Last week, China’s anti-corruption campaign took a significant turn, though a largely overlooked one. The Supreme People’s Court released a statement accusing former Politburo Standing Committee member Zhou Yongkang, the highest-ranked official thus far implicated in China’s ongoing anti-corruption campaign, of having “trampled the law, damaged unity within the Communist Party, and conducted non-organizational political activities.” In Chinese bureaucratic speak, this was only a few steps shy of confirming earlier rumors that Zhou and his former political ally and one-time rising star from Chongqing, Bo Xilai, had plotted a coup to pre-empt or repeal the ascension of Chinese President and Party General Secretary Xi Jinping. Thus, the court’s statement marks a radical departure from the hitherto depoliticized official language of the anti-corruption campaign.

Of course, it has long been clear that the Xi administration’s anti-corruption campaign is far more than just a fight against graft — it is also a political purge designed to tighten the new leadership’s control over Party, government and military apparatuses. But up to now, official language on the anti-corruption campaign has been couched in terms of fighting graft and abuse of power “for personal gain.” So far as we are aware, very few if any official statements have alluded to “political activities” by suspects — and certainly none concerning high-profile figures like Zhou, whose position at the top of the country’s energy industry and domestic security apparatus made him one of the most powerful Chinese politicians of the 2000s. Whatever the court’s precise intent, that it chose language even hinting at a coup by Bo and Zhou is extraordinary.

If we accept that the use of a phrase like “non-organizational political activities” is significant, then we have to ask what the decision to use that phrase at this time may signify. To our minds, two possible interpretations stand out. First, it could mark a nascent shift in the way Chinese authorities frame the anti-corruption campaign and imply that going forward the campaign will become more overtly political. Second, it could signal that Xi and his allies, confident of having fully eliminated any threat posed by Zhou and his associates, are acknowledging an end to one phase of the anti-corruption campaign — the elimination of competing factions — and are now embarking on the further consolidation of authority and control over the far reaches of the bureaucracy.

If the former interpretation is correct, the anti-corruption campaign is about to get more brutal and potentially more destabilizing, as it moves from a relatively focused purge and general cleansing of the Party to a full-on assault against those who have the strength to challenge Xi’s nascent authoritarianism. According to the latter hypothesis, with the would-be challengers routed and acknowledged as anti-Party plotters, and with political power firmly centralized under Xi and his allies, China’s leaders can now put politics aside and move on to the more difficult and important task of building a government ready to manage the profound social and political disruptions that will almost certainly accompany China’s economic slowdown.

Xi’s Strategy

In either case, the anti-corruption campaign and political centralization are not occurring in a vacuum. The campaign may be the highest profile of Xi’s initiatives thus far, but it alone is clearly not sufficient to deal with China’s myriad problems. The question, then, is what to expect next.

Two recent developments in particular frame our understanding of the trajectory of China under Xi and his strategy for ushering China and the Communist Party safely through the difficult years ahead. First is the Party’s renewed emphasis following the Fourth Plenary Session in October on establishing effective rule of law. Second is the announcement in February that going forward, the anti-corruption campaign would center on 26 of the country’s largest state-owned enterprises, with a focus on resource, construction, heavy industrial and telecommunications businesses. This announcement came one month prior to renewed government pledges to merge and consolidate the state sector. It also stands out as the first time the government has pre-emptively and publicly named potential future targets – thus, in theory, giving them fair warning. As one official put it, the government plans to “hang the sword of Damocles” over the state-owned sector’s head.

The thread that binds these two seemingly disparate elements together is the problem of political development in the context of rapid social and economic change — that is, how to build flexible and adaptive governing institutions capable of adjusting to meet the emerging needs of an urbanizing and industrializing (in some regions, post-industrializing) society like China’s.

Although Chinese society and its economy have undergone profound changes over the course of the past 30 years — China’s economy has grown nine-fold since 2000 alone — the country’s political structure has changed only incrementally. To be sure, China’s government is in many ways stronger and more effective today than it was when Deng Xiaoping took power in 1978. But it retains the same basic form he put in place more than two decades ago. As long as China’s economy was growing of its own accord, this model sufficed. Its task was simply to prevent politics — a second Mao — from derailing the economy. But as the anti-corruption campaign and Xi’s power consolidation drive signify, the model of consensus-based political decision-making put in place by Deng is breaking down.

The leadership transition from former President and Party General Secretary Hu Jintao to Xi was the first since the late 1970s that was not pre-ordained by Deng. Following the ravages of the Great Proletarian Cultural Revolution and the brief reign of the so-called Gang of Four, Deng assumed the mantle of Chinese leadership, reversing many of Mao Zedong’s economic policies, but also fundamentally altering the political organization of China. Rather than Mao’s revolutionary model, which required perpetual upheaval, Deng proffered an evolutionary model — one that would use consensus politics to both break down the extreme factionalism of the Mao era and undermine the ability of any single individual to rebuild a clear faction in the face of multiple competing and cooperating interest groups.

To further reinforce stability, Deng selected both Hu and his predecessor, Jiang Zemin, ensuring more than two decades of clearly defined succession plans. During the economic growth of China’s nearly three-decade “miracle,” the system of political consensus proved largely effective. The main purpose of government was to provide stability in the Party and the overall economic system, primarily serving a managerial role rather than a truly innovative leadership role. Certainly there were crises during these years, but these were frequently short-lived, and the government response was often one of delay followed by mitigation, rather than the implementation of any significant change in the underlying political, economic or social systems.

But as China neared its 2012-2013 leadership transition, it was clearly entering uncharted waters. Not only did this transition move beyond anything Deng had prepared for, it also occurred at a point where China’s Deng-era economic model had clearly run its course. As with many of the Asian economic tigers before it, China’s export-oriented and government investment-heavy model had reached a point where growth alone was no longer sufficient to sustain economic activity, and society had evolved faster than the political model. The global economic crisis, along with Europe’s sustained sluggishness, only served to

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