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CAN XI JINPING CREATE A NEW REALITY?


STEVE JOBS AND XI JINPING
Aug 13, 2014

BUT FIRST, DO THE DIRTY DISHES

The previous blog on Steve Jobs and Xi Jinping made the seemingly counter-intuitive case for likening Steve Jobs and Xi Jinping. It’s not just the sheer force of will both embody, but the capacity to proclaim new realities, a new normal that fuses a mass of contradictions into a coherent narrative that everyone can buy into, and feel part of. That magical ability satisfy yearnings lasts as long as the magician is a step ahead. Almost the moment Steve Jobs died, the magic died, we got to see behind the façade, to discover that magical tricks are just tricks, some of them tawdry.

Can the same be said of Xi Jinping? The magic is flowing and new realities are aborning. Foreign observers, focused mostly on China’s increasingly muscular stance internationally, warn of China’s emergence, under Xi, as a regional bully. But at home, Xi ticks all the boxes, among a public that long ago noticed the Chinese Communist Party’s top priority is to look after its own, and its cronies; and that Deng Xiaoping’s promise that eventually everyone gets to be rich doesn’t actually trickle far out of the sticky fingers of the elite. Now that the gap between rich and poor in China is one of the most extreme in the world, the masses have noticed that the party’s monopoly on political power is directly responsible for concentrations of wealth in a few favoured hands.

The previous leaders, Hu Jintao and Wen Jiabao, said as much, many times, but did little to curb the princelings. Many times they warned that extreme concentrations of wealth are a threat to the stability of the party-state regime. Now, Xi Jinping and his supporters are in “their protracted war to save the Communist Party from what they see as terminal decay.” So says John Garnaut, an acute observer with remarkable insider contacts. Garnaut reminds us of the deeply dualistic you-or-me world top party leaders inhabit: “Mr. Xi was raised in a you-die-I-live world where leaders who failed to destroy potential rivals were constantly at risk of losing far more than their jobs. Gradually, the weaker leaders who rose after the massacres and purges of 1989 extended a bargain of market opportunity and immunity to one another, as they worked to fuse the post-communist Communist Party back together following the Tiananmen crackdown. Stability prevailed but so too did corruption. Bureaucracies and state-owned companies became empires unto themselves. Leaders’ families grew fabulously rich. The compact of market opportunity and political immunity held for members of the Politburo Standing Committee for 25 years, until Mr. Xi tore it up late last month.”

Official media call the current campaign Xi’s “iron-fisted corruption crackdown that is winning the peoples’ hearts”  铁腕反腐,“拍蝇打虎”深得民心. There is a lot of winning to be done. What is at stake, as Xi Jinping clearly knows, is nothing less than the fraying of the implicit social contract between rulers and the ruled, as Professor Zheng Yongnian pointed out in May 2014. He went so far as to say that Xi realises he needs to change China’s political ecology. No longer does the legitimacy of the emperor rely on proclaiming the blessings of “heaven’s mandate”, Prof Zheng points out, yet today’s rulers do need to re-establish a source of legitimacy, if the party-state is to survive.

What happens after the purge? Will Xi Jinping then go on to build the China Dream he so often speaks of, and make it available to all, not just the well-connected? That might be a lot to ask of anyone who inhabits a you-die-I-live world, which is the most literal translation of Xi Jinping’s calls for a “life or death” struggle to cleanse the rot.

Assuming the purge succeeds in weakening entrenched resistance to major change, will Xi then launch deeper reforms that enable China’s emergence as a normal neoliberal competitor, in which the rule of law becomes more than a selective weapon to be used against those in the losing faction? Will a new reality emerge, a believable master narrative that persuades the masses to trust a party-state that has lost credibility?

For decades China accepted Mao’s master narrative, a dominant discourse of past humiliation and current renewal, a narrative of victimhood and loss. Now that China is so much wealthier and more powerful, the attractions of ongoing victimhood remain. Whenever China feels its rise is obstructed, the old cry: “Never forget national humiliation!” comes quickly to the lips of leaders, Xi Jinping included.

But the hope of the world is that China outgrows victimhood and a belief in an eternal foreign plot to keep China weak, grows genuinely confident and relaxed, and can take its place in the world. That too has long been the hope of the Dalai Lama, a scenario he has always seen as the best prospect for allowing Tibetans the cultural autonomy they yearn for. A more honest China, not captured by oligarchs, has better prospects for avoiding the “middle-income trap”, a vague term used by economists for the many ways emerging economies slow or come to a halt, their ongoing growth and widening prosperity stymied by entrenched rent seekers.

If Xi Jinping recognises this familiar capture of an entire economy by vested interests as China’s biggest challenge, then he is out to create a new reality –as Steve Jobs did- and the war on corruption is just a clearing of the decks.  Whether this is his long-term intention, and whether he can succeed, are far from clear at this point. But if he is to succeed, more of the destructive aspect of capitalism’s creative destruction is ahead.

That is the big picture Xu Gao invites us to consider. Xu, economist at a leading SOE brokerage, says: “From a longer-term perspective, fighting corruption will actually create more healthy and sustainable economic growth, and therefore its impact on the economy is positive. The reason many including middle-income countries fall into the trap, for example the Philippines, Argentina is the prevalence of crony capitalism. This leads to the allocation of resources by the powerful, and does not depend on the market, resulting in extremely unfair distribution of national income, and  economic growth potential cannot be realized. If you do not oppose corruption, the greater is the probability of the Chinese economy falling into the middle-income trap, and corruption fighting  can reduce this probability.”

That is the long term prospect, but as soon as October 2014, at the Fourth Plenum of the CCP, we may see more clearly whether the rule of law, genuine competition and a modern market economy will emerge.

MINING THE HEART OF DARKNESS

But right now Xi Jinping has his hands full catching the tigers of corruption. The purge has caught many, enough to discern a pattern, making it possible to identify which sectors of the economy have been most attractive to the corrupt. Top of the list, as mentioned in the previous blog, is mining.

Mining is ideal for crooks, for lots of reasons. The profits can be massive, and if they are generated in obscure places, they are readily transferred to private hands, even literally smuggled out as bars of gold. Mining tends to be in obscure places far from effective official regulatory scrutiny, and these days Chinese mining companies are likely to be operating in Zimbabwe, Peru or Tibet. For state-owned mining companies –and most are- its gets better: the finance needed to build a mine comes from the public purse, to which SOEs have privileged access. Further, the SOE resource extraction  companies are the pioneers of China’s global reach, and have often worked closely with China’s central leaders to get the contracts to extract the oil of Angola or the copper of Congo. On top of that, the importation into China of metals mined around the world has also been a major temptation for the corrupt, who use stockpiles of metals in Chines port warehouses as collateral for financialising further borrowings, giving them access to cheap money to sink into quick money but high risk investments.

In fact, it was the widespread practice of using metal stockpiles as collateral for loans, over and over, rather like mortgaging your house four times over to four banks at once, that led to the exposure of mining, and specifically mining in northern Tibet, as an epicentre of corruption.

What is the evidence for this? The corruption at the Qingdao port is documented in dozens of reports, as the biggest of banks and other lenders, rushed to Qingdao to verify whether the  metal stockpiles, putatively exclusively theirs should the borrower default, actually exists. The biggest of global commodity traders and lenders had the capacity to send their own investigators to check. The Tibetans have no such capacity so safeguard their landscapes, their sacred mountains and lakes, from mining. When they do protest, ever so politely, quoting Xi Jinping’s own words on environmental protection, they are teargassed, forcibly dispersed, often arrested and tortured.

Mining now takes place all over Tibet, nearly all of it technically illegal since all but the biggest and most modern mining was banned, especially in Tibet Autonomous region, by decree, almost a decade ago. In today’s China, what is technically illegal often flourishes, under local government protection, while national leaders proclaim themselves good global citizens. If illegal golf courses can pop up all over China, right next to major cities; it is not hard for illegal mines in remote areas to function. A new book on the proliferation of illegal golf courses, gobbling up prime arable land needed for food production, has just been published. The only book on the new mines in Tibet is the one I wrote a year ago, before the recent revelations of corruption. So this is an update on that book, Spoiling Tibet: China and resource nationalism on the Roof of the World.

Wang Qishan, secretary of the Communist Party’s Central Commission for Discipline Inspection singled out mining and resource extraction at the top of his list of industries prone to corruption. In mid July 2014 he”urged inspectors to watch closely over corruption in mining, natural resources, land transfers, real estate developmentconstruction projects, public and special funds” according to the official Xinhua news agency.

The metals warehouse rehypothecation scam is connected to an inner-party investigation into Western Mining, the only major Chinese mining company headquartered in Tibet, in Xining city. Western Mining, on its website, is ambitious about getting big and going global, and is in a hurry to arbitrage its base of assets in Tibet into something bigger: “WMG’s overall objective in the 12th Five Year Period [ending 2015] is to become a major force in Chinese mining sector through continued structural readjustment, better recycling and brand building in our main businesses, lead, zinc, aluminum and copper and improved our overall competitiveness and profitability. Our goal in the coming five to seven years is to make total assets and sales revenue both hit the threshold of RMB100 billion so as to build WMG into a renowned multinational corporation and offer better assistance to Qinghai province in transforming its modes of economic development and adjusting its economic structure.”

A

The rise and rise of Western Mining began with a zinc and lead mine in northern Tibet, on the northern edge of the mineraliferous Tsaidam Basin. Starting life in the 1980s as the Xitieshan Mining Bureau, a branch of the Ministry of Land and Resources, it later rebadged itself Western Mining, under the  adroit leadership of Mao Xiaobing who was so well-connected he eventually became mayor of Xining city, capital of Qinghai province, in which position he was arrested in April 2014, accused of widespread and long standing corruption.

Mao Xiaobing (ABOVE) pulled off many acquisitions of key mines in Tibet, and  got Western Mining into the club of major mining houses to be bulked up by the party-state to become one of China’s “national champions.” This story is told in my 2013 book, Spoiling Tibet: China and Resource Nationalism on the Roof of the World, Zed Books, London.

Now, it seems, Mao Xiaobing cut too many corners, and has come undone.

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