Category Archives: Politics & Society

Jobs’ Challenge To Slowing Growth

THE ECONOMY CONTINUES along its glide path to slower growth. Last year’s GDP growth target of ‘about 7%’ has been replaced by 6.5%-7% for this year. Announcing this to the National People’s Congress (NPC), Prime Minister Li Keqiang warned that the rebalancing of the economy towards consumption-driven growth faced challenges and tough times ahead.

One of those will be keeping unemployment ‘within 4%’ – of a workforce of more than 800 million that has been adding 12 million jobs a year for the past five years and faces an unusually high number of 15 million new graduates joining the workforce this year.  A detailed reading of the 13th Five-Year Plan, the economic development blueprint to 2020 due to be approved by the NPC, will provide some insight into how that will be done.

The official unemployment rate was 4.05% in the second half of last year.

Like any economy deindustrialising, China has to bear a heavy burden of workers left without jobs or the skills to get new ones. At least 3 million jobs, or 30% of the workforce, could go from heavy industry as a result of cutting surplus production capacity. The bulk of those redundancies will fall on the coal and steel industry. Human resources minister Yin Weimin says that 1.8 million jobs in those industries, an estimated 10-15% of the workforce, are at risk.

With that comes the possibility of social unrest and thus a threat to Party rule based on the premise of delivering ever higher living standards. The number of strikes and protests by workers, at more than 2,700 last year, was more than double 2014’s number, according to the China Labour Bulletin, a Hong Kong-based civic group.

The response has been carrot and stick — a crackdown on labour activists and non-governmental organization to snuff out any political nexus forming and financial measures such as the 100 billion yuan ($15.3 billion)  to be given to local authorities ‘solve the problem of worker placement’ under the umbrella an industrial enterprise restructuring fund.

The stick, though its use is well practiced, is not without hazard. Overzealous suppression of labour unrest could cause the Party itself to become a target of worker anger, and especially in provinces such as Guangdong, where local officials have traditionally held a relatively tolerant attitude towards labour relations but where several labour activists were arrested in January and put on trial as ‘foreign subversives’.

The only officially sanctioned trade union, the All-China Federation of Trade Unions (ACFTU), has recently reformed itself to stress its role as an instrument of Party and government and to straighten its top-down control over its local unions. This could have the unintended consequence of turning disgruntled workers more towards unofficial channels.

So far, though, labour disputes are overwhelmingly economic, not political, and a Party leadership that puts a premium on maintaining stability will want to keep it that way.

There are risks in the carrot, too. Local governments already have a debt time bomb ticking quietly under them. For all the help they will get from Beijing, they will face immense fiscal pressure as growth slows to pay for dealing with shuttered mines and mills and factories and workers demanding unpaid wages (a chronic problem, particularly in the construction industry), redundancy pay and social security.

The pressures will be particularly acute in those areas where heavy industry is concentrated, notably the rust-belt of the northeast, in the export factories in the Pearl River delta, and where the reforms of state-owned enterprises bite hardest, particularly the proposed rationalization of ‘zombie’ companies hitherto kept afloat by local governments seeking to avoid job losses.

If more and more workers see the Party failing to look after their interests, the overarching risk is that their acceptance of the social compact that underpins the Party’ monopoly on political power will erode, which is what the Party is most set on avoiding.

This Bystander recalls a far more drastic set of state-sector reforms and sharply decelerating growth in the late 1990s.  If there is a ray of hope for the top leadership, it is that the Party got through that when it had fewer carrots and less sophisticated capabilities with its sticks.

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Xi’s Jiang Dilemma

Jiang Zemin (L) and Xi Jinping seen at an undated National Day reception

LAST AUGUST, RUMOURS circulated that former but still-powerful President Jiang Zemin, then just turning 89, had been placed ‘under control’ — a measure to restrict his freedom of movement for a while.

Jiang (seen left above) slipped from public view and it was being said that this was a prelude to President Xi Jinping moving against the man who had been instrumental in elevating him to the top leadership positions, but whose desire to rule from retirement remains the greatest constraint on Xi’s political supremacy.

Jiang led the Party from 1989 to 2002, but has remained one of the most politically powerful actors since. Before retiring, he appointed acolytes to key positions and let them establish varying degrees of autonomy from the formal leadership, particularly in the security apparatus.

With Zhou Yongkang, as head of the security services, and Guo Boxiong and Xu Caihou, in place as vice-chairmen of the Central Military Commission, the Party agency that controls the PLA, Jiang had more sway over the military and the security services than the man who succeeded him as Party boss and president, Hu Jintao. And he had enough power in within the Party to promote Xi over Hu’s favoured successor, Li Keqaing, who had to settle for being prime minister.

Once in the top positions, however, Xi showed more determination that Hu to shake free of Jiang’s controlling hand. Xi’s anti-corruption campaign was directed against many associated with Jiang’s Shanghai faction. Zhou, like Xu and Guo, three of the biggest ‘big tigers’ snared, were purged and expelled from the Party. One way to view that is as a rooting out of the parallel power network Jiang had established and restoring the leadership’s centralised control.

Rumours are circulating again that Xi may now feel political secure enough to move against the biggest tiger of them all, Jiang himself. This, the word is, would not be another round of control, but a prosecution for corruption.

Xi’s frustration with what he perceives as Jiang’s hinderance of his political control and economic reforms (which Xi sees as critical to the Party’s success in the existential struggle in which he believes it is engaged, but which would financially disadvantage many members of Jiang’s ‘Shanghai’ faction) is well known.

This, rarely, bubbled into public view when an editorial in the People’s Daily referred to former leaders who prevented their successors “rolling up their sleeves and doing bold work” and sniped at leaders who, “being unhappy to retire … do everything they can to extend their power”. Most readers would have quickly parsed the list of ‘former leaders’ to one.

Darker minds talk about conspiracies by Jiang’s supporters to overthrow Xi. Meanwhile, newly published writings by Xi carry a similarly coded warning that even ‘super-emperors’ should not be spared from the anti-corruption campaign.

Prosecuting Jiang would carry enormous risks for Xi. For one, it would sweep away the unwritten promise of immunity for former Party leaders that has allowed a leadership succession every decade.

Xi might then feel he would have to hold onto power beyond the customary ten years. That and the vacuum created by ripping up the old political rules that delivered a steady escalator of professional advancement and personal enrichment could trigger a revolt in a Party where morale at many levels is already fragile.

However, Xi is also time boxed. At the 19th Party Congress next year, the new generation of leaders — Xi’s heirs — could be expected to be nailing down their promotions for the top jobs which are due to rotate in 2022. If Xi is to move openly against Jiang, he will need to have done so — successfully — before then.

The calculation, though, is finely balanced.

The purges and Xi’s reorganisation of the PLA have diminished Jiang’ s influence in the military. That will have choked off some of the ‘pay for promotion’ that has enriched the Shanghai faction, just as the anti-graft probes into the state oil industry have closed off another honeypot. But it persists in the Party, including in the Politburo — which makes the promotions at the next Party Congress so critical. Taking Jiang down now would cement Xi’s absolute grip on power from the Congress on.

However, it would also risk splitting the Party and perhaps fatally damage it at a time when a slowing economy makes it especially vulnerable to social unrest, particularly if the newly affluent middle class starts to feel the effects.

Xi may also reckon that he need not take the risk; that he has taken down enough of Jiang’s inner circle to have undercut Jiang from below, and that Jiang will finally give up the game knowing Xi has the evidence to charge him whenever he chooses.  And there is always the alternative of hoping that age and infirmity do the job for him.

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Sidelining The Thinking Classes

IT IS NOT unknown for Chinese intellectuals to be seen on state television confessing to their alleged crimes. It is not unknown for hyphenated Chinese, Chinese-Americans in particular, to be seen doing the same.

It is exceedingly rare for a non-ethnically Chinese foreigner to be seen doing so. That makes the case of Peter Dahlin so exceptional.

The Swede had been detained since early January amid a crackdown on human rights lawyers and activists, before being expelled from the country today.

Dahlin founded Chinese Urgent Action Working Group, commonly known as China Action, a non-governmental organization that provides legal aid to people alleging human rights violations and assistance to uncertified lawyers in rural areas.

Authorities accuse China Action of receiving foreign funding to ‘instigate confrontations’ and to have ‘trained others to gather, fabricate and distort information about China’. They say they have ‘smashed an illegal organization that sponsored activities jeopardizing China’s national security’.

Well, they would, wouldn’t they, this Bystander is tempted to say.

However, beyond the particulars of this case, what are the general implications? Is this the sending of a chilling message — as seems to have been the case of the disappearing Hong Kong booksellers including Gui Minhai, who holds a Swedish passport and who was apparently detained in Thailand in what is seemingly an early example of the exercise of the new national security law that gives security forces international reach.

Or does it fit into a broader pattern of deterrence, and, if so, a pattern of what?

Certainly, there has been a crackdown on human rights lawyers and activists since last summer. Scores of Chinese lawyers and their staff have been detained for interrogation, leaving many facing political subversion charges that carry potential sentences of life imprisonment.

Giving this operation the veneer of rooting out a Western conspiracy against China provides popularly acceptable patriotic cover. And if it is on television, it must be true.

However, the crackdown goes wider than civil rights lawyers. Last year, more than 30 university officials were accused of taking bribes or other corruption. Their number included Zhou Wenbin, the high-profile head of Nanchang University who was sentenced last month to life imprisonment for taking bribes and embezzlement. At least seven other university presidents, including that of the Communication University of China in Beijing, have been removed from their posts in the sweep.

Visiting and Chinese scholars talk of an academic chill having descended. Indeed, it may be the worst time to be an open-minded academic since the anti-bourgeois liberalisation campaigns of the 1980s following strict new guidelines on criticism of Party and government.

The leadership’s centralization of power to protect the Party’s political monopoly has imposed, inevitably, severe constraints on civil society as it represents a possible alternative centre of political activity that could challenge the Party. Notions of human rights, judicial independence and multi-party democracy are seen as particular threats to the Party’s supremacy that need to be countered.

The effect is self-censorship within academia and the avoidance of controversial issues.

Top leadership believes the Party faces an existential struggle. The example of post-Communist eastern Europe has been noted. There, professors, writers, lawyers and journalists became politicians and the intellectual leadership of new political groupings.

This distrust of potential rival sources of power coincides with the emergence of the notion among the leadership that it no longer needs intellectuals to inform it and shape policy, a traditional role that political scientists within universities have played.

The increasing prominence of ministry-sponsored think thanks taking on that role is no coincidence. At the same time, the capability of the security apparatus to gather mass information — and of ‘big data’ to analyse it — provides a new potential alternative to critical independent scholars.

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China’s Pressing Need To Prevent Industrial Accidents

Landslide at industrial zone in Shenzhen, December 2015

The deadly landslide that engulfed part of the Hengtaiyu Industrial Park in Shenzhen was, on the basis of the early reports, a man-made disaster. It would appear that a mountain of mud composed of illegally dumped construction waste piled up over a quarry over the past two years became unstable. It then, in the parlance of civil engineers, ‘spilled over’.

A torrent of soil slammed into 33 industrial and dormitory buildings just before noon, and also ruptured the West-to-East natural gas pipeline causing an explosion. Some 900 people evacuated. Three are said to have been injured, but at least 91 were reported missing as of Monday morning, presumably buried under the mud that is estimated to cover more than 60,000 square meters to a depth of 6 meters (see photo above).

The attention the massive rescue effort is getting from the highest levels —  President Xi Jinping and Premier Li Keqiang have sent urgent instructions to provincial and local authorities — indicates the political threat such disasters potentially hold — and underlines the shortcomings in the approach to hazard management.

Complaints by residents about illegal dumping went unheard or were ignored by Shenzhen officials. Shoddy building compounded the damage. The two factors exacerbate a view that untrammeled economic development has been at the expense of citizen well-being.

That is not a view that the Party can tolerate. In this case, local officials will, no doubt, be found to take the blame. In the longer-term, industrial safety legislation will have to be enforced to prevent industrial accidents taking the toll they currently do.

The Shenzhen landslide was just as much a man-made disaster as the series of massive blasts at a hazardous-materials warehouse in Tianjin that killed more than 100 people in August or the explosion that ripped through a chemical factory in Changzhou in Jiangsu Province earlier in the month. Or the fireball at a petrochemical factory in Rizhao in Shandong Province the previous month. Or the succession of accidents in China’s mines stretching back. At least 750 people have died in industrial accidents in the construction, manufacturing and mining sectors this year.

Employers will always push the boundaries of health and safety legislation — of which China has plenty. But it requires diligent local officials to enforce those rules. Of those, China is lacking.

The most effective industrial safety policy is a preventative health and safety culture.  Good practice on work safety standardization is more prevalent than it was a  decade ago, but it remains the exception rather than the rule. And it requires resources and political will at the local level to enforce it. We wish the extraordinary rescue effort in Shenzhen every success, but residents would have been better served by it not being necessary in the first place.

Sadly, we fear we will be saying the same after the next large industrial accident, and repeating it until the political attitude changes to one that says the Party best shows that it is looking after citizens by preventing preventable industrial accidents in the first place rather than by rushing to clean up the mess afterwards.

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And The Greatest Of These Is Order

THE WORLD WIDE Web is increasingly having national boundaries drawn over it. At the second Global Internet Conference, a meeting of a couple of dozen countries convened by China in Wuzhen in Zhejiang province, President Xi Jinping laid out his notions of online national sovereignty along with a defence of online censorship.

“Freedom is what order is meant for,” Xi said, “and order is the guarantee of freedom”. And the greatest of these are order, this Bystander is tempted to add.

The right of a country to control the information flows across and within its borders, which is what cyber sovereignty means, is at odds with the way the internet has grown up as a free exchange of information (and thus ideas).

Russian Prime MinisterDmitry Medvedev, Pakistani President Mamnoon Hussain, Kazakh Prime Minister Karim Massimov kept company with a host of executives from such US tech titans as Apple, Facebook, IBM, LinkedIn and Wikipedia were there to hear Xi’s message that “no country alone can claim the role of the sole universal regulator of the world-wide web”.

This all, though, fits squarely with the massive resources that are being directed towards internal security and with China’s creation of parallel institutions to circumvent what it sees as the Western-dominant existing ones.

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Li Ruigang: Kicking On With Soft Power

Li Ruigang, Founding Chairman, CMC Capital Partners, seen at a World Economic Forum meeting in Dalian, September 11, 2015. Photo credit: World Economic Forum / Benedikt Von Loebell. Licenced under Creative Commons.LI RUIGANG IS one of those particular Chinese combinations of government official, Party insider and entrepreneur — and perhaps a proto manifestation of the statist-corporatist economy that President Xi Jinping sees as China’s future.

In the 2000s, a 30s-something Li, though a state official who had started out with a degree in journalism and a job as a reporter on a local Shanghai TV station, was a pioneer in China’s fledgling media market. Rising rapidly through the programming ranks, he brought foreign programming and popular international TV formats to the staid, insular world of state broadcasting. He also married TV and radio with online and mobile media, riding the emerging wave of  young newly affluent Chinese going online.

As president of Shanghai Media Corp., a state broadcaster formed in 2002 when the city’s television and radio stations merged, he turned a municipal broadcaster into a national media powerhouse. His vision of popular programming allied to mastery of the crease where global popular culture meets Chinese mass propaganda meant that even staid national state broadcaster CCTV could not ignore SMC’s transforming influence.

In western media terms, he was a meld of such media moguls as News Corps’ Rupert Murdoch and Viacom’s Sumner Redstone, both of whom Li numbers as friends. As the photo above indicates, he now moves in that world of the global great, good and successful.

By 2009, Li had overseen a fourfold increase in SMC’s revenue to $1.2 billion. That year, he founded China Media Capital Holdings (CMC), a state-backed Shanghai-based private equity and venture capital firm specializing in cultural, media and entertainment investments inside and outside China. At the same time, he started to scale back his work at SMC, though he would not finally cut formal ties until this year.

Li’s motives for switching from state official to state-backed venture capitalist are complex. Not all his programming deals with foreign media companies panned out. A public sale of SMC shares planned for 2009 was put on ice following the 2008 global financial crisis. Other political constraints on SMC’s freedom to do deals with foreign partners started to chafe.

But Li was not railing against the system. In 2011, when he stepped down from full-time management at SMC, he would become deputy Party chief in Shanghai. He retained the confidence of his political superiors that he could be trusted in the fast evolving world of media, even as the soft power of cultural assets became more of a national concern.

Among some of CMC’s recent investments are:

  • a deal to develop a Legoland amusement park outside Shanghai;
  • a joint venture with Warner Bros to co-produce Chinese-language films (DreamWorks Animation is already a JV partner. Kung Fu Panda 3 is the result of that); and
  • with Jack Ma’s Alibaba and Tencent, a company to develop InternetTV.

CMC’s latest deal, announced this week, is a $400 million 13% stake in City Football Group. CFG is the holding company owned by Sheihk Mansour from the United Arab Emirates for English professional football club, Manchester City FC, its U.S. sibling, New York City FC, its Australian cousin Melbourne City FC and a stake in Japan’s Yokohama F. Marinos.

Li is following another Chinese entrepreneur, Wang Jianlin, founder of the property group Dalian Wanda, in investing in European professional sports. Both men have an eye to exploiting the Chinese TV market for watching the teams’ games, buying their merchandise and learning the ropes of what is becoming an increasingly lucrative part of the media business.

Even back in his SMC days, Li understood the importance for broadcaster of both creating and owning content and having the means to distribute it.

CMC already owns a slate of sports media rights, including those for Chinese Super League. It blew away CCTV for those with a spectacular five-year 8 billion yuan ($1.3 billion) bid in October; previously the rights had sold for 50 million yuan a year.

The Manchester City deal might also prove an avenue for improving the woeful standard of the game within China. President Xi would love for the country to hold its head high as a world footballing power. China ranks 84th in Fifa’s global rankings for national teams and is not even number one in Asia. South Korea is 48th and Japan 50th.

Xi would also like China to host a World Cup, as South Korea and Japan have already done. A World Cup final in Beijing would, like the 2008 Beijing Olympics, be another sign of China’s emergence on the world stage.

Li’s deal, reportedly two years in the making, now seems it make it clear why Xi chose to visit the Manchester City club during his recent state visit to England.

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China Considers Overseas Counterterrorism Special Ops

BEIJING IS CONSIDERING with renewed urgency law to authorize counterterrorism operations beyond its borders. One of the provisions of its controversial proposed anti-terrorism legislation, Article 76, would let People’s Liberation Army (PLA) and state and public security forces operate in other countries with the approval of that country.

A draft of the new law was circulated late last year. Primarily focused on combating domestic terrorism, the draft has been criticized by human rights organizations for its broad definition of terrorism. The execution of a Chinese citizen held by Islamic State for ransom, which Beijing’s apparent efforts failed to avert, and the siege in Mali in which three China Railway Construction Corp. managers were killed have given new impetus to enacting the draft law to provide the PLA with the legal authority its commanders desire if they are to conduct counterterrorism operations abroad.

Details of what overseas counter-terrorism operations could be undertaken are not laid out in any detail, in the manner of draft Chinese law. Article 76 says no more than:

Given that the proposed law includes ‘thought, speech or actions’ that seek to ‘influence national policy making’ as possible acts of terrorism, it potentially provides authorities with broad latitude abroad as well as at home. However, regardless of what is finally put into law, and, more critically, implemented — and it is highly unlikely that Beijing would be anything but ultra-cautious in embarking on overseas counterterrorism missions, even in lawless areas of the world where Chinese citizens are in harm’s way — carrying out any such operations will be challenging even with the cooperation of other countries.

Chinese military and security forces have scant experience of the political, cultural and operational constraints on such work beyond their borders despite the country’s extensive domestic security apparatus. Flushing out suspected terrorists with flamethrowers before shooting them, as reportedly happened recently in Xinjiang, would not necessarily be acceptable elsewhere.

It was only in late 2013 that the PLA sent its first detachment of armed personnel abroad to join a UN peacekeeping force, a deployment of 170 soldiers (now increased to 400) — in Mali, as it happens. Previously, Beijing’s peacekeeping contributions had concentrated on logistical and medical support, as it has done in the international anti-piracy operation off the Horn of Africa.

The PLA-Navy has, though, in recent years undertaken evacuations of Chinese citizens from Libya in 2011 and Yemen earlier this year. In 2011, it engaged in combined operations with Thailand, Myanmar and Laos on the Mekong river against drug runners.

Operations a few metres offshore are obviously very different from sending special forces or even intelligence teams on counter-terrorism missions a few thousand kilometres away. However, providing a legal framework for doing so would signal a change in both foreign policy and military doctrine.

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