New York University's independent student newspaper, established in 1973.

Washington Square News

New York University's independent student newspaper, established in 1973.

Washington Square News

New York University's independent student newspaper, established in 1973.

Washington Square News

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Chinese government must expand privatization

The Chinese government established a strategic reserve of state-owned pig farms and frozen pork in 2007 to combat rises in pork prices. Chinese citizens spend roughly 34 percent of their income on food, a large share of it devoted to pork. The government, which governs on a mandate of providing prosperity to everyone, credibly sees rising food prices as a potential threat to its power.

A similar fear motivates General Secretary Xi Jinping’s current anti-corruption initiative. Taking office in 2013, he vowed to fight corruption at all levels of government. Just this month, he upped the ante by expanding the hunt to senior political and military leaders, investigating the ex-general Gu Junshan and retired party leader Zhou Yongkang. Housecleaning was overdue as discontent had been mounting. By 2012, 50 percent of the Chinese public saw corruption as a major problem, more so than income inequality at 48 percent and the more basic problem of food safety at 41 percent.

The government’s belated attempt at tackling graft seems contrary to its eager intervention in minutiae such as food prices, but the two are actually interconnected. So long as the party demands the ability to directly manage the economy, it entrenches an elite that abuses that power. Xi simply culls it, shuffling the elite around.

Replacing officials is ineffective because even a clean official like ex-Premier Wen Jiabao had family members who monetized their association with him into business investments when he was in office. In fact, the whole generation of officials that oversaw China’s rapid economic development accrued connections with the industries they ran or regulated during their tenure. Zhou Yongkang’s case highlights this issue. His family had many energy investments tied to the China National Petroleum Corporation. Zhou had spent over a decade at CNPC starting in the 1970s, moving from oilfield technician to its leader before entering politics.

Xi needs to sever these connections by expanding privatization and removing government from the day-to-day running of businesses. Important enterprises like railways and telecommunications are state-owned with protection from commercial competition. The corporate focus shifts to maintaining political connections, creating a situation ripe for corruption. When China focused on double-digit growth, state control was needed to coordinate the massive infrastructure spending and cheap credit that sustained it. The inefficiency and corruption could be dismissed as the cost of rapid expansion. As China shifts to more sustainable growth driven by domestic consumption, efficient private corporations — such as Lenovo, TCL, Geely and Huawei — now deliver the prosperity that legitimizes the party’s rule. Not only would privatization uproot corruption, the party’s survival may even depend upon it.

William Peng is a contributing columnist. Email him at [email protected].

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