Interesting question – in China, does the power lie with billionaire capitalists or with the Party?
In the USSR there were no capitalists just powerful apparatchiks and the Party ruled. But China is quite different – a fusion of a strong centralised Party of 87m members with encouragement to capitalists to build, develop and grow.
But who is in control? Who has the final word – the Party or the Billionaires? My guess – the Party.
Todays extract in the FT notes a key meeting in Beijing attended by Ant Owner, Jack Ma, Chairman Eric Jing and CEO Simon Hu. On the other side of the table were regulators from the Bank of China, the China Banking and Insurance Regulatory Commission, the Securities Regulatory Commission and the State Administration of Foreign Exchange.
After the meeting a spokesman for Ma’s company, Ant, stated “…Ant Group will implement the meeting opinions in depth and continue to follow the guidelines of “stable innovation, embracing supervision, service to the real economy and openess for mutual benefit”. The Ant Company’s value? $316bn
China’s critics fail to understand the significance of the Deng Hsiaoping/Xi Jinping Reforms. They are so important. As Tony Blair has said “Understand China from China’s perspective”
For the past 150 years from 1800 to 1949, the Chinese people suffered tremendously under the yoke of feudalism, colonizationism and imperialism because China lagged behind Western nations scientifically, economically and militarily.
China was invaded and wars were waged on her soil by foreigners with the aim of subjugating and extracting resources and wealth from the country. The Qing government was weak, corrupt and unable to defend China’s interests. Various treaties were signed where China was forced to repay war reparations, to open up its market for foreign trade and to grant concessions of land and territories to foreign powers.
The Chinese people were incensed and fed up with the corrupt Qing government and rebelled against its rule. Finally in 1911, after many years of struggle, Dr. Sun Yat Sen overthrew the Qing Dynasty and founded the Republic of China.
During the early days of the new Republic, China was far from being a unified country because the warlords in different regions of China sought to establish their own territory without any regard to national unity to form a united front to fight against foreign domination and colonization.
During this time, four prominent families were responsible for much of China’s management of finance, economy, politics and law.
1. Chiang Family – Chiang Kai-Shek was the President of the Republic of China and was Director-General of the Kuomintang Party. He was one of the longest-serving non-royal heads of state, having held the post for 46 years.
2. Kung Family – Kung Hsiang-Hsi (HH Kung) was the 75th generation descendant of Confucius from a wealthy banking family in Shanxi. Kung served as the Minister of Industry and Commerce from 1928-1931 in the Nanking Government, and later as the Minister of Finance from 1933-1944. Kung was Governor of the Central Bank of China from 1933–1945. Kung served as China’s Chief Delegate to the International Monetary & Financial Conference in 1944, where he signed the Bretton Woods Accord during the Bretton Woods Conference at the Mount Washington Hotel, in New Hampshire, United States. This conference established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group.
3. Sung Family – Tsu Ven Soong (TV Soong) served in a succession of offices in the Nationalist Government, including governor of the Central Bank of China (1928–1934) and minister of finance (1928–1933).
• TV Soong, along with Kung and a few others founded the China Development Finance Corporation (CDFC) in 1934 which provided China’s chief access to foreign investment for the next decade. In the summer of 1940, Chiang appointed Soong to Washington as his personal representative to win America’s support for China’s war with Japan. Soong negotiated substantial loans for this purpose. After Pearl Harbor, Chiang appointed Soong Minister of Foreign Affairs to manage the alliance with both the U.S. and the U.K.
• TV Soong served as head of the Chinese delegation to the United Nations Conference on International Organization in San Francisco, April 1945, which later became the United Nations.
• Soong Ai-ling was the elder sister of TV Soong and wife of HH Kung, banker and Governor of Bank of China. She is said to be the Soong sister who loved money.
• Soong Ching-ling (宋慶齡) – elder sister of TV Soong and wife of Dr. Sun Yat-sen, father of modern China, who overthrew the Qing Dynasty and founded the Republic of China. Prior to marrying Dr. Sun, she served as his person secretary in the revolution. She is said to be the Soong sister who loved China.
• Soong Mei-ling (宋美齡) was married to KMT leader Chiang Kai-shek and became First Lady of the Republic of China. She is said to be the Soong sister who loved power.
4. Chen Family
• Chen Qimei (陈其美) was a revolutionary activist, a close political ally of Sun Yat-sen and early mentor of Chiang Kai-shek. He was as one of the founding fathers of the Republic of China and was the uncle of Chen Lifu and Chen Guofu.
• Chen Lifu served as confidential secretary to Chiang Kai-shek in 1926. He was was later promoted in 1927 to head the Investigation Section of the Organization Department of the KMT. In 1938, Chen was again promoted, becoming the minister of education. Chen held this position until 1944.
• Chen Lifu was the younger brother of Chen Guofu. As a result of the two brothers significant influence in the KMT government, they formed a political faction known as the CC Clique.
Many historians have mixed reviews of the four most powerful families of the Republic of China. Supporters of Chiang credit him with playing a major part in unifying the nation and leading the Chinese resistance against Japan, as well as with countering Soviet-communist encroachment. Critics denounce him as a dictator of an authoritarian regime who brutally suppressed opponents.
Supporters credit the Kung and Soong families for establishing access to foreign capital and getting the US’ support on China’s war against Japan. Critics denounce them for being selfish and corrupt who monopolized their wealth and power for their own personal gain.
Corruption in the KMT government was rampant and deeply affected all levels of society. It stiffled China’s social and economic progress which led to frequent social unrest.
The majority of Chinese people remained illiterate and poor. Inequality was a major challenge which undermine social stability. Drug addiction and prostitution were common place. The majority of land in the countryside was held by a small percentage of farmers and the wealth in the cities was held by a small number of industrialists and capitalists. Most workers worked in horrible conditions and were underpaid. Some peasants were so poverty stricken they resorted to selling their own children…
The Communist party recognized the sufferings of the proletariat and rallied to support their cause to create a more just and equal society.
However, Chiang refused to share power with the Communists and instead devoted much of his time and energy in numerous attemps to exterminate them. As a result, the KMT government had lost the support of the Chinese people and lost the civil war to the CCP.
Corruption and abuse of power occur when so much wealth and power is concentrated in a few hands. Based on the history of the KMT government and the overwhelming influence of the four powerful families, the CCP have good reasons to be careful not to allow individuals to monopolize the financial industry to enable them to become “Too Big to Fail”.
During the Clinton administration, the US financial industry pushed for deregulation to maximize profits which led to the repeal of the Glass-Steagall Act.
It had created an environment for speculation and an unprecedented concentration of global financial power into a few institutions.
This deregulation enabled the financial institutions to engage in risky lending in order to maximize profits. The profits strangled local small businesses in the U.S. and overshadowed the real economy. The toxic sub prime mortgage lending eventually led to the 2008 financial meltdown.
Fortunately, China’s financial sector has been under strict government control and it explains why China was able to weather the 2008 Financial Crisis better than its Western counterpart.
The CCP bears one of the greatest responsibilities facing the world today to ensure they safeguard the integrity of China’s financial markets because its stability not only affects the well-being of the Chinese people but also that of the world. Any collapse in China’s financial markets such as the 2008 Financial Crisis created by Wall Street would spell disaster for not only the Chinese people but also the world.