China's Bid to Challenge the US and Rewrite International Rules

Source article in Chinese: 2013年中国对美的探底式外交
By He Qinglian on November 30, 2013

While the Sino-US diplomatic relation is still far from sabre-rattling, it is obvious that China intends to test the bottom line of the US. By testing the bottom line I mean China's approach of continually pushing the boundary of its adversary. If its adversary yields, China would tentatively push further. This bottom-line testing of Beijing is not an ad hoc action taken on a whim, rather, it is a strategy developed a long time ago.

Xi Jinping: the second most powerful man after Mao Zedong

Source article in Chinese: 习近平:权位之重仅次于毛泽东的独裁者
By He Qinglian on November 13, 2013

For the Communist Party of China (CPC), the biggest political achievement of the Third Plenum of the 18th CPC Central Committee is that a National Security Committee would be created to improve the national security system and strategy. According to the political logic of the CPC, “l'Etat est le Parti”, the so-called national security means nothing other than the security of the red regime. Whatever reform policies the so-called “reform group” may put forward in future serve only to safeguard that regime.

China's Shadow over the UNHRC

Source article in Chinese: 何清涟:联合国人权理事会上的中国阴影
By He Qinglian on November 14, 2013

Following the election of the UN Human Rights Council (UNHRC) on November 12, countries with bad human rights records like China, Russia, Cuba, Vietnam, Saudi Arabia and Algeria became its new members. Xinhua News Agency specially pointed out that China got elected with 176 votes (91% of total votes). When this story came out, twitter, the only place where Chinese netizens can freely express themselves, was boiled over. Some commented sarcastically that this was “an invasion of the UNHRC by barbaric tribes”. Cartoonist @badiucao drew a picture, the comeback of the Panda, which depicted a panda putting a barbed wire annulus with spikes onto the emblem of the UN.

Xi Jinping: slave to the CPC political system

By He Qinglian on November 9, 2013
Source article in Chinese: 习近平:中共政治制度的奴隶

There was no signal that a political reform would be initiated before the Third Plenum of the 18th National Congress of the Communist Party of China (CPC) convened. Nonetheless, overseas media outlets still sought to speculate Xi Jinping's political motives from the suspension of publication of the Little Red Book, and Xi's stopping short of paying homage to Mao's ancestral home in Shaoshan and the like. Some of those who have high expectation of Xi thought that, the General Secretary hasn't found a direction after he assumed office more than one year ago and his swaying political attitude upset the leftists, the rightists and the princelings alike—a judgment that seems to indicate the top leader of the CPC has made many enemies in both the government and the public. This remark has got the situation wrong in that its premise erroneously mistook autocracy that worships power for democracy and assumed that those disgruntled members in the ruling clique could become Xi Jinping's opponents.

On the Consequences of youth being nurtured into mercenary beings

By He Qinglian on October 20, 2013
Source article in Chinese: 青年被培养成利益动物的后果 - 从贵阳“拆迁学生军”谈起

This is a piece of news that I found unacceptable: On October 12, 72,000 square meters of “illegal constructions”* at Shangpu village, Shanhu District, Guiyang City, Guizhou province was demolished. Of the 2671 individuals who took part in tearing down those buildings, 837 were local college students.

This incident is but an example showing that the youth of China is being nurtured into mercenary beings.

Chinese Regime Suffers From Fiscal Hunger but Adds New Censors

Source article in Chinese: 网络舆情分析:用税收残害纳税人的新产业
By He Qinglian on October 3, 2013
This translation first appeared in the Epoch Times.

The Chinese state has a huge problem called “fiscal hunger”. Prior to 2012, the government had money freely flowing, as the annual tax revenues maintained a double-digit growth. Although the total tax revenues have continued to increase, the state’s demands are even more pressing, as the revenue growth rate is dropping.

China’s Secret ‘Regulation 1984′ on Prisoner Organ Extraction

Source article in Chinese: 一部剥夺死者尊严的“1984”法规
By He Qinglian on October 3, 2013
This translation first appeared in the Epoch Times.

Regulation 1984 discussed here does not refer to George Orwell’s 1949 novel, but to a Chinese law that took effect in 1984. The full name of the law is “Provisional Regulations regarding the use of corpses and organs from executed inmates by the Supreme People’s Court, Supreme People’s Procuratorate, Ministry of Public Security, Ministry of Justice, Ministry of Health, and the Ministry of Civil Affairs.” If this regulation triggers the same horror as Orwell’s novel, it is purely by coincidence.

When all that's left in China's economy is real property

By He Qinglian on September 16, 2013.

In a report published on September 13, Southern Weekend said that Wenzhou housing speculators are now dumping real property, and that property owners have relinquished over 10,000 units of flats or commercial property with outstanding mortgages or were pledged to banks. This number exceeded the total supply of new flats in Wenzhou in 2012.

Since the funds used to speculate real property in Wenzhou came almost entirely from private capital, other areas were not too worried if Wenzhou would be the first fallen domino leading to the burst of property bubble.

Yet, whether or not this bubble would burst in the near future, one cannot help but feel that this so-called golden age (better called as "gilded age") of China is a period of absurdity when reviewing this unitary “pillar industry” of China and all the tragedies and bizarre things that happened around it.

Withdrawal of foreign funds: the People's Daily's Rebuttal, and the secret leaked

By He Qinglian on September 13, 2013
Source Article in Chinese: 人民日报“十大外资来源地”背后的秘密

China claims to be the world's second largest introducer of foreign investment. Yet when it comes to the origin of foreign investment, there is an embarrassing fact that the Chinese government would not want to admit: a large part of foreign capital is actually Chinese funds posing to be investment from overseas. 

The People's Daily published on August 12 an article saying that foreign funds have not withdrawn from China en masse, and included in it a chart listing the “top ten places of origin of foreign investment in China”. That chart debunked this lie. 

Foreign Capital Withdrawing from China

By He Qinglian on September 11, 2013 
Source Article in Chinese: 外资撤离成势,官媒为何否认?

The withdrawal of foreign capital from China has been a trend that began in 2009. Although at times there were new funds entering the country, they were not enough to change that trend. What drew my attention is that the People's Daily published articles time and again, asserting on one occasion that “the mass exodus of foreign funds is a purely groundless statement”, and claiming on another that “the withdrawal of part of the foreign funds was merely a temporary adjustment, its impact on China's economy is limited”. 

That the withdrawal of foreign investment is an issue important enough to drive an official newspaper of CPCCC to running several pieces to “set the record straight” made one feel very interested in the key arguments of Chinese official media.

Reading closely, I found that Chinese official media used three main arguments.

Xi Jinping’s “Speech 8.19” misinterpreted

By He Qinglian on September 8, 2013.
Source Article in Chinese: 被左右两方曲解的习近平“8.19讲话”

The recent debate about constitutionalism is very lively. While Maoists and Leftists took Xi Jinping’s remarks that showed his admiration for Mao as indications of a full turn to the left; the pro-constitutionalism faction (aka the “faction of universal values”) expected the Communist Party of China (CPC) to put political reform on the agenda during the Third Plenum this fall. And so the two factions talked past each other, oblivious to the strong political signal Xin Jinping released in his speech “Ideology work is a paramount task of the Party” (known among the Chinese media circle as “Speech 8.19”) and continued to make interpretation following their wishes.

Likonomics scrapped

By He Qinglian on August 13, 2013.
Source Article in Chinese: 政府投资号急吹 “克强经济学”破产

This is a time when economic bubbles exist side by side with conceptual bubbles, a time in which concepts get invalidated quicker than they take shape. One such example is Likonomics, introduced by Barclays Capitals in June this year. Of the three main points of this concept, “no stimulus” and “deleveraging” have been nullified. As for the “structural reform”, under the influence of government investment, it would bring about no change but instead give way to the old methods.

"Li Keqiang Put" and "Zha Cai index"

By He Qinglian on August 12, 2013.
Source article in Chinese: 从“李克强看跌期权”到“榨菜指数”.

There are no consensus as to whether the Chinese economy is getting better or getting worse. The popular “Li Keqiang Put” indicated that the international investment banking sector expect the Chinese economy “to get better”; while the “Zha Cai index” brought forth by the National Development and Reform Commission (NDRC) signaled that the entity economy of China is irretrievably “getting worse”.

What lies ahead for World Bank's proposals for China

According to a Wall Street Journal Report dated August 2, the World Bank, at the request of PRC State Council Premier Li Keqiang, and Development Research Center of the State Council are working together to set a reform agenda. The report revealed that the World Bank are gathering a wide variety of proposals and suggestions for China to privatize a major bank and allow farmers to sell their land. The author of that report commented that these are “Changes that could upend decades-old Communist Party ideology if implemented”.

Likonomics: Can it work? Will it last?

By He Qinglian on July 22, 2013.
Source article in Chinese: “李克强经济学”的制度基础何在?

Since its coinage by Barclays Capital in a research report in June this year, the term "Likonomics" became a smash hit in the international investment banking sector, the media responded to it was so zealous that they interpreted the concept  in almost a free-wheeling manner.

Stability Maintenance and China

By He Qinglian on July 10, 2013.
Source article in Chinese: 中国基层政府的“维稳疲劳”.

Despite the fact that “stability maintenance” has evolved into a new thriving industrial chain in China and provided numerous officials and their families with opportunities for the distribution of benefits, local governments, being at the forefront of conflicts between government authority and the people, are increasingly weary of the never-ending stability maintenance measures, both in terms of budget input and bearing capacity of grassroots officials. Many signs indicated that grassroots officials generally developed a “stability maintenance fatigue”, and local governments, a fiscal fatigue.

A Financial crisis in China in the near future?

By He Qinglian on July 3, 2013.
Source article in Chinese: 中国近期内会不会发生金融危机?

Due to the recent “money shortage”, the question whether China is facing a financial crisis became a trending topic. Discussion on this focuses on two main themes—those inside the financial sector wonder how big this crisis actually is, how profound an impact it would have on China’s economy, and whether or not the crisis would erupt; those outside the sector are concerned if a financial crisis would lead to a political one.

This article will discuss if a financial crisis would take place in China in the near future.

Banality of Evil

By He Qinglian on June 16, 2013.

Source article in Chinese: 中国“硬币”的两面:独裁之罪与平庸之恶.

Some of the incidents that recently took place in China made me want to write this article. 

Sin of Dictatorship

The people of China have come to understand quite well about the sin of dictatorship. Their different views on Mao Zedong aside, most of them are aware of what dictators like Adolf Hitler, Josef Stalin, Muammar Gaddafi and Kim Jong-Il have done. The evil of dictatorship in real life could easily be identified. The recent arrest of photojournalist Du Bin by Beijing police on the charge of “suspicious of disturbing order in public order” is an example. 

Mouthpiece of the CPC and Ai Weiwei's Dumbass

Source Article in Chinese: 中国的戏剧:权力的谵妄与《傻伯夷》.
By He Qinglian on May 24, 2013.

Of late two dramas about China made their debut one after another. The protagonists of the first drama featured People's Daily, PLA Daily and Red Flag Manuscript (a progeny and an outpost of Qiu Shi, an organ publication of the Central Committee of the CPC). These Party media outlets ran in succession three articles that used flowery language to present the proposition of the “divine right of the Party”.

And the other drama centered on Ai Weiwei's “Dumbass”, a postmodern rock music video that used swearwords and vulgar language to express the producer's extreme contempt for the regime and his anger toward the various parties that suggested dissidents to give up the fight and reach a reconciliation with the regime.

The split and confrontation between the ruling clique and the masses in China can thus be seen.

Could Xi Jinping become another Mao Zedong?

Source article in Chinese:  以毛式铁腕捍卫权贵资本主义——习近平的执政蓝图(一)
By He Qinglian on May 14, 2013.

It's been over a half year since Xi Jinping began his reign. The ruling blueprint he has is very clear: he sees as his political mission acting as a “guardian of the Red Regime”. Facing the facts, even the most tenacious dreamers found it hard to continue their argument that Xi Jinping would engage in the so-called “great cause of political democratization reform”. 

“Document no. 9”.

Recently, a “Briefing on the current state of ideological sphere”, issued by the General Office of the CPC Central Committee, is being circulated on the internet. Since the file number of that document is “GO-2013-9”, it is known as “document no. 9” for short. Allegedly the document has already been distributed to the county and regiment levels; in Chongqing, Jilin and other provinces and cities there are reports about studying of “document no.9”.

What would happen to NGOs after the Ya’an Earthquake?

Source article in Chinese: 雅安救灾后非官方NGO的命运

By He Qinglian on May 3, 2013.

There are two things about the Ya’an earthquake in 2013 that are worth taking note of: 1) the credibility of the Red Cross Society of China (China Red Cross, CRC) (which is actually the credibility of the Chinese government) and 2) the exceptional disaster relief work of NGOs, as opposed to the Government-operated NGOs (GONGOs).

As people commended the operational capacity of these NGOs, few seemed to have thought about what would possibly happen to these organizations after the disaster.

Elegy on the loss of Chinese government credibility

Source Article in Chinese: 2008-2013:中国政府公信力之殇
By He Qinglian on April 25, 2013.

There is a time span of only five years between the Wenchuan earthquake in 2008 and the Ya'an earthquake this year, but the difference in the government's ability to mobilize the people and the popular support they enjoyed between these two quakes made people feel as though generations have passed.

One of the most conspicuous problems is the rapid degradation of the political credibility of the Chinese government. Despite round-the-clock effort from Internet surveillance personnel to delete posts and suspend users, various voices of doubts continuously emerged from the cracks of Weibo, China's equivalent to twitter. 

China's politics and public opinion

Original article in Chinese: 中国舆情与政治之间的复杂演变
By He Qinglian in April, 2013.

Ren Xianliang, Standing Deputy Chief of the Publicity Department of Shaanxi Provincial Party Committee, has recently published an article entitling “Managing the two domains of public opinion and bringing together the positive power in society” in Red Flag Manuscript, a subsidiary of Qiu Shi, a supreme publication of the Communist Party of China.

With tough remarks directed at media and opinion leaders such as “to warn whoever should be warned, to disallow whoever should be disallowed from making comments and to shut down whichever [websites] should be shut down”, the article drew a chorus of criticism on the internet.

On “China model”

Original article in Chinese: “中国模式”贻害全球.
By He Qinglian on April 2, 2013.

Xi Jinping's visit to Africa in mid-March has again spurred “neo-colonialism” into a hot topic of concern of the international community. The so-called “neo-colonialism” means that in order to plunder the resources of Africa, China disregards the environment and ecology of the continent; at the same time, it makes Africa a dumping ground for cheap industrial products. China's economic development in Africa brought scarcely any employment opportunities for the peoples of Africa; the Chinese government's policy of non-interference in the internal affairs of other countries and its unconditional aids broke the aid-with-political-conditions pattern of Western countries, as a result, dictators of some African countries became even more unbridled.

Why does Panda hug the Bear?

Original article in Chinese: “熊猫”为何热切拥抱“北极熊”?
By He Qinglian in March 2013.

On March 22, Chinese President Xi Jinping arrived in Russia for a brief visit. Russia Today, Russia's official [news] website listed the story in a less prominent position, giving it the title: Geopolitical giants: New China leader in Moscow boosting ties; in stark contrast, China's publicized the visit with full force.

On China’s “Two Sessions” 2013

This is an abridged translation of two articles by He Qinglian in March 2013. 
Links to original articles:

While the annual “Two Sessions” in Beijing is nothing more than an “elite gathering” through which the authorities manifest the size of the legislative body and the united front, it nonetheless captivates the attention of media around the world. The clothes those delegates wear, the demeanor and proposals they make, and the way they answer questions from reporters could all constitute a final public opinion test of theirs. The comments on the representatives of the “Two Sessions” are the true expression of the people’s opinions.

Outlook of China

By He Qinglian in March, 2013.

Original article in Chinese: 从2013“两会”话题的兴衰看社会脉动

Through observation of the emergence and disappearance of topics in the “Two Sessions” over the years, one could get a glimpse of the hidden political pulsation.

If a given motion is the focus of discussion, it means that the Communist Party of China (CPC) acknowledges a problem is there and that it is serious. If a once hotly deliberated topic vanished all of a sudden, it does not mean that the problem is solved. Instead, the problem became a “general disease” of the ruling clique. It cannot be solved, and they don’t want to solve it. Therefore, the topic disappeared from the “Two Sessions”.

In the “Two Sessions” this year, the hot topic is “environmental pollution”, and the frozen topic is the issue of “naked officials”*. Between the two issues there is in fact a close correlation that is extremely subtle.

Shrouded by “environment panic”, China ceases to be a country of happiness.

China’s environment pollution has long driven the people in some regions into a hopeless situation. Villagers of hundreds of cancer villages across the country are victims of this category. Part of the environmental pollution data, such as the portion of contaminated groundwater across the country has already reached as high as 97%, and the dramatic increase in cancer patients, got disclosed prior to the government transition out of political needs. At a time when a number of cities in China were shrouded in haze and smog, academician Zhong Nanshan told the public that those could lead to cancer, which period of high incidence would come in four or five years.

All of a sudden, the news overshadowed the Chinese people, privileged and poor alike, with fear about the environment because while the privileged could have access to special food and drinking water supply, they have to breathe the same air as the poor. The people look to the rulers to immediately start addressing the environment pollution issue so that they could breathe clean air.

As the “Two Sessions” held amidst the fear about the environment, both the representatives and the media feel worried. Many delegates are beginning to care about the environment and called on the government and corporations to disclose environmental information in a timely manner. Lu Xinhua, spokesperson for the Chinese People's Political Consultative Conference (CPPCC) who claimed that the quality of domestic powdered milk is safe and reliable, feels otherwise about the air. In response to the schedule brought forth by the relevant department that the air quality of major cities would meet national standard by 2030, he said, probably out of the deep concern for his own life, that it is a bit too long to wait for 18 years and expressed hope that the schedule could be shortened.

Possibly out of the memory of “Happy China” being the theme of the “Two Sessions” in 2011, Mr. Zhong Nanshan from “happy Guangdong” lashed out; “irregardless of whatsoever harmonious society you call, or whatsoever platform you have, the most important thing for human is the air they breathe, the food they eat, and the water they drink. None of these is safe, and there is no happiness at all!”

The outgoing Premier Wen Jiabao could only point out: "It is needed to implement practical pollution prevention and control measures to solve the pressing problems of the air, water, and soil contamination that are closely related to the vital interests of the public. It is necessary to improve the environment, safeguard the health of the people, and take concrete actions so that the people see hope.” However, he did not mention how much the environment pollution issue had actually worsened during the years his held office as Premier.

And while there are wishes, it is not easy to take actions. Most of the delegates own car(s). It is understandably difficult if they are requested to stop using their own car(s) and to commute with public transport instead; and it would be even more difficult to make those business owners who profit from pollution emission and their agents in the government quit what they are doing. Take the province of Shanxi for example. Severely polluted, Shanxi would even mine out the ground (over 10% of the ground hollowed) within its province for economic development, and the officials there have always insisted that economic development comes before of environment protection. Faced with the “environment fear” of delegates of the “Two Sessions”, Ms. Shangguan Yongqing, CPPCC member from Shanxi, said calmly that “the weather of smog and haze is a problem difficult to avoid in the process of economic development. To address the pollution problem would require taking every concerning aspect into consideration and implementation in a comprehensive way.”

It is said that many of the flats in Beijing have been purchased by officials from Shanxi.

A frozen topic: "cracking down on naked officials".

The once hotly deliberated topic of “cracking down on naked officials” in the “Two Sessions” in 2011 remained frozen. As happened in 2012, some journalists pressed Ma Wen, head of the Ministry of Supervision (MOS), about the exact figure of “naked officials”. Ma replied that he could not produce such a figure and prevaricated by saying that the issue of “naked officials” is one that involved internal management of cadres, the journalists should go to the Organization Department of the CPC Central Committee for the figure.

The pretext does not hold water in that the organization system of the CPC is one that has a long history and powerful functions. Back in the days when the CPC was a “revolution party”, it was already able to thoroughly record who among its members were traitors and who had left the party. Now being the ruling party for over 70 years, would the functions of the CPC actually degrade that it could not produce the statistical data of naked officials after several years of work? Of course not, technically this could be done without any difficulty. Just look back at what happened before and after the topic of naked officials became trending and one could tell what the real crux is.

The attitude with which the CPC government treats “naked officials” has undergone a transformation process. Initially, verbal statements that the issue would be addressed were made; and in the end the Party just switched to a laissez-faire approach. The year 2010 in which the political situation was far better than today was the year that verbal statements of cracking down on naked officials were made. On February 22, 2010, the MOS issued on its website a directive, “The main points of the National Bureau of Corruption Prevention 2010”, which for the first time included “regulation of naked officials” as a focus of corruption prevention. During the “Two Sessions” held in March that year, Ms. Lin Zhe, a representative of the National People's Congress (NPC) and a professor of the Central Party School of the CPC, disclosed publicly to the media that from 1995 to 2005, a total of 1.18 million officials’ spouses and children settled abroad. After the disclosure of this figure, the Chinese Internet was like it exploded.

On May 19, the General Office of the CPC Central Committee and the Office of the State Council promulgated and implemented the “Interim Provisions on Strengthening the Management of Civil Servants whose Spouses and Children have settled outside the Country (Territory)”.

Guangdong, Hunan, Shenzhen and other places posed to enact similar provisions. For instance, officials whose spouses and children have settled abroad would no longer be allowed to assume top positions in organizations and so on.

I am convinced that Lin’s statement that there were 1.18 million “naked officials” was not an irresponsible comment; instead, it was made based on internal data. Now it’s been eight years since 2005, and China has experienced an outflow of the rich, the number of “naked officials” should have long exceeded 1.18 million. In early February 2012, the Chinese Academy of Social Sciences published its Blue Book on the Rule of Law, which contained a sub-report that reported 38.9% of public servants believe it is okay that their spouses and children have foreign nationality. And the higher the ranking the officials are in—that is, the more capable they are of facilitating their spouses and children to settle abroad—the greater the degree of recognition they have for “naked officials”. One of the factors behind this phenomenon is that CPC officials are extremely pessimistic about their future in the country, and among their worries include the concern of the deterioration in environment and ecology.

Environmental panic drives a surge in the number of "naked officials".

The reason that Chinese officials are so eager to become “naked officials” is of course out of the consideration to avoid danger. If in the past it was mainly about political and economic concerns, then in recent years as the ecological environment deteriorates, those officials who want to be “naked officials” have yet another consideration that is closer to the bottom line of survival: the hope that their children could live in a safe ecological environment. A number of emigration study reports mentioned that the rich take this into consideration when they choose to emigrate. It should also be the case for the officials.

Can the Chinese ecosystem that is on the verge of collapse be restored? I knew it is difficult. Officials as insiders would of course be more fully aware of this: the deterioration of China's ecological environment could be attributed to both political and economic reasons, and it is also related to the increasingly tense relations between China's resources and its population. Due to space limitations, this article would discuss only the two causes of politics and economy.

That China's environment is in such a state is a “tragedy of the commons” at its most extreme in human history. The most noticeable characteristics of the CPC regime is that its hegemonic power over social resources is far greater than all dynasties throughout the history of China, and at the same time it assume no accountability in politics. In the case of China's feudal monarchy there was an emperor as the ultimate accountable person. Yet under the totalitarian regime of the CPC, the highest rulers barely need to bear any political consequences for the wrongful deeds they have committed. Take the ecological environment for example. It is claimed that all of China's resources belong to the people, and the CPC government, the “people's representatives”, take charge of the resources management and allocation. Government (officials) of all levels, however, being the actual owners of the public resources, have the right to use them without having to be responsible. As a result, resources are used to depletion and pollution is everywhere. That I call this a “tragedy” is because while every official knows that the resources would be depleted due to excessive use, none of them feel they could do anything to stop the situation from continued worsening. On the contrary, they are of the attitude that they profit from the resources while they could, which exacerbates the deterioration of the situation.

A while ago, a number of netizens urged their local chief of the Environmental Protection Bureau (EPB) to swim in the river. Some EPB chiefs considered pollution in local rivers not entirely their responsibility. That was in fact not a remark of prevarication because environmental assessment and supervision of local EPBs are done almost in complete compliance with orders from leaders of local Party branch and government.

Since this giant ship of China could not escape the fate of sinking, officials are all very “wise” and want to grab what they could before the ship submerges; sending wives and family to settle abroad first became a “collective action” of the officialdom. Sensing what the “naked officials” have on their mind in taking the “collective action”, an official of the Central Commission for Discipline Inspection surnamed Li commented that “not fight corruption would result in the demise of the Party and the country; to crackdown on corruption, too, would result in the demise of the Party and the country”.

It could be said that the increase and decrease in the importance attached to the issues of the environment and the “naked officials” respectively in the “Two Sessions” this year serve to pinpoint the future of China. The real tragedy of the Chinese people is that, the collapse of ecological environment is a fate that could not be reserved simply with a change in the political system.

*Naked Officials, officials who stay in China while their family settle abroad.

Milk Powder and China's self-confidence

Self-confidence of a Great Nation Shattered by Milk Powder.
By He Qinglian on March 2, 2013.

Original article in Chinese: 

At a time when media in China are brooding over what to dig up from the “two sessions” to report as news stories, the country's milk powder has again become a hot topic of overseas Chinese media. March 1 is the first day Hong Kong's new law to put a cap on the amount of milk powder travelers could bring out of the city. That new law stipulates that unless with permit, each individual shall not on departure carry milk powder of more than 1.8 kg in net weight, the equivalent of two cans of infant formula. On this very day, ten individuals were arrested for infringing the law. On March 2, Lu Xinhua, spokesperson for the Chinese People's Political Consultative Conference (CPPCC), made a claim at a CPPCC news conference that 99% of milk powder produced in mainland China meet quality standard.

Hoping for a Gorbachev in Today’s China

By He Qinglian Created: February 6, 2013

At a recent meeting of the Central Commission for Discipline Inspection, Communist Party leader Xi Jinping stressed that anti-corruption efforts need to target both “flies” and “tigers,” referring to lower and senior level officials. He does not seem to have real political reform in mind, though.
Observers have long concluded from the new Chinese Communist Party leader’s “tour to the south” late last year that “Xi Jinping is following Deng Xiaoping’s heritage.” However, the official media report on Xi’s “southern tour” speech was abridged.
Xi’s complete speech surfaced online recently, and disappointed many reformists. One noteworthy comment that Xi made regards the collapse of the Soviet Union. Xi said, “In the end, Gorbachev whispered a few words and the Communist Party of the Soviet Union collapsed. A huge Party was gone, just like that. The Soviet Union had more Party members than us [the Communist Party of China]. However, no one was a real man to take a stand and fight.”
The phrase “no one was a real man” was coined by Lady Huarui, a poet and concubine of an emperor who lost his empire after the fall of the Tang Dynasty (A.D. 907-960). When Xi Jinping used this phrase to describe the fall of the Soviet Communist Party and the Soviet Union as an “annihilated nation,” he clearly sensed the weight on his shoulders.
I, however, am not at all disappointed by Xi’s complete southern tour speech. In my article titled “Xi Jinping: The Guardian of a Red Regime,” I already concluded that Xi is not a person with an ambiguous attitude. What he talks about is exactly what he wants to do. Whether it can be accomplished is another matter. Xi always has a clear understanding of his role. Moreover, the veteran cadres of the Communist Party of China (CPC) would not have chosen Xi as the person to safeguard the “red regime.”
But the problem is that the Chinese regime is already in such a degenerated state that the only possible outcome is total collapse. Even if all seven members of the Politburo Standing Committee were “real men,” nobody can prevent the inevitable collapse of the regime. The fate of either the Soviet Communist Party or the CPC is not determined by any single Party leader, but by the general public. Now, the Chinese regime is simply refusing to recognize the fact that it has thrown away its good name, replaced trust between people with suspicion, and given up all its own trustworthiness. This is also known as the “The Five Ends.”  
On Dec. 25, 2011, CPC mouthpiece Xinhua published an article titled “Reasons for and Revelations From the Collapse of the Soviet Union,” which shows the CPC’s view on the Soviet Union’s collapse. The author of the article, Wan Chengcai, raised eight questions. Apart from a neutral question on the “important reason for the collapse,” all other questions were raised from the perspective of the CPC’s single-Party rule. For example: Who benefited and who lost out from the collapse? What are the major impacts on the world from the collapse? What should China learn from the collapse? How should one evaluate Mikhail Gorbachev, who initiated the political reform?
Vladimir Putin already gave a two-folded answer to these questions. He said, “anyone who doesn’t regret the passing of the Soviet Union has no heart; anyone who wants it restored has no brains.” On the one hand, Putin was sad because the Soviet Union went from a superpower to a second-tier country. On the other hand, Putin considered it the right move to end the dictatorship in the Soviet Union. However, the Chinese media intentionally paraphrased this so all Putin purportedly said was that he felt sad about the collapse of the Communist Party.
In fact, the root causes behind the collapse of the Soviet Union have long been attributed to three factors. First, corruption by the political elite had contributed to the growing social division and unrest, alienating the common people and intellectuals, who lost faith in the Soviet Communist Party. Just before the collapse, workers organized a nationwide strike to protest bureaucratic embezzlement. Second, to maintain its status as a superpower, the Soviet Communist Party engaged in an arms race with the United States, which caused a financial crisis. Third, Soviet General Secretary Gorbachev initiated a series of “new thoughts” reforms, that resulted in an end to the dictatorship in socialist countries in Eastern Europe.
Let’s compare the CPC’s current situation with that of the Soviet Union 20 years ago.
Let’s start by looking at the international environment. Compared with the Soviet Communist Party, the CPC is undoubtedly luckier. In the 1980s, the totalitarian regimes in Soviet Eastern Europe had “angered both men and gods.” Pope John Paul II and the President Ronald Reagan led the war to end communism, uphold justice, and safeguard beliefs. President Reagan’s famous speech to “Tear Down This Wall” was broadcast worldwide, and moved me to tears. The then Soviet General Secretary Gorbachev simply followed the desires of the people and accepted democracy. The Velvet Revolution, which took place in Eastern Europe, opened the doors for democracy, and brought an end to the Cold War. Mikhail Gorbachev became the 20th century’s hero of great wisdom, and he will forever be admired by freedom-loving people.
The world has changed a great deal since then. While China was rising in the first decade of the 21st century, Europe was declining. The formation of the European Union was merely a weak attempt at restoring the glory of Germany and France as world superpowers. Another superpower, the United States, was financially handcuffed by the war on terrorism, the war in Iraq, and the financial crisis in 2008, with debts reaching up to the stratosphere and widespread disgruntlement from citizens with U.S. participation in any kind of war. When the Jasmine Revolution struck North-East Africa, Europe and the United States could barely offer any assistance, not to mention resolving chaos in Syria. Under such circumstances, keeping an eye on the human rights situations in China was merely an international obligation for the U.S. and European nations. They do not have the will nor the resources to become the driving force of democracy as they did in the third wave of democratization.
However, the favorable international environment will not decrease the domestic pressure Xi Jinping is facing. Apart from vowing “not to become Gorbachev,” Xi is in a very difficult situation.
First, the corruption amid the elite circle of the CPC is much worse than that of the Soviet Union, Mobutu, and Gaddafi. This can easily be seen from reports by the regime’s own media, let alone reports by The New York Times and Bloomberg. The embezzlement of hundreds of millions of dollars by a village-level official is not rare. Chinese Internet portal QQ published an article titled “Corruption History of the Soviet Union in the 1970s,” which exposed the corruption of the Soviet Union. It is nothing compared with the corruption of the CPC officials. The so-called “special supply” for the Soviet officials was just importing goods, such as wine, clothes, cameras, and perfume, from the U.S. and European nations. Meanwhile, the CPC officials had reached the state of “luxury goods coming from bribery and no need to spend salary” as early as the 1990s. What the Soviet officials cannot even imagine is the international spread of CPC officials. Millions of Party members have become “naked officials” by moving their family members abroad. The only “special supply” they need is clean water, clean air, and safe food.
Second, the Soviet economic system had abundant domestic resources and a low unemployment rate. But today’s China is plagued by a lack of natural resources and a high unemployment rate. Over 100 million farmers do not have land. Tens of millions of city dwellers are unemployed. The profits from the economic reform have been depleted during the 10-year rule of Hu and Wen.
Just as I wrote in my 2004 article, “The Current and Future State of China’s Authoritarian Regime,” there are four basic requirements for a society to sustain itself: the ecological system as the basis; the moral system as the median among different social entities; basic living rights measured by the unemployment rate; a political system that maintains the normal operations of a society. Currently, the ecological system, moral system, and the basic living rights have already collapsed or are close to collapse. The only thing left is the political dictatorship.
Under such circumstances, only the CPC’s political gangsters would reject political reform. Even the intellectuals, who fear violence the most, are wishing for reform to abandon the one-Party system and avoid a violent revolution.
The person who acts as China’s Gorbachev will become the “good man,” respected and admired by the entire world.

This translation first appeared here, reproduced with minor changes.

Problems with China's New Ubranization (3)

中国没有“贫民窟”的虚荣后面 ——“新城镇化”的难点(三)

By He Qinglian on February 12, 2013.

Speaking of China's urbanization, many would feel proud that there are no slums in cities in China, and they use this as their main supportive argument that China's dictatorship is better than India's democracy.

Problems with China's New Ubranization (2)

Original article in Chinese:
无就业,“新城镇化”=制造流民 ——“新城镇化”的难点(二)
by He Qinglian on February 7, 2013.

Starting from the Industrial Revolution of the British Empire, the urbanization process around the world had never just been simply a migration of people. It is instead a modernization process that is closely related to the industrialization, the modernization of agriculture and the expansion of service industries. The most important issue of all is job opportunities.

Problems with China's New Urbanization (1)

By He Qinglian on February 4, 2013.

Following the emergence of the new industrial zone of Tijuana, Mexico, Beijing has finally realized that “the factory of the world” will relocate elsewhere and it has to find a new supporting point for economic development. Judging from incoming Premier Li Keqiang's speeches on economic development in the last six months, “new urbanization” will be the core of China's economic development from now on.

In fact, the so-called “new urbanization” derives essentially from the same mindset of “using real property (as an engine) to drive economic growth”, only that something new is added. For example, social policies like the probability that individuals of rural registered household could adopt an urban one.

But I think that the registered household policy could only address the problem of discrimination against people from rural background, it is of little significance to the urbanization success and economic sustainability in China.

The problems of new urbanization are as follows: 1) where do the huge funds required to promote the new urbanization come from? 2) who will be the genuine purchasers of these real estate? 3) with urbanization driven by policy, where do the job opportunities for the new urban population come from? 4) and how to solve the conflicts caused by the land acquisition of the rural population?

This article will analyze the first two questions.

First, who would inject the funds needed for “new urbanization”?

The urbanization of developing countries is generally an outcome shaped jointly by the rise or shift of industries and government policy, with diverse sources of funds. This was the case in the Pearl River Delta and the Yangtze River Delta years ago. At that time, various enterprise-based community funds came together to compete projects, be it the construction of industrial zones, living facilities, or logistics infrastructure. But the “new urbanization” that is about to start coincides with the shift of the “world’s factory” to Southeast Asia, Latin America and elsewhere and could only depend on government policy. Therefore, the first question for the “new urbanization” is that where to raise the huge money needed?

Judging from the current situation, this new urbanization is solely driven by policy and thus there can only be one major source of investment, the government funds.

In the past five years, the Chinese government sought to avoid recession and keep thriving amidst the global economic downturn by issuing astronomical amount of currency. The so-called 4 trillion by the Central government and over a dozen trillion in investment by local governments were just approximate numbers. The amount of currency issued by China’s central bank far exceeded this figure, as proven by data: by the end of 2012, the global M2 balance was as high as 366 trillion dollars, the amount of China’s new issued money was half the world’s total. Take 2011 for example, China’s contribution was up to 52% of the world’s new currency; and at the end of 2012, China’s M2 balance was close to 100 trillion. Interestingly, despite being the world’s largest cash printer, China has been openly condemning Japan for its unlimited monetary easing policy.

With new issuance at a scale rarely seen in the world’s history, coupled with the RMB not being an international currency, the impact of excessive issuance could only be digested domestically and it resulted in severe inflation. The so-called inflation indicators of the China's National Bureau of Statistics were far lower than the price increases felt by the Chinese people. However, the property price is a fact that they cannot hide.

In 2012, British luxury property consultant Knight Frank announced the average house prices increase in the last five years among countries. China topped the list with an increase of more than 110%; Hong Kong, and Israel ranked second and third; Taiwan, with an average increase of 30.1% in house prices over the past five years, came sixth.

The statistics calculated the average increase of all countries from the fourth quarter of 2006 to the fourth quarter of 2011 and showed that the housing price in China has more than doubled over the past five years. Take Beijing and Shanghai for example. In 2011, the average housing transaction price in Beijing stood at 13,173 yuan per square meter and the city's per capita income was 32,903 yuan. A person's annual income was enough to purchase 2.5 square meters of flat; in Shanghai, the average housing price was 13,448 yuan per square meter, and the per capita income there was 36,230 yuan, the annual income of an individual could purchase 2.69 square meters of flat.

The rapid rise in property prices illustrated that the "economic boom" China maintained by massive over-issuance of money came at the costs of the swift devaluation of the currency and the drastic diminution of the people's wealth. A property market that is above the purchasing power of the majority of the members of a given society and is supported mainly by speculators is only a highly inflated economic bubble. If the government continues to make investment to push for “new urbanization” before the bubble subsides, there will be serious consequences. David Daokui Li, former member of the Monetary Policy Committee of the People's Bank of China, believed that China with such a huge amount currency in stock is like placing a “dammed lake” above it, “A stock of money too large in scale would bring corresponding risks, such as high inflation, asset price bubble or the outflow of funds.”

These are what China is experiencing right now. Regarding the amount of capital outflow, I quoted in “Xi Jinping’s Dilemma: to fight corruption or not to fight” a report by the Central Commission for Discipline Inspection (CCDI) and calculated the ratio of that to the GDP of the year: in 2012 the amount of capital outflow was estimated to exceed $1 trillion, making up 12% of the year’s GDP of $ 8.23 trillion; in 2013, the scale of illegal capital outflow is expected to reach $ 1.5 trillion, based on the annual GDP growth rate of 7%, that would approximately be 17% of the year's GDP.

Second, who would purchase the apartments constructed in the “new urbanization”?

As the term “new urbanization” implies, the focus of future urbanization would shift from Beijing, Shanghai, and Guangzhou to cities of third- and fourth-tiers. But whatever types of cities that would be, apartments constructed have to be purchased, or there won’t be “sustainable development”. Now let’s analyze what kinds of people there are in China that could be potential apartment buyers.

China’s property prices have rendered over 80% of the Chinese people unable to become buyers. Before 2009, China’s property buyers comprised big and small speculators from inside the country and worldwide; after 2009, it was domestic speculators that made up property buyers. These people purchased apartments not for rent or their own use; they stocked up the apartments to preserve the value of their assets and wait for an opportunity to reap a profit. The “apartment families” that got exposed since November 2012 were just a few of those.

The “apartment family” mainly set their target in big and medium-sized cities like Beijing and Shanghai as there is great potential for appreciation, the market is relatively stable and it is easier to cash. They basically would not consider third- and fourth-tiers cities. Therefore, even after a round of promotion, the demand for real property in third- and fourth-tiers cities remains cold. Recently, major property enterprises withdrawn from third- and fourth-tiers cities and moved back to the first-tier ones in succession, the “ghost towns” are spreading in China.

What is more, since November 2012, Xi Jinping has been making “anti-corruption” rhetoric, coupled with the news that real property data network from 40 cities across the country would soon be (inter)connected, predominant members of the “apartment family” like officials and managers of State-owned enterprises jumped on the bandwagon to undersell their real property. These people are now cashing their real property and transferring their assets, and they would not reenter the property market in the near future. Without this legion of apartment buyers, who would purchase the apartments constructed in the “new urbanization” process?

Although I am aware that the "new urbanization" is the most important development plan in the heart of the incoming Prime Minister, I would in no way be able to envisage the following: what is the difference between the apartments that will be built in the "new urbanization" process and the 6,540,000 idle units in 660 cities across the country? Will this difference be so significant that those future apartments would actually attract enough buyers?

According to Chinese media reports, on average 450 acres of arable land are “requisitioned” each day in China, the urbanization project is like an arrow ready to leave the bow at any time. However, faced with the countless “ghost towns” in China—the samples of the bubble economy created by the power of the government, the policy makers should at least think through two questions: first, will the “dammed lake” of excessive currency issuance above their heads burst? and second, with hundreds of “ghost towns” that are already there, does China really need to construct yet more “ghost towns”?

Xi Jinping's Dilemma

Xi Jinping's Dilemma: to fight corruption or not to fight?

Original Article in Chinese: 习总的哈姆雷特之困:反腐败,还是不反?

By He Qinglian on January 30, 2013

Lately, CPC General Secretary Xi Jinping is caught in a Hamlet dilemma. The question on his mind, though, is not "to be or not to be", it is about fighting corruption.

By fighting corruption it could mean a general anti-corruption campaign or one that focuses on a small area; it could also imply a campaign with actions to be taken in full force or with some restraint.

To be fair, “not to fight corruption” is truly not what’s on Xi Jinping’s mind. Otherwise, he would not have personally led five other CPCCC Standing Committee members to the Central Commission for Discipline Inspection (CCDI), an organ oversaw by Wang Qishan, to deliver his speech that he would "catch both tigers and flies" when fighting corruption and corrupt officials, regardless of the scale of the bribe they took and their social prestige, would not escape punishment.

That speech was, in all probability, an attempt to correct Wang’s comment earlier that the anti-corruption campaign should be gentle and low-key. However, the dilemma Xi is facing is that there is an overwhelming number of both large and small bribe-takers—"tigers" and "flies"—in the government, and it is difficult to determine where and how to strike. Apartments owned by officials are but an example of a problem impossible to address.

The dramas triggered to officials' apartments in China are related to the economy and politics. And since these dramas are also relevant to the people's livelihood, they have become aggregation points for people's grievances. As a result, the anti-corruption campaign in China's officialdom and the mass selling of real property from late November 2012 could be likened to a two-act play in which officials assume the leading role and their apartments served as the predominant props.

The first act began when the so-called “the apartment families” that were exposed by an internet anti-corruption campaign in late November 2012. In the twenty-odd days to follow, netizens across the country took the opportunity to report officials of middle and low rankings who processed a dozen or even more than twenty luxury apartments. Based on the age and gender of those officials, they were dubbed “apartment uncle”, “apartment grandpa”, “apartment auntie”, “apartment sister”, “apartment girl” and “apartment ancestor” (!). Officials included in this list have at least a dozen apartments to their names. The most noticeable “apartment ancestor” at the moment is Cheng Shaochun, chief of Licheng District Public Security branch bureau, Jinan city, Shandong, who reportedly owns 16 luxury apartment complexes—not just apartments, but apartment complexes.

With reference to the property price in China, it is nearly impossible for the country's officials, regardless of their ranks, to purchase commodity flats using their salary alone, not to mention owning ten-odd or even dozens of apartments.

Without doubt, these apartments are related to their owners' acts of corruption.

Once dawned on the mind of those officials that their assets could come to light at any moment and would be used as the target to fight corruption, the apartments these officials used to see as the symbol of their wealth are now “risk assets”. The officials and their family became anxious about their apartments.

And so the second act of the play began. In dozens of cities across China there have been selling of apartments en masse.

According to a circular by the CCDI, the statistics prepared by the Ministry of Housing and Urban-Rural Development (MOHURD) and the Ministry of Supervision has it that 60% of the luxury apartments and mansions sold were owned in anonymity, using pseudonyms or corporate names. All of the sellers requested payment be made in cash and the money not to be wired via financial institutions; the selling of the property was done solely by lawyers and the owners did not show up in the entire transaction process.

After checking the initial purchase records and movements of capital between accounts, it was found that some of the owners who sold their property are public servants or in the rank of senior management in state-owned enterprises.

Allegedly, by mid-December, the CCDI, the General Office of the CPC, and the Organization Department of the CPCCC have already summoned over 120 senior officials currently in office to instruct them to tell their family to stop underselling property and closing bank accounts registered in anonymity or using pseudonym.

The anxiety caused by the apartment issue has eventually become the worries of the Party and the government. The CCDI circular has also listed the counts of recent withdrawal of foreign currency by the family members of middle and high-ranking public officials of Party and government organs in nine provinces and municipalities directly under the Central Government: Tianjin, Jiangsu, Shandong, Shanghai, Zhejiang, Guangdong, Fujian, and Hubei.

Guangdong topped the list with a withdrawal amount of 1.792 billion US dollar; and the lowest was 370 million US dollars. The CCDI circular stated that, according to incomplete statistics, the amount of illegal capital outflow in 2010 was 412 billion US dollars (6.9% of the year's GDP of 5.98 trillion US dollars); in 2011 the number reached 600 billion (8% of the year's GDP of 7.49 trillion US dollars); in 2012, the number was projected to exceed one trillion US dollars (12% of the year's GDP of 8.23 trillion US dollars); in 2013, the scale of illegal capital outflow is expected to reach 1.5 trillion (based on the annual GDP growth rate of 7%, that would approximately be 17% of the year's GDP of 8.8 trillion.)

The worries of the Party and the government are of course not just limited to this. When the officials undersell their apartments, it means they would not become new buyers of real property in future. And this is relevant to the smooth implementation of future economic development plan—the new urbanization project, I would present my analysis of this in a separate article.

Judging from the Economic Observer report on January 18, the CCDI has a fairly accurate understanding of the number of apartments owned by officials across the country. It was several years ago when the MOHURD started the establishment of the information system of individual property ownership in 40 cities. The time that system became publicly available for use was, however, postponed time and again. To this date the list of those 40 cities has still not been announced. Reportedly some of the cities have not yet completed the makeup of the housing history archival data. The reasons for the slow progress are that, apart from the complexity of the data entry work, the project encountered invisible boycott from officials of various regions.

It was said that to ensure smooth progress of the data entry work, MOHURD Minister Jiang Weixin told senior officials across the country that “the housing data of a particular individual would be retrieved only when there is consent from the Municipal Committee Secretary, the Mayor, and personnel from the MOHURD.”

Deputy Minister of the MOHURD once said that “the data collected from ministries, and provincial (regional) government is for statistical, analytical and aggregation purposes only; apart from local inquiry made in accordance with existing relevant provisions, no other inquiry service would be provided.

The government of the Guangdong province promised that the housing data gathered would be for statistical, analytical and aggregation purposes only, inquiry permission would be set in strict accordance with the relevant provisions.

It is precisely because the data has close relevance to the amount of assets owned by officials that a professor doing a research project of individual housing information system said:

Data entry of individual housing information is a risky job. Officials of the relevant department who have higher “political consciousness” would be reluctant to take this “hot potato”.

Regarding the issue of property ownership alone, there is concrete evidence of corruption of officials across the country, and Xi Jinping has repeatedly expressed his determination to crack down on corruption. Now there is only one problem left: to fight corruption or not to fight.

In view of the people's interests, Xi Jinping has to punish these officials because “he came from the people”, a propaganda highlight of the Xinhua News Agency since Xi ascended to the highest position in November 2012.

And the feature article about Xi Jinping was entitled “the people is the spring of our strength”.

But to make the people feel happy would mean great suffering to the Party cadres. If Xi is serious about fighting corruption, like carrying out the campaign pursuant to the provisions laid out by the Criminal Code, then his every move could be startling.

I did a quick check and found that the Article 383 of the Criminal Code stipulates four levels of meting out punishment on corruption. The lightest punishment would be criminal detention for fewer than two years for taking bribes of less than 5000 yuan; the heaviest sentence would be ten years or life imprisonment and confiscation of property for those who took bribes of more than 100,000 yuan. For cases of particular seriousness, the convicts would be punishable by death and the confiscation of property.

If Xi Jinping truly means to rule by law, then the majority of cadres of numerous Party organs and government departments are likely to get the maximum penalty pursuant to the Criminal Codes about corruption. In that case, how would Party offices and the government function?

Therefore, the "best" way is to hold high the banner of "anti-corruption"—otherwise the Party could hardly face the people, and Xi Jinping would be considered untrustworthy—and secretly amend the Criminal Codes, so that the meshes of the “cage” would be both big and wide, say by allowing every official to own 5 to 20 apartments in accordance with their respective ranks and put forward the crime of “illegally obtaining individual housing data” to deter those troublemakers who dare to leak on the Internet information of assets owned by officials.

In so doing, the “anti-corruption campaign” could achieve instantaneous results and end swiftly. If not, Xi's campaign would end up like the alcohol ban imposed by Yuri Andropov, 
General Secretary of the CPSU—scrapped without any success. However, Andropov managed to hunt down a few “tigers” such as the sons- and brothers-in-law of Brezhnev, his predecessor, former General Secretary of the CPSU in his anti-corruption campaign when he newly assumed office.

Numbers About China’s Social Inequality Don’t Add Up

Official data widely seen as attempt to hide growing potential for social unrest

China’s National Bureau of Statistics recently published Gini coefficients for 2003 through 2012 after a decade of silence on this topic. The data shows the coefficient peaked in 2008 at 0.491 but has gradually dropped since then. According to the official statistics, in 2012 it stood at 0.474.

However, the numbers have been widely questioned. Most college-educated Chinese know that the Gini coefficient is an index measuring inequality, and a Gini coefficient of 0.4 and above may lead to social unrest.

Doubt Over Government’s Credibility

Hu Jintao and Wen Jiabao’s 10-year rule not only exhausted China’s environment and overdrew its financial power (with local governments deeply in debt), but what’s worse, it expended the government’s credibility. In particular, the fact that million-dollar households in China amounted to 670,000—the third highest in the world and next to only the United States and Japan—has irritated the public the most.

At the same time, with housing prices soaring and unemployment and income inequality worsening, those in the lower class find moving up increasingly difficult, while those in the middle class can easily slip down.

In the midst of intensifying social polarization and social degeneration, the tidbits of information that have made it through tight censorship have given ordinary Chinese occasional peeks into how China’s wealth has been centralized in the hands of a few.

According to a set of Chinese Ministry of Finance data widely quoted since 2010, the wealthiest 10 percent of households possesses 45 percent of wealth in urban areas, while the poorest 10 percent of households owns only 1.4 percent.

Many Chinese also know that 64.3 percent of the Chinese population falls into the low and mid-low income groups. As recently as 2005, 19 percent of the population, or 254 million, lived below the international poverty line of a $1.25 per day.

The propaganda of the Chinese communist regime claims the United States has the highest concentration of wealth and highest income inequality in the world. But according to the World Bank, 5 percent of Americans controls 60 percent of the country’s total wealth, while in China 1 percent households owns 41.4 percent.

This means the concentration of wealth in China has far exceeded that in the United States, and China has become the most polarized country in the world.

While the Bureau of Statistics had kept the nation’s Gini coefficient as a secret for a decade, other research institutes have publicized their own findings.

The United Nations estimated that the number for China was over 0.52 in 2010, fourth highest in the world, and would go above 0.55 in 2011 while remaining fourth highest.

Among the more than 190 countries in the United Nations, about 150 have complete statistics, and less than 10 have Gini coefficients higher than 0.49. China’s number is only slightly lower than the world’s three most impoverished countries.

In December 2012, the Chinese Household Finance Survey Center of Chengdu’s Southwestern University of Finance and Economics cited a 0.61 Gini coefficient based on a 2010 survey of 8,438 Chinese households. The report also said that such an enormous income gap as exists in today’s China is a rarity in the world.

China’s Bureau of Statistics publicized its version of a decade’s worth of Gini numbers soon after the Southwestern University report was released, probably in an attempt to neutralize its effect. But the wide gap between the official numbers and other organizations’ statistics has been widely questioned.

Some bloggers said mockingly that there’s nothing you can do about income polarization, so you just change the Gini coefficient.

Blind Spot: Gray Income

A large portion of China’s social wealth is distributed in the form of gray income—the significant portion of urban residents’ income that is outside of state supervision and control.

While officials and the rich can easily obtain a large amount of gray income, ordinary Chinese rarely have such opportunities. The National Bureau of Statistics was not able to take into consideration the income from corruption in its Gini calculation, so the Bureau’s number cannot accurately reflect China’s real income gap.

The exact size of China’ gray income is impossible to know, but official data published in May 2012 gives some clue. In the past 30 years, 4.2 million Party officials were involved in corruption, including 90 provincial or ministry-level officials who were investigated and punished.

Although Chinese authorities have been conservative about making corruption cases public, many cases reported by the media involved embezzlement of tens or hundreds of millions of dollars.

The highest publicized record is held by Zhang Shuguang, the former director of the Transportation Bureau at the Ministry of Railways. He was sacked and accused of funneling US$2.8 billion into his offshore bank account.

In addition, corrupt officials often own tens of houses. For example, Chinese media recently reported that a former housing administration official was arrested because his immediate family members own 31 houses.

But what has been exposed is only a very small portion of the actual corruption in China. About 80 percent to 95 percent of corruption cases remain unpublicized or unpunished.

Most Chinese do not have the privilege of hearing a “state secret.” The red aristocrats, however, have used their powers to amass huge fortunes, and the sources, size, and whereabouts of their money are well-kept secrets. That’s why the state-run media could rebuke foreign dictators’ extravagance without feeling embarrassed.

But in 2012 a crack appeared in the official stonewalling about the wealth of the top regime figures. Political factions leaked confidential information their antagonists’ wealth to the world’s media in order to get the upper hand in a fierce power struggle. Reporters from the New York Times and Bloomberg exposed the tip of the iceberg of the red aristocrats’ wealth.

Though these media reports were censored in China, the stories have been widely spread through word-of-mouth.

A higher Gini coefficient means a greater income gap. As unemployment among new college graduates rises and the pathway to higher social status is blocked, poverty is passed down to the next generation in the impoverished population. If a society has more and more poor who can’t see a brighter future, hatred will build up and become unsolvable.

This translation first appeared here.

Accounting Firms’ Gold Rush Puts US Credibility on the Line

By He Qinglian on December 24, 2012.
Translated by Cao Yaxue on January 23, 2012.

The Securities and Exchange Commission in December charged the Chinese affiliates of five big accounting firms Deloitte, Ernst & Young, KPMG and PwC and BDO for failing to comply with laws requiring access to the work papers of their audit on Chinese companies. The SEC was supposed to make a decision at the end of the December, including the possibility of delisting all Chinese companies in the US exchange. But the “deadline” has long passed and we haven’t heard the outcome of the suit. I am afraid it has probably disappeared into the black box called “diplomatic solutions.”

Xi Jinping: Guardian of the Red Regime

By He Qinglian on January 14, 2013.

Many people persistently make remarks that Xi Jinping might or has to initiate political reform. The story that appeared on January 13 in Ming pao should serve to somewhat cool down the wishful thinking of these observers.

Tocqueville and China's political predicament

By He Qinglian in December 2012.

[Partially abridged translation].

To this day, China's politics is still determined by those at the high level. The hobbies and interests of those people, including the books they read, therefore, become wind vanes that people use to guess what would happen next in politics. Wang Qishan's recommendation that people read L’Ancien Régime et la Révolution (The Old Regime and the Revolution), a classic book on the French Revolution by the 19th century French historian Alexis de Tocqueville, has helped make it a bestseller.

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.