Book summary: One hundred years of the CCP (On Jiang Zemin

Summary: Mao Zedong and the twelve other young men who founded the Chinese Communist Party in 1921 could hardly have imagined that less than thirty years later they would be rulers. On its hundredth anniversary, the party remains in command, leading a nation primed for global dominance. Tony Saich tells the authoritative, comprehensive story of the Chinese Communist Party―its rise to power against incredible odds, its struggle to consolidate rule and overcome self-inflicted disasters, and its thriving amid other communist parties’ collapse.

Wrestling with a Red-Hot Economy

Whereas Deng Xiaoping’s interventions saved the reform program, both the economy and the society were in danger of exhausting party control and oversight. The economic boom was fueled by investment and growth of the non-state sector, the real estate sector, and foreign investment in manufacturing.

In Beijing, more of the old city was lost to real estate speculation than had been destroyed in any previous decade, including during the periods of the Japanese invasion and the civil war. Cities all over China became building sites.

The joke among foreigners was that the national bird of China was the crane. There was a sense within society that military units, police forces, and government institutions were all profiting from the development opportunities.

Jiang Zemin Takes Command

For many, Jiang Zemin had seemed to be a stopgap leader sent to Beijing due to the fallout from 1989: a buffoonish figure who liked to cite from American and Western classics and to burst into song. However, he was a shrewd politician, adept at maneuvering his way through the bureaucratic apparatus.

One seasoned Russian diplomat told me how much Jiang reminded him of Brezhnev, not in the sense of causing economic stagnation but in terms of his understanding of how the rules of the Leninist-party game were to be played.

By the mid-1990s there was a general sense that not only the economy but also society and even the party were slipping out of control. The plenum emphasized the party’s leading role and the principle of democratic centralism, going even further to emphasize the need for a core within the leadership.

Jiang Zemin would be the core of the third generation of leaders, following Mao Zedong as the core of the first generation and Deng Xiaoping as the core of the second.

Boosting what would become known as the “Shanghai clique,” close associates of Jiang were promoted to leadership positions.

Maintaining Economic Reform: The Fifteenth Party Congress

Jiang Zemin recognized that most people were primarily concerned about their livelihoods, and therefore nationalism and legitimacy were increasingly predicated on the CCP’s ability to deliver the economic goods. At the time of the October 1996 plenum, in preparation for the 1997 Fifteenth Party Congress, supporters of Jiang published “Heart to Heart Talks with the General Secretary.”

The materials placed a much more positive spin on the need for reform and opening up the economy, in response to the attacks from the left.

The work advanced the process of drawing on Chinese tradition to legitimize CCP rule. The approach highlighted themes that would be taken up at the Fifteenth Party Congress and the following session of the NPC.

Jiang also tried to restore credibility with establishment intellectuals when he visited Peking University on May 4, 1998, to celebrate the centennial anniversary of its establishment. By all accounts Jiang was very relaxed, enjoying his interactions with faculty and students. It was a risky gamble given that Peking University had been at the epicenter of the 1989 demonstrations.

Jiang also showed that he was a smart politician, noting that “although Tsinghua University is our present, Peking University is our future.”

Reforming the SOE sector

Policy innovation was necessary for the SOE sector. By the time of the congress, it was even more apparent that the sector was a drag on the overall economy.

The World Bank suggested that perhaps less than 10 percent of the 100,000 SOEs were viable. In 1995 SOEs absorbed 60 percent of national investment and received subsidies amounting to one-third of the national budget, and net credit to the SOEs amounted to over 12 percent of GDP.

Importantly, 50 to 75 percent of household savings, mediated and directed by state banks, went to finance SOE operations.

Jiang announced that a shareholding scheme would be adopted, with 1,000 of the largest enterprises reinvigorated in hopes that they would behave like the chaebols in South Korea. Other enterprises were to be reorganized through a mixture of mergers, leasing, contracting, joint stock partnerships, or sales.

This was referred to as “grasping the large and releasing the small” (adopted in 1996).

What was missing from the congress was any serious consideration of political reform. When addressing the topic, Jiang rejected any idea of copying Western ways, such as having multiparty electoral competition or interest-group pluralism, and he reaffirmed the need for the press to toe the party line and extoll the party’s virtues.

Even though in his speech Jiang mentioned the word “democracy” thirty-two times, the stress was on cooperation with China’s other political parties but under the leadership of the CCP.

Addressing inequalities

During the boom years of the early 1990s, little attention had been paid to redistribution, the general belief being that high levels of economic growth would lift all boats and resolve all problems; this is another example of a failed trickle-down theory.

By the end of the 1990s it was clear that not all had benefited equally from the reforms and that inequality and differential access to services had become a major problem.

After narrowing in the 1980s, the urban-rural divide was increasing. By the mid-1990s the ratio of urban to rural income had risen to about 2.38:1. In 1998, in high-income areas 22.2 percent of persons were covered by cooperative medical facilities, but in the poorer regions only 1 to 3 percent were covered.

Other initiatives tried to wrestle with this problem. The grandest was the “Develop the West” program launched by Jiang Zemin in late 1999 and confirmed at the Tenth NPC in March 2003.

The program included twelve provinces, with policy relying on state-led infrastructure investment combined with political persuasion and arm twisting of the more developed provinces to shift investment to the interior provinces.

Per capita GDP in the west was only about 60 percent of that in the east. In Premier Zhu’s view, this was to be a long-term situation, lasting for several generations. In 2000 some $6 billion was set aside for investment, and Zhu headed a leading group to oversee the work. In reality, state commitments were limited, with most of the projects already scheduled, allowing many provinces to shift the costs to the central government from the provincial budgets.

Many analysts saw the program as serving political purposes rather than serving genuine developmental needs, and the excluded provinces expressed their resentment.

Sovereignty: Hong Kong, Taiwan, the United States, and the WTO

Jiang Zemin had to navigate a difficult legacy in the international arena, especially in dealing with the fallout from the repression of the 1989 demonstrations and the collapse of the Soviet Union. The end of the US-Soviet superpower rivalry meant that the CCP had to reconfigure its international position without the room for maneuver that the Cold War had offered.

It was a struggle to adjust to the new world order, especially because of the way CCP leaders were accustomed to analyzing global politics—in terms, that is, of an overarching framework based on ideological premises that provided structure for policy and relationships.

The CCP had settled into a foreign policy premised on the notion that international politics would be dominated by the existence of a bipolar relationship between the two superpowers. This allowed China space to play one off the other and to create more room for itself in international affairs.

With this balance gone, CCP leaders felt vulnerable and marginalized in world affairs.

Throughout his tenure as general secretary, Jiang Zemin had to navigate the rise in nationalist sentiment, not repressing it but also not letting it slip out of control. Following 1989, patriotic education was promoted, especially for students. Inevitably, the targets of criticism were Japan and the United States.

A predictable relationship with the United States was clearly important if the CCP wanted to continue its economic reforms and draw in more foreign capital.

Despite domestic opposition, Jiang Zemin sought to maintain Deng Xiaoping’s legacy of a neutral or a pro-US international orientation. However, unlike in the 1980s, there was no strategic rationale to hold the relationship together; it was driven by specific interests and policies and thus liable to be buffeted by unexpected events. And indeed, it was.

Despite presidential candidate Bill Clinton’s harsh rhetoric about China and its human rights violations, once Clinton became president he maintained the previous administration’s policy of engagement, with the hope that closer integration into the global community would lead to domestic change in China. A major area of frustration for China was the need each year to renew its most-favored-nation (MFN) status.

In 1993 President Clinton linked China’s MFN status to human rights, protection of Tibetan culture, and allowing foreign broadcasts into China. However, in late May 1994 he reversed this decision and unlinked MFN status, much to China’s delight.

1997 was an important year for China and for Jiang Zemin, with the return of Hong Kong to Chinese sovereignty in July and a state visit to the United States in October.

Hong Kong played an important role for China as a window to the outside world, even during the height of the Maoist period. Exports were routed through the Hong Kong port; it was an important listening post for intelligence; and once China opened up, Hong Kong capital was important for mainland development. Lacking private capital, China made use of its connections with Hong Kong to encourage investment in the mainland, and throughout the 1980s and the 1990s much of Hong Kong’s manufacturing base moved across the border where land was cheaper.

Hong Kong investors played an important role in the early development of mainland real estate; many Hong Kong millionaires became billionaires as a result and were welcomed to join national and local branches of the CPPCC. This was safe capital because these Hong Kong billionaires were highly unlikely to challenge the CCP, especially as their accumulation of capital was dependent on the party’s goodwill.

British prime minister Margaret Thatcher, during her 1982 visit to Beijing, took the view that Hong Kong was too valuable to China, and she expected agreement on some sort of continuation of the treaties governing Hong Kong Island and Kowloon.

This reflected a lack of comprehension of the emotive role the unfair and unequal treaties played in the Chinese narrative of national humiliation at the hands of the foreigners.

Deng Xiaoping had different ideas and insisted that the New Territories be returned, and without the New Territories, Hong Kong Island could not function. In fact, Deng completely rejected the validity of the treaties that had ceded Hong Kong Island and Kowloon.

Deng did not live to witness the handover, but Jiang Zemin was able to benefit. He praised Deng for his foresight in developing the concept of one country, two systems, and he confirmed that Hong Kong residents would administer Hong Kong. In December 1999, Macau was brought back into the fold, ending 442 years of Portuguese rule.

Now only the issue of Taiwan remained unresolved. At the Macau handover, Jiang suggested that the concept of one country, two systems, could provide a solution to the issue of Taiwan. The economic relationship with Taiwan was expanding rapidly, and the Chinese leadership seemed to think that the strategy of tying the business community into the mainland economy would work with Taiwan.

The hope was that the economic and business elite would see their future so closely intertwined with China that they would become lobbyists for reunification.

Visiting China in June 1998, President Clinton moved the relationship forward. In a speech at Peking University, he praised China’s progress and expressed America’s willingness to work with China, but he repeated his concern about human rights.

Most importantly, during his trip Clinton mentioned publicly the “three nos.”

They were: no recognition of Taiwan independence, no support for two Chinas or one Taiwan and one China, and no endorsement of Taiwan’s entry into any international organization for which statehood was required. This abandoned the two-decades-old policy designed to preserve the right of Taiwan’s people to self-determination.

Jiang Zemin’s Legacy

The last years of the Jiang era bequeathed two major legacies that would be crucial for China’s development in the new century.

The first was a fundamental shift in the nature of the CCP, welcoming private entrepreneurs to become party members. Second, at the end of 2001, China finally became a member of the WTO, leading to a further economic boom.

When visiting Guangdong in February 2000, Jiang delivered an important speech intended both to portray himself as a great theoretician and to show that the CCP was still relevant to China’s future. 

Jiang put forward a simple idea encapsulated as the Three Represents: the CCP was to represent the advanced social productive forces, the most advanced culture, and the fundamental interests of the majority of the people.

The remainder of the year saw the unfolding of a major campaign to promote this concept, and in 2002 it was incorporated into the Party Statutes, thus situating Jiang alongside the pantheon of greats. Unlike his predecessors, however, Jiang’s name was not included.

Promotion of the Three Represents portrayed the CCP as not only leading the new and dynamic areas of the economy but also leading the newly emerged technical and economic elite.

It was a move in the direction of Khrushchev’s idea of the party as that of the whole people. The party was not only welcoming new constituents but also was going to exercise its leadership over the rapidly developing new sectors of the economy.

Joining the WTO

The decision to join the WTO was equally contentious, so much so that many of the details of the agreement were kept secret from the public, and Jiang, Zhu Rongji, and their close associates kept debate away from the NPC system and the government bureaucracy.

WTO membership would have clear advantages because China would no longer have to deal with the whims of the US Congress over annual trading decisions, and it would help avoid rounds of antidumping accusations from the West.

Membership would also put pressure on the domestic economy to reform further in order to remain competitive. The advantage here was that the painful reforms that Jiang and Zhu wanted to pursue could be blamed on foreigners.

Against the positives was the huge uncertainty about what exactly the domestic impact would be, and many were concerned that the WTO would have an adverse impact on the rural sector and the SOEs, and that the Chinese government would have to cede important levers of control.

In the 1990s Chinese tariffs were among the highest in the world; now they would be reduced from an overall average of 24.6 percent to 9.4 percent, and to 7.1 percent on US priority goods.

In a major concession to US manufacturers and agricultural exporters, China agreed to relax its tight controls over trading rights and distribution services, opening up repair and maintenance sectors as well as storage and transportation. Dramatic concessions were also made in the financial and insurance sectors.

Given the disruption that these measures would cause for the Chinese economy, as well as the considerable opposition, why did Jiang Zemin and Zhu Rongji decide to push ahead so swiftly and with such determination?

More than ever before, China’s future economic health would be intertwined with the progress of the global economy and vice versa. Basically, China had very little choice other than to join. Remaining outside would have afforded protection over the short term, but would have shut China out from the benefits of membership.

Jiang Zemin clearly wanted China to be consulted on major global issues, and sitting outside of the premier trading organization would limit China’s capacity to be involved in the global decision-making process. If China was not a member of the WTO, key decisions would be made that would have an impact on its vital interests without it having a voice.

Jiang, Zhu, and their supporters concluded that without strong external disciplinary mechanisms, domestic economic reform might stall, with vested interests setting in to frustrate forward momentum.

The WTO measures supported the push to increase market influences in the economy, with a particular impact on the SOEs and financial sectors. Finally, there were specific benefits that WTO entry would bring.

State investment was producing diminishing returns, and by the late 1990s overall growth was beginning to slow, meaning that new sources of growth had to be tapped.

Most importantly, WTO entry improved access for Chinese goods to reach major markets in Europe, Japan, and the United States, especially textiles, fashion goods, and telecommunications equipment. The “made in China” label became ubiquitous.

In 1999 foreign direct investment had dropped, but WTO membership encouraged increased US and European capital to supplement that from Hong Kong and Asia. The basis was established for a twenty-first-century boom.

Changing of the Guard: The Sixteenth Party Congress

A major issue for the congress was installation of the new leadership, the “fourth generation,” which would take China into the new century. Although there were complications, this was the first and only peaceful transition of the leadership in the history of the PRC, although Jiang did retain control over the military.

Hu Jintao took over as general secretary, having been proposed by Deng Xiaoping in 1992. Even though he was appointed general secretary, Hu was not designated the core of the new generation.

Indeed, the period under Hu was one of consensus-building and genuine collective leadership, something that his successor Xi Jinping saw as causing stasis and avoidance of hard decisions.

At the September 2004 party plenum, Jiang Zemin stepped down from his final leadership position as chair of the Central Military Commission, turning the post over to Hu Jintao

Despite stepping down as general secretary, Jiang retained his influence within the party apparatus.

Jiang was the only departing leader to continue to receive minutes of Politburo Standing Committee meetings. The new leadership of the Standing Committee and the Politburo certainly was not of Hu’s making—it was dominated by Jiang’s supporters.