Taking at face value the bombastic official statements concerning corruption within the Chinese Communist Party, a book paints a dark picture of the collusion of Chinese elites.
Minxin Pei’s book documents the extent of crony capitalism in China, one of the many forms of the “great blurring” between the public and private spheres that is the subject of this special issue. The professor at Claremont McKenna College is one of the most influential and critical commentators on Chinese politics. His previous book, China’s Trapped Transition: The Limits of Developmental Autocracy (Harvard University Press, 2006), announced that no liberalization should be expected from the Chinese Communist Party, and predicted on the contrary that the latter would even end up stifling economic growth. This last book is apparently designed to confirm the thesis of the decline of the communist regime, despite the maintenance of economic growth (6.9% in 2017), and the multiplication by 2.6 of the GDP per capita (in purchasing power parity). It is based on Xi Jinping’s official statements and media coverage of the vast anti-corruption campaign he launched when he came to power in 2012, which brought down a million Chinese civil servants in 5 years. The author did not conduct a field investigation into this legal and illicit collusion between Chinese political and economic elites that emerged in the 1990s. Given the impossibility of accessing the archives of the party’s Central Commission for Disciplinary Inspection, his study is based on a sample of 260 cases widely exposed and commented on in the official Chinese press, for more or less understandable political and strategic reasons.
The causes of collusion
According to Mr. Pei,
China’s ruling elites have deliberately made political choices that have subsequently enabled them to create an environment conducive to their personal appropriation of state assets. (p. 19)
He devotes the first two chapters to presenting the reasons why cases of collusion between Chinese elites have been increasing since the 1990s. Before this period, cases of collusion involving several executives (wo’an And chuan’an) are virtually non-existent or invisible, because, according to Mr. Pei, the conditions are not right for this practice to develop. In the 1990s, the decentralization reforms of the management of executive careers as well as the control of public property, without a complete clarification of property rights, offer great latitude to local executives, free to plot to appropriate or allocate state property at prices below market prices, or even for free. This is particularly the case for land and natural resources. Land ownership and use rights have in fact been separated in order to create a market for land use without the state losing ownership. Mr. Pei refers to the common practice of local governments to attract investors by lowering the price of land, a loss of revenue that is all the greater since the recentralizing tax reform of 1994, the sale of land has become a major source of income for these governments (52% in 2007). However, Mr. Pei denounces the pitfalls of this practice in a context of discretionary political power, because it results in a loss of income for local governments, which sell off their land revenues to investors and developers who offer them the highest bribes. Some natural resources, such as mines, and some state-owned enterprises have, through a similar mechanism, been plundered by executives who were able to transfer them to members of their entourage.
Besides entrepreneurs, the primary beneficiaries of the system are the Party leaders at the all-powerful prefecture and district levels (yibashou), chosen for their loyalty to the Communist Party, which available data indicates can amass, although this depends on the value of public property and the contracts they can grant to investors, a higher loot than their hierarchical superiors. The weak supervision to which they are subject is supposed to guarantee their effectiveness. The central government, aware of these setbacks, has sought, in vain, to better control them. The lack of power and resources of the Discipline Inspection Commissions at the local level has not allowed this. Mr. Pei does not rule out, however, that the measures taken by Wang Qishan during Xi Jinping’s first term will finally bear fruit.
The Impact of Collusion on Government Performance
The illegal market for public sector jobs (maiguan maiguan) is the centerpiece of Minxin Pei’s argument: corruption, rather than merit, governs the selection of officials and allows Party leaders who accept bribes to establish a strategic network of accomplices (vertical collusion) whom they can more easily mobilize to help the businessmen who have bribed them.
Mr. Pei strongly emphasizes the destructive and predatory impact of this collusion, which significantly affects the ability of local governments, which become “local mafia states,” to fulfill their public service mission (p. 9). Since the book, from its subtitle, announces the decomposition and decline of the Chinese regime, it is surprising that Mr. Pei devotes few pages to the impact of collusion on government performance, apart from a few headline-grabbing cases of environmental violations, violations of judicial procedures, forced evictions, or intervention in trade disputes (pp. 144-147). Mr. Pei describes the decrepitude of the system where a veritable “culture of corruption” reigns, evoking the consequences of a future democratization of the regime, which could place these new corrupt oligarchs in power. The last chapter thus claims to demonstrate the corrosion of the institutions (judicial, regulatory, police) of the Leninist party-state by collusive practices. In a Manichean way, it nevertheless recalls that we observe “a total absence of corruption” in areas more open to competition such as import-export, retail trade or light industry. This could partly explain the very high levels of trust that Chinese institutions and companies generally enjoy, according to a recent study.
Mr. Pei rails against the “oligarchic cronyism” that has deprived ordinary citizens of public goods that have been seized by China’s political and, above all, economic elites. He attributes to it the rise of a strong and opportunistic leader using the fight against corruption to defeat his political opponents, which is reminiscent of the anti-corruption engineering in Putin’s Russia, even if, in Xi Jinping’s case, it is also about keeping a party of 88 million members in power. Less convincingly, he also attributes to it a decline in economic growth, the loss of legitimacy of the Party, the end of China’s authoritarian resilience and the division of leaders. The author’s determinism is striking: collusion and “exclusive and oligarchic alliances are the inevitable result of economic modernization in an autocratic context” (p. 266) and their study “proves that it is inconceivable that the party can reform the political and economic institutions of collusion capitalism since they are the very foundations of the monopoly of power” (p. 267). He therefore draws a line under a gradual democratic transition in China, made impossible in a predatory authoritarian regime based on large inequalities.
A work without nuance
The book is based on a vision of Chinese reform that is extremely pessimistic, according to which, instead of having modernized the country according to the principle of “socialism in the colors of China” stated by Deng Xiaoping, “the party-state has produced a form of predatory crony capitalism” (p. 2), a fact that is all the more incontestable since it is explicitly affirmed by the Chinese President himself following the reading of the investigation reports on the misdeeds of provincial leaders in 2014. But basing such an investigation entirely on the media coverage of the anti-corruption campaign, because of its political expediency (populism, quest for legitimacy, placement of allies) and its great opacity, seems particularly risky. The reader’s approval would be more easily gained if the author diversified his sources and explained more finely the mechanisms by which this systematic corruption is deployed, in particular state capitalism and the local development model based on the sale of land or on competition between local governments to attract investors and encourage economic growth, which many studies have nevertheless documented. It is regrettable that Mr. Pei favors a position that may seem ideological, even moralizing, and does not seek to understand or explain further the real impact of this collusion of elites on the Chinese economy, supposedly “considerably hampered by a chronically inefficient allocation of resources” (p. 25). It is important to recognize that the impact of corruption on the economy is not easily measurable and is even the subject of divergent assessments. Similarly, the phenomenon of collusion, which, as far as executives are concerned, can be vertical, horizontal and between them and businessmen, theoretically encourages agents to be less productive. Mr. Pei thus contrasts performance and bribes without nuance (p. 36):
Inevitably, colluding agencies fail miserably in fulfilling their public functions. (p. 217)
The work of A. Wedeman and H. Li and LLP Gore have shown, however, that corruption in China does not necessarily exclude performance, since even corrupt officials must contribute to maximizing the common good. This could help reconcile Mr. Pei’s harsh observation with the nevertheless significant results achieved since the launch of reforms in 1978.