As with any autocracy, the words emanating from Beijing during the spring 2012 struggle for dominance are opaque and rhetorical in composition. They are designed to avoid any suggestion of political panic and to emoliate a population that largely fears and despises them all.
Unquestionably, however, three major economic issues identify the battle-field over which internecine war rages for the so-called ‘purity’ of the communist party. The future prosperity of China depends completely on how these three issues are resolved.
The first issue is the current dominance in the economy of state-owned enterprises (SOEs). These economic dinosaurs still account for approximately 50 percent of China’s gross domestic product. They are stifling China’s private sector and its entrepreneurial family enterprises.
The second issue is the use of state-owned banking and financial institutions to subsidize the SOEs.
The third issue is the corrupt mishandling of land rights and land usage for the benefit of state bureaucrats, a severe form of corruption that was at the heart of the recent troubles in the village of Wukan.
The reformers, led by outgoing premier Wen Jiabao and by Wang Yang, the governor of Guangzou, are on the correct side of each of these issues. They would like to introduce reforms designed to significantly reduce the role of the SOEs, to privatize the banking and financial sector, and to create land rights for peasant communities who are threatening revolution against communist party predations on such rights.
The far-leftists – I shall refrain from referring to them as conservatives – are anxious to preserve the central power of the elite through the power provided by the SOEs, the state banks and the availability of land seizures to provide wealth to provincial bureaucrats.
The princelings, who now expect to transition into power along with their leader, Xi Jinping, are more than reluctant to disclose their hands publicly in this momentous struggle, knowing the powerful vested interests that are weighing in against market reforms. All of them have lived lives of privilege under the leftist model. None of them has displayed the courage and leadership qualities of Deng Xiaoping.
Whether China’s market miracle will falter and fail, or whether it will accelerate and take China into the upper reaches of the wealth of nations, depends entirely on the outcome of this struggle. With weakness at the top, one must expect that the forces in favor of the status quo will prevail, and that China will stagnate as a middle income nation, until a capitalist revolution eventually sweeps the world’s last major communist party into the trash can of history