As the Party heads towards its November plenum on deepening economic reforms the question that comes to the fore is whether China’s elites can benefit from rebalancing the economy in the way they have done from the three decades that followed the opening up of the economy after 1978.
High levels of Party/state/government controlled investment, access to cheap credit, and soaring asset prices, particularly real estate, created fortunes for the politically powerful. And not just for the political leadership but also, crucially, for the military. The focus of the next wave of reforms, which includes eliminating unproductive investment through the more efficient allocation of capital, providing more opportunity to not especially well connected small and medium sized businesses, and favouring the consumer interest over that of the (typically state-owned) producer is not obviously to the existing elite’s personal advantage — even if the rebalancing collectively enhances their long-term chances of retaining their grip on power.
That trade-off is certainly understood — and accepted as essential—at the very top of the leadership — and has been for some years; remember Wen Jiabao wittering on about it to anyone who would listen in the last half of his prime ministership. How far down the pecking order that understanding now goes is moot.
Yet even assuming that the need for reform is widely accepted, how it is implemented is something else again. Who among the elite gets to bear the costs of change and in what proportion? The reality is that the state-owned pie than can be shared out to buy off opposition to reform is going to shrink because state-owned enterprises are going to have to bear the brunt of the adjustment. Ally that with a natural instinct of elites to be fearful of change, particularly institutional and technological change that threatens the status quo, and the potential brake on reform could be powerful.
That is not to say that either institutional and technological change won’t force political change, or that change won’t be imposed from the top assuming the power is there to do it — vaulting China into the ranks of rich countries is a powerful motivation for the new leadership for so many reasons — or, on the other side of the ledger, that there is even common cause among the ‘vested interests’ that are at risk of losing out when it comes to blocking particular pieces of reform. The process could be ugly, especially when viewed from outside the country, or even from outside the narrow confines that the various overlapping factions of China’s elite inhabit.