Are 91% of China’s rich the children of Communist Party officials?
91% of China’s richest are said to be the children of Communist Party officials. Carsten A. Holz, a professor at Hong Kong University of Science and Technology makes that claim in the course of a very interesting article in the Far Eastern Economic Review. The piece assesses the legitimacy, limits and objectivity of current academic research on China:
how to collect systematic information about the influence of the Party on the operation of a state-owned or state-controlled enterprise, when these are typically matters that nobody in the enterprise will speak about?
We talk about economic institutions and their development over time as if they were institutions in the West. “Price administration” regulations, central and local, abound, giving officials far-reaching powers to interfere in the price-setting process. Yet we accept official statistics that show 90% of all prices, by trading value, to be market-determined…
we take at face value China’s Company Law, which makes no mention of the Party, even though the Party is likely to still call the shots in the companies organized under the Company Law…The Shaanxi Provincial Party Committee and the Shaanxi government in a joint circular of 2006 explicitly require the Party cell in state-owned enterprises (including “companies”) to participate in all major enterprise decisions; the circular also requests that in all provincial state-owned enterprises the chairman of the board of directors and the Party secretary, in principle, are one and the same person.
At the national level, the leadership of the 50 largest central state-owned enterprises — enterprises that invest around the world — is directly appointed by the Politburo…
The governor and Party secretary of China’s central bank, Zhou Xiaochuan, writes extensively in Chinese about “comprehensively accelerating central bank work” based on the “three represents” (the Party represents the “advanced productive forces, the advanced Chinese culture and the basic interests of the Chinese people”). He describes the three represents as “guiding macroeconomic policy” in ways that defy any Western concept of logic. And yet we take this person as seriously as if we were dealing with the governor of a Western central bank, as if China’s central bank were truly setting monetary policy…
We ignore the fact that of the 3,220 Chinese citizens with a personal wealth of 100 million yuan ($13 million) or more, 2,932 are children of high-level cadres. Of the key positions in the five industrial sectors — finance, foreign trade, land development, large-scale engineering and securities — 85% to 90% are held by children of high-level cadres.
With the introduction of each new element of reform and transition, cadres enrich themselves: the dual track price system, the nonperforming loans, the asset-stripping of SOEs, the misuse of funds in investment companies and in private pension accounts. The overwhelmingly irregular transformation of rural into urban land may well qualify as “systematic looting” by local “leaders.” Local cadres are heavily invested in the small, unsafe coal mines they are supposed to close, and nobody knows how they obtained their stakes in these operations…
Statistics on specific current issues are collected by the National Bureau of Statistics on special request of the Party Central Committee and the State Council. None of this information is likely to be available to the public. The quality of the statistics that are published comes with a large question mark...
We have previously discussed the Investor’s Business Daily claim that China’s GDP numbers are seriously overstated. This is very troublesome, as is China’s high money supply growth, and as are the other evident imbalances in China’s econommic structure. In our view the extent to which China’s numbers are cooked will have a major impact, perhaps the single greatest impact, on how severe the next global economic downturn is, whenever that should happen. (HT’s: Daniel Drezner, Bruce Kesler)
April 22nd, 2007 at 5:27 pm
Outsiders invest/whatever in China. What isn’t seen is the cost of when China turns on itself. Workers against Communist/capitalist. Whom will the West ride to save when the disruption comes? I’m betting on the Communist partners in greed with the westerners. No doubt that the worker masses will be lifted and inspired by some populist. I’m sure our Berkeley, Yale, MIT Chinese graduates will provide a sutible insult to our embassy or equilivant jingoistic Reichstag event such that we come down on the ‘right’ side. Boxer Rebellion, part deux. Dirt dwelling rice beggers take it on the chin.