Thursday, May 26, 2011

Rightful Resistance Turned Wrongful?

Dear All, over night, the biggest news in China was a series of explosions in the town of Fuzhou in Jiangxi Province. I attach some news summaries of the events below. What's really striking is that the perpetrator seems to be a farmer who had petitioned through both the courts and the petition system for over ten years. In fact, he had his own weibo account, which recounts his ordeals. In the end, he apparently took matters into his own hand. On the Chinese weibo-sphere, users almost universally lauded his actions as justified! (His weibo account is: http://weibo.com/1773401361) I venture to guess that the leaders in Beijing may be more disturbed by his martyr status than by the bombing itself. For us political scientists, the may be a watershed event in the rightful resistance model developed by Kevin O'Brien and Li Lianjiang.

China Explosions Kill at Least Two

Wall Street Journal


SHANGHAI—Three explosions rocked government offices in a small city in the relatively poor Chinese province of Jiangxi, killing at least two people and injuring others, state media said.

A blast in a parking lot near the prosecutor's office in Fuzhou city's Linchuan district Thursday morning was followed minutes later by a second inside the nearby headquarters building of the district government, where two people were killed and six injured, China's state-run Xinhua news agency said. Another blast rocked an office in the district related to food and drug administration, a witness and Xinhua said.

Smoke rising from explosions that shook government offices in Fuzhou city Thursday

The explosions took place between 9 a.m. and 10 a.m. Citing a witness, Xinhua reported that windows were blown out of the eight-floor building housing the prosecutor's office. Xinhua said it didn't yet have casualty figures for the explosion there or at the third building struck.

The buildings are located within a short drive of each other.

A woman answering telephones in the Fuzhou city government offices said no one was available to comment, and calls to the local police department went unanswered.

"The cause of the blasts is still being probed, but the source with the provincial government said a farmer was suspected to have triggered the explosions to (avenge) his resentment," Xinhua said.

A photo showed grey smoke rising at least 100 meters over the site of one of the blasts.

Xinhua and other reports said it was likely at least one of the blasts was in a car. A Volkswagen Santana was destroyed and several other cars were damaged, Xinhua said.

Such incidents aren't unusual in China's city centers. In recent years, for instance, people have died in suspicious bus fires in Kunming, Chengdu, Wuxi and Shanghai that were blamed in some cases on gasoline brought on board.

Earlier this month, an explosion possibly ignited by a crude gasoline bomb injured 49 people at a rural bank office in northwestern China's Gansu province, government media reported. According to Xinhua, the county government later reported police had apprehended a suspect, a former bank employee recently fired for embezzlement.

Series of Blasts Leaves at Least 2 Dead in Southern Chinese City
Published: May 26, 2011
New York Times

BEIJING — At least two people were killed and six injured by three explosions within an hour on Thursday at different government office buildings in a city in southern China, according to state media and a provincial government Web site.

The blasts occurred in the city of Fuzhou in Jiangxi Province between 9 and 9:45 a.m., according to the government posting, which appeared on the province’s propaganda bureau Web site. The first one was at the Fuzhou Procurator’s Office, the second at the Linzhuan District government building and the third in a car park at the Linzhuan Food and Drug Administration office.

A photograph posted on a Chinese social networking Web site and on the Web site of Phoenix Television, based in Hong Kong, showed a large cloud of smoke rising above a cluster of buildings as scores of people watched from a wide avenue. Other photos and a short video on the Phoenix Television Web site showed government buildings with windows blown out, shattered glass on sidewalks and damaged cars.

The Web site of Xinhua, the state news agency, posted an item saying the explosives were planted by a farmer who was angry with the handling of a court case, which could explain why the first explosion took place at the procurator’s office. That office supervises legal matters in Fuzhou and is responsible for the prosecution and investigation of legal cases. The Xinhua posting had been deleted by 1 p.m.

The lack of rule of law in the country is an abiding source of frustration for ordinary Chinese, many of whom believe that true justice is elusive. Legal experts say China’s attempts at legal reform have stalled in recent years, and in many cases have gone backwards. The central government’s disregard for legal proceedings has been evident during a broad crackdown this year on progressive speech and thought, as security officers have detained and interrogated hundreds of intellectuals, artists, dissidents and rights advocates without citing any legal basis.

If the attacks in Fuzhou were carried out by a disgruntled farmer, as the Xinhua Web site had reported, then that raises again the question of whether China needs to establish greater rule of law in order to ensure stability.

A report under the local news section of the Xinhua Web site said the mayor of Fuzhou, Zhang Yong, gave a talk earlier this week on “maintaining social stability” to officials who were attending a class on social management. Fuzhou is a city of four million in a farming region.

Deadly explosions have taken place in recent years in several Chinese cities, even outside the restive western region of Xinjiang. In May 2008, an explosion during rush hour on a public bus in Shanghai killed at least three people and injured at least 12, according to official reports. In July 21, 2008, bomb attacks took place at around the same time on two buses in Kunming, the capital of Yunnan Province, killing at least two people. The explosions in both cities, along with violence in Xinjiang, raised security concerns ahead of the Summer Olympics, which began in August 2008 in Beijing.

Five days after the Kunming attack, a shadowy group called the Turkestan Islamic Party, which claims to be a jihadist group working for the liberation of Xinjiang, where many ethnic Uighurs are frustrated by the policies of the ruling ethnic Han, put out a video taking credit for the explosions in Kunming and Shanghai. Chinese officials said their investigations showed the group was not responsible, but it was unclear who had carried out the attacks.

Hi Victor

Yes. When I read this report I immediately thought of Fuzhou in Fujian. In 05 I think it was, some disgruntled farmer exploded a large fertiliser bomb in a bus two blocks from the city centre. Numerous deaths and body parts all over the banyan trees. Total news clampdown and the street was sanitised within hours. However, you could still bee the scorch marks on the road.
Hi Victor, I understand your concerns. However, I doubt whether O'Brien and Li have ever suggested that 'rightful resistances' have to be RIGHT. In my personal opinion, the 'rightful resistance’ is all about framing. It is a framing strategy through which citizens may gain more ‘legitimacy’ or sympathy for their noninstitutionalised protests. Therefore, from this perspective,‘rightful resistance’ will never turn wrongful since the concept itself has nothing to do with right or wrong; and whether a rightful resistance should be appreciated and/or sympathised really depends on its targets and the way it is carried out. But you are quite right to point out that nowadays many people in China simply sympathise everything that goes against the government, and this is what the Chinese Government should really concern.
The key is not whether it is right resistance or not and how it is framed, but lack of mechanisms in China for the disadvantageous to seek redress of their cases and justice, or in other words, prevalent social injustice everywhere in China for disadvantage groups to endure. The "perptrator" farmer gained sympathy because he was just a victim of the dictatorial regime. The government and the communisit party should hold responsible for the unrest incident.
The key is not whether it is right resistance or not and how it is framed, but lack of mechanisms in China for the disadvantageous to seek redress of their cases and justice, or in other words, prevalent social injustice everywhere in China for disadvantage groups to endure. The "perptrator" farmer gained sympathy because he was just a victim of the dictatorial regime. The government and the communisit party should hold responsible for the unrest incident.
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Wednesday, May 25, 2011

How do we characterize China?

When people ask me about contemporary China, I find myself describing something that is a mix of socialism, state capitalism, and crony capitalism. Of course, China has the socialist legacy of state ownership of strategic firms and the entire financial sector (except for underground banks and trust products....etc.). Because these SOEs face competition within China and in the global market, some of us call this phenomenon state capitalism. Of course, China endowed itself with capitalist competition by deliberately opening its market in many sectors to global competition, which set it apart from autarkies like North Korea. Increasingly, however, we see interest groups with strong state connections trying to influence state policies in order to obtain private gains. Crony-influenced state policies tax the households, as in the case of forced evictions, create oligopolies, as in the case of oil companies in China, and stall further reform in various sectors.

In the case of England, it might have been some form of state capitalism, as was the US. However, in both cases, institutions eventually developed to allow different interest groups to influence policies in a more transparent way. Powerful interest groups still drive policies in both of these countries, but the media and the public provide some (I emphasize "some" here) checks against crony capitalist tendencies. Eventually, some institutions (not necessarily a constitution) develop to protect the property rights of ordinary citizens.

In China, leaders with regime-wide influence used to check against cronyist tendencies. Today, I see less clear stance against powerful interest groups, and more inaction dressed up as reform. I would agree with the assessment that institutional development is lagging, although I hesitate to call this "fascist," as some have done

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Monday, January 24, 2011

Land Grab in Yunnan and Political Struggle?

Once again, Caixin hit the nail on its head within its expose of a major real estate scandal in a Yunnan county. Tengchong County, which is close to the Burmese border, is supposedly a beautiful place. In late 2007, Century Golden Resource Group rolled into this sleepy town and grabbed over 5000 mou of virgin forest land to build a giant golf luxury villa complex. After acquiring the land for 51 yuan a sq meter, Century Golden is now selling the villas at 7000-12000 yuan a sq meter. Now, there are several anomalies at work here. First, county authorities or even provincial authorities can't approve this large a tract of land. It needs the approval of Ministry of Land in Beijing. Also, some of this land was protected virgin forest, and developing of such land usually takes a lengthy approval process involving several central ministries. All of this was bypassed. Now, the Ministry of Land and Resources (MLR) has made this a "high priority case," but Caixin found that villas are still being sold and that there are no plans to demolish the villas at all. In fact, it looks as though Century Golden Resource will get away with a light fine. What kind of political power is behind this mysterious project?

Now comes the speculative part:
1. Century Golden Resource Group is headed by Fujianese Huang Rulun, who is known to be the real estate king of Fuzhou. Of course he has branched out all over China since then, most recently in Chongqing. Of course, we know that Xi Jinping lived and worked in Fuzhou for many years as party secretary of Fuzhou and later as governor of Fujian. It is all but certain that Xi and Huang had a close working relationship.

2. The article implies that "high level provincial approval" was given for this project. The party secretary of Yunnnan at the time and today is Bai Enpei, who is from Shaanxi. Curiously, both Bai and Xi Jinping were working in the Yan'an area during the late Cultural Revolution period. Bai was first at a farm then in a tractor factory, while Xi was the head of a production brigade. Well, guess what collective farms need to farm-- tractors. Although the tie is more tenuous, there is a high probability that Bai and Xi knew each other. After all, Bai's career went nowhere until 1985, when he was suddenly catapulted into the Yan'an leadership. A year before that, Xi Zhongxun was elevated to the Politburo. "Dad, my good friend Bai needs a job..."

3. The timing of the approval of the project was also curious. Century Golden signed an MOU with the county government on October 11th, 2007, four days before the 17th Party Congress formally elevated Xi Jinping into the PSC. By early November, the county had given formal approval for the project to go ahead (again in violation of dozens of central regulations). Talking about acting fast!

4. Now, the Ministry of Land, by publicly condemning this project, is clearly under instruction to give Century Golden and its political backers an embarrassing slap on the wrist. To be sure, the project will go ahead because the MLR clearly cannot impose punitive measures on an entity with this much political backing, but everyone now knows that certain leading cadre is not so clean after all.

本文来源于《新世纪》周刊 2011年第4期 出版日期2011年01月24日 财新传媒杂志订阅















协议出让与海尔,用于建设以公司命名的工业园区,同时约定将土地价款全额返还。之后,地方政府如约出让并返回土地出让金 5431万元,但海尔却中途提出将其中一块地(约
















本文来源于《新世纪》周刊 2011年第4期 出版日期2011年01月24日 财新传媒杂志订阅
《新世纪》周刊 记者 付涛 李慎

























  据腾冲县国土局办公室有关人士介绍,2010 年8月18日,腾冲县政府给世纪金源公司发了函,要求停止高尔夫别墅项目一切销售活动。第二天,世纪金源公司回复称,已撤销









































为:国用(2007)第109392号,地号533023101-DL-29-2,50年的土地使用权(2057年 11月25日),用地类型为综合用地,使用权类型为出让,使用权面积为3198806平方米(约









  2009年9月,世纪金源高尔夫项目一期建成并投入使用,别墅开盘销售。项目一期独栋540套、联排30栋(60套),占地约1000亩。10 月,世纪金源体育度假有限责任公司申





























从违规占地到造城运动 二三线城市“圈地”冲动不减





  而这些土地存在这么几个问题:第一是这么大片的集体土地几乎在一夜之间变成了世纪金源的,就是云南省一级的国土局都没有资格来报批,那五千亩的土地为什么一夜之间就变成世纪金源使用了,这里头是非常奇怪的。当然在这个过程中,刚才我前面讲到的,它先拿到土地证,过了几个月之后才交纳的土地款,而且它一边在拿土地过程中间,一边又进行了扩地的征用。而且从始自终根本没有看到过公开的招牌挂的公告,这个事情当时是国土部去年8月份的时候挂牌督办的六个比较重大的案件之一,但是直到现在这个别墅项目依然在销售,记者12月底的时候去当地看,销售人员说一期已经卖的只剩60多套了,二期他们还在建,还要建200多套。 记者:根据《新世纪周刊》的报道,恒大地产进驻四川大邑县是始于2005年地方上发展旅游业的战略规划,而这一点上地方也很无奈。他们的无奈从何而来?像恒大山水城这“突破”万亩的大规模开发,又怎样去获得征地批文呢?





Very interesting observations, Prof. Shih! I am not sure, however, if your blog post is implying that Xi Jinping is actually behind approving this enormous land transaction? But if so, I wonder how it is that the Ministry of Land and Resources would put this on their list of serious violations. It seems as though with someone as high up as Xi Jinping, the Ministry would not dare start a public investigation into the affair. The article also states that the county-level Departments (of Land and Forestry) heads have been punished for their malfeasances. I was just curious to hear how you think elite influences (at such high levels) works in such cases. Thank you!
Hi Victor

I wonder if you have picked up on this piece of major league malfeasance, given your interest in Bo Xilai.


King Tubby
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Monday, December 27, 2010

CNOOC vs China Customs
Well, Caixin published a very interesting story which immediately got "harmonized". Fortunately, Bill Bishop (Twitter @niubi) caught it and forwarded it to me. As you can see China Customs actually sent customs police and arrested sub contractors who worked with a CNOOC subsidiary which imported oil drilling machineries for cnooc. Although cnooc was given low customs rate when importing oil machineries in the 80s, that privilege has been revoked by a more recent state council document. However, cnooc still refused to pay the full rate. Now the interesting thing is that this dispute simmered below the surface until customs sent police to arrest cnooc officials and subcontractors. I would guess that high level approval is needed before this is done. This likely was done with the approval of li keqiang or Wang qishan. One or both of them seemto be flexing some muscle. However, I don't think this infringes on Zhou yongkang's turf as his power base is petro china rather than cnooc. Anyway interesting case to chew on.

caixin reporter linked to this on tianya


  本文来源于《新世纪》周刊 2010年第51期 出版日期2010年12月27


  《新世纪》周刊 记者 陈竹 特派香港记者 王端
































11 月,天津新港海关正为完不成年度海关税收目标而发愁。这时海油工程境外子公司所属一艘工程船抵达天津,向新港海关申报。新港海关同意以“暂时进口”方式报关,但提出此次申报不通过银行担保函担保,而是缴纳3亿元保证金。据知情人士透露,新港海关一位官员对海油工程人员暗示说:“过去我们帮你,关键时候你们要帮我。”























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Friday, December 10, 2010

How China Really Works...

True, I haven't posted for a long time, sorry loyal readers. Anyway, wikileak provided even some fodder for the discussion on elite politics in the form of a cable on how China really works. As seen below, top leaders are close to various business interests, and princelings are powerful. I would say the assessment below is more or less true. Moreover, at the local level, local leaders are close to various real estate companies and construction contractors, who help finance their promotions. Now, we can understand why imposing strict monetary policy that would cut off credit to SOEs and real estate developers may be difficult to do.


WikiLeaks: China's Politburo a cabal of business empires


China's ruling Politburo is a cabal of business empires that puts vested
interests over the needs of the poor and curtails media freedoms to avoiding
having shady business deals exposed in the press, according to a leaked US
government diplomatic cable.

Peter Foster
By Peter Foster, Beijing 9:00PM GMT 06 Dec 2010

The damning description of China's secretive leadership machinations also
described how the descendants of China's Communist revolutionaries - known
as "princelings" - derided officials from less august revolutionary
backgrounds as mere "shopkeepers".

The assessment of what motivates China's opaque top-level decision-makers
was relayed to Washington in July 2009 in one of the 250,000 cables
published by the WikiLeaks website.

"China's top leadership had carved up China's economic 'pie,'" the US
embassy contact said, "creating an ossified system in which 'vested
interests' drove decision-making and impeded reform as leaders maneuvered to
ensure that those interests were not threatened." The US embassy contact
also asserted there were no "reformers" within the top Communist Party
leadership, only competing factions that sought to protect their business
empires from attack by in-coming leaderships.

The source said that it was "well known" that former Chinese premier Li Peng
and his family controlled China's "electric power interests" while the
country's security tsar Zhou Yongkang controlled the state monopoly of the
oil sector.

The wife of China's premier Wen Jiabao, a popular figure in China often
affectionately referred to as "grandpa Wen" for his feelings for the common
man, is said to control China's "precious gems" sector, while Jia Qinglin,
ranked fourth in the Politburo, has "major Beijing real estate

Further down the political food-chain, the desire of local officials to
protect current business interests also explained China's reluctance to rein
in rising inflation and take steps advocated by international economists to
re-orientate its economy more towards domestic consumption.

"They [local officials] always supported fast-growth policies and opposed
reform efforts that might harm their interests," the contact said, adding,
"As a result, the proponents of "growth first" would always be in a stronger
position than those who favored controlling inflation or taking care of the
poor." The assessment also said that economic self-preservation was one of
the key reasons why China's leaders were so resistant to increased media

"Vested interests were especially inclined to oppose media openness, he [the
contact] said, lest someone question the shady deals behind land
transactions." China's reluctance to engage in political reform is to be
highlighted this week when Liu Xiaobo, the dissident author of the Charter
08 petition for greater rights in China, is awarded the Nobel Peace Prize
"in absentia" after being jailed in China for 11 years for challenging state

The perception inside China that the country is run in the interests of a
Party elite is also growing, with an online poll last February by the
state-run China Daily finding that more than 90 per cent of Chinese believed
that the new rich had achieved their wealth through political connections.

The web of commercial interests also forces China's modern rulers to act by
consensus, with the current President Hu Jintao likened to the "Chairman of
the Board or CEO of a big corporation", juggling factional interests, unlike
the autocratic figures of Mao Tse-tung or Deng Xiaoping who could rule by

The man tipped as China's next leader, Xi Jinping, was selected, not for his
leadership qualities but, the contact said, because he "maintained a
non-threatening low profile and had never made enemies" and could be relied
upon not to wage political vendettas through anti-corruption investigations.

"The central feature of leadership politics was the need to protect oneself
and one's family from attack after leaving office. Thus, current leaders
carefully cultivated proteges who would defend their interests once they
stepped down," the contact said.

In the past in-coming Chinese leaders have consolidated their position by
instituting crackdowns, with Jiang Zemin, the former president, shutting
down a number of businesses owned by the associates of his predecessor, Deng
Xiaoping, when he came to power in the early 1990s.

A similar process was observed in 2003 after Hu Jintao took office, with
several high-level figures in Jiang Zemin's Shanghai power-base facing
investigations and purges that analysts said were aimed at curtailing the
power and influence of the Jiang faction.

The contact also outlined the scornful factionalism that divided the scions
of the old 'red' families - those with revolutionary lineage whose fathers
and grandfathers fought to bring the Communists to power in 1949 - and those
who had risen up the Party ranks, so-called "shopkeepers".

China's current leaders, President Hu Jintao and prime minister Wen Jiabao,
both fall into the latter category, while the putative next leader,
57-year-old Xi Jinping, is the son of a revolutionary hero Xi Zhongxun and
often referred to as a 'princeling'.

The US embassy contact said that China's princelings felt they had a "right"
to the fruits of the revolution, recalling one family deriding those without
revolutionary pedigrees by saying: "While my father was bleeding and dying
for China, your father was selling shoelaces".

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Tuesday, May 18, 2010

The People's Daily Cites Me

Dear Readers, my life has reached a great milestone-- the People's Daily website has cited my work through an NDRC official. As you can see though, the official number and my number have converged in recent weeks. The official number used to be 6 trillion. It is now 7.38 trillion, which actually is a CICC number....


Local govt. debt crisis unlikely: official
13:24, May 18, 2010

A Chinese local governments' debt crisis is unlikely to break out in China, but it is worth close attention, Xu Lin, an official from the National Development and Reform Commission, said at a forum Sunday.

Bank regulators and economists say they are increasing concerned that borrowing by local governments is fueling asset bubbles and may lead to a surge in bad debts at the nation’s banks. Local-government entities may have had 11.4 trillion yuan (US$1.7 trillion) in outstanding debt by the end of last year, according to estimates from Northwestern University Professor Victor Shih.

However, according to data from the China Banking Regulatory Commission, China’s outstanding loans to local governments’ financing platforms stood at 7.38 trillion yuan by the end of 2009, rising 70.4 percent year on year.

The risks posed by local government financing vehicles should not be exaggerated, government adviser Ba Shusong also wrote in the Shanghai-based Wenhui Bao last week.

Commercial banks in China are “very cautious” about lending to the investment arms of county-level governments who account for more than 70 percent of all such local authority entities, said Ba, who is deputy director-general of the Financial Research Institute at the State Council Development Research Center.

Very few local governments rely on land transfer income for more than 50 percent of their funding and most have many sources of income, he said.

Source: Shenzhen Daily


My condolences. I'm of the opinion that is always better to be off their radar, rather than on. Unless one unabashedly and publicly agrees with them on issues of importance to them, something I think your independent mind will not permit.


Rich Kuslan, Editor

























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Friday, April 16, 2010

Premier Wen's Essay on Hu Yaobang

As many of you know, Premier Wen Jiabao recently penned a very emotional essay remembering former Party Secretary General Hu Yaobang. To be sure, it was published on the 21st anniversary of his death, but there are some very unusual elements of this essay. I attach the full text below for readers' own analysis. Needless to say, the China studies community has been in an uproar about this essay. Below, I present my own take of this essay; comments welcomed!

To be sure, Wen shows no hesitation to display affection publicly, but if his feelings were "sincere," why didn't he write such an article last year? Also, like many, I find the last paragraph especially strange. Isn't reminiscing Hu's greatness enough? Why also tell readers that he continues to visit Hu's widow every year? I read that as a credible signal to all Hu YB sympathizers which side Wen stands on.

Now, the question is why send such a signal. To be sure, Hu Yaobang has been making a come-back in the official press. the last time that Hu was praised by a Politburo Standing Committee member was Zeng Qinghong's speech in 2005. If you read the text of the Zeng Qinghong's 2005 speech on HYB (which I also append below), it reads like a detailed official biography of Hu with some usual pleasantry about "great Marxist"...etc at the end. The Wen piece clearly appears to be the most "heart-felt." Again, the issue is why the need to send such an emotional signal.

One possibility is that Hu Jintao is trying to send a strong signal of the CYL's power in the run-up to the 18th Party Congress. But if that were the case, why not just write such an article himself. I am sure Hu can conjure up many emotional anecdotes of his former mentor.

Finally, we come to the hypothesis that Wen Jiabao himself is in deep trouble and may be under threat of being removed. I find this possibility the most reasonable. In essence, Wen may feel that he is under direct threat of being removed or may implement a policy which puts him in danger of being removed. As either a last ditch effort or an insurance policy, he writes this article to rally HYB sympathizers on his side in case his enemies move to remove him from power. In particular, I was struck by the paragraph on Hu YB's insistence of working despite
being ill. We know of course that "illness" has historically been used to sideline or remove top officials in China (Chen Yun, Li Peng...etc.). It seems that Wen is saying through that passage that "as a loyal student of HYB, I would never let illness stop me, so you shouldn't believe people if they say I am stepping down due to illness." All this may be related to the possible implementation of the property tax, which may indeed place Wen under the threat of removal by powerful interests.

http://www.sina.com.cn 2010年04月15日05:24 人民网-人民日报














  2月10日上午,身体稍稍恢复的耀邦同志不顾大家的劝阻,坚持前往广西百色。经过320多公里的山路颠簸,耀邦同志于晚上6点多到了百色。在百色期间,耀邦同志带着我们参观了中国工农红军第七军旧址,并与百色地区8个县的县委书记座谈。2月11日晚,我们赶到南宁。随后两天,耀邦同志在南宁进行短暂的休整。我根据耀邦同志的要求,又带着几个同志到南宁市郊区就农业生产、水牛养殖、农产品市场等问题进行调研。每次回到住地,他总是等着听我的汇报。 14日和15日,耀邦同志经钦州前往北海市,先后考察了北海港和防城港的港口建设。2月16日,耀邦同志又折回南宁,与三路考察访问组人员会合。接着,他用两天半的时间听取了考察访问组和云南、广西、贵州的汇报。






  1985年10月,我调到中央办公厅工作后,曾在耀邦同志身边工作近两年。我亲身感受着耀邦同志密切联系群众、关心群众疾苦的优良作风和大公无私、光明磊落的高尚品德,亲眼目睹他为了党的事业和人民的利益,夜以继日地全身心投入工作中的忘我情景。当年他的谆谆教诲我铭记在心,他的言传身教使我不敢稍有懈怠。他的行事风格对我后来的工作、学习和生活都带来很大的影响。1987年1月,耀邦同志不再担任中央主要领导职务后,我经常到他家中去看望。 1989年4月8日上午,耀邦同志发病抢救时,我一直守护在他身边。4月15日,他猝然去世后,我第一时间赶到医院。1990年12月5日,我送他的骨灰盒到江西共青城安葬。耀邦同志去世后,我每年春节都到他家中看望,总是深情地望着他家客厅悬挂的耀邦同志画像。他远望的目光,坚毅的神情总是给我力量,给我激励,使我更加勤奋工作,为人民服务。


曾庆红 (2005.11.19)

Prof. Shih, some observations from Chinese political tradition's perspective:

1. Wen is notorious for his emotional style of political performance, particularly public appearance and writing. So it's not unusual for him to go emotional in such article. It may be the case that he carries much emotion in the article of HYB, given their past connections, but such conclusion can not be drawn based on his rhetoric in this article.

2. The reason Wen didn't write it last year was clear, a reminiscence of HYB in the 20th anniversary of Tian'anmen Square naturally leads to a reminiscence of all things happened following HYB's death that year. It'd be a political disaster and earthquake to publish that in 2009, unless Wen has a more aggressive agenda.

3. HYB's stature in CCP's history is unique. He has always been officially recognized as "Leader of the Party and Nation", and the official treatment he received posthumously is at a reasonable level. No political committee member in recent terms has publicly criticized HYB. In CCP's perspective, HYB is completely different with Zhao Ziyang, and there'll be no political asset for any leader to deny HYB. Hence, no one actually stands against HYB, So Wen's benefit from signaling his stance is actually limited, if any.

4. If we take a look at the Chinese political tradition in remembering leaders, Zeng Qinghong's appearance in 2005 is actually the most meaningful inroad. CCP tends to remeber high leader's birth at the beginning point of each decennium,i.e. 80,90,100 anniversary. And HYB didn't get such one in 1995, his 80 anniversary, which is understandable given the atmosphere then, the 2005 then become crucial in evaluating CCP's attitude toward HYB. ZQH's appearance, as the Standing member in charge of party affairs, carries great weight. In terms of his speech then, it's a standard-written one in typical CCP leader memorial style. ZQH's speech and WJB's article is two form of expression, with the former disallows personal emotion, and actually reflects the authority's appreciation of HYB, rather than ZQH's personal idea. WJB's essay is a personal article, not for official occasion, and given his lavish and emotional style, comes as no surprise.

5. It's possible that this article is intended to push CYL's power before 18th congress. But one notable fact in CCP politics tradition is that party boss rarely publish personal authored pieced on People's Daily. I find no record of HJT, even JZM publishing articles of this style on People's Daily ever. (except political documents, such as new year speech, party congress report). Interestingly in contrast, Wen has utilized People's Daily in remarkable frequency to publish personal-authored articles similar to this HYB one. That's also one thing worth examination, on different political communication strategies different leaders choose. So even HJT wish to write such articles, it's not consistent with his style. And I wonder whether WJB is closely-allies with HJT enough to make push for CYL. WJB is never considered as a part of CYL, and is not expected to be a staunch supporter of this bloc.

6. Removal of PM is of greatest significance in China, the only time when PM was unusually removed was in 1980, associated with major political reshuffle then. There's extremely slim possibility that Wen even foresees a potential forebode of risk of removal. With his term to expire within 3 years, it's so hard to imagine that Wen is at risk of removal, and if he's in that dangerous situation, I don't think he'll still be capable of getting this article published.
I always appreciate your analysis, Prof Shih, but I do wonder a bit about this kind of reading.

If you - a scholar who's dedicated himself to reading the runes - and all the other political analysts can't read clearly what the "signal" being sent here is, then why do we believe that party cadres (not always intellectual giants) are able to decode them? This idea of treating Party publications as code breaks down if no-one can actually understand the code.

I liked the essay a lot - I'm a bit of a Wen fan, despite the emetic Uncle Wen stuff. Until someone comes up with a better reason, I'm going to take his essay at face value.
No way I know way way less than central committee members
Another notice,

Wen omitted one notable fact that, when HYB and Wen paid visit to Xingyi, Guizhou Province in 1986, HJT happened to be the party boss there. Accordingly, HJT must be present during HYB and Wen's visit. Interesting to see this historical dynamic not cited in Wen's article.
I really don't think that the HYB piece was a move by Wen to bolster support for himself. Agree with earlier comments that there is almost no chance he leaves before the transition. In China the safest road is almost always to err towards the politically conservative left. If Wen sensed he was in a tepid political position why would he add additional risk by penning this essay? It doesn't make sense at all to me.

My theory is that Wen is trying to bolster support for planned policy changes. Hu Yaobang is well-known to be a proponent of reform and of the youth/student demographic. The Hu/Wen administration is currently considering some difficult economic reforms (I agree, property tax is one, but only one of these) and meanwhile the problems of the unemployed recent college demographic are not going anywhere quickly. So rekindling the memories of HYB's effective governance style (which is a major focus of the piece), and promising to emulate these lessons, seems to be a way to lay the groundwork for how the leadership is going to get through a tough couple of years before 2012.
I'll come back on your reply there.
First, modesty is always attractive; but modesty should not blind you to reality. You may not be as "in the loop" as the very highest in Beijing, but you know an awful lot about Party factionalism. More than most Party members.

Second, you seem to be confusing two groups of people here. If Wen had a message for the central committee members, he would talk to them. They're all right there in Beijing. He can get in a room and say what he wants to say.

The purpose of publishing an article would surely be one of two things: (a) a way of talking to the much broader Party membership (and they really aren't in the loop; there's no reason to assume they can "crack the code"); or (b) a public statement which serves some kind of purpose analogous to your "nauseating displays of loyalty". Obviously not the same, as Wen's at the top.

If it's (a), then the article needs to be decodeable by a large proportion of the Party. Your difficulty in reading suggests that it isn't.

If it's (b), then we need to ponder what the value of such a display would be, given that it can't be expression of loyalty to a faction. I haven't seen a good explanation of what it might be.

So I'm left with (c): it's just an article that Wen wanted to write, and enough people decided that with HYB dead 20 years, it wouldn't be too dangerous now.
I think this article by Wu Zhong at Asia Times is the best out there on the subject. Basically makes the argument that Wen wants to correct the historical record before he leaves office.

Whatever his motives, Premier Wen is apparently carrying on with his one-man campaign against the system. Any comment Professor Shih about his visit to Beijing University?
Any comment also on Yu Keping's article on Hu Yaobang in Study Times that appeared shortly after Wen's?
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Sunday, April 04, 2010

A Reply to my Critics on Local Debt

Victor Shih

Since the publication of my editorial in the Asian Wall Street Journal on local debt, there has been a wave of interest on this issue. Several investment banks have issued reports on local debt, and some of them have disputed my main finding that current local government investment vehicle debt stands at around 11.4 trillion RMB. The World Bank likewise addressed this issue and came up with a much lower estimate on local investment company (LIC) debt. In the discussion below, I outline some reasons why I still adhere to my estimate that existing local investment vehicle debt stands at around 11 trillion RMB. Furthermore, I once again reiterate that local debt is a serious problem which will require decisive actions from the Chinese government.

Some points people have raised about my estimate of local debt:
1. The Chinese government claims that there is only 6 trillion RMB in local investment vehicle debt.
My response: A. This widely cited figure was produced by a 6/2009 CBRC survey of the situation. The exact methodology is unclear, but informants state that the CBRC extrapolated this amount on the basis of a partial study of a few provinces.
B. Other government agencies have provided conflicting and higher amounts. For example, a MOF research team uncovered "well over 4 trillion" in late 2008 (excellent Credit Swiss research even states that the 4 trillion was a YE 2007 figure).
C. The CBRC finding concerns only bank loans, but total debt should also include bond issuance and accounts payable, which constitute triangular debt.
D. if we sum the gross debt of just the top 50 or so LICs, we quickly arrive at gross debt of over 2 trillion (try adding the gross debt of Guangdong Highway, Guangdong Transportation Group, Chongqing Highway, Beijing Basic Construction, Shanghai Urban Construction and Development Company, Shanghai Pudong Development Co., Tianjin Urban Basic Infrastructure, Binhai Development...etc.), so the remaining 8000 or so entities only owe 4 trillion (on average 500 mln RMB each)?

2. The 11.4 trillion is too high when compared with total bank loans in various categories.
My response: A. First of all, total loans outstanding at the end of 2009 was well over 40 trillion RMB, and I think it is completely reasonable to believe that nearly 1/4 of it was loans to LICs. In fact, I wouldn't be surprised that a higher share of bank loans ended up in LICs.
B. Some analysts have trouble believing that such a high share of medium and long-term loans ended up in LICs. When we consider how many LICs there are and the vital role they play in the local economic strategy, it is not surprising that likely as much as 3/4 of new medium and long term loans in 2009 ended up in LICs.
C. Beyond medium and long term loans, many LICs are holding companies with subsidiaries engaged in a wide range of businesses. For example, the LICs run thousands of hotels across China, and loans to these hotels would be classified as loans to the service industry. Thus, in addition to medium and long term loans and loans to infrastructure, it is perfectly reasonable for a sizable share of working capital loans, trust loans, and loans in the "other" category to end up in LICs. Again, gross debt of these entities would also include bond issuance and debt owed to each other.

3. LIC debt can be calculated by subtracting government spending on basic infrastructure from the total infrastructure spending figure. In that light, LIC debt only increased by 2.8 trillion RMB in 2009.
My response:
A. First, as pointed out, LIC are diversified holding companies which do not only engage in infrastructure construction. For example, thousands of subsidiaries of local investment companies engage in real estate development and absorb some share of the real estate loans. The figure generated using the method above, however, may be meaningful one-day when the government decides how much of the existing LIC debt it will seek to take over as part of a bail out.
B. The calculation above assumes that much of the extrabudgetary revenue from local governments derived from land sales went to infrastructure construction. According to excellent research done by Standard Chartered and UBS on land sales, much of the land sales revenue is spent on compensating original residents, leaving only a minority share for actual investment. Thus, a realistic application of this methodology would lead to something like 3.5 trillion RMB in new loans to LICs, not just 2.8 trillion.

4. My estimate of 12.7 trillion in future LIC debt is baseless and is way too high for YE 2011.
My response:
A. To be sure, I now think most of this debt will not realize by YE 2011 also. However, it would not be far-fetched to think that most of this debt will be realize by YE 2012. This estimate is not "baseless" as it comes from the hundreds of lines of credit that banks have granted to local governments. As long as banks more or less adhere to these lines of credit, they will lend this amount to local governments at some point in the future.
B. Although the State Council has called for more caution in lending to local investment vehicles, we still see local governments aggressively trying to raise money from the banks. Hubei, for example, has an investment plan worth 12 trillion RMB, and plans on investing 6 trillion RMB between now and 2012 (please see http://nf.nfdaily.cn/epaper/21cn/content/20100324/ArticelJ07002FM.htm). Of the 6 trillion, at least 3 trillion will come from bank loans and other forms of debt. If Hubei is able to realize its ambition, we are already 1/4 of the way toward my 12.7 trillion estimate. Thus, unless the central government harshly restricts overall credit, I think local governments at the provincial and municipal levels will have no trouble borrowing an additional 12.7 trillion by YE 2011 or 2012.

Beyond critizing my estimate, some investment bank reports also argue that whatever the debt amount, the Chinese government is fully capable of addressing this issue and in heading off a financial crisis. On this point, I mainly agree with my colleagues, but I still don't think the problem is trivial, especially in light that local governments seem determined to take on trillions in additional debt in the coming two years to finance ambitious investment plans. My main worry is that unless Beijing decisively restricts local investment projects, local investment companies will continue to borrow in large quantities in the coming two years.

Even relatively bullish investment bank report suggests that new non-performing loans in the banks can increase by 2-3 trillion RMB in the next couple of years. To be sure, this is well within the government's ability to handle and likely will not lead to any kind of financial crisis. However, this remains a daunting problem for the government and for current shareholders of China's banking stocks. This will require the China Investment Corporation to inject tens of billions of dollars into banks through Huijin. Additional asset management companies will have to be formed to take over the NPLs. This is a lengthy and difficult process involving numerous ministries and interests, which is expected to generate a great deal of uncertainty. If the expectation indeed is a couple of trillions in NPLs, it deserves careful watching rather than dismissal.

Finally, some investment bank reports suggest that the enormous sum of state assets must be considered along side of the debt. If debt ever becomes a problem, the Chinese government can always sell state assets to repay the debt. Here, I am in complete agreement with my colleagues. It will be a great day when the Chinese government decides to privatize trillions in state assets to raise money to repay local debt. The record of the Chinese government in privatization, however, is spotty at best. Even in the late 1990s, when the fiscal shape of the central government was at its weakest, only small SOEs were privatized, often through murky processes to insiders. Since then, both the central and local governments have done their utmost to maintain the dominance of large state-owned corporations through protectionism and subsidies from both the budget and the financial system. Instead of privatizing these firms and allowing them to compete on equal footings with private and foreign firms, they are given every advantage so that they can dominate the domestic and even the global markets. The financial system in particular channels the bulk of its resources to the state sector. Unfortunately, it does not seem privatization is anywhere near on the horizon. Instead, we can expect trillions more being poured into state entities, including local investment companies, in the foreseeable future.

Man alive, China too? Is there a country out there that is NOT in debt? Awesome stats, I know whom I sit under if directed to take classes on Chinese politics!

Thank you for enumerating the responses to your critics. The sheer volume suggests your research has made quite an impact on popular thinking.

You seem to invoke investment banks and their research quite frequently. While it is gracious of you to give their views air time, I think you can afford to be less conciliatory. Some of us who have published "research" on China at an investment bank (at least since 改革开放 took hold) would not take those reports' conclusions as seriously as you seem to.

As in many other circumstances, the road between the data and their interpretation is filled with unscientific potholes. No employee can afford to be critical of Chinese policy without somehow softening their conclusion and/or using the findings in a normative prescription for how the central government should do the "right" thing. As a recent example, take Citi chief economist Willem Buiter, he of the former Maverecon blog, in his March 24 note "Is China Blowing Bubbles?":

"Even if a large fraction of the loans made during 2009 as part of the government-mandated bank lending boost were to go bad eventually, this does not mean that the policy itself was misconceived from a macroeconomic and social welfare perspective...If even part of the additional productive capacity created through the bank-financed investment stimulus has a positive social rate of return, the policy is superior to paying unemployed workers to dig holes and then to fill them again."

Left unsaid, of course, is the very risk you have highlighted, that this large block of LIC lending has not been directed toward "additional productive capacity". Investment bank research on China has many fine qualities but balance is surely not one of them.
Dear professor, are the excellent research reports by the investment banks you mentioned in this blog post available online? I am very interested in them, but do not know where to find them for research. Thanks very much.
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Tuesday, March 30, 2010

Dear All, this excellent piece by the Financial Times may well bar me from China! It's very good for Northwestern's reputation in Asia, however. Now everyone will want to come!

China: To the money born

By FT Reporters

Published: March 29 2010 22:37 | Last updated: March 29 2010

New Horizon Capital is one of the most influential and successful participants in China’s fledgling private equity industry. It has billions of dollars under management and a stable of investors that includes Deutsche Bank, JPMorgan Chase, UBS and Temasek, Singapore’s sovereign wealth fund. But you would not guess any of that from its central Beijing headquarters.

The company has no nameplate in the lobby of the Golden Treasure Tower, a nondescript building near the Forbidden City, the traditional seat of imperial power. Its simple 12th floor offices are identified only by a small sign inside the door that reads, in Chinese, “New Horizon Growth Investment Advisory Limited”.

The company does not need flashy suites as it has one of the most valuable assets in China. He is Winston Wen, an MBA from Northwestern University’s Kellogg business school in the US who keeps a low profile and bears a striking resemblance to his father – Wen Jiabao, premier of the People’s Republic of China.

The younger Mr Wen and New Horizon are in the vanguard of a more aggressive generation of taizidang (“princelings”) – offspring of senior Communist party officials – who dominate the burgeoning home-grown private equity industry, where huge profits are to be made from restructuring state assets and financing private companies.

In 2009 private equity deals in China totalled $3.6bn, accounting for one-third of all such transactions in the Asia-Pacific region, according to Thomson Reuters. But industry participants say the potential market is far larger.

According to those working in the sector, the princelings’ ascendance is squeezing out less well connected operators, including foreign firms, which might have important consequences for two reasons. First, private equity could play an important role in modernising the economy, channelling funds to promising but capital-starved companies – but those benefits will be felt only if the industry is run in a professional and competitive manner.

Second, some in the political establishment fear that princeling dominance of private equity could exacerbate public perception of nepotism and misrule at the top of the Communist party. In an opaque authoritarian system lacking the popular legitimacy of a democracy, such fears are hard to dismiss. A recent online opinion poll by the People’s Daily, the party’s official mouthpiece, found that 91 per cent of respondents believe all rich families have political backgrounds.

In an interview with the same newspaper, the former auditor-general said the fast-growing wealth of officials’ children and relatives “is what the public is most dissatisfied about”. Li Jinhua, widely respected as the senior graft-busting official between 1998 and 2008, told the paper this month: “From the numerous cases currently coming to light, we can see that many corruption problems are transacted through sons and daughters.”

Many of the elite’s children are western educated and, over the past 15 years, dozens have been recruited by western companies and banks hoping to secure an entry into the Chinese market and win mandates to take state-owned companies public in New York or Hong Kong. As most foreign investors know, employing the relative of a senior party leader as an adviser or employee can help cut through bureaucratic obstruction and resistance from local interest groups.

But today those institutions and investors are scrambling to invest in the private equity funds of princelings who would once have been on their payroll. “In the past, the best option for these people with ‘background’ was to go to the high-paying western investment banks but now the economic strength has shifted,” says one person in the private equity industry, asking not to be named because of the sensitivity of the topic. “Now they’re saying to the foreigners, ‘Hey, I’m in the driving seat, I have all the deals – so you give me your money and I’ll invest it myself and take a big cut’.”

Prominent private equity princelings include George Li, a former banker at Merrill Lynch and UBS with an MBA from the Sloan School of Management at the Massachusetts Institute of Technology, whose father, Li Ruihuan, was one of the country’s senior leaders from the late 1980s until 2003. Another son, Jeffrey Li, recently resigned as China head of Novartis, the pharmaceuticals group, to go into private equity, according to people familiar with the matter.

Wilson Feng, who bankers and private equity investors say is the son-in-law of Wu Bangguo – officially second in the party hierarchy – left Merrill Lynch two years ago to launch a fund with ties to the state-owned nuclear energy conglomerate, according to media reports and people familiar with the matter. Mr Feng was key to securing Merrill’s mandate to take Industrial and Commercial Bank of China public in Hong Kong in 2006 in the biggest initial public offering in history.

Other private equity princelings include Li Tong, daughter of Li Changchun, the member of the nine-strong ruling Politburo standing committee in charge of propaganda and the media. Ms Li now runs a private equity fund at Hong Kong-based Bank of China International focusing on the media sector, according to three people familiar with the matter. Stanford-educated Jeffrey Zeng, son of Zeng Peiyan, former vice-premier, has also set up a fund affiliated with state-owned financial institutions.

“This is turning into a crucial moment for the financial industry in China,” says the head of a foreign bank in Beijing.“But we are very worried that foreigners and other skilled Chinese are being shut out by a string of princelings and other very well-connected people trying to dominate [the private equity] market.”

The government has been encouraging the creation of a home-grown private equity industry in recent years but approvals to set up funds are tightly controlled and investments often require them from numerous state agencies. Having the relative of a top leader in its management team can help fledgling funds overcome these hurdles.

Princelings have long been suspected of leveraging parental political power for personal gain; the topic was a source of public anger during the 1989 Tiananmen Square student protests that ended in a bloody military crackdown. But Beijing political insiders say two men led the way for the ambitious new generation, fostering the modern perception of close ties between money and political power.

Levin Zhu, son of former premier Zhu Rongji, and Jiang Mianheng, son of former president Jiang Zemin, are familiar to many foreign investors, having worked for or set up joint ventures with several large western companies. Their fathers helped push through some of the past two decades’ most important market-based reforms, including World Trade Organisation membership.

Mr Zhu has a PhD in meteorology from the University of Wisconsin-Madison. Following a stint at Credit Suisse First Boston in New York, he returned to China in the late 1990s and orchestrated a virtual take­over of China International Capital Corp, a joint venture in which Morgan Stanley holds about 34 per cent.

Mr Jiang boasts a PhD in electrical engineering from Drexel University in Philadelphia. Returning to Shanghai in the early 1990s he was courted by foreign investors who saw him as the country’s most valuable joint venture partner. Today, he controls Shanghai Alliance Investment Limited, a government investment company operating much like a private equity firm.

With their parents both out of formal office since 2003, the influence of Mr Jiang and Mr Zhu has waned. But as children of the “third generation” of technocratic leaders, they are seen to have paved the way for the current wave of princelings. “Those two really helped create the image of Red families running this country for their own benefit,” according to one person who deals closely with many princeling families. “Their actions have given all the younger generation a green light to go out and aggressively build their own buckets of gold, no matter what the consequences for the image of the party or the leadership.”

By squeezing out foreigners and other competition, dominance of the private equity sector by princelings will bring few benefits in terms of management skills or financial discipline, some analysts and industry participants say.

“Private equity is a very good area for princelings because with these sorts of connections you can get into companies ahead of their IPOs and make a lot of money in a short space of time,” says Professor Victor Shih of Northwestern University. “It is an easy way to make money because everyone will be willing to back them because of their connections. Everyone will do it willingly in order to potentially get favours from senior leaders in return.”

People close to several private equity princelings say they often feel they are victims of reverse discrimination; that no matter how smart or hard-working they are, the public will assume their success relies purely on nepotism. However, some important operators in the Chinese sector, while benefiting from family links, are seen in the industry as well qualified in their own right. One such person is Liu Lefei, son of Liu Yunshan, head of the party’s central propaganda department. The younger Mr Liu previously managed Rmb1,000bn ($147bn; €109bn; £98bn) as chief investment officer for state-owned China Life Insurance and has taken over the reins of the state-controlled Citic private equity fund.

The Financial Times was unable to reach some of the individuals named in this article or their companies, and those who were contacted refused to comment.

Because it can prompt public dissatisfaction and accusations of nepotism, information about the private lives and business dealings of leaders and their offspring often falls within the scope of vague and wide-ranging state secrecy laws, regularly used to silence critics of the regime. Even the existence of leaders’ relatives is usually a well-guarded secret. Internet searches on princelings and their activities are usually blocked in China.

Most live in luxurious gated communities around Beijing and maintain holiday homes around the country and the world. Spouses are almost never seen in public. Younger, less discreet, princelings can be identified in Beijing by their luxury sports cars with military or paramilitary licence plates, which allow them to ignore traffic regulations and avoid being stopped by the police.

But the princelings themselves face a dilemma. If their business activities are too successful or high profile they may damage the political fortunes of their powerful parents, even without specific allegations of inappropriate dealings or special privileges.

Some analysts and industry insiders foresee a situation where the scions of powerful political families use the private equity industry to carve up parts of the economy at the expense not only of foreign investors but also of the older generations of princelings with direct bloodlines to China’s revolutionary Communist party founders.

But the constant jockeying for position within the party behind closed doors in Beijing is set to intensify as the next big leadership transition approaches in 2012. Some analysts say the private equity activities of the more aggressive younger princelings could be used by political enemies as a weapon against their parents.

In the case of Winston Wen, “You have to wonder if this will leave Wen [Jiabao] open to some sort of blackmail if his son has such a high-profile position in the financial sector, where all sorts of favours might be offered”, says Mr Shih. “What if someone gets some dirt on Winston Wen?”


‘Red-blooded ‘veterans versus ruthless arrivistes

The term “princeling” was coined to refer specifically to the children of senior leaders of China’s Communist revolution – the veterans who joined Mao Zedong on the fabled Long March of the mid-1930s or were members of the inner circle at the time of the 1949 Communist victory.

Today it is used more broadly to include the offspring of later generations of technocratic leaders – but a distinction remains between them and the truly “Red-blooded” revolutionary families.

Beijing political insiders say that distinction is made sharper today by the aggressive business dealings of the newer generation of princelings and their moves into the hot new field of private equity.

None of the most prominent players in the burgeoning domestic private equity sector is from the revolutionary dynasties that include the offspring of such Communist icons as Deng Xiaoping, the late paramount leader, and the children of the “eight immortal” party elders who supported his rule through the 1980s and 1990s.

“The old revolutionary royalty, like the family of Deng Xiaoping, are still untouchable and they regard this country as belonging to them in a very real sense,” says one such insider. “They see the newer generation of princelings as more ruthless, and some even go as far as saying that when the eunuchs become powerful it means the end of the dynasty is near.”

Some analysts see the private equity activities of princelings as a potential political problem as the government prepares for a leadership transition in 2012, especially since there is a recent precedent of senior leaders cracking down on the business activities of their predecessors’ children.

When he was consolidating his power in the early 1990s, Jiang Zemin, former president, shut down companies and arrested a number of business executives with close ties to Deng’s children.

After Hu Jintao, the current president, came to power in 2003 he launched a similar high-level crackdown that brought down the party secretary in Mr Jiang’s power base of Shanghai and netted prominent real estate developers and businessmen with close ties to his son.

In the jockeying for power and influence that is sure to dominate the Beijing political scene for the next two years and beyond, the new generation of princelings may become pawns in a high-stakes game, just as their predecessors did before them.

Nice post. I am very skeptical that the original structure of the PRC can survive the influx of capital it has experienced. This article is troubling as it appears oligarchy is imminent.
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Thursday, March 04, 2010

New Mobilization Law a Political Maneuver?

Well, I have been really busy with the local debt stuff that I hardly paid any attention to the on-going NPC session. Fortunately, I saw a twit yesterday on something I think will be very important. Apparently, the NPC will try to pass a law which divides the power to mobilize the army between three actors. First, a full or even a partial mobilization must be approved by the NPC Standing Committee. Second, both the State Council and the Central Military Commission (CMC) will implement this order from the NPC. To be sure, people say that well, that is just procedural because the army always just obey the party through the CMC.

This has been the case up to this point indeed. But imagine if Li Yuanchao was the head of the NPC and Li Keqiang was the premier, they now have strong legal grounds to veto a mobilization order by Xi Jinping, who at some point may become chairman of the CMC. May this be an intentional move by Hu Jintao to dilute the power of the CMC? I think so, and we can find numerous examples of this kind of power dilution through institutional changes. I think it is a brilliant move on the part of Hu. One implication, however, is that the principle of "party controlling the military" is weakened by this law because now the NPC has the constitutional authority to approve mobilization. This may have enormous long-term implications.

The key provision is "国务院、中央军事委员会领导全国的国防动员工作,制定国防动员工作的方针、政策和法规,向全国人民代表大会常务委员会提出实施国防动员的建议,根据全国人民代表大会常务委员会的决定和国家主席发布的动员令,组织国防动员的实施。"

But then there is also an escape clause which allows the CMC to act unilaterally in an extreme emergency...

Here is the draft law:

中国人大网 www.npc.gov.cn日期: 2009-04-24浏览字号:大 中 小打印本页 关闭窗口




第一章 总  则

  第一条 为了加强国防建设,完善国防动员制度,保障国防动员工作的顺利进行,维护国家的主权、统一、领土完整和安全,制定本法。

  第二条 国防动员的准备、实施以及相关活动,适用本法。

  第三条 国家的主权、统一、领土完整和安全遭受威胁时,全国人民代表大会常务委员会依照宪法和有关法律的规定,决定全国总动员或者局部动员。国家主席根据全国人民代表大会常务委员会的决定,发布动员令。

  第四条 国防动员坚持平战结合、军民结合、寓军于民的方针,遵循统一领导、全民参与、长期准备、重点建设、统筹兼顾、有序高效的原则。

  第五条 公民和组织在和平时期应当依法完成国防动员准备工作;国家决定实施国防动员后,公民和组织应当完成规定的国防动员任务。

  第六条 国家保障国防动员所需经费。国防动员经费按照事权划分的原则,分别列入中央和地方财政预算。

  第七条 国家对在国防动员工作中做出突出贡献的公民和组织,给予表彰和奖励。

第二章 组织领导机构及其职权

  第八条 国务院、中央军事委员会领导全国的国防动员工作,制定国防动员工作的方针、政策和法规,向全国人民代表大会常务委员会提出实施国防动员的建议,根据全国人民代表大会常务委员会的决定和国家主席发布的动员令,组织国防动员的实施。


  第九条 县级以上地方人民政府应当贯彻和执行国防动员工作的方针、政策和法律、法规,并依照法律规定的权限管理本行政区域的国防动员工作;国家决定实施国防动员后,应当根据上级下达的国防动员任务,组织本行政区域国防动员的实施。

  第十条 国家国防动员委员会在国务院、中央军事委员会的领导下负责组织、指导、协调全国的国防动员工作;军区和县级以上地方人民政府国防动员委员会负责组织、指导、协调本区域的国防动员工作。



  第十一条 县级以上人民政府有关部门和军队有关部门在各自的职责范围内,负责有关的国防动员工作。

  第十二条 国家的主权、统一、领土完整和安全遭受的威胁消除后,应当按照决定实施国防动员的权限和程序解除国防动员。

第三章 国防动员计划、预案与潜力统计调查

  第十三条 国家实行国防动员计划、国防动员实施预案和国防动员潜力统计调查制度。

  第十四条 国防动员计划和国防动员实施预案,根据国防动员的方针和原则、国防动员潜力状况和军事需求编制。军事需求由军队有关部门按照规定的权限和程序提出。

  第十五条 各级国防动员计划和国防动员实施预案的编制和审批,按照国家有关规定执行。

  第十六条 县级以上人民政府应当将国防动员的相关内容纳入国民经济和社会发展计划。军队有关部门应当将国防动员实施预案纳入战备计划。


  第十七条 县级以上人民政府统计机构和有关部门应当根据国防动员的需要,准确及时地向本级国防动员委员会的办事机构提供有关统计资料。提供的统计资料不能满足需要时,国防动员委员会办事机构可以依据《中华人民共和国统计法》和国家有关规定组织开展国防动员潜力专项统计调查。

第四章 与国防密切相关的建设


  第十八条 根据国防动员的需要,与国防密切相关的建设项目和重要产品应当贯彻国防要求,具备国防功能。

  第十九条 与国防密切相关的建设项目和重要产品目录,由国务院发展改革部门会同国务院其他有关部门以及军队有关部门拟定,报国务院、中央军事委员会批准。


  第二十条 列入目录的建设项目和重要产品,应当依照有关法律、行政法规和贯彻国防要求的技术标准进行设计、施工、监理和验收,保证建设项目和重要产品的质量。

  第二十一条 企业事业单位投资或者参与投资列入目录的建设项目建设和重要产品制造的,依照有关法律、行政法规和国家有关规定,享受补贴或者其他政策优惠。

  第二十二条 县级以上人民政府应当对列入目录的建设项目和重要产品贯彻国防要求工作给予指导和政策扶持,县级以上人民政府有关部门应当按照职责做好有关的管理工作。

第五章 预备役人员的储备与征召

  第二十三条 国家根据国防动员的需要,储备所需的预备役人员。


  第二十四条 预备役人员按照专业对口、便于动员的原则,采取预编到现役部队、编入预备役部队、编入民兵组织或者其他形式进行储备。

  第二十五条 国家根据国防动员需要,建立预备役专业技术兵员储备区。

  第二十六条 县级以上地方人民政府兵役机关负责组织实施本行政区域预备役人员的储备工作。县级以上地方人民政府有关部门、预备役人员所在乡(镇)人民政府、街道办事处或者企业事业单位,应当协助兵役机关做好预备役人员储备的有关工作。

  第二十七条 预编到现役部队和编入预备役部队的预备役人员、预定征召的其他预备役人员,离开常住户口所在地1个月以上的,应当向其预备役登记的兵役机关报告去向、联系方式;联系方式发生变化的,应当及时报告变更情况。

  第二十八条 国家决定实施国防动员后,县级人民政府兵役机关应当根据上级的命令,迅速向被征召的预备役人员下达征召通知。


  第二十九条 被征召的预备役人员所在单位应当协助兵役机关做好预备役人员的征召工作。


  第三十条 国家决定实施国防动员后,预定征召的预备役人员,未经其常住户口所在地的县级人民政府兵役机关批准,不得离开常住户口所在地;已经离开常住户口所在地的,接到兵役机关要求其返回的通知,应当立即返回。

第六章 战略物资储备与调用

  第三十一条 国家实行适应国防动员需要的战略物资储备和调用制度。


  第三十二条 承担战略物资储备任务的单位,应当按照国家有关规定和标准对储备物资进行保管和维护,定期调整更换,保证储备物资的使用效能和安全。


  第三十三条 战略物资按照国家有关规定调用。国家决定实施国防动员后,战略物资的调用由国务院和中央军事委员会批准。

第三十四条 国防动员所需的其他物资的储备和调用,依照有关法律、行政法规的规定执行。

第七章 军品科研、生产和维修保障

  第三十五条 国家建立军品科研、生产和维修保障动员体系,根据战时军队订货和装备保障的需要,储备军品科研、生产和维修保障能力。


  第三十六条 军品科研、生产和维修保障能力储备的种类、布局和规模,由国务院有关主管部门会同军队有关部门提出方案,报国务院、中央军事委员会批准后组织实施。

  第三十七条 承担军品转产、扩大生产任务的单位,应当根据所担负的国防动员任务,储备军品转产、扩大生产所需的设备、材料、技术,建立军品转产、扩大生产所需的专业技术队伍,制定和完善军品的转产、扩大生产预案和措施。

  第三十八条 各级人民政府应当支持和帮助承担军品转产、扩大生产任务的单位开发和应用先进的军民两用技术,推广军民通用的技术标准,提高军品转产、扩大生产的综合保障能力。

  第三十九条 国家决定实施国防动员后,承担军品转产、扩大生产任务的单位,应当按照国家军事订货合同和转产、扩大生产的要求,组织军品科研、生产,保证军品质量,按时交付订货,协助军队完成维修保障任务。为军品转产、扩大生产提供能源、材料、设备和配套产品的单位,应当优先满足军品转产、扩大生产的需要。


第八章 战争灾害的预防与救助

  第四十条 国家实行战争灾害的预防与救助制度,保护人民生命和财产安全,保障国防动员潜力和持续动员能力。

  第四十一条 国家建立军事、经济目标和首脑机关分级防护制度。分级防护标准由国务院、中央军事委员会规定。


  第四十二条 承担军事、经济目标和首脑机关防护任务的单位,应当制定防护计划和抢险抢修预案,组织防护演练,落实防护措施,提高综合防护效能。

  第四十三条 国家决定实施国防动员后,人员、物资的疏散和隐蔽,在本行政区域进行的,由本级人民政府决定并组织实施;跨行政区域进行的,由相关行政区域共同的上一级人民政府决定并组织实施。


  第四十四条 战争灾害发生时,当地人民政府应当迅速启动应急救助机制,组织力量抢救伤员、保护财产,尽快消除战争灾害后果,恢复正常生产生活秩序。


第九章 国防勤务

  第四十五条 国家决定实施国防动员后,县级以上人民政府根据国防动员实施的需要,可以动员符合本法规定条件的公民和组织担负国防勤务。


  第四十六条 18周岁至60周岁的男性公民和18周岁至55周岁的女性公民,应当担负国防勤务;但有下列情形之一的,免于担负国防勤务:








  第四十七条 被确定担负国防勤务的人员,应当服从指挥,遵守纪律,保守秘密。担负国防勤务的人员所在单位应当给予支持和协助。

  第四十八条 交通运输、邮政、电信、医药卫生、食品和粮食供应、工程建筑、能源化工、大型水利设施、民用核设施、新闻媒体、国防科研生产和市政设施保障单位,应当依法担负国防勤务。


  第四十九条 公民和组织担负国防勤务,由县级以上人民政府负责组织。担负预防与救助战争灾害、协助维护社会秩序勤务的公民和专业保障队伍,由当地人民政府指挥,并提供勤务和生活保障;跨行政区域执行勤务的,由相关行政区域的县级以上地方人民政府组织落实相关保障;担负军队作战支援保障勤务的公民和专业保障队伍,由所在部队指挥,并提供勤务和生活保障。

  第五十条 担负国防勤务的人员在执行勤务期间,继续享有原工作单位的工资、津贴和其他福利待遇;没有工作单位的,由当地县级人民政府参照民兵执行战备勤务的补贴标准给予补贴;因执行国防勤务伤亡的,由当地县级人民政府依照《军人抚恤优待条例》的有关规定给予抚恤优待。

第十章 民用资源征用与补偿

  第五十一条 国家决定实施国防动员后,储备物资无法及时满足动员需要的,县级以上人民政府可以依法对民用资源进行征用。


  第五十二条 任何公民和组织都有接受依法征用民用资源的义务。


  第五十三条 下列民用资源免予征用:






  第五十五条 被征用的民用资源使用完毕,县级以上地方人民政府应当及时组织返还;经过改造的,应当恢复原使用功能后返还;不能修复或者灭失的,以及因征用给公民或者组织造成直接经济损失的,按照国家有关规定给予补偿。

  第五十六条 中国人民解放军现役部队和预备役部队、中国人民武装警察部队、民兵组织进行军事演习、训练,需要征用民用资源或者采取临时性管制措施的,按照国务院、中央军事委员会的有关规定执行。

第十一章 宣传教育

  第五十七条 各级人民政府应当组织开展国防动员的宣传教育,增强公民的国防观念和依法履行国防义务的意识。有关军事机关应当协助做好国防动员的宣传教育工作。

  第五十八条 国家机关、社会团体、企业事业单位和基层群众性自治组织,应当组织所属人员学习和掌握必要的国防知识与技能。

  第五十九条 各级人民政府应当运用各类宣传媒体和宣传手段,对公民进行爱国主义、革命英雄主义宣传教育,激发公民的爱国热情,鼓励公民踊跃参战支前,采取多种形式开展拥军优属和慰问活动,按照国家有关规定做好抚恤优待工作。


第十二章 特别措施

  第六十条 国家决定实施国防动员后,根据需要,可以依法在实施国防动员的区域采取下列特别措施:






  第六十一条 在全国或者部分省、自治区、直辖市实行特别措施,由国务院、中央军事委员会决定并组织实施;在省、自治区、直辖市范围内的部分地区实行特别措施,由国务院、中央军事委员会决定,由特别措施实施区域所在省、自治区、直辖市人民政府和同级军事机关组织实施。

  第六十二条 组织实施特别措施的机关应当在规定的权限、区域和时限内实施特别措施。特别措施实施区域内的公民和组织,应当服从组织实施特别措施的机关的管理。

  第六十三条 采取特别措施不再必要时,应当及时终止。

第十三章 法律责任

  第六十四条 公民有下列行为之一的,由县级人民政府有关主管部门责令改正;拒不改正的,处2000元以上2万元以下罚款:







  第六十五条 企业事业单位有下列行为之一的,由有关人民政府主管部门责令改正;拒不改正的,处5万元以上20万元以下罚款:









  第六十六条 有下列行为之一的,对直接负责的主管人员和其他直接责任人员,依法给予处分;构成犯罪的,依法追究刑事责任:







第十四章 附则

  第六十七条 本法自 年 月 日起施行。




























great stuff victor. do you have an estimate of china's total short term external debt (including local) compared to reserves, or any pointers on how one would begin to gather data to construct such a rato? will read through your posts and see what i can find also. thanks for any help.
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Sunday, February 14, 2010

Expose on Princelings

Really not much to add to this wonderful expose on princeling politics and business by Sydney Morning Herald reporter John Garnaut. I wholeheartedly agree that Bo junior is indeed trying to demonstrate something to somebody by going after Peng Zhen's children and the Deng clan. I think Bo's actions will make the coming two years very interesting...


Children of the revolution

February 13, 2010

A sensational court case has exposed the power and connections of China's princelings, writes John Garnaut.

The arrest and kangaroo-court conviction of another successful lawyer might hardly be worth mentioning in a place where imprisoning, deregistering, or beating lawyers for doing their jobs is becoming commonplace. But the case of Li Zhuang has generated a heated 10-week media and internet debate in China, and not just because of the way it was carried out.

It is the first time a lawyer has been convicted of coaching his client to lie on the basis of testimony from mobster, Gong Gangmo, according to another respected lawyer (who has himself been beaten and deregistered for representing the wrong kind of clients). The 4000-word character assassination planted in the China Youth Daily straight after Li's arrest was also unusual.

But it is the background to this case that makes it so riveting for onlookers and disruptive for China's political status quo.

The man who must have authorised Li's arrest is Bo Xilai, the only Politburo member who can comfortably wear epithets such as colourful, mercurial or maverick. The Communist Party boss of the central-west city of Chongqing has captivated the nation with a brave but risky war against the city's organised crime.

Bo got to where he is partly because he is the son of Bo Yibo, one of China's "eight immortals" - the tag for an exalted club of revolutionaries who lived long enough to stamp their marks on China's reform era history.

The China Youth Daily hinted at the equally impressive power behind the lawyer that Bo arrested: "As Li Zhuang arrived at Chongqing, he began to play the peacock, saying many times 'do you know my background? Do you know who my boss is?"

What the censors won't let local media spell out is that Li's law firm is headed by Fu Yang, who is the son of Peng Zhen, also one of the eight immortals and more powerful than Bo Yibo. Li's lawyer from the same Kangda law firm, Gao Zicheng, said he could not talk about the background politics: "I can't go there …''

But the fathers Bo Yibo and Peng Zhen were once factional allies. Their families lived close together and were closely entwined, often entertaining guests at a Shanxi restaurant they both helped to open, says a Beijing political aficionado.

"Both Peng Zhen and Bo Yibo were loyalists of [Mao's one time chosen successor] Liu Shaoqi," says Huang Jing, a visiting professor at the National University of Singapore. "This hate-love relationship is certainly inherited by their children."

So it turns out that Bo Xilai has just spectacularly arrested, convicted and rejected the appeal of a lawyer who works for Bo's equally powerful childhood playmate, Fu Yang.

The Communist Party has enjoyed enormous success in turning China into a powerful nation and lifting its citizens out of poverty. But the party is also a club that allocates political, financial and social privilege to its members. It has its own internal system of hierarchy and quasi-royalty, where revolutionary leaders bequeath their status to their children and children's children. Those descendants are called "princelings" in China.

Mostly, China's princelings get on with expanding the national cake and carving it up. It was Bo Xilai's own father, Bo Yibo, who is said to have helped institutionalise the princeling nexus of power and wealth in the 1990s by supporting a proposal that each powerful family can have only one princeling in politics, leaving other siblings to cash their political inheritances for financial ones.

But the case of lawyer Li Zhuang suggests the country may not be big enough for all of them.

Political analysts say Bo is pursuing an audacious but calculated political strategy. Most say he is appealing directly to the people by implicitly attacking his peers, in the hope of forcing his own promotion into the nine-member Politburo standing committee at the next leadership reshuffle in 2012.

"Bo Xilai is indeed challenging the privilege of some princelings to boost his own popularity," says Bo Zhiyue, an expert on China's princelings at the National University of Singapore.

It's not impossible for an outsider to secure the right patrons and make it to the top, like President Hu Jintao (who was anointed by former party secretaries Hu Yaobang and Deng Xiaoping).

Generally, however, modern China belongs to the children of the revolution. All three officers appointed last year to the rank of full general in the People's Liberation Army were children of senior party leaders. Xi Jinping, who many expect to be the next president, is the son of a revolutionary hero. Eight or nine of the 25-member Politburo are princelings (defined as having a parent or parent in-law who held the rank of vice-minister or above), according to Cheng Li, an expert on Chinese elite politics at the Brookings Institutution. In the previous Politburo there were only three.

The strategic heights of China's economy are also in princeling hands.

The family of former president Jiang Zemin - whose adopted father was a revolutionary martyr - pulls strings in the telecommunications, railways and postal systems. The family of former premier Li Peng - who was adopted by former premier Zhou Enlai - has outsized influence over electricity production, transmission and hydro-electric dam building. His daughter Li Xiaolin, who became famous in Australia this week for her disagreement with Clive Palmer over a $60 billion deal, is at the helm of a major power generating company. Her brother headed another large electricity company before being transferred to help run the coal-powered province of Shanxi. Family friend Liu Zhenya controls the electricity grid.

Distinctions between state and personal enterprise are not always clear in China. Some of the most eminent princeling families discreetly control large companies that are listed on the Hong Kong stock exchange, sometimes in concert with Hong Kong's mega-billionaire families, and often through loyal personal secretaries or close relatives who have changed their names.

Further in the background, Chinese political analysts say the descendants of Marshall Ye Jianying, Deng Xiaoping, Chen Yun, Wang Zhen, Peng Zhen and Bo Yibo are China's real political and financial king makers.

Which brings us back to Bo Yibo and Peng Zhen's children, Bo Xilai and Fu Yang.

Overwhelmingly, China's intellectuals and the legal professionals castigated Bo Xilai (although not by name) for his crackdown in Chongqing and for cloaking himself as a modern day Maoist and making a mockery of the rule of law.

The intellectual tide seemed to turn last week when the accused lawyer, Li Zhuang, shocked his own legal advisers with this open court confession: "I fabricated evidence to deceive the police, the procuratorate, and the court to exculpate Gong."

While that confession was itself clouded in controversy, liberal opinion leaders began to reframe the debate. Li and his law firm, Kangda, are respected for being very good at what they do. But they are also welded into the elite of a Communist Party judicial system that runs on kickbacks and connections.

It is no stretch to say the fathers of Kang Da's three founding principals ran China's entire political-security and judicial systems in the 1980s.

The law firm was itself spun out of the legal department of an immensely profitable and unaccountable corporate-charity empire called Kanghua, which was run by Deng Pufang, son of Deng Xiaoping. Controversy about this type of cronyism was one ingredient in the build up of public unease leading up to the Tiananmen Square demonstrations of 1989.

All that concealed backdrop helps explain why Li was once again the leading chat topic on leading blogging portals this week, after a Chongqing court rejected his appeal but reduced his jail sentence.

"Bo is the great saviour of Chinese ordinary people," said one reader's comment on the People's Daily website. "Strike hard against gangsters and black lawyers. Drag all their [mafia] uncles out!"

And Bo hasn't just locked up one well-connected lawyer who may or may not have been doing his job. In China it is impossible for the mafia to thrive without it being joined at the hip to the Communist Party, as the open trials of some of Bo's nearly 800 gangland prosecutions have shown.

Wen Qiang, Chongqing's former deputy police chief and then justice bureau chief, was in court trying to explain more than 16 million yuan ($2.6 million) of suspected kickbacks and sheltering mobsters such as his sister-in-law, "the godmother of Chongqing".

But it emerged in court for the first time this week that the bulk of Wen's wealth was acquired from payments received in return for handing out promotions.

"The trial of the underworld has become a trial of corrupt officials,'' wrote Liang Jing, the pseudonym of a political columnist on overseas Chinese language websites.

Yang Hengjun, one of China's most influential political commentators, had previously criticised Bo for his Maoist rhetoric and politicisation of the legal process. Last week he took a different course, skating close to the limits of permissible speech, after his email inbox had filled to overflowing with unhappy readers.

Yang wrote that the whole debate about defending "rule of law" in Chongqing was premised on the assumption that there was actually something already resembling "rule of law" anywhere in China, which there patently is not.

"If you are serious about spreading the 'rule of law' in China I have a suggestion," he wrote.

"All legal elites and opinion leaders can join hundreds of thousands of netizens in demanding that Chongqing's fight against gangsters be introduced across the whole nation so that it can terminate unlawful 'rule of law' by corrupt officials."

In the end, writes Yang, debates about rule of law will remain academic in China for as long as it is run by a one-party state: ''Only a greater political system or democracy can provide an answer.''

Privately, close political observers in China say that whatever you think of Bo Xilai or his personal motivations, he has thrown a bomb inside Party Central. His public dissection of Chongqing's power and protection rackets invites Chinese people to worry and talk more openly about whether their country is evolving towards some kind of mafia state.

Some liberal thinkers hope Bo is a catalyst for those in the system who are not beholden to "princelings" - perhaps the Vice-Premier, Li Keqiang - to rise and challenge the party's privileges. But the party's princeling bonds will be hard to break. To the extent that they stick together they will loosen their grip on power only when necessary to preserve it.

"Reporters have every reason to explore the infighting among the princelings,'' writes Cheng Li, at the Brookings Institution.

''But I believe the princelings' incentive for co-operation and the need to share wealth and power are far more important than their internal tensions and conflicts.''

John Garnaut is the Herald's correspondent in Beijing.

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