Deng Xiaoping said that for the Chinese Communist Party (CCP) to survive, it must reform.  So three decades of capitalism have enabled communism to hang on and even prosper!  But after reading Richard McGregor’s excellent book “The Party: the Secret World of China's Communist Rulers”, one must ask how much longer can it last.

The key to understanding China and the Communist Party is understanding that the Party’s basic ideology is power and defense of power.  The Party’s principal motivation is remaining in power and it will seek to eliminate all those who are perceived as being a threat to or even critical of that power.  The Party has a strong grip on the state, media, civil service, military, police, education, social organizations and the media. 

China may have all the trappings of a pluralist system with executive government, a parliament and courts.  But behind this the Party is pervasively and seemingly invisibly pulling all the strings.  Corruption is the system by which the profits of capitalism are shared out among Party members.  And high profile anti-corruption cases are usually a means for settling political battles.   

This elite dominated society should not be totally foreign to Westerners.  The UK has its old boy network, France its enarques from the Ecole Nationale d’Administration, Japan its Todai elite from Tokyo University, and the US the Ivy League network.  And when it comes to non-transparent elections, the CCP comes closest to the Vatican’s choice of the Pope.

But the Communist Party has much more vast tentacles than any Western elites.  Just imagine a single body in the US that oversaw the appointment of the entire US cabinet, state governors and their deputies, the mayors of major cities, the heads of all federal regulatory agencies and the justices on the Supreme Court.  The same body would also clear the appointments of the chief executives of GE, Wal-Mart, Exxon Mobil and about fifty of the remaining largest US companies; the editors of the New York Times, the Wall Street Journal, and the Washington Post; the bosses of the TV networks and cable stations; the presidents of Yale and Harvard and other big universities; and the heads of think-tanks like the Brookings Institution and the Heritage Foundation.

Not only that, the vetting process would take place behind closed doors, and the appointments announced without any accompanying explanation about the basis on which they were made.  This process is run by the Central Organisation Department which is congenitally secretive.  This body controls the lives and careers of a vast elite in China.  And yet it has no sign outside of its office and no listed phone number!   

The Department maintains files on top-level officials to keep tabs on their political reliability and past job performance, making it indispensable to the Party’s control of the country and the nation’s vast public sector.  It is thus a make-or-break forum for the system’s toughest internal political battles.  Politburo members, factional groupings, the centre and the provinces, and individuals aligned to different ministries and industries – all struggle to place their people into positions of power and influence in state institutions.  Few people, even foreigners living in China, appreciate just how vast and resilient the party apparatus that underpins the government in China is, and how deeply its tentacles extend into all manners of institutions.

The development of China’s dynamic private sector may seem like a great success in economic transformation.  But it is more subtle than that.  The government employed a policy of “Grasp the big, let go of the small”.   The CCP and the state retained control of the large companies in what were deemed strategic sectors, such as energy, steel, transport, power, telecommunications and the like.  A small number of shares were listed overseas, while the government kept about 70 to 80 per cent of the equity in its hands.

Over the past decade, state-owned enterprises have benefited from cheap land, resources and energy, which means that the profits of China’s boom have been captured by the state and the share of workers’ wages in national income has dropped sharply -- from 53% to 40%.  These big cashed up companies were then pushed to invest overseas, especially in the resource sector.  In little over a decade, the CCP constructed a profitable state sector, with independent commercial aspirations, but still ultimately under its control. 

How long can the Chinese Communist Party last?  One of history’s great lessons is that nothing lasts forever, especially in China which has seen dynasties come and go.

The Party has been remarkably adaptable, and will no doubt adapt even more in the future.  Some observers talk of democracy within the Party, and an ever widely embracing Party that co-opts more and more parts of society.  Former President Jiang Zemin forced through a decision whereby businessmen were allowed to join the Party.  Could China progressively democratize like Taiwan did?

The Party may have greater popular support and legitimacy today than ever before thanks to the rapid economic growth and poverty reduction, and thanks to the nationalism that it actively promotes.  The Chinese are quite rightly proud of what they have achieved in the last three decades, even though China has become a rich country with poor people.  PR events like the Beijing Olympic Games and Shanghai World Exposition are designed to dazzle the local population more than international audiences. 

The global financial crisis has, in Chinese eyes, totally devalued the Western brand and model -- or at least this is the song that Chinese like to sing to foreigners to put them in their place.  The crisis has only reinforced their chip on their shoulder about the imperialist west and Japan which trampled over China in the 19th and 20th century. 

But one constraint on its capacity is the Party's insistence on its monopoly on political power.  This will no doubt be tested in the years ahead.  It becomes more and more difficult to control a society which becomes ever more complex.  The Party is riddled with factions which may one day splinter. 

And as Japan has shown, a state-driven system generates a whole range of vested interests who profit the system, and who will oppose future reform and reduce the Party’s adaptability.  The current resistance to revaluing the Chinese exchange rate is in part an example of this.  In addition, the economically wasteful investment- and export-led growth strategy may not ne sustainable over the long term.  

But we must be careful about speculating that the Party might lose power.  Party members are the only officials with the skills, know-how and networks to run the country.  Despite occasional protests here and there, the Chinese poor people basically accept repression and are culturally submissive to authority.  As Falun Gong found out, the Party will lash out at anyone who attempts to tries to organize a rival political force.  And at the end of the day, the People's Liberation Army is the Party's army, not the country's.

Reference:

The Party: The Secret World of China's Communist Rulers by Richard Mcgregor

http://www.amazon.com/Party-Secret-Chinas-Communist-Rulers/dp/0061708771