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Writing on the wall for China's leaders

One thing is certain as the Chinese Communist Party gathers in Beijing for its 17th Congress – a political earthquake is inevitable that will in time sweep the delegates away. The political and social contradictions in the country are glaring and unbearable, starting with the name of the organisation under whose banner the delegates meet. The party is communist in name only, representing as it now does capitalism with Chinese characteristics. For example, present in the hall are the chief executives of state owned enterprises (SOEs).

Some SOEs are privatised and owned by foreign investors and others by local capitalists. In the 1990s, the major SOEs were restructured into joint-stock companies and listed on overseas and domestic stock markets. Then in 1994, China began to allow the big SOEs to retain all their profits. Hence over the past 13 years, none of these SOEs has contributed a single penny to the state coffers for public expenditure. According to official statistics, China's state sector made a total 1.22 trillion yuan (US$157 billion) of profits in 2006, of which 754.7 billion yuan or 62% came from the 155 central SOEs. Not surprisingly, the management have enriched themselves, paying themselves handsome bonuses and buying lavish luxury goods.

So the SOEs’ executives must have smiled to themselves today when President Hu Jintao told the congress that "socialist core values will prevail among the people..." These words are meaningless, Stalinist rhetoric from a leadership that has presided over the transformation of the country into a sweatshop for the transnational corporations. Hu was forced to acknowledge that growing social tensions threatened the country’s future.
"Resolutely punishing and effectively preventing corruption bears on the popular support for the party and on its very survival, and is therefore a major political task the Party must attend to at all times," he said. The reality is quite different.

In a new report from the Carnegie Endowment, Minxin Pei, an expert on economic reform and governance in China, paints a picture of corruption in China, where 10% of government spending, contracts, and transactions is estimated to be used as kickbacks and bribes, or simply stolen. Though the Chinese government has more than 1,200 laws, rules, and directives against corruption, the odds of a corrupt official going to jail are less than 3%, making corruption a high-return, low-risk activity, he finds. Even low-level officials have the opportunity to amass an illicit fortune of tens of millions of yuan. Corruption in China is concentrated in sectors with extensive state involvement. The direct costs of corruption could be as much as $86 billion each year, his report claims.

Significantly, Pei’s report says that corruption sparks tens of thousands of protests each year and contributes to China’s environmental degradation - up to 750,000 people a year die of air pollution - deterioration of social services, and the rising cost of health care, housing, and education. “Corruption has not yet derailed China’s economic rise, sparked a social revolution, or deterred Western investors. But it would be foolish to conclude that the Chinese system has an infinite capacity to absorb the mounting costs of corruption,” writes Pei.

Police were out in force in Beijing for the congress. Dissidents have been detained and thousands of petitioners rounded up to prevent them lobbying officials. One protester was dragged away by security and bundled into a police van in front of a clock on Tiananmen Square counting down to the 2008 Olympics. In 1989, the democracy movement was savagely suppressed by tanks and soldiers in the same square. The leadership’s attempts to impose a brutal form of corrupt capitalism on China since then has only deepened the anger of the masses and ensured that the writing is really on the wall for the delegates inside the Great Hall of the People.

Paul Feldman
AWTW communications editor
October 15, 2007

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