Chinese Leaders’ Dire Predicament


World Bank’s Feb. 27 report points out that China’s current export- and investment-led growth model is unsustainable and a further economic liberalisation reform shall be carried out to avoid hard landing and middle-income trap. Chinese leaders have to take World Bank’s suggestions seriously as decrease in growth rate may give rise to serious unemployment leading to the collapse of the CCP (Chinese Communist Party) Dynasty.

However, the key factor of reform, privatisation, is so radical that it will certainly be resisted by vested interests and the huge number of poorly educated workers and peasants including the about 30 million Party members among them who advocate Maoist public ownership and planned economy. The large number of bloggers who support Du Jianguo’s opposition to the report indicates the strength of the resistance.

In addition, corruption is so serious that former premier Zhu Rongji had to break his silence on July 18 to make implied criticism.

The next generation of leaders has to be superheroes to maintain the high growth rate. However, I am confident as they are the youngest of the generation of talented scholars with moral integrity described in my book who overcame lots of difficulties when they grew up.

Jiang Zemin and Zhu Rongji were superheroes able to radically transform state-managed enterprises and vigorously develop the private sector, but they were lucky enough to be able to exploit the pervasive fear in the Party caused by the Tiananmen protests.

When problems of the export-led growth model loomed, the financial tsunami gave rise to serious unemployment among migrant workers. Hu Jintao and Wen Jiabao are superheroes to maintain the high growth rate as they have been lucky enough to exploit the opportunity to overcome conservatives’ opposition to the reduction of restrictions to private capital and encourage private capital to enter various other industries where there were open and hidden barriers for private capital to enter in the past.

Private capital displayed its great vigor and potential in making surprisingly great achievements in those industries and soon employed back all the migrant workers they had laid off. Seeing the evil of the monopoly of China’s huge state-owned enterprises, they allowed private sector to compete with the public sector. In order to earnestly develop China’s private sector, the State Council issued on May 7, 2010 “Several Opinions of the State Council on Encouraging and Guiding the Healthy Development of Nongovernmental Investment” (the “Opinions”).

For implementation of the Opinions, the General Office of the State Council issued on July 22, 2010 “Notice of the General Office of the State Council on Division of Labor for Major Tasks of Encouraging and Guiding the Healthy Development of Nongovernmental Investment” (the “Notice”) to assign the responsibilities for helping private investment in various industries to various central departments and local governments.

According to the Notice, central departments and local governments are to encourage private capital to participate in transformation of state-owned enterprises, conduct independent innovation, transformation and upgrading and take part in international competition. They had to help private enterprises establish their engineering and technology research centers and technology development centers, increase their technical reserves, and satisfactorily train their technical personnel.

Further, private capital is encouraged to play its role in hi-tech sector, utilize high technologies to reform and develop traditional industries, vigorously develop recycle economy and eco-friendly economy, and invest in the development of the emerging industries with development potentials, such as the industries of energy conservation, emission reduction, water conservation, reduction of water consumption, biological medicine, information network, new energy, new materials, environmental protection, integrative utilization of resources.

After over a century of defeat and aggression by foreign powers, Chiang Kai-shek’s corrupt autocracy and Mao’s tyranny, China has had more than three decades of good luck. I hope its good luck will remain till 2030 when the radical economic reform has been completed and there is sound foundation for political reform.


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