Chinopoly: in a game of political stratagem, China is using Western capital and know-how to further empower and enrich Communist Party members, but its commitment to communism may bring its downfall

New American, The, Jan 7, 2008 by William F. Jasper

Party, Princelings, and Power

But what about the rapidly proliferating Chinese millionaire and billionaire entrepreneurs that Forbes magazine profiles each year? Forbes' list of China's super-rich made an eye-popping jump from 15 billionaires in 2006 to 66 in 2007. Are they not proof of China's market orientation? That's the usual media take on it, like the 2006 USA Today report that exulted that "a country that once persecuted disciples of free enterprise is now barreling down the capitalist road." The "capitalism" that exists in China has little to do with entrepreneurialism. Rather, it is a form of statist monopoly capitalism that is reserved for the privileged "princelings," who are either Communist Party members or the favored relatives and associates of Party members.

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As China Digital Times points out, "90 percent of China's billionaires are children of senior officials. There are about 2,900 senior officials' children in China, with total wealth amounting to two trillion yuan. Their businesses mainly cover 5 areas: finance, foreign trade, land development, large-scale projects, and bonds and securities." The Digital Times was not speculating. Like a number of other publications, it based its reporting on a published study by the PRC's own China Academy of Social Science and the Research Office of the (Communist) Party School.

Let's be a little more specific. Take, for instance, the top dog on Forbes' list of "Asia's Self-Made Billionaires," Li Ka-shing, chairman of the mammoth Hutchison Whampoa conglomerate ($47 billion) and personally worth a reported $23 billion. Known as the "Hong Kong Superman," Ka-shing's fortunes have been closely tied to China's banks and corporations of the People's Liberation Army for many years.

China's market socialism is dominated by state-owned enterprises (SOEs) run by Communist Party princelings and foreign companies that operate under tight controls imposed by the Party and are directed more toward making products for export.

Even The Conference Board, a business research group that strongly supports increased trade with China, acknowledges, in its December 2007 report entitled Can China's Growth Trajectory Be Sustained? that China's moves toward market reforms have been dismally slow. The study, which focuses on the decade of 1995-2005, notes that in the early years of that period--which is to say, 20 years after the beginning of so-called reform--"large-and medium-sized domestic private firms were virtually non-existent. Even as late as 1999, employment in these enterprises was still less than one percent of the total. By 2003, they accounted for 4.9 percent."

Yes, 30 years after the transition to market socialism, China is still 95 percent socialism and 5 percent market! SOEs, with their ties to the Party, receive favorable bank loans and contracts, as well as special tax, trade, and regulatory favors not available to genuine entrepreneurs. But even that bleak picture does not tell the whole story. For, as many economists and China observers have pointed out, even many of those firms officially designated "private" are, in essence, state entities.