Beijing's economic carve-up dooms vital reform to failure

In March next year Beijing will adopt its next five-year plan. The new directive will aim to construct a more sustainable model of economic development by promoting private consumption as the main driver of China's growth, instead of exports and investment.

It's a commendable objective, but a confidential US embassy cable posted on the WikiLeaks website this month gives a telling insight into why it will be almost impossible to achieve.

Sent in July 2009, the cable describes how senior Communist Party bigshots have 'carved up China's economic pie' between them.

Quoting 'embassy contacts with access to leadership circles', the US cable says it is 'well known' how former premier Li Peng and his family exert control over the electricity generation sector, while former security chief Zhou Yongkang and his allies dominate the country's oil industry.

Similarly the cable describes how the family of late revolutionary leader Chen Yun control substantial interests in the banking sector, while Chinese People's Political Consultative Conference chairman Jia Qinglin is said to command an extensive power base among Beijing's real estate developers. Other senior leaders boast close ties to developers elsewhere and to the heads of major corporations in other key economic sectors.

The result of this carve-up is an 'ossified system' in which vested interests drive decision-making and impede reform as leaders constantly manoeuvre to ensure that their personal fiefdoms are not threatened.