The Fat Years (27 page)
There were two major reasons that could induce the Chinese people to accept the Chinese model of one-party rule: it would promote social stability, and it would concentrate resources to accomplish “big things.” That is to say, the preservation of social stability would be only a necessary condition of the party-state’s legitimacy. This is because democratic systems are not necessarily unable to maintain stability themselves. Take Taiwan, for example: we ridicule them for their democratic chaos, but they carried off a peaceful transition of power and their political situation remained quite stable. Thus, just saying we can maintain social stability is not enough. We have to prove that our one-party rule can accomplish big things that democratic systems are unable to accomplish. If we cannot do this, the value of maintaining our one-party rule will be open to challenge.
He Dongsheng was just waiting for a major stroke of luck that would allow for the accomplishment of big things. Privately his plan was known as the “Action Plan for Ruling the Nation and Pacifying the World.” This title followed the old neo-Confucian slogan, but no matter how many sleepless nights he spent thinking about it, with its echoes of imperial Confucianism, he just couldn’t come up with a new name.
If a major crisis didn’t occur in a timely fashion, the transition from the then ruling group to a new ruling group would be fraught with danger. On the one hand, the Communist Party’s transfers of power have always been dangerous—full of fierce power struggles between various inner-party factions. On the other hand, there have certainly been many problems during the past few years, starting with the 2008 financial tsunami. Contradictions in Chinese society have intensified, Party officials have been shown to be at fault at every turn and have indeed grown extremely weak; they have given their enemies much food for criticism. If things continued like that right up to the next Party Congress, the ruling group would certainly have had to step down. He Dongsheng was not a member of the ruling group’s inner circle; at the time, he was merely a major figure who had served consecutive Party leaderships. He had a pretty good idea, though, who was slightly less reprehensible, and who was much more unscrupulous. He rather preferred to support the empowerment of some of those technocrats who had little family background to recommend them. Be that as it may, he didn’t want to be dragged into a power struggle between various factions; he didn’t want to see China’s political situation thrown into greater turmoil due to transfer of power within the Party.
He needed Heaven’s help. If, about a year before the scheduled transfer of power, a major crisis occurred and the Politburo decided to scrupulously follow his “Action Plan for Ruling the Nation and Pacifying the World”—with that, He Dongsheng believed, China would certainly be saved. Of course, future generations would never know how much blood, sweat, and tears he, He Dongsheng, had contributed to the perfection of this strategy. They would never know that his plan was his own ingenious design to preserve Communist Party rule in China forever. All the credit would go to the existing party-state leadership.
He Dongsheng had grasped very early on the imminence of another crisis in Western capitalism. His own investment strategy was to bet
against
the U.S. dollar. He had been in Zhongnanhai for so many years, and at first, like all the other high officials, he spent as much as possible of his Chinese renminbi in purchasing dollars. About ten years earlier, he became less confident about his dollar assets. At that point, he exchanged his American currency for Canadian dollars, to pay for his only son’s school fees overseas. He also purchased a mansion in an old bourgeois neighborhood called Shaughnessy in Vancouver. With the remainder of his American funds, he bought into gold, petroleum, and other mineral and energy stocks with the intention of hanging on to them long term. Even more importantly, he decided to retain a good deal of renminbi and invest them in the Chinese real estate market. He didn’t play the Chinese stock market because he couldn’t spare the time, didn’t like the duplicity and lack of transparency of the whole game, and didn’t want to appear greedy. Over these past few years, his anti-American investment strategy had returned a hefty profit, and confirmed him in his view of international economics.
The 2008 financial tsunami caused him to reflect deeply on his economic theory, to reconstruct his mental image of the world economy and China’s road to development, and cleverly to incorporate his further ideas into his “Action Plan.”
He saw that the American-led developed countries, due to their two-party or even multiparty democratic political systems, had neither the ability nor the resolve to tame the monster known as globalized finance capitalism. America’s elected politicians were beholden to a plethora of interest groups: Wall Street, big business, the arms industry, local power groups, the churches, labor unions, and various public-relations lobbies; they also had to take care of popular and media opinion. So when it was necessary for them to unite to accomplish something big and important, all they could do was look around, to the left and right, and fight meaningless little battles; they didn’t dare to cut to the bone and heal the body politic, and were even less likely to take bold and decisive action. American market fundamentalists and the right wing of the Republican Party constantly dragged their feet and added to the confusion; they were completely out of touch with reality and could certainly mess things up, but they could not make any positive contributions. He Dongsheng was completely discouraged by Western representative democracy; he didn’t have the slightest hope for it. He was even less hopeful that those government financial decision-makers, with their multifarious connections to Wall Street, had the
cojones
to make correct decisions that would save the world economy. On the contrary, he was more and more convinced that China’s vast post-totalitarian government really did have the ability to manage and direct this historical stage of globalized finance capitalism—that is, if China had the correct understanding of the globalization of capital.
He Dongsheng realized, however, that in the Chinese system, merely having a correct understanding of any situation was not enough. This was because every level of the party-state-government was under the excessive control of interest groups and corrupt officials, and they would distort or reject even the most correct policy if it didn’t profit them directly. Thus, He Dongsheng thought that only a major, unprecedented crisis would permit the current ruling group to implement a genuine dictatorship, guarantee action at the bottom on every order from the top, and build a firm foundation for China’s Golden Age of Ascendancy that was just waiting to blossom out of the nation’s growing power.
He Dongsheng had never imagined the 2008 global crisis would happen so soon. Nor had he imagined that on the first frenetic day, the Chinese Politburo would set in motion a completely new plan for tackling the situation. The policy proposal was called the “Action Plan for Achieving Prosperity amid Crisis.” This proposal, of course, represented the collective wisdom of the entire Politburo Standing Committee, but very many of its elements were in accord with He Dongsheng’s own secret plan.
First, let’s answer the question: What about the United States? How did they start learning from our Chinese state-run system?
The United States government printed money and sold bonds, tried to save the bankrupt car manufacturers, poured money into already defunct banks … spending all that money in the wrong places. The result was that credit didn’t revive, the market continued to contract, house prices continued to plunge, the unemployment rate edged up as before, and the value of the U.S. dollar steadily declined. American investors didn’t want dollars and international investors didn’t want them either; even the central banks of Japan, Russia, and Taiwan didn’t dare to hold only American currency. American bonds, both long- and short-term, were hard to sell no matter how good their interest rates were. The dollar rose for a while at the beginning of 2009, but a little later it again lost twenty-five percentage points. In the end, worldwide confidence in the dollar reached a critical low, and, in one trading day in February, panic selling began. This was followed by the collapse of the American stock market. The chairman of the Federal Reserve Board, the secretary of the Treasury, and economics Nobel laureates such as Joseph Stiglitz and Paul Krugman all agreed that the United States was in a state of high-inflation decline or “stagflation”—what the Chinese media called an economic crisis of “fire and ice.”
While the world economy was floundering, what was the situation in China?
China was also in danger as exports came to a standstill, the number of unemployed suddenly rose steeply, and stock markets fell until trading was halted to forestall further losses. This time China’s economic growth would probably not avoid slipping from positive to negative figures.
The economic stimulus of 2009—relying on the National Treasury to allocate funds for direct investment to stimulate the economy—helped maintain the national GDP, but didn’t genuinely encourage domestic consumer demand. Much of the stimulus money was invested in dubious mega-projects and fixed-capital assets, and the chief beneficiaries were the bureaucrats, state-run enterprises, and the interest groups tied to their apron strings. In other words, the stimulus helped increase the monopoly of state-run enterprises over the market, and further decreased the scope of private businesses.
The most troublesome thing was still the huge decline in the value of the dollar. Before 2004, China’s annual trade surplus had not been very large. After 2004, however, China had less and less need to import foreign manufactured goods, and its exports grew at an ever more ferocious pace. China’s foreign-exchange reserves abruptly rose to over two trillion dollars. Then, all of a sudden, those dollars lost more than a third of their value.
Although China had originally made a lot of noise about the dollar, it had not actually been selling off dollars the way Japan, Russia, and Taiwan had; China held on to its dollars and kept buying American-dollar assets right up to the end. It wasn’t that China didn’t want progressively to distance itself from the dollar, but it lacked an alternative place to invest its money. The government was already trying to reach mutual currency-exchange arrangements with Japan, South Korea, the ASEAN, and the Shanghai Cooperation Organization nations, and was already actively urging the United States to issue some bonds payable in renminbi—what the foreign press had dubbed “Panda Bonds.” So it wasn’t that the government wasn’t making crisis preparations, it was that time was against them; they could only pray that the dollar would not decline further—they certainly could not imagine that it would go under so quickly.
Politics is a cruel business. Just the “crime” of allowing our sovereign wealth to shrink so much was bad enough. Add to that the negative growth in the national economy that was certain to follow, and the ruling group at that time would have completely lost its prestige within the Party. The following year, that governing group would not have had the strength to resist the opposition, and would certainly have fallen from power; it would have been a time for their friends to weep and their enemies to laugh. And this is the most important reason why they resolutely decided to put the “Action Plan for Achieving Prosperity amid Crisis” into operation.
So. Since they were going to die anyway, they thought they might as well make one last stand, and take drastic measures to alter the course of the heavens, an attempt to turn a bad situation into a victory. If they won, it would be a complete victory. And if they lost … well … if they lost, the great deluge that came after them would be a problem for the next Party leadership to resolve.
The day that the dollar fell so precipitously in 2011 was the eighth day of the first lunar month. The New Year vacation period had just ended, and, except for a few factories, every place was open again for business. That morning virtually all the news media reported that the global economy had entered a period of “fire and ice” crisis.
Where was the machine of state?
In fact, the Public Security police, the armed police, and the army were all in a state of readiness that day. Party Central had announced to all levels of government that the entire nation was in a state of emergency, and that the “Action Plan for Achieving Prosperity amid Crisis” had gone into operation. This was a coordinated chain of actions. The entire nation had to be regarded as a single chessboard and each move had to scrupulously follow the planned schedule if complete success, total victory, was to be achieved.
In the first phase, except for establishing martial law in Xinjiang and Tibet, the machine of state was forbidden to do anything without express orders from Party Central. In other words, the party-state machine was going to wait. Why? They were waiting to see how long it would take for genuine chaos to materialize. Waiting to see how long the common people could endure a state of anarchy. When that moment arrived, the people themselves would call on the government not to abandon them; they would beg the government to save them. The machine of state was waiting for the people of the entire nation once again to voluntarily and wholeheartedly give themselves into the care of the Leviathan.
If large-scale rioting or a mass exodus of people occurred, that would be the signal for the machine of state to go into action. As things turned out, the people went through six days of being so scared they couldn’t face another such day, rumors were circulating wildly, and by the seventh day, many regions reported to Party Central that a genuine upheaval had broken out in their area. Still, in this situation, only a few places experienced large-scale rioting and mass exodus. On the eighth day, the fifteenth of the first lunar month, token forces of the People’s Liberation Army and the armed police entered over six hundred cities around the country, and, as expected, were welcomed with open arms by the local population. This demonstrated the fact that in a moderately well-off society, the people fear chaos more than they fear dictatorship. And besides, Chinese society was really not as disorderly as was imagined; the vast majority of the Chinese people crave stability. As long as the government was not a target of attack, everything could be easily taken care of.