Economic Reforms Weigh in Beijing Power Struggle
Summary:
The Communist Party of China Central Committee (CPCCC) began a
four-day meeting in Beijing Sept. 19. The stated agenda of the
meeting - Beijing's last chance to organize efforts before Oct. 1,
the 50th anniversary of the founding of the People's Republic of
China - is economic reforms. Specifically, the meeting will focus
on state-owned enterprises (SOE), unemployment levels and entry
into the World Trade Organization (WTO). The outcome of the meeting
will be closely tied to the power struggle underway in Beijing:
Prime Minister Zhu Rongji is on the fall, the military is on the
rise, while President Jiang Zemin is left to manage the chaotic
aftermath of the country's economic reforms.
Analysis:
A four-day meeting of the Communist Party of China Central
Committee (CPCCC) began Sep. 19 in Beijing. The meeting, which will
focus on economic reforms, is Beijing's last chance to organize its
economic and social stance before the 50th anniversary of the
founding of the People's Republic of China. While the CPCCC meeting
will coordinate future economic reforms in China, understanding the
extent and depth of such reforms will depend on the current power
struggle among Jiang, Zhu and elements of the army.
The economic reforms, implemented by Prime Minister Zhu Rongji,
have exacted a social and political cost in China, in part
contributing to the power struggle in Beijing. Even in normal
economic circumstances, the massive restructuring required to
liberalize China's economic system would have caused higher
unemployment, raising opposition from those who benefited from the
inefficient old system. The timing of the reforms, however,
coincided with Asia's economic crisis, further compounding these
side effects.
As pressures from the swelling ranks of the unemployed began to
rise, Jiang decided to add to the reforms by divesting the People's
Liberation Army (PLA) of its business ties in an effort to
centralize control over the military. Jiang, concerned that social
instability would require a solid central military structure,
feared the possible fragmentation of the PLA as regional leaders
maintained and protected their own business empires, rather than
the interests of China.
As the reform processes moved forward, a three-way split began to
open in Beijing. Zhu and Jiang disagreed on the divestiture of
businesses by the PLA over concerns that the central government
would not be able to absorb the costs incurred by the military
[ stratfor.com ]. Jiang, deeply
concerned about China's internal stability, weakened Zhu's reforms,
ultimately weakening his powers as well. The PLA, upset at the loss
of finances from its businesses, blamed both Zhu and Jiang for its
economic difficulties.
While rumors of Zhu's resignation or dismissal have floated for
months [ stratfor.com ],
Jiang has instead undercut Zhu's power. Jiang has reportedly taken
control of the government policy on state-owned enterprises (SOEs)
from Zhu, giving the on-the-ground implementation to Vice Prime
Minister Wu Bangguo. Zhu's dismissal is unlikely, as it would
undermine China's international image and present an appearance of
instability in the regime. Keeping Zhu in place, albeit with
limited powers, appeases both the reform elements in the government
and international investors interested in China. It also lets Jiang
keep a close eye on Zhu's moves.
While Jiang has taken power from Zhu, the PLA continues to focus
attention on Taiwan, emphasizing the army's importance to Chinese
unity and stability. According to PLA sources quoted by the Wen Wei
Po Sept. 20, the PLA considers the prevention of Taiwan's
independence its primary task. It has repeatedly used the Taiwan
issue to push for an increased budget, in part to make up for its
loss of business revenues. If China were to act against Taiwan, as
it has threatened to do repeatedly since Taiwanese President Lee
Teng-hui's state-to-state comments, the military would then
effectively take control of Chinese foreign policy as long as shots
were being fired.
Zhu's powers have been virtually stripped away. At the same time,
he faces military cadre who accuse him of unpatriotic behavior for
attempting to block their push for bigger military budgets vis-a-
vis Taiwan. In this precarious state, Zhu has attempted to shift
the responsibility for the reforms to Jiang. In a statement quoted
in the People's Daily last week, Zhu emphasized that economic
reforms were being carried out "in accordance with the spirit of
the important speech on state enterprise reform and development by
Jiang Zemin."
With both the PLA and Jiang acting against Zhu, the results of the
CPCCC meeting on economic reforms will hinge on the relationship
between Jiang and the PLA. Jiang's attempts to reign in the PLA
have to a large extent backfired. Rather than gain more centralized
control, his military reforms have caused the military to assert a
more independent line, primarily on the issue of China's response
to Taiwan.
In an attempt to retake control on the Taiwan issue, Jiang has now
set up an independent military control unit, which he oversees, but
is operated by Vice Chairman of the Central Military Commission
(CMC) Zhang Wannian, according to PLA sources cited by the Ming Pao
Daily. The unit oversees all military concerns regarding Taiwan.
The appointment of Zhang puts a close ally of Jiang and a staunch
opponent of military corruption in charge of China's strategic
Taiwan policy.
The price Jiang is paying to wrest control of both China's economic
and military policies is unclear. Jiang's moves against Zhu may be
an attempt to appease the military, perhaps as part of a deal to
maintain power while keeping the military in its barracks. However,
at the same time he continues to try to maintain an upper hand over
the PLA, both to emphasize and ensure its loyalty to the Communist
Party and central leadership.
What is clear, however, is that Zhu is effectively finished, the
PLA is an ascending power and Jiang is working to maintain a
balance between control and stability. The CPCCC meeting will
likely result in a weaker reform process than the one endorsed by
Zhu, and may even defer to the military on some economic issues,
including the possibility of a softened stance on military
divestiture. As China enters a new era and Jiang takes his position
as a true successor to Mao and Deng, it is likely that, at least
for a while, China's opening up has run its course.
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