China in a state of Zero-Sum Game

By He Qinglian on December 30, 2012

On December 26, 2012, the Bloomberg published a story about the fortune of the Red families of China. Some of the data made me realize that China has already entered the stage of zero-sum game. 

Zero-Sum Game: what the winner gains is what the loser loses

That data is: “Three children alone—General Wang’s son, Wang Jun; Deng’s son-in-law, He Ping; and Chen Yuan, the son of Mao’s economic tsar—headed or still run state-owned companies with combined assets of about $1.6 trillion in 2011. That is equivalent to more than a fifth of China’s annual economic output”. By “annual economic output” it means GDP. China's GDP ranks second in the world. 

The data showed that the controlling capacity these companies have on China's economy is already beyond people's imagination. The figure also served to reveal a fact that I have not seriously thought about before. The saying that 4% of the people own 75% of the country's wealth obscured a fact: the descendent of a very small number of Red families have already controlled the lifeline of China's economy.

This abnormal interest structure has long constituted a state of “zero-sum game”. There is no longer any possibility for members of Chinese society to work together.

The “zero-sum game” is a concept of the game theory. It means that under a state of competition, what a participant's gain (or loss) is exactly balanced by the losses (or gains) of the other participant(s). The parties involved, therefore, would have no way to cooperate. 

One-Party Dictatorship: the Systemic Guarantee for winner-takes-all

Once a given society enters the state of zero-sum game, the happiness of a certain class of it is constituted upon the suffering of others. Hence, all parties would try every possible means to "beggar thy neighbor". In the last decade or so, Chinese have experienced forced demolition and removal, land grab, and crazy surge of property price. To seek profits, manufacturers no longer care about food safety. Serious damage has been done to the environment. Property developers, food producers and owners of various pollution enterprises reap their profits from the ultra-high property price the flat-buyers pay, from the loss of health and reduction of lifespan of all Chinese people. 

Why do the waves of mass incidents fail to stop the plundering of these parties with vested interests? Because these “elites” formed a symbiotic relationship with the CPC regime. The organizational resources in the hands of the CPC are the systemic guarantee that the plundering could carry on smoothly.

Once the meaning of zero-sum game and the current state of China are truly understood, people would see why the authorities dismiss every suggestion of political reform, including the latest, the Proposal of Consensus for Reform, jointly signed by Zhang Qianfan and more than 70 other scholars.

Although the Proposal only asks the authorities to implement enlightened despotism under the Party's leadership, the authorities are fully aware of the ultimate outcome of that would put an end to the dark dictatorship, the multifarious privileges the ruling clique enjoy and the plundering of public resources and the wealth of the people for their own gain. Ben Ali of Tunisia implemented enlightened despotism in the early 1990s, and Hosni Mubarak's revising the constitution under the pressure from the U.S. and allowed the existence of the multiparty system and abolished news control in 2005. The CPC has always seen these as what led to the Jasmine Revolution. 

Two reasons why Xi Jinping won't carry out political reform

Since Xi Jinping ascended to the throne, the world has been watching his shows: anti-corruption, a trip to the South, all the way to the so-called “get close to the people” shows, and could not find any information that could be related to political reform. And so some started again the blaming game: “Xi Jinping intends to reform, but couldn't make it happen as he is constrained by elders in the Party like Jiang Zemin.”

I believe the saying that Xi Jinping is constrained by elders is basically nonsense. Hu Jintao's relinquishment of all his posts proved he's losing in the power struggle, Jiang Zemin's influence is even less regarded. What truly constrain Xi Jinping are two things: his own governance vision and the already fixed interest structure of China.

Xi Jinping has so far shown no yearning for Western democratic politics. Instead, his attitude toward it has been of prevention and rejection. The reasons that Xi Jinping is picked to lead the CPC are firstly that he is politically reliable—he could not possibly become figures like Mikhail Gorbachev, and secondly, he has a strong tie with the current regime. Under these two constraints, Xi Jinping has already become predetermined to reject political reform. Even if he is aware of the state of gross imbalance of the current wealth distribution in China, he could not possibly alter the situation in which the things the winners get come from what the losers lose.

Lesson from the Arab Spring

CPC elders Chen Yun and Wang Zhen had both said that it would be best that their own children take over. The context of this saying has not been fully revealed until today. Indeed, the corruption in China’s officialdom is not just limited to the high level; even those at the most basic level could take bribe of up to a hundred million. Yet after the Arab Spring in 2010, the CPC has come to realize acutely that the high and low level officials of an autocratic country could face different ends. In January that year, revolution began in Tunisia. As the Swiss Dictator Asset Law took effect in February, the Switzerland, and the U.S. and the U.K. alike, announced confiscation of the fortunes those dictators and their family members gathered and would give back to the peoples of those countries respectively. The dictators and their family members fell into a situation of having nowhere to go.

Countries of the West, however, did not announce confiscation of the overseas assets of high- and mid-level officials. The reason for this is not clear, but an educated guess could be that it is far harder to collect such information and those countries were not able to create records of those officials and their relatives.

This year, due to the power struggle in China, high level members of the CPC like Xi Jinping, Wen Jiabao, and the eight elders see the fortune of their family disclosed in succession. According to Bloomberg, international media used the Woodward-Bernstein model—named after the journalists who followed the Watergate scandal—to track the flow of funds. 

Determined Not To Reform

Since the safe of their fortune is no longer secure, the amount and whereabouts of their treasures could be revealed at any time, the Red families of China have to reconsider their shared fate with the regime in Beijing. They come to understand that China has entered the phrase of zero-sum game. Once the regime’s toppled, they would not only lose their privileges in China but also be caught in the dire situation of having nowhere to hide. Officials of provincial and municipal levels, however, might be able to take refuge in the West and continue to lead a comfortable life as they are small targets, with little about their relatives is known, and it is hard for the West to fully grasp information about them.

I am convinced that the high level of the CPC has reached a consensus: the only way to forever ensure the safety of their lives and their assets, both at home and abroad, is to make every effort to keep the regime in power. One step backward could lead to the loosening of their footing, and they would lose the whole game.

China in the state of Zero-Sum Game

Once a country entered the state of zero-sum game, the fixed interest structure could hardly be altered. It is not possible that the party with resources under their control would initiate reform as what they gain come basically from exploitation of the other party. The other party, without sufficient resource and the ability to self-organize, would not be able to stage a revolution.

Under this circumstance, the disadvantaged, who are struggling to survive, would generally seek to gain access to some rare resources and various opportunities by such means as abandoning their principles, selling their body or getting close to the party with resources in control.

The female doctorate holder who caught much attention after she disclosed how she made every effort to bribe with money and sex to get an opportunity to work in Beijing is a perfect and saddening illustration of the state of zero-sum game China is now in. Sadly, most Chinese people only see the corrupt character of that woman and pornography and overlook what is truly implied.

This state of zero-sum game is a state of the jungle in which the winners take all. Its manifestation in China is as follow: the upper class think of nothing but plundering money and indulging themselves in sex; the lower class dream only about an across-the-board redistribution of assets; those in the middle feel dreadful about a violent revolution from the bottom and wish the upper class would carry out reform; at the same time they voice their opposition to violent revolutions which might lead to anarchy and chaos should the CPC regime collapse. As a result, this group of people become the sandwich class that is squeezed from both sides.

This state will be the keynote of the coming decade of Xi Jinping and Li Keqiang.