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An analysis of China's economic shift under Deng's reforms, leading to state capitalism dominated by bureaucratic families. Explore the impact on politics, economy, and state firms post-Deng era.
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The Rise of the Bureaucratic Bourgeoisie and Factional Politics of China Yuchong Li
The Rise of the Bureaucratic Bourgeoisie and Factional Politics of China • China’s rise towards capitalism has been guided by the cautious reform approach set by Deng (1904-97). • The principles: • Economic reforms does not mean a democratic political system. • Western model of power sharing not to be followed. • Every major reform needs permission from Government. • Resulted in rent capitalism with major beneficiaries as state bureaucrats
Deng’s reforms and its impacts • Key state organizations set up to deal with foreign companies. • Allows rise of bureaucratic capitalist regime ,with bureaucrats' family members holding top positions in these firms. • Unconnected firms vanished due to bureaucratic hurdles.
Post Deng Era • Many examples to show bureaucratic families seizing control of state corporations. • Jiang Mianheng: Director, Shanghai Alliance Investment Ltd. (SAIL). • Li Xiaopeng:General manager and board chairman, Huaneng International • Hu Haifeng:Party Secretary ,Tsinghua Holdings
State capitalism in China • State-directed capitalism is not a new idea: witness the East India Company. • State-backed companies account for 80% of the value of China's stockmarket . • China sees state capitalism as a sustainable model for beating West.
Effects of State Capitalism • State capitalism's supporters argue that it can provide stability as well as growth. Example: So Lee Kuan Yew's government in Singapore. • When the government favors one lot of companies, the others suffer. • Studies show that state companies use capital less efficiently than private ones, and soak up young talent.
Bureaucratic Capitalism and Why China is rising? • Bureaucratic capitalism,” a term that refers to the use of political power and official influence for private pecuniary gain through capitalistic or quasi-capitalist methods of economic activity.
Why China is rising? • The previous slide shows a graph between USSR and China(real GDP) • If we observe that both countries following the policy of state capitalism • While China continued in its rise ,same cannot be said about Russia/USSR. • The following observations can be made: • Presence of strong authority is necessary for success. With a despotic state in its hands, the Chinese bureaucracy is more than capable of containing the economic cycle.
Why China is rising? • State firms must be outward looking. Eager to trade with outside world. Chinese firms grab contracts around the world. • Having established a culture where company’s baton is passed within the family, has reduced instability when power vacuum is created.
The Future of Factional Politics • Such a concentrated and linked nature of political institutions and economic opportunities motivates the use of public office for private gain. • As more and more market sectors are penetrated by the coalition-specific bureaucratic bourgeoisie, economic measures have started being used as political tools. • This can impact CCP selection process in a big way.
References • The Rise of the Bureaucratic Bourgeoisie and Factional Politics of China by WING-CHUNG HO • http://socialistresistance.org/china-bureaucratic-capitalist/4188 • http://www.europe-solidaire.org/spip.php?article35764 • The rise of state capitalism by Economist • The Rise of the Working Class and the Future of the Chinese Revolution by Minqi Li