 'monetarism', the flip side to Keynesianism, hence the austerity
measures in Europe and the US as governments find they have reached the
limit of their borrowing, and hence the present problems in China and the
calls for restraint and privatisation to rein in inflation in China (see

Thanks to the $600bn fiscal stimulus, China now faces a debt mountain, with
local government debt reaching in the region of $2tn and 'bad loans' to the
tune of 8% of GDP being investigated. This has led to more and more land
grabs or peasant clearances by the local authorities as they attempt to
stave off default by selling off this land to predatory developers. A
speculative boom has been unleashed by all the cheap credit, with house
prices shooting up astronomically and an accompanying increase in inflation
(which the government is trying to bring down), and a looming crisis of
overproduction in heavy industries. In this way the policies of
Keynesianism, which worked to prolong the boom, are now at an end and are
conspiring to bring the whole economy and cherished social and political
stability down with it.

The immediate consequence of this is that the ruling class and state are
leaning in the other direction, i.e. towards monetarism. This does not mean
that in the next year we will start to see mass privatisations and an
immediate end to borrowing, which would spell disaster for the economy.
What it does mean is that the hand of the 'princelings', i.e. those
privileged bureaucrats who run State Owned Enterprises as their own
monopolies, with super-profits to boot, is significantly weakened; that the
independent, indigenous Chinese bourgeoisie centred around Guangdong
Province is growing more confident and more influential over the state; and
that therefore the Chinese ruling class is openly split and weakened as a
whole, emboldening the working class who will come more and more onto the

All of this coincides with the once-a-decade leadership transition in the
CCP and decreases the likelihood of the desired smooth transfer of power.
Under a bureaucratic and totalitarian system, leadership transfers are
always extremely risky and unpredictable affairs, because there is no
'safety valve' for factional interests to be expressed through. Every 10
years the CCP attempts to maintain the veneer of unanimity as power is
transferred; only once in recent times has this been achieved. Now the
transfer coincides with the need for the state power to keep its balance as
it crosses from one economic policy to another, leaning on one section of
the ruling class as opposed to the other. The ability to do so looks
increasingly unlikely. Indeed, considering Bo Xilai's high profile removal,
one could argue that the smooth changeover has already been sacrificed. In
a totalitarian regime such as the one in China it is not at all
straightforward to get a clear appraisal of the processes going on within
the ruling elite and which section is the strongest. But the events of the
past few days appear to indicate that there is now a clear strategy at the
top of the state to push for the interests of the 'entrepreneurial'
bourgeoisie by 'reforming' the state and its role in the economy. In 2010
Li Keqiang, apparently the protégé of the President, Hu Jintao and the
favourite to take over from Wen Jiabao as Prime Minister this year,
commissioned a report into how to reform China's economy to avoid crisis in
a collaboration between the World Bank and the Development Research Center
of the State Council, which is under the leadership of Wen.

This indicates that very powerful people in the Chinese state were actively
seeking a justification for more monetarist, openly bourgeois policies,
since one could hardly expect the World Bank to advocate anything else. And
indeed, the report, titled 'China 2030: Building a Modern, Harmonious, and
Creative High-Income Society' and published at the end of February, has
advocated the breaking up of state owned enterprises (SOEs), increasing
private competition and liberalising the finance sector. Many on the left
in China have slammed this report as a ruse of US imperialism. This is
one-sided. That the report was created *in collaboration *with the Chinese
state indicates that it reflects deep and powerful interests in the Chinese
bourgeoisie, especially that section based in the manufacturing powerhouse
of Guangdong.

This section is angry at the power of the monopolistic SOEs and wishes to
get its vampiric fangs into their super-profits. And they appear to be
successful in convincing the top echelons of the state that they are more
efficient than the SOEs and therefore privatisation is the way forward. On
March 5th Xinhua, the official state media outlet, blandly issued this
statement, "China vows to develop the non-public sector of its economy by
breaking up monopolies and relaxing restrictions on market access, says a
government report to be delivered by Premier Wen Jiabao on Monday. The
report says the government will encourage nongovernmental investment in
areas such as railways, public utilities, finance, energy,
telecommunications, education, and medical care. 'We will promote reform of
the railway and power industries,' says the report distributed to the media
before the opening of the annual session of the 11th National People's
Congress (NPC)."

In another article on 13th March Xinhua reported the following,

"Zhou Tienong, vice-chairman of China's top legislative body, said reform
of monopoly industries has lagged far behind and resulted in unfair

"Although there are already policies in place allowing the involvement of
private capital in financial markets, those applying to do so were often
rejected because of the high requirements, said Zhou Dewen, chairman of the
Wenzhou Small-and Medium-sized Enterprises Development Association.

"The establishment of private sector financial institutions will play an
active role in solving the financing difficulties of SMEs and promote the
healthy development of the private sector, he said."

And the Financial Times agrees that the wind is blowing in the direction of
'reform' due to the limitations of the fiscal stimulus, "There is a general
sense among the elite that there needs to be some big changes to the system
but there is not yet a consensus on what kind of changes these could be and
in what sequence they should happen," said Victor Shih, an expert on
Chinese elite politics at Northwestern University. "Wen's comments show at
least some people within the elite are strongly supportive of more
fundamental political reform in China."

The shift in the balance of power explains the purging of Bo Xilai, which
along with the World Bank report and Wen's pro-privatisation speeches, is
clearly part of a strategy to secure the leadership transfer later this
year as one that is decidedly pro-business. When he recently toured the US,
Xi Jinping (the President-to-be) made an interesting choice of companion
for the tour which says much about the extent to which the newly emergent
independent bourgeois has achieved decisive influence over the state. This
was Lu Guangqiu, a car-parts tycoon who is the richest person in Zhejiang
province (itself one of the most capitalistically developed provinces, next
to Shanghai, and one famed for its emphasis on entrepreneur-led
development, as opposed to SOE led) and the third richest person in the
National People's Congress. He even attended a meeting between Xi and Joe
Biden, the US Vice-President.

However, in openly attempting to curb the 'vested interests' of the SOEs,
which are still very powerful, the state must justify its actions and try
to build up a swell of support among the masses. Hence the smear campaign
against Bo Xilai's family in the run up to his removal, where rumours were
circulated that his son, already famous as over-privileged, somehow came by
a Ferrari which he flippantly crashed, and that his wife had assets far in
excess of what should be acceptable for a humble public servant.

This pro-business faction of the CCP will use the anger of the masses - who
desire reform of another sort - to try to secure support for the
pro-business reforms they want. The mass movement that broke out this
winter in the small town of Wukan, Guangdong, was an expression of the deep
well of anger in the masses, who will no longer tolerate being bossed
around by corrupt CCP party bosses. And yet this movement has been
cynically used by Wang Yang, the openly pro-business head of the CCP in
Guangdong, to further his political career. Wang intervened in the struggle
and admonished the local CCP leaders, pretending to be a friend of the
people of Wukan and that their problems, which related to land seizures,
were now solved by his small concession to local democracy. This indicates
that in order to get their way, this section of the bureaucracy may promote
superficial democratic reforms which mask unpopular policies of

However, in leaning on the Chinese masses in such a way they are playing
with fire. The aspirations of the awakening Chinese working class are far
deeper and more powerful than a couple of democratic reforms. Moreover such
characters as Wang Yang, Wen Jiabao and Xi Jinping (soon to be President
and an economic liberal) could not be confident of any serious democratic
reform as they would likely lose in an election to populists such as Bo
Xilai. The real alternative to the corruption of the SOEs is not
privatisation sprinkled with some bourgeois democracy, but the
expropriation of the SOEs from the hands of 'princelings' under workers'

What does Bo Xilai's sudden demise mean? The removal of Bo Xilai is an
extremely dramatic event. The CCP does not take such open and dangerous
action as sacking a popular and famous leader lightly, as it destroys their
image of harmonious leadership and exposes deep cracks in the regime.

However, Bo had already smashed that image of bland unity by his own
behaviour. Recently he had become the hero of many on the left in China, as
he seemed to represent an alternative. His policies in Chongqing have, to a
small extent, favoured the working class and poor more than elsewhere. He
has publicly attacked the richest of the rich in Chongqing, even sentencing
many to death, which has been popular since there is huge anger about the
new rich in China, who have clearly acquired their wealth through extremely
unscrupulous means. Some of the wealth extracted from these parasites has
been put into social programmes. In addition, he famously encouraged the
singing of 'Red Songs', songs with a revolutionary air about them.

It is necessary to point out the extreme superficiality of all this and the
way in which Bo was simply using, just as the pro-business faction does,
the anger of the masses for his own ends. The singing of songs was not
linked to any actual revolutionary campaign. It was tightly stage managed;
whenever people started to sing revolutionary songs independently of the
party apparatus, this was swiftly stopped. The Internationale was banned
from these events. Whilst Bo did carry out some pro-worker reforms, the
differences between these policies and those of the rest of the country
were not so large. Yes, he built social housing, but so has the rest of
China. There is a dire need for housing in China, and the ruling class
recognises that more social programmes will be necessary to buy social
peace. The housing he built was reportedly of poor quality and intended to
lure business investment. And his attempts to gain publicity by attacking
the rich were just that - publicity campaigns that did nothing to reverse
the overall inequality in Chongqing or elsewhere. Actually it appears Bo
enriched himself from these attacks, as businessmen accused of corruption
would have to pay a heavy ransom to escape death. No wonder Bo could afford
to send his son to Harrow and Oxford!

In truth Bo is something of a local bourgeois Bonapartist, leaning on the
working class to promote himself. But in doing so, he came into direct
conflict with the CCP national apparatus, especially as it moves towards a
more openly bourgeois policy. To promote himself, Bo was clearly attacking
the above mentioned Wang Yang, who in addition to being a noted 'economic
liberal' was also his predecessor as leader of Chongqing. In one of his
many purges, Bo had Wang Yang's former deputy police chief executed. And
the growing 'entrepreneurial' bourgeoisie is getting fed up of Bonapartists
such as Bo who may confiscate their property at any time. In this way, the
interests of the increasingly influential 'entrepreneurial' bourgeois
coincide with the state apparatus, both of whom could no longer tolerate
such a loose cannon. Thus he was removed.

The pretext was the bizarre affair of Bo's chief of police, Wang Lijun,
fleeing to the American consulate and threatening to defect, claiming Bo
had threatened his life. But it seems that this was simply a slightly
mistimed bureaucratic manoeuvre from the beginning, as leaked audio files
show that Wang was threatened by Bo because Wang informed him that Bo's
family was being investigated, presumably for the kind of corruption Bo was
so famed for fighting. In other words, the CCP leadership tried to quietly
get rid of Bo with an investigation into corruption; instead he went loudly
by threatening Wang who publicly fled to the US consulate!

This demonstrates the inherent dangers and instability in a bureaucratic
totalitarian regime. Lacking any other way to express their desire for an
alternative to rampant capitalism and inequality, the masses may now rally
around Bo as an unjustly victimised defender of the people. Of course Bo
does not want to provoke a mass movement; he is from the system. But events
have a logic of their own. He is often described as 'ambitious' - as if the
likes of Xi Jinping and Wang Yang are not. The point is that to force his
way forward, Bo was compelled to whip up an independent support base. In
doing so who has gone too far for the CCP, he has become a dangerous and
unpredictable element, and so he was removed.

But in doing so, they may have made the situation worse for themselves. On
the one hand Bo has given vent to the seething anger of the masses. On the
other hand he has become a point of reference for those vested interests in
the state opposed to any further privatisation, and they are very powerful.
In fact the CCP has had to replace Bo with someone who appears to represent
the same factional interests as himself. Don't forget that the famed Deng
Xiaoping fell out of favour towards the end of Mao's tenure, and appeared a
forgotten man. But when Mao died, it emerged that Deng, a pro-business
'reformer', actually represented very powerful interests in the
bureaucracy, and he was subsequently made President.

The battle is not over, and that means that mass privatisation will not be
immediately introduced. But it is clear which faction has the upper hand.

Bo may have conjured up forces he cannot control. China is now one of the
most unequal societies in the world. Both the 'princeling' elite and the
burgeoning independent bourgeoisie have nothing in common with the hundreds
of millions of working masses. Both of them have benefitted extremely
disproportionately from the boom. But the lowest 10% in society have
actually seen their income decline in absolute terms. The last 30 years of
breakneck growth have raised living standards, but in an incredibly uneven
fashion. It is precisely the violently fast and brutally unfair nature of
this growth that is stoking revolution. A vast proletariat has been created
in a relatively short period of time, thrown into the cauldron of dormitory
factories and 12 hour + shifts. History teaches us that such scenarios
breed revolution. The fabric of Chinese society is being stretched to its

A recent article in Caixin expressed the sense of anger and frustration
throughout society:

"What is the most common feeling in China today? I think many people would
say disappointment. This feeling comes from the insufficient improvement in
their lives that people are achieving amid rapid economic growth. It also
comes from the contrast between the degree to which individual social
status is rising and the idea of the 'rise of a great and powerful nation'.

"In opportunities for education, employment, promotions and overall
improvement of their lives, people are discovering that society's resources
and opportunities are increasingly concentrated in the hands of a few.
People in the middle and lower strata of society are becoming increasingly
marginalized and are finding that improving their lives is getting harder.

"The 2004 China Social Mobility Report published by China Academy of Social
Sciences said that people whose fathers have power or capital have an
easier time becoming party cadres than people in general. Research into the
changes in private businesses ownership after 1993 showed that the elite in
non-business fields were more likely to own businesses today.

"Meanwhile, the elite are moving overseas. The elite stratus, despite its
overwhelming preponderance of resources, has a huge sense of insecurity
because of the overall deterioration of the social ecosystem. Members of
this class either move abroad themselves or transfer their property

"The stagnation of the reform process also inevitably causes society as a
whole to lose its vitality.

"When, in the name of maintaining social stability, migrant workers are not
allowed to organize and seek to recover wages in arrears, and those who
have had their homes demolished are not allowed to negotiate for proper
compensation, stability maintenance has become a tool to safeguard the
interests of lawless companies and contractors that are refusing to pay
wages and the developers robbing those whose homes they are demolishing. A
vicious cycle forms: The more stability is maintained, the more unstable
society becomes."

There is a widely reported and intense hatred of the rich, especially of
the so-called entrepreneurs who have quite blatantly made their money
through corruption. These entrepreneurs, whom the state is currently
lauding, do not represent a way forward for China. As the above quote from
Caixin indicates, they are far from being 'patriots' interested in the
well-being of the nation. They are Chinese patriots only insofar as they
can make money from the Chinese people, through rampant exploitation and
the plunder of state industry. Many of them have or are moving their money
overseas, such is their fear of revolution and reprisals.

The fury at the way in which these people appear to have captured the state
was clearly expressed in the recent flurry of internet activity based
around spotting the obscene ostentation of members of the National People's
Congress (NPC), which met in the past week. The Chinese people are rightly
disgusted at the way in which their supposed Congress appears to be nothing
more than a networking scene for the super-rich, who secure membership of
the Congress for no reason other than to protect and enhance their wealth
and power. According to the Hurun report "the wealthiest 70 delegates are
worth $89 billion. According to Bloomberg News, that's 11 times the net
worth of the entire U.S. Congress, plus the U.S. president, his Cabinet and
justices of the Supreme Court."

Many on the left in China have correctly pointed out that the above
mentioned World Bank report, which purports to show China the way to avoid
a crisis, only seeks to introduce into China the policies of financial
deregulation and privatisation that have failed so abysmally in the West.
The point is, however, that capitalism *can offer no other policy.*

The introduction of such policies could well be the spark that ignites an
uncontrollable conflagration throughout China with revolutionary
implications. Side-by-side with the newly powerful bourgeoisie is a new
factor in China - the awakening working class. The bureaucracy, drunk on
its 30 year success story, is coming-to with a terrible fright. China is
not the China of 30 years ago and will be far less governable. In a recent
poll conducted by Global Times, 49% of respondents said they believed China
was 'close' or 'almost close' to revolution. That is why they are now
spending more on internal security than on the military, despite the hugely
growing budget of the latter.

The exploited and oppressed masses are finding it impossible to live in the
old way. And the exploiters are not able to live and rule in the old way. A
new, far less stable period is opening up for China, one characterised by
splits and factional struggles at the top and mass movements and militant
strikes from below. Mirroring the global tendency produced by the global
capitalist crisis, the Chinese masses will seize the opportunities
presented by these splits in the ruling class to force their demands onto
the table. They have had enough and will not take no for an answer. We are
in an epoch of global revolution, and China is long overdue one.

To give an indication of the mood, we publish below the 'People's Proposal
on China's Development' as it appeared with a covering letter on the
website 'Red China'. This proposal has emerged as the popular alternative
to the proposals of privatisation emanating from the ruling class.

"Dear all,

A few days ago, People's Daily published an editorial calling for further
reform while acknowledging the potential oppositions. In the Chinese
context, "further reform" in the mainstream media means neo-liberal reforms
like privatization, marketization, etc. This article attracted lots of
critique from Marxists and left wing in general, the scale of which is very
unusual in the last 20 years. These discussions gave birth to a People's
Proposal on China's future development. The first draft was written by a
writer on one of the largest online forum in China. Red China website
quickly edited them into a concise version. After that, people have been
enthusiastically discussing the proposal all over the Internet and have
been adding other things. We translate the Red China version into English
to give you a sense of what the proposal looks like. This achievement is
definitely a milestone in working class movement in China in that for the
first time in recent three decades so many people are consciously
questioning the whole program of the ruling class and begin discussing what
they want. The proposal does not use any Marxist term, nor does it mention
socialism, but everyone can see where it is going.


1. That the personal and family wealth of all officials be publicized and
their source clarified, and all "naked bureaucrats" be expelled from the
Party and the government. ("Naked bureaucrats" refer to those officials
whose family lives in developed countries and whose assets have been
transferred abroad, leaving nothing but him/herself in China.)

2. That the National Congress concretely exercises its legislative and
monitory function, comprehensively review the economic policies implemented
by the state council, and defend our national economic security.

3. That the existing pension plans be consolidated and retirees be treated
equally regardless of sector and rank.

4. That elementary and secondary education be provided free of charge
throughout the country; compensation for rural teachers be substantially
raised and educational resources be allocated on equal terms across urban
and rural areas; and the state assume the responsibility of raising and
educating vagrant youth...

5. That the charges of higher education be lowered, and public higher
education gradually become fully public-funded and free of charge.

6. That the proportion of state expenditure on education be increased to
and beyond international average level.

7. That the price and charge of basic and critical medicines and medical
services be managed by the state in an open and planned manner; the price
of all medical services and medicines should be determined and enforced by
the state in view of social demand and actual cost of production.

8. That heavy progressive real estate taxes be levied on owners of two or
more residential housings, so as to alleviate severe financial inequality
and improve housing availability.

9. That a nationwide anti-corruption online platform be established, where
all PRC citizens may file report or grievance on corruption or abuse
instances; the state should investigate in openly accountable manner and
promptly publicize the result.

10. That the state of national resources and environmental security be
comprehensively assessed, exports of rare, strategic minerals be
immediately cut down and soon stopped, and reserve of various strategic
materials be established.

11. That we pursue a self-reliant approach to economic development; any
policy that serves foreign capitalists at the cost of the interest of
Chinese working class should be abolished.

12. That labour laws be concretely implemented, sweatshops be thoroughly
investigated; enterprises with arrears of wage, illegal use of labour, or
detrimental working conditions should be closed down if they fail to meet
legal requirements even after lawfully limited term for self-correction...

13. That the coal industry be nationalized across the board, all coal mine
workers receive the same level of compensation as state-owned enterprise
mine workers do, and enjoy paid vacation and state-funded medical service.
Personnel in state-owned enterprises be publicized; the compensation of
such personnel should be determined by the corresponding level of people's

15. That all governmental overhead expenses be restricted; purchase of
automobiles with state funds be restricted; all unnecessary travelling in
the name of "research abroad" be suspended.

16. That the losses of public assets during the "reforms" be thoroughly
traced, responsible personnel be investigated, and those guilty of stealing
public properties be apprehended and openly tried."

[ORIGINALLY PROPOSED BY Hanjiangchunmeng (&#23506;&#27743;&#26149;&#26790;) on bbs.people.com.cn


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