Red China, Inc. Does Communism Work After All?

By and

Part 2: " A social market economy with Chinese characteristics"


China calls this odd construct a "social market economy with Chinese characteristics" -- a term that already hints at tremendous ideological flexibility. After all, a market economy cannot be socialist at the same time. And the term "Chinese characteristics" is more than vague.

In fact, the Chinese Communist Party has shown great skill in repeatedly reinventing, making cosmetic changes to and even chiseling away at its construct of ideas. As flexible as a bamboo grove in the wind, the Communist Party is constantly replacing the content of its propaganda slogans.

All changes aside, the name "Communist Party" is kept in place, like a familiar façade, behind which the country's leaders long ago redefined their supreme political goals. Today, their objective is to build a great and strong China, a nation that can no longer be humiliated abroad and plays an important role on the international stage.

"Whatever the party calls itself, its most important job has always been to transform the country from a semi-feudal and semi-colonial state into a modern society," says economist Shi Shaomin of the state-controlled Chinese Society for Economic Reform.

Discovering the rule of law in China

The revolutionary class struggle, traditionally a communist party's bread and butter, vanished from the official rhetoric long ago. On the contrary, President Hu Jintao's speeches are peppered with talk of a "harmonious society." It doesn't seem to trouble Hu that this concept is borrowed from the feudal-era philosopher Confucius, whose teachings were ostracized under Mao.

The "Theory of the Three Representatives," the brainchild of Hu's predecessor, Jiang Zemin, now allows the party to accept private business owners as members. Instead of the class struggle, the official vocabulary is filled with words like "democracy, equality, justice, earnestness, friendship and vitality," and with phrases like the "rule of law."

This democratic-sounding verbiage conceals the concept of an elite party that uses laws and regulations -- and no longer a complicated army of class-conscious but incapable Mandarins and a tangled mass of directives and decisions -- to rule its people and country as efficiently as possible.

With more than 70 million members, the Chinese Communist Party (or "Party of Common Ownership") is the world's largest political party. It governs one-fifth of humanity and yet it remains a secretive organization comprised of countless "leadership groups," commissions, research centers, central offices -- and even a "Central Committee for Protecting Secrets."

The Communist Party and the country's bureaucracy are so tightly intertwined that party members enjoy the same privileges as government officials -- from pension rights to health care. Important functionaries even bear the title "minister." Indeed, anyone who is not a member of the party's exclusive club doesn't stand a chance of building a career in government.

In a party that insists on its sole claim to power and staunchly upholds its dogma of "democratic centralism," career changes from the private sector are generally frowned upon. Hu consistently maintains that China is and remains a "democratic dictatorship of the people."

A gold rush mentality

One would think that a market economy could hardly flourish within such an authoritarian system. But precisely the opposite is true in China, a country consumed by a kind of gold rush mentality reminiscent of the pioneer days in the United States. Although the party and central government determine the overall direction, just about anything is allowed that the 70 million party members and their fellow Chinese can concoct to stimulate China's economic miracle. After all, continued growth virtually guarantees the party a stranglehold on power. And economic growth, be it in Beijing or elsewhere in the country, is what counts in this land of myriad contradictions.

It certainly counts in Shanghai, where the party is one of 60-year-old Xu Weihu's favorite topics. He has been a member throughout his working life -- first as a simple laborer and now as head of SVA, a state-owned electronics manufacturer. With its flat-screen monitors, SVA is part of the elite in China's high-tech industry. Xu greets visitors at his company's headquarters, a castle-like building complete with Neoclassical columns, that is meant to embody the pride of achievement -- and both the company's and China's claim to the future.

Dressed in a blue suit and red tie, Xu talks like a Western business executive. But he tires of his stiff outfit within a few minutes, removing his tie and tossing his jacket onto a chair. Stripped down to his plain blue shirt, he now looks more like a normal party official -- which is exactly what he is, because he fills two positions within the company, that of CEO and the important post of party secretary.

Xu routinely tests his employees to ensure that they are firmly behind the party's key theories, including the dogma of a "harmonious society." This is extremely important, says Xu, because SVA can only contribute to industrial growth if the party maintains order within the country.

Xu has been performing this patriotic duty as head of his company since the mid-1990s, when SVA was created out of a merger of several state-owned businesses. In those days the Chinese were still producing bulky television sets for a market in which they were practically the only player.

But when China joined the World Trade Organization (WTO) in 2001, SVA suddenly found itself vying with foreign competitors. In order to arm the company against the competition, SVA entered into a partnership with Japanese electronics manufacturer NEC to produce high-quality, flat-screen TVs.

Although the Japanese provided the technology for SVA's virtually dust-free factory, where many of its 3,400 employees work clad in white, spacesuit-like clothing, this is only the beginning of a long march to global leadership. That might explain why Comrade Xu hardly mentions NEC's role in the venture, instead preferring to tout "socialism with Chinese characteristics."

But what exactly is socialist about SVA, a company whose CEO is indistinguishable from his Western counterparts when it comes to pushing for low costs and high profits? Xu chooses to ignore the question, instead focusing on what he and his party consider to be more important: that his company is Chinese.

Reclaiming lost ground

China is on the rise, intent on reclaiming a position to which it believes it is entitled. For centuries the former empire, the birthplace of printing and gunpowder, was a leading power -- both politically and economically.

China's descent from power began in the 15th century, when the country suddenly isolated itself from the rest of the world. The West forcibly put an end to that self-imposed isolation in 1842. Since then various groups have tried to revitalize China, beginning with Qing Dynasty reformers loyal to the emperor, followed by Republicans and finally the Maoists. But Deng Xiaoping, the legendary reformer who died in 1997, was the first to embrace pragmatism to bring about a Chinese rebirth. "Whether a cat is black or white makes no difference," he told his fellow Chinese. "As long as it catches mice, it is a good cat."

Deng, a short, wiry man, had had enough of the failures of Chinese communism when he announced his new policy of liberalization and reform in 1978. He had witnessed the Great Chairman Mao Zedong's 1958 plan to dispatch China on his Great Leap Forward, his declared goal having been to surpass Great Britain and eventually the United States. But the main outcome of his ludicrous mass campaign was that millions of Chinese starved to death.

In the wake of Mao's disaster, it was up to Deng to revive the economy. But instead of thanking him for his efforts, during the course of the Cultural Revolution Mao banished Deng to the eastern Chinese city of Nanchang in 1966, where he was forced to work in a tractor factory. The building is a museum today.

The workbench where Deng used rudimentary tools to file parts is on display in the museum. From his workspace, he could read Cultural Revolution slogans covering the walls, like: "Strive for strength using your own power." Sitting at his workbench in a drafty factory building, Deng must have felt that approach to communism was nothing but irony.

Tapping the energy of a billion Chinese

Although Mao eventually rehabilitated Deng, he only managed to regain his power after the dictator's death in 1976, when he began to unleash the energy and creativity of a billion Chinese.

Putting enough food on the tables of Chinese families was his first priority. Once the Communist Party allowed agricultural collectives to grow grain and vegetables and keep the profits, China's markets began thriving again.

China also abandoned the model of the Soviet Union, its former ideological counterpart. The Russians had once pointed the way for China's communists in developing heavy industry. Using the Stalinist model, Soviet advisors were sent to China to develop steel combines and factories to manufacture trucks and machinery.

But when Mao sent the Russians home in the late 1950s, the former allies became bitter ideological foes. Their paths also diverged when it came to the economy. China's communists were well ahead of the Soviets in launching economic reforms. The Chinese had one decisive advantage over the Soviets: Their agriculture had not been collectivized for as long as that of the Soviet Union. When Beijing loosened the reins on its rigid planned economy, ordinary Chinese were already capable of taking the initiative needed to produce abundant harvests.

Most importantly, Chinese reformers avoided the "shock therapy" to which Russia was subjected after the collapse of the Soviet Union, explains economist Wang Jue of the Communist Party's school in Beijing. At first the party permitted only small private businesses in villages and rural centers, providing much-needed employment for a surplus of farmers. Deng Xiaoping's motto in revitalizing his huge country was to "cross the river by feeling one stone at a time."

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