China: Neo-Liberal Princelings Versus Populists

CHINA is the world’s largest economy, with a GDP in 2017 of $23 trillion, based on purchasing power parity. By comparison, the EU (including Britain) clocked up $20 trillion and the United States came in a global third at $19 trillion. America’s diminished economic power explains a lot about Donald Trump’s trade tantrums but how is China responding?

There are increasing signs lately that the upper echelons of the all-powerful Chinese Communist Party (CCP) are split on how to respond to the imposition of US tariffs. Crudely, the CCP leadership is divided into two main factions (but many sub-factions) who have opposing views on what to do next.

On one side are the so-called Princelings, the sons and (occasionally) daughters of the original party leadership under Mao Zedong. This grouping were the main financial beneficiaries of the drive towards industrial development and Westernisation fostered by Mao’s pragmatic, chain-smoking successor, Deng Xiaoping. Now reaching retirement, the Princelings represent a privileged millionaire (even billionaire) caste who grew rich on the emergence of a market economy in China in the 1990s. Their social base is in China’s new coastal cities which provide the country’s export hub and rising middle class.

These Red Princes and Princesses are ideological enthusiasts for neo-liberalism and global free trade. Globalisation and access to Western markets for Chinese exports has allowed them to get very, very rich. As a result, while China is still protectionist to some degree, its leaders have been opening the economy. For instance, China raised the value of the yuan compared to the dollar by 20 per cent, between 2005 and 2008, rendering foreign imports more competitive. Understandably, the Princeling faction is deeply alarmed at the sudden rise of US tariffs against Chinese goods. Which is why we are about to see Communist China become one of the leading advocates of neo-liberalism and free trade.

The other broad faction in the CCP are the so-called Populists. They represent a less-privileged strata economically, from the poorer inland provinces. Many Populists advanced in the Party through the Communist Youth League, earning the label Tuanpai (literally: “league faction”). Leaguers can be as corrupt as any other section of the Party but – cynically or otherwise – they promote the concerns of farmers, migrant workers and the urban poor. Their pro-nationalist populism is used as an ideological counterweight to the neo-liberalism of the Princelings.

In 2012, the Princeling faction seized six of the seven seats on the Politburo Standing Committee, the party’s leading body. This power grab propelled Xi Jinping to the Chinese presidency in 2013 – his father was Mao’s sometime propaganda chief. Xi has since consolidated power, making himself lifetime President, the first since Mao.

True to his globalist agenda, Xi launched the One Belt, One Road initiative: the largest international infrastructure project in history. China is spending $150 billion every year to build new ports, railways, and pipelines converting 68 countries into destinations for Chinse exports. Xi also wants to make the yuan into a global trading and reserve currency, dethroning the dollar and US finance capital.

FACTIONAL WAR BREAKS OUT

Donald Trump’s trade offensive has opened major factional war inside the CCP between Xi and the Populists. Even more destabilising, the impact of a slowing economy – even before US tariffs kick in – has caused a wave of labour disputes across China in the last few years. These have spread from the interior to the richer coastal provinces. In some cases, youthful student Maoists have helped organise protesting workers, who often go for months without pay when companies have problems.

In recent weeks, Xi has come under intense criticism from within his own Princeling faction – both for misjudging Trump, and for responding to US tariff threats by upping the ante and imposing Chinese taxes on American goods. China’s billionaire Princelings are frightened all this will get out of hand and blame Xi for being “too nationalistic”. But Xi needs to play the nationalist card in order to outflank the Populists, who are ever ready to launch their own bid for power.

Xi has sought to deflect criticism by pinning blame for the spat with Trump on his own chief ideologue, Wang Huning. Wang sought to counter the appeal of the Populist faction to ordinary workers and peasants by urging Xi to talk up Chinese national ambitions, especially in the South China Sea. Xi and fellow Princelings are worried this power play – not China’s economic prowess – has provoked an unnecessary American backlash. They quote Deng Xiaoping to the effect that China should always “keep cool and maintain a low profile”.

A divided house, as Theresa May knows, is likely to fall. The West greatly over-estimates China’s internal stability. Xi’s increasing internal repression of striking workers and Muslim minorities is a sign of weakness. China may be the biggest economy on the planet, but it now suffers from all the structural weaknesses of a neo-liberal economy – and one with a deeply unsound banking system, to boot. Watch this space.

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  1. Mike Edwards says:

    Absolutely fantastic and insightful stuff George. You are one of the very few people publishing in the media (mainstream or otherwise) who seem to have any grasp of the reality of how the world currently works. And the insight and analysis you bring is enlightening.

  2. Mathew says:

    I wonder what spending $150 billion every year to build new ports, railways and pipelines does to the biodiversity of China?

    1. Alf Baird says:

      The Chinese, like most savvy countries, realised that they would need to invest in creating new advanced and efficient seaports if they wanted trade growth and economic development and that is what they did, all along the coast from Shanghai to Shenzhen. As it happens half of the world’s top-20 container ports today are in China whereas only 40 years ago there were none; that is why they are where they are today, top of the global trade league, and now investing in building future global trading networks. Contrast this with Scotland, where no new general cargo port serving international trade has been built since Queen Victoria was on the throne. And we wonder why our international trade is not what it might be, and firms such as Michelin up sticks. If a country has no ports/maritime policy and strategy it has no economic/trade policy or strategy either, and that is the prevailing situation in Scotland and has been for many years. (http://reidfoundation.org/portfolio/invest-in-our-ports-2/). Fortunately the SNP has now been provided with a maritime policy – they just need to implement it! Brexit surely makes this an even higher priority.

      1. Mathew says:

        Yes but you haven’t addressed the question – what does it do to the biodiversity?

  3. Angus Baird says:

    I wonder has the writer ever actually been to China?

    It reads like someone that has simply read some internet blogs without ever having been near the place.

  4. Mathew says:

    Probably won’t be on BBC news but 6,000 people turned out today in London to protest climate and extiction emergency. 5 main bridges across the Thames were shut down and 85 were arrested.
    This is what we need – EXTINCTION REBELLION.

  5. Angus Baird says:

    Has the writer ever actually been to China? I very much doubt it.

    Where did he get his information, what contacts does he have in the CCP?

  6. Gerry says:

    I have just returned from my 3rd visit to China. George Kerevan’s “expose” of the backstage manoeverings within the CCP is very interesting, but it’s entirely speculative. All I can say for definite is that their transport infrastructure has improved dramatically since I first visited in 2011. The ruling elite’s policies have lifted 700,000,000 people out of poverty over the last 30 years.
    Of course, their political system does not tolerate any organised dissent, and any opposition is ruthlessly put down. Our Western democracies are, of course, perfect models whereby the will of the people is fairly expressed through our elections and referenda. Blatant lies are never told to the electorate; the media is free to hold Govt to account and government itself acts in the best interests of the whole country and not just a small elite group.
    Mr Kerevan, look at our own elite, and tell me that they are any better, either as leaders of society, or as human beings, than their Chinese counterparts.

    1. Angus Baird says:

      Completely agree. I lived there (China) for two years and still have the most basic of insights.

      I do however know enough that this piece has been written by someone with no real knowledge of the middle kingdom or eastern politics.

      Don’t get me wrong I like the guy, but he should stick to writing about Scotland rather than pure speculation/fantasy. What about the CCP’s internal voting system etc? No mention of it.

      1. It’s human rights record isn’t too great is it Angus?

        1. Angus Baird says:

          Of course it isn’t but is the UK’s, USA’s record any better? I’d argue far worse.

          At least the CCP has vision and ambition, what have we got in the Conservative or Labour party?

          1. You are arguing that the UK has a worse human rights record than China?

          2. Angus Baird says:

            Yip, if you take the last 200 or so years I would say yes.

            What countries has China invaded recently? How many civilians have they killed using drone strikes?

            The CCP has ruthless practices and imprisons people without trial which is unforgivable. But then again the UK government is responsible for countless deaths throughout the world.

    2. Alf Baird says:

      Well said Gerry. China’s many new and still expanding ports, maritime and trade developments have helped lift hundreds of millions out of poverty. As someone who has studied global shipping markets China is an excellent example of how port investment is essential to facilitate trade growth. Similarly dynamic port investments across all of the so-called less developed world, including many ex colonies, has helped lift millions out of poverty and improved the competitiveness of these nations to help them produce and trade goods and improve standards of living. This is a lesson to Scotland – we had better provide competitive strategic/international seaports or we can forget about economic growth: http://reidfoundation.org/2016/01/sort-out-our-ports/ Scotland’s central belt port infrastructure is way out of date and still no ports/maritime policy at Holyrood.

      1. Mathew says:

        We should forget about economic growth. Or any kind of growth. Time to shrink for a change.

      2. Gerry says:

        Cheers, Alf. From what I have seen, the Chinese people are less stressed going about their daily lives than folk here. In the cities, the transport infrastructure is terrific, and costs pennies to use.
        The Yuan is a sovereign currency, and the Govt can spend as much of it as they like, esp on big public infrastructure projects. They are a net creditor to the world economy, unlike ourselves and the USA. They seem to be trying to tackle environmental issues in a more meaningful way than USA. They are investing heavily in Africa, and other under~developed regions, and are garnering invaluable goodwill as a result. I know of a lad from Tonga, who at 15 won a scholarship to study Sports Science at Beijing University. Still there 15 years later, thriving. Compare and contrast with May’s “hostile environment”.
        Of course there are major concerns regarding human rights. Methinks our elite wish they had similar powers and control of the media “enjoyed” by the CCP, or do they not already?

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