The Magazine

The Paradoxes of China

Understanding our rival.

Nov 5, 2012, Vol. 18, No. 08 • By CHARLES WOLF JR.
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China, on the cusp of a major leadership transition, has cropped up only sporadically in our presidential campaign. The candidates, in their occasional comments on our largest lender and trading partner, seem only to vie with one another in how “tough” each will be. But “toughness” is not a policy. 

The Paradoxes of China

China is rife with paradoxes. They include paradoxes of class, foreign aid, military spending, and corruption. Whether and how they are resolved will seriously affect the evolution of policies within China, as well as its future relations with the United States.

The Class Paradox

In principle and doctrine (Mao, Marx), communism in China aspires to a classless society. In practice, it is formally stratified into a multitiered hierarchy of specified classes. The 27 tiers encompass not only government officialdom, but the Communist -party’s 83 million members as well: At the middle and higher levels, most government officials are also CPC members. The defined classes extend to state-owned enterprises (SOEs), the military’s upper reaches, and such public services and NGO entities as hospitals, schools, and research institutes. Since Jiang Zemin called for eligibility for CPC membership to businessmen and businesswomen, the stratification encompasses some from the private sector as well.

The steps on the stratification ladder are differentiated in several ways. Compensation levels vary widely, consisting of an explicit “visible” component, and a substantially larger, “invisible” component, including different allowances, benefits, and other perquisites. For the visible component, the spread between top and bottom is a modest 10-fold; for the invisible component, it is probably several orders of magnitude, that is, a thousand or more times, larger.

The classes are also sharply differentiated by the honorific conferrals that accompany them. The rarefied top reach of Class 1 is thinly populated by the party general secretary (who also is China’s president and chairman of its Central Military Commission) and several of the other eight members of the Politburo’s Standing Committee, including the premier and the chairman of the National People’s Congress. Class 2 includes the vice president and deputy premier, other members of the Politburo, and the first vice chairman of the People’s Congress. Classes 3 and 4 include members of the Central Committee and the State Council, governors of major provinces and of megacities like Beijing, Shanghai, and Chongqing. As a rough approximation, these top four classes correspond to what was referred to in the bygone Soviet Union as its nomenklatura; in China, they have some of the trappings of royalty.

China’s remaining classes are filled in descending order by government leaders of smaller provinces and cities, and by the lower-level officials and CPC cadres who occupy the remaining tiers of the class pyramid.

The system provides for meritocratic mobility among the classes, although an element of legacy intrudes in this process. For example, the so-called princelings—children and relatives of previous top-tier leaders—often inherit upscale status, quite apart from their merit. The recent Bo Xilai-Gu Kailai-Wang Lijun scandal in Chongqing was replete with evidence of the legacy phenomenon.

How the paradox of a sharply stratified class structure juxtaposed with a principled doctrine of classlessness will resonate in an extensively networked and increasingly informed population of 1.3 billion people is a high-stakes “riddle, wrapped in a mystery, inside an enigma,” as Churchill once said about Russia.

The Foreign Aid Paradox

In recent years, China’s annual worldwide foreign aid has been very large (more than China’s officially reported defense budgets), concentrated on development of natural resources (fossil fuels, ferrous and nonferrous metals), and extended to 93 countries with exacting, “quid pro quo” conditions attached to the loans that require repayment in kind, and thus accord with the direct economic interests of the donor. Hence, China’s aid has a distinctly “capitalist” character, in contrast to the more “philanthropic” aid extended by the “capitalist” West.

Development of natural resources comprised nearly 40 percent of the pledged totals, while infrastructure development amounted to 45 percent, and the remaining 15 percent consisted of technical assistance, humanitarian aid, education aid, and recipients’ sovereign debt acquired or forgiven by China.

Most of this aid is financed by subsidized loans from the China Development Bank, its Export-Import Bank, and the China-African Development Fund. These sources are supplemented by technical and financial support from major SOEs that have natural resource development interests. Formal management responsibility for China’s foreign aid resides in the Ministry of Commerce.

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