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Friday, January 28, 2022

Jack Ma and the Communist Party of China

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Graham Perry
Experienced Arbitration Lawyer | China & Chinese Business Affairs | Public Speaker/Lecturer.

When Lenin wrote The State and Revolution, and Marx wrote his Critique of the Gotha Programme, and Mao Tsetung mapped out the post 1949 plan for China – there was no mention of the need for Socialism to embrace Billionaires. On the contrary, Socialism  promoted its political orthodoxy by stressing its links with the Dictatorship of the Proletariat, the leading role of the Party, the active involvement of the working class and the ultimate goal of building a classless society. These were the key marking points that would guide the post-Liberation period as the thinking of Marx, Engels, Lenin and Stalin together with that of Mao Tsetung took root.

Against this background, it is a big move for China to step away from political orthodoxy and make pursuit of Building Socialism with Chinese Characteristics a goal which can be áchieved with the active participation of the Billionaires.

It is often said that Mao Tsetung saved the country, Deng Hsiaoping saved the Economy and Xi Jinping saved the Party. Today we look at the Economy because the policy initiatives introduced by Deng have had much to do with the growth of prosperity in China that has seen 500m citizens being lifted out of poverty and the growth of a consumer oriented middle class – the same class that has given stability to the domestic economy as it strives to maintain balance and growth in the post pandemic period. Deng was the force behind the SEZs – Special Economic Zones – which encouraged experiment with business systems that was popularised by Deng’s famous observation – “I don’t mind if it is a black cat or a white cat so long as it catches the mouse”. Deng was asking the question – What economic structure is most likely to succeed and bring about growth of the economy, and prosperity to the people?

Radical thinking followed a micro-analysis of the failed Soviet Union state. Why had it failed?. Why did the Party lose authority and cede power to the Oligarchs who cheaply purchased state assets and turned themselves into very rich men at the expense of the ordinary Soviet citizen? Many Chinese research institutes and think tanks and University departments pored over every aspect of Soviet life for answers to the key question – What Went Wrong? Why did the Soviet Union Fail? How can the Peoples Republic of China avoid the same fate?

Two conclusions emerged; the first, unsurprisingly, was the need for the Party to exercise control, authority and discipline. Gorbachev had failed, and the Soviet Party had become a follower instead of a leader. The lesson from the Soviet failure was to ensure that the Chinese Party was infused with a dynamic sense of serving the people. Their purpose was not for Party members to enrich themselves but, instead, to implement policies that enriched the country. And with this strongly in mind, Xi Jinping focused on the motivation of the 92m Party members which was to promote achievement, success and prosperity and not self-advancement. He waged, and continues to wage, an unrelenting campaign against Party members who took money, bribes or engaged in any illegal activities for their own benefit. People in the West often downplay the significance of Xi’s Anti-Corruption Campaign because they do not realise how it helped to strengthen the Party to People bonds that had been damaged by the Tiananmin Incident of June 1989.

People looking at China from a distance often fail to see things from a Chinese perspective. The lens through which they view events in China are often blurred by their own rose tinted vision of Western forms of governance and, thereby, miss the significance of quite different policies in China. The Party in the USSR had become the source of widespread corruption – as the famous saying of the UK historian Lord Action goes “Power Corrupts and Absolute Power Corrupts Absolutely”. The Soviet Party was corrupt and the corruption had much to do with the decline and fall of the USSR. The message was loud and clear to China’s Politburo – there must be absolute intolerance of corruption in any forms. It made the Soviet people cynical about the Soviet Party, and China would surely fail if corruption was not rooted out at all levels in China.

The second conclusion, and one that brings us closer to Jack Ma and the Billionaires, was the absolute need to decentralise the decision making within the economy – a reversal of the USSR policies of control by central planners. If China was to grow and flourish, and the people to enjoy an improving standard of living, the Party needed to encourage initiative and invention at all levels – especially in the Provinces. Decision making needed to be made increasingly by people on the ground and not by people at the centre, and by people with an interest in the decisions that were being made. Whilst the motivation of the Party was to Serve the People, the motivation of the people was to work hard and enjoy the fruits of their endeavours.

Central Planning was essential in mapping out National Plans but local planning, local initiative and local entrepreneurial skills were given the green light to bring creativity, imagination and business skills into play. The purpose was to accelerate growth and prosperity and to allow the people the opportunity to enjoy the fruits of their well earned labours. It is into this mix that the Communist Party of China brought into play the innate business skills of enterprising Chinese citizens to create wealth and a rising standard of living. This meant the return of widening wage differentials and a superior level of wealth for those who owned capital.

At this point – some people shout “Betrayal”. Isn’t this the return of Capitalism? No – for a number of reasons. First, the Party is in control – not the capitalists or the Billionaires. The Party is the ultimate re-assurance that the socialist principles remain in place. The Party, which has to be incorruptible and possessed of a determination to Serve the People (that phrase again) must remain the Boss. It can never cede power. It can never allow Capitalists to use their economic skills and influence to buy their way into the corridors of power. The Party has a socialist agenda and it must remain dedicated to its implementation.

The second reason is that the Capitalists must be allowed to enjoy the fruits of their success but with two restraints – an absence of conspicuous indulgence and a determination not to try to buy influence. In the UK such influence is encouraged by donations to either of the two main parties – in China such activity is a criminal act.

The third reason is that the purpose of growth and development is to raise the living standard of the people. Two often quoted statistics now apply; first, 500m Chinese citizens have been lifted out of poverty and, second, 117m Chinese citizens travelled abroad in 2019 and all returned home. The People have “Never Had It So Good”. The lot of the people is improving and, within this overall achievement, it is right that the capitalist risk takers should be rewarded. But such reward stops short of political influence or political power.

This has been highlighted in recent weeks as China’s top Billionaire, Jack Ma, has had his wings clipped. A trial of strength has seen the Party impose its will – a reminder of where power lies in Socialist China today. Mr Ma likened traditional banks to pawnshops, and labelled the existing regulatory framework “an old people’s club”. The Regulators responded and abruptly suspended the roughly $34bn IPO of the Ant group – an Alibaba spin off in which Ma is a controlling shareholders – an enormous intervention of great significance. Ma’s successor as Alibaba CEO, Daniel Zhang, performed the big climbdown, pledged loyalty to the authorities and stressed the importance of government support to the company. A new era of regulation has been ushered in. The State Administration for Market Regulation has issued a twenty two page document of guidelines which stops large internet companies from obstructing competition. Share prices of the big companies have fallen. Tencent were then fined for failing to obtain regulatory approval of a takeover of New Classics Media. Big Tech has been put in its place. The Party wins. The Billionaires lose.

The Party’s concern is not just that the Monopolies are too big, but also that they try to manipulate social attitudes and media reporting and this has prompted the National Radio and Television Administration to tighten its rules for online streaming platforms. Another aspect are the offers of cheap banking deals which has prompted the China Banking and Insurance Regulatory Commission to say that it is necessary “to take timely and targeted measures to prevent new systemic risks”.

The Party has two goals;- first, to check the power of the internet conglomerates and, second, to bring regulations on data privacy and internet finance up to international standards. Under Xi Jinping’s China, there has to be a role for initiative, commercial thrust and drive but that trio of essential skills can never be allowed to challenge the overarching power of the Party – business and the Billionaires have to know their limits. Cutting Jack Ma down to size was an essential step for the Party to take.

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