China's Red Nobility and the Non-Rule of Law

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Makes the Politburo go round

The scandal involving Chinese Politburo Princeling Bo Xilai is shaking up the autocratic elite coaltion that runs China. Bo and his wife are accused of abusing their political position to massively enrich themselves and their family. Bo's wife is also being investigated for murdering a British expat with whom she had business dealings. Her crime was reported by a former ally of Bo, Chongqing police chief Wang Lijun, who was so afraid of retribution that he even sought protection at the U.S. consulate.

As numerous reports make clear, Bo is far from being the only member of the Red Nobility to use political power to enrich themselves. Last week, the New York Times reported on how the children of Politburo members extract wealth from businesses eager to operate in China:

For example, Wen Yunsong, the son of Prime Minister Wen Jiabao, heads a state-owned company that boasts that it will soon be Asia's largest satellite communications operator. President Hu Jintao's son, Hu Haifeng, once managed a state-controlled firm that held a monopoly on security scanners used in China's airports, shipping ports and subway stations. And in 2006, Feng Shaodong, the son-in-law of Wu Bangguo, the party's second-ranking official, helped Merrill Lynch win a deal to arrange the $22 billion public listing of the giant state-run bank I.C.B.C., in what became the world's largest initial public stock offering.

Much of the income earned by families of senior leaders may be entirely legal. But it is all but impossible to distinguish between legitimate and ill-gotten gains because there is no public disclosure of the wealth of officials and their relatives. Conflict-of-interest laws are weak or nonexistent. And the business dealings of the political elite are heavily censored in the state-controlled news media.

The spoils system, for all the efforts to keep a lid on it, poses a fundamental challenge to the legitimacy of the Communist Party. As the state's business has become increasingly intertwined with a class of families sometimes called the Red Nobility, analysts say the potential exists for a backlash against an increasingly entrenched elite. They also point to the risk that national policies may be subverted by leaders and former leaders, many of whom exert influence long after their retirement, acting to protect their own interests….

"This is one of the most difficult challenges China faces," said Mr. [Minxin] Pei, [an expert on China's leadership and professor of government at Claremont McKenna College in California]. "Whenever they want to implement reform, their children might say, 'Dad, what about my business?' "

There are also growing concerns that a culture of nepotism and privilege nurtured at the top of the system has flowed downward, permeating bureaucracies at every level of government in China. "After a while you realize, wow, there are actually a lot of princelings out there," said Victor Shih, a China scholar at Northwestern University near Chicago, using the label commonly slapped on descendants of party leaders. "You've got the children of current officials, the children of previous officials, the children of local officials, central officials, military officers, police officials.We're talking about hundreds of thousands of people out there — all trying to use their connections to make money."

China is a "natural state" still run by patron-client networks in which patrons distribute a bit of looted wealth to clients as a way to obtain their support if factional fighting breaks out among the elites. However, if a patron looks like he or she is going to lose a factional fight, clients will head for the hills. The Times today details just such a hasty retreat by former supporters of the fallen princeling Bo. Three leading businessmen with close ties to Bo tried to smooth over the rift between Bo and his police chief Wang Lijun. They failed, so they fled abroad. As the Times reports

The most famous of the three [Bo associates], Xu Ming, 41, listed by Forbes as China's eighth-richest person in 2005, had flown in on his private jet. He and the others held separate meetings with Mr. Bo and Mr. Wang. The damage was irreparable. The former intelligence agent, Yu Junshi, rushed home and stuffed a bag with 1.2 million renminbi, or nearly $200,000, to take to a bank with Ma Biao, the other businessman, known for his girth. Then all three fled to Australia within days, fearful of the fallout from a possible investigation of Mr. Bo.

Unfortunately for these Bo clients, they decided to return to China 10 days later when it looked like their patron would weather the scandal. They are now being held by the authorities as chief witnesses in the investigation against Bo. 

For more background see my column, China Needs the Rule of Law, detailing why this scandal bodes very ill for China's future political and economic prospects. 

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  1. This is why our political and chattering classes love China so much. They are envious of Chinese elites.

    1. Failed communist statism and totalitarianism generally is all Red China can teach us. If the pinkos over here don’t like constitutional republicanism, they can always board a flight or ten to Beijing. Nobody’s stopping them. And once they’ve fucked off, maybe we’ll have respite for a while before their successors show up and resurrect the HURRRRRRRRRRRRRRRRR.

      1. They only failed because they didn’t have the right people in charge…

        1. If only the Grand God-King Barack I Obama were in charge, shit would be truly great in the land of red and rust.

      2. Well, to be fair, it also teaches us that liberalized markets, even when done very, very, very poorly, are light years better than socialism.

  2. So “Led Nobirrity” in big tlubber…”Big Tlubber in Ritter China”, hmmm?

    I am ronery….so ronery….

    1. “Deck the harrs with bows of horry, Fa ra ra ra ra ra ra ra ra!
      ‘Tis the season to be jarry, Fa ra ra ra ra ra ra ra ra!”

      1. “A Rannister always pays his debts”.

  3. There’s an old saying in China: “Become a bureaucrat and grow rich.”

    1. Grandfather Lenin would be immeasurably proud.

  4. Ultimately, this will hold down China as an economic competitor. When politics picks business winners and losers, the best product or service is not necessarily the winner.

    As many problems as we have in the USA, we’re still much better about letting the market make those decisions.

    1. Of course we are! Would you like to buy a Chevy Volt?

      1. Chevy is the most popular automobile brand in the PRC. That’s all you need to know.

        Though Roketa scooters are actually pretty decent.

    2. This is just one of a dozen major problems they have. There’s also a real estate bubble, bad bank loans, corruption, pollution, thousands of riots every year, a rapidly aging population, and an excess of males due to female infanticide. Not only will they not be surpassing us in the coming years, they will be lucky to avoid collapse.

      1. We’re not looking too solid these days ourselves.

        “We cannot allow an economic collapse gap!”

  5. last couple times I have been in China I noticed that at the tourist attractions the metal detectors were ALWAYS unplugged. I usually just walk through all of them without bothering to empty my pockets. I always attributed this to security theater and indifference of the young PLA soldiers. Now I know there was a third reason to enrich Hu Jintao’s son. I haven’t been there in 2 years but I bet they’re still unplugged

    1. Mostly. I took the family to Beijing last fall and they were running the metal detectors going into Tiananmen Square but otherwise I’ve walked right past the things at ferries, train stations and small, local tourist attractions for years.

  6. Corruption, graft, nationalism, and myopia will once again hobble this ancien regime. This cycle has been repeated in China for the last 2200 years. It is interesting to see American alarmists and their reaction to “a strong China”. These alarmists should read some Chinese history, and realize that left to its own means, China will always fly up its own ass.

    1. Indeed – China is a paper dragon. And the coming crash will be big.

      1. Yes it will. And just as shocking for the China bootlickers as the fall of the Soviet Union was to its boot lickers.

        What infuriates me the most about the China love is that there is a certain breed of person who seems to want oppressive places like China to succeed and the US to fail. They just really can’t help but hope freedom fails and central control wins.

        1. Thomas Friedman just wants the bullet trains to run on time, John. Is that so bad?

        2. They just really can’t help but hope freedom fails and central control wins.

          Well, duh! People are just too stupid to order their own affairs. There needs to be experts and authority in control, ordering everyone and everything.
          How else will you know you got it right without authority telling you so?

        3. I’ve never understood why it supposedly makes sense for China to be one big country. It seems it could be a lot better off if it were either separate countries or a loose confederation of states.

          1. China is roughly the same area as the US.

            Though the Tibetans and Uighurs seem to agree with you (quietly)

          2. Only racists are in favor of secession. It is known.

        4. Don’t worry, the USSR is on its way back, shrunken somewhat in land area but more defensible and more homogeneous.

    2. You forgot to add the part about how the cultural revolution did such damage to their educational system that they have yet to recover.

      I don’t know that’s the reason, but I’ve found that systematic thinking and inductive reasoning are in very short supply, even among well-educated Chinese. Many of them have a fantastic ability to recall facts, follow instructions, and perform deductive reasoning, but the so called “thinking outside the box” doesn’t come easily.

      1. This thread is about China not Ivy League graduates.

        1. Maybe it was a bunch of Ivy League education majors that designed their system? Top men and all that.

        2. I’ll give you Yale, but most of the Ivy League is very good outside the goofy social science and humanities programs (which are pretty rough nearly everywhere).

          Harvard, Cornell, and Princeton in particular are top-notch in the STEM disciplines.

          1. Yeah because STEM graduates are all God like. No way any of them could ever have been affected by the group think and the bullshit put out by those universities. Not like those evil liberal arts majors.

            STEM is just libertarian for “Top Men”.

    3. +42. China, for all of their bought (or stolen) advances remains what it has always been: a land of bureaucrats and peasants.

  7. We don’t call bureaucrats ‘mandarins’ for nothing

  8. The thing is, if the PRC economy starts going downhill things are going to get ugly. The younger generations have tasted wealth and are not going to go back to being slaves of the Party quietly. All the Little Red Books in the universe can’t make up for going from a nice apartment with indoor plumbing to living on a dirt floor and shitting in an outhouse.

    It’s either going to be come an even more fascist totalitarian country or become a giant South Korea.

  9. So, are they learning from us, or are we learning from them?

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