China Economy

Follow the money along the road to ruin of Deng's vision

China's wealthy princelings are derailing the party's plan to lift living standards for all

PUBLISHED : Saturday, 29 December, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:01pm


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China has had a rough year with an international media that are in Woodward-and-Bernstein mode: it is following the money.

This week's Bloomberg News expose on the so-called Eight Immortals is a case in point. Building on a June article tracing the accumulated wealth of the family of Xi Jinping, China's next president, it described the vast fortunes being amassed by the offspring of the founding fathers who were instrumental in Mao Zedong's rise to power in 1949. Mao changed the world by meeting US President Richard Nixon, and Immortals such as Deng Xiaoping engineered the economic boom that has unfolded since then.

Now, the tactics of the journalistic duo that brought down Nixon, Bob Woodward and Carl Bernstein, are helping to unearth the rot that has taken hold in Deng's vision for his people. Deng's plan, and that of China's other Immortals, was to cement the Communist Party's rule by boosting living standards. And it succeeded wildly, lifting some 600 million people out of poverty and putting China on a growth path that might allow the country's economy to surpass the US' in 15 years or so.

What the Immortals hadn't counted on was how their children would foul things up. By harnessing the trust of the state and top-level political connections, these princelings are reaping outsized benefits from China's growth. It is an outcome that would shock Deng: after 30 years of explosive growth, opening markets and reducing poverty, inequality levels now echo the pre-Communist era. One of modern history's greatest wealth grabs isn't just exacerbating the rich-poor divide, but delaying the reforms needed to roll back the state control that masks underlying economic inefficiency. There is lots of money in the status quo - an unfathomable amount, in fact. Just three of the Immortals' dozens of children and their spouses - among them Deng's son-in-law and the son of Mao's economic tsar - founded or run firms with combined assets of US$1.6 trillion as of last year. That's equivalent to almost a fifth of China's gross domestic product.

More than a third of the Immortals' children and their spouses hold top positions in state-owned enterprises. And then there's princeling Xi, who will run China for the next 10 years and have the final say over whether his pledge to root out corruption is real or hollow rhetoric. Bloomberg documented how his family accumulated a fortune estimated at US$376 million. The New York Times also had a busy year following the money and connecting the financial dots. It reported that the family of Premier Wen Jiabao has made billions of dollars during his tenure. That's quite a blow to the carefully honed image of the modest and simple "Grandpa Wen" of the people.

The government's response has been indignation. It accused the Times, for example, of harbouring political motives to destabilise the regime. Yet China has a growing corruption problem on its hands, one that must be addressed in a transparent manner.

When you peruse many of the reader responses to foreign press reports about Chinese graft, conspiracy theories abound: the Western media want to undermine China's rise and is doing the bidding of officials in Washington and Tokyo. That, of course, is silly. Only a fool would hope for a crash in the world's No2 economy and for 1.3 billion people to struggle to find enough to eat. Global economics isn't a zero-sum game. When hundreds of millions of people get rich, that will benefit all of us, whether you work for Rolex or Toyota Motor.

The sad truth is that hundreds of millions of Chinese aren't rolling in yuan the way Deng might have hoped. It's getting harder to hide that reality from China's masses, and that poses a growing threat to the Communist Party. Closing international-media websites, as China does at the sight of an unflattering article, can't hide the internal decay as wealth becomes more and more concentrated.

No industrialising economy has ever avoided a crash, and neither will China. Possible catalysts include pollution and surging living costs. Yet the one that China's leaders are probably most loath to confront is the sight of Communist Party officials becoming modern-day Rockefellers and Vanderbilts. It surely never occurred to Deng that finding wealth would be China's undoing. When you follow the money, it's hard to conclude otherwise.



Shirley Yam is on holiday