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Journal of Contemporary China
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The New ‘Comprador Class’: the re-
emergence of bureaucratic capitalists
in post-Deng China
Wing-Chung Ho
Published online: 15 May 2013.
To cite this article: Wing-Chung Ho (2013) The New ‘Comprador Class’: the re-emergence of
bureaucratic capitalists in post-Deng China, Journal of Contemporary China, 22:83, 812-827, DOI:
10.1080/10670564.2013.782128
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The New ‘Comprador Class’: the
re-emergence of bureaucratic capitalists
in post-Deng China
WING-CHUNG HO*
The past two decades have witnessed increasing use of the concept of ‘bureaucratic
capitalism’ to explain various endemic problems in China, including corruption and social
inequalities. Yet, scant attention has been paid to the rise of key bureaucratic capitalists and
the state corporations under their control. Neither has there been adequate discussion of the
recent form of bureaucratic capitalism in contradistinction to that of the previous forms
evolving in the republican and early reform periods. In question therefore is a small circle of
bureaucratic bourgeoisie who are children, close relatives or prote
´
ge
´
s of top political
leaders. They have come to control key state-corporation apparatuses, and some of whom
possess close ties with the military. In conclusion, the future implications of this emergent
form of bureaucratic capitalism on Chines e politics will also be discussed.
Introduction
Since the reforms began in 1978, China’s transition towards capitalism (or ‘socialism
with Chinese characteristics’) has been guided by the cautious reform approach set by
Deng Xiaoping (1904–1997). This approach has the following principles: that
economic reforms are not juxtaposed with a democratized political system;
1
that state
governance will not follow the Western model of tripartite separation of powers;
2
and
that every major reform policy has to be channeled through the existing authoritarian
bur-
* Wing-Chung Ho is an associate professor of sociology at City University of Hong Kong and holds a Ph.D. in
anthropology from SOAS, University of London. He has published broadly on community studies and social
problems in relation to subordinate people in Hong Kong and Chinese societies. His academic articles appear in
Journal of Contemporary Ethnography, The Canadian Review of Sociology, Journal of Contemporary Asia, Modern
Asian Studies, Journal of Social History, The Asia Pacific Journal of Anthropology and Human Studies. He teaches
mainly on social research issues and methods. The author can be reached by email at wingcho@cityu.edu.hk
1. Michael Johnston and Hao Yufan, ‘China’s surge of corruption’, Journal of Democracy 6(4), (1995), pp. 80–94;
Guo Dingping, ‘The changing nature of Chinese socialism comparative perspectives’, European Journal of East Asian
Studies 8(1), (2009), pp. 1–29, esp. p. 25.
2. In his secret journal published in 2009, former party secretary, Zhao Ziyang, remembered that Deng Xiaoping
was strongly against the Western model of the tripartite separation of powers; Deng once said, ‘Let there be not even a
trace of tripartite separation of powers’. Bao Pu, Renee Chiang and Adi Ignatius, eds, Prisoner of the State: The Secret
Journal of Zhao Ziyang (London, New York, Sydney and Toronto: A CBS Company, 2009), p. 280.
Journal of Contemporary China, 2013
Vol. 22, No. 83, 812–827, http://dx.doi.org/10.1080/10670564.2013.782128
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eaucracy.
3
These principles have created a ‘rent capitalism’ through which state
bureaucrats and their accomplices become the major beneficiaries.
4
Along this vein,
Hutchcroft calls postsocialist China an exemplar of ‘bureaucratic capitalism’ in
which there exists a strong, patrimonial administrative state while countervailing
forces from the rational–legal system are strikingly weak.
5
At issue is the integration
of the state and economy in such a way that the state actively involves itself in newly
emerging markets and even plays a leading role in guiding the transformation of the
local economy. The phenomenon of local state authorities engaged in profit-making
activities has been variously described as the ‘socialist developmental state’,
6
‘local
market socialism’,
7
‘local state corporatism’,
8
‘bureaucratic entrepreneurialism’,
9
‘entrepreneurial state’,
10
‘state entrepreneurialism’
11
and ‘bureau-preneurialism’.
12
The development of bureaucratic capitalism has led to a specific institutional
arrangement which allows local governments, as suggested by Lu, to take a spectrum
of economic roles, ranging from a promoter or coordinator of the market, to a
collaborator with enterprises, to an investor or entrepreneur itself directly involved in
business activities.
13
With such a merger of state and economy, local party officials
have both the incentive and the responsibility to pursue economic and industrial
development, form cadre–entrepreneur alliances, and ultimately, make profits for
private gain.
14
The cozy relationship between the party-state and capitalists has been
described by Dickson as ‘crony communism’ which refers to ‘a system of interaction
3. Susan L. Shirk, The Political Logic of Economic Reform in China (Berkeley, LA and Oxford: University of
California Press, 1993), p. 333.
4. Sun Yan, Corruption and Market in Contemporary China (Ithaca, NY and London: Cornell University Press,
2004), p. 16.
5. Paul D. Hutchcroft, Booty Capitalism: The Politics of Banking in the Philippines (Ithaca, NY and London:
Cornell University Press, 1998), pp. 20–21.
6. Robert Wade and Gordon White, eds, Developmental State in East Asia (Basingstoke: Macmillan, 1988);
Gordon White, ed., The Chinese State in the Era of Economic Reform: The Road to Crisis (London: Macmillan,
1991).
7. Lin Nan, ‘Local market socialism: local corporatism in action in rural China’, Theory and Society 24(3),
(1995), pp. 301–354.
8. Jean C. Oi, ‘Fiscal reform and the economic foundations of local state corporatism in China’, World Politics
45, (1992), pp. 99 – 126; Jean C. Oi, ‘The role of the local state in China’s transitional economy’, China Quarterly
144, (1995), pp. 1132–1149.
9. Lu Xiaobo and Lance Gore, ‘The Communist legacy in post-Mao economic growth’, China Journal 41,
(1999), pp. 25–54.
10. Marc Blecher, ‘Developmental state, entrepreneurial state: the political economy of social reform in Xinji
Municipality and Guanghan County’, in White, ed., The Chinese State in the Era of Economic Reform; Marc Blecher
and Vivenne Shue, Tethered Deer: Government & Economy in a Chinese County (Stanford, CA: Stanford University
Press, 1996).
11. Jane Duckett, The Entrepreneurial State in China: Real Estate and Commerce Departments in the Reform Era
in Tianjian (New York: Routledge, 1998).
12. Lu Xiaobo, ‘Booty socialism, bureau-preneurs, and the state in transition: organizational corruption in China’,
Comparative Politics 32(3), (2000), pp. 273–292.
13. Ibid., pp. 273– 274. See also Ko Kilkon and Zhi Hui, ‘Fiscal decentralization: guilty of aggravating corruption
in China?’, Journal of Contemporary China 22(79), (2013), pp. 35– 55.
14. David L. Wank, ‘Bureaucratic patronage and private business: changing networks of power in urban China’,
in Andrew G. Walder, ed., The Waning of the Communist State (Berkeley, CA: University of California Press, 1995),
pp. 153– 183; Zhang Jianjun, ‘State power, elite relations, and the politics of privatization in China’s rural industry:
different approaches in two regions’, Asian Survey 48(2), (2008), pp. 215 – 238; Pei Sun, Mike Wright, and Kamel
Mellahi, ‘Is entrepreneur– politician alliance sustainable during transition? The case of management buyouts in
China’, Management and Organization Review 6(1), (2010), pp. 101–121.
THE NEW ‘COMPRADOR CLASS’
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between economic and political elites that is based on patrimonial ties and in which
success in business is due more to personal contacts in the official bureaucracy than to
entrepreneurial skill or merit’.
15
The present paper, however, is different from previous endeavors which mainly
examine the state–market connection at the local level. Rather, it focuses on the
larger state processes through which the offspring and prote
´
ge
´
s of central-level
cadres are turned into a small circle of powerful bureaucratic bourgeoisie who have
privileged access both to the state machinery and the market. To date, scant attention
is paid to the rise of key bureaucratic capitalists and the state corporations under their
control. Neither has there been adequate discussion of the recent form of bureaucratic
capitalism in comparison to that of the previous forms of the republican and early
reform periods. This paper endeavors to fill these lacunas. In conclusion, the future
implications of this emergent form of bureaucratic capitalism on Chinese politics will
also be discussed.
A re-emergence
Meisner also offers a succinct definition of bureaucratic capitalism. It refers to an
economic system in which there is a prevailing ‘use of political power and official
influence for private pecuniary gain through capitalist or quasi-capitalist methods of
economic activity’.
16
In China, Fairbank has rightly observed that a bureaucratic
economy is not a novelty. In the late imperial period, it had already been common
practice that westernizing economic projects were handled by the mu-yu (unofficial
legal secretary) of top-level mandarins who often embezzled funds in their charge.
17
Meisner argues that the establishment of the Nationalist government of Chiang
Kaishek in 1927–1928 inaugurated a two-decade reign that is perhaps the most
archetypical case of bureaucratic capitalism in modern world history.
18
Under the
Nationalist regime in the mainland (1919–1949), major economic activities
(including the banking and food sectors) were controlled by powerful state
bureaucrats, including the notorious ‘four big families’ (sida),
19
so as to guarantee
adequate financial resources would be channeled to support Chiang’s political
ambition, essentially, his armies. Such a fusion between the state and the enterprise
did not open the door to market competition and efficiency, but rather to a new height
of official corruption and opportunistic speculation. Gong stresses that the corrupt
activities of the Nationalist government had ‘increased the burden of taxation and
requisition on the citizens and, hence alienated the government from the general
public’.
20
Fairbank further remarks that the bureaucratic capitalism of the Nationalist
15. Bruce J. Dickson, Wealth into Power: The Communist Party’s Embrace of China’s Private Sector (Cambridge
and New York: Cambridge University Press, 2008), p. 23.
16. Maurice Meisner, The Deng Xiaoping Era: An Inquiry into the Fate of Chinese Socialism, 1978 –1994 (New
York: Hill and Wang, 1996), p. 300.
17. John King Fairbank, The Great Chinese Revolution: 1800–1985 (New York: Harper & Row, 1986), p. 121.
18. Meisner, The Deng Xiaoping Era, p. 302.
19. These were the families of the top National Party leaders: Chiang Kaishek, Song Ziwen, Kong Xiangxi and the
Chen brothers (Chen Lifu and Chen Guofu).
20. Gong Ting, The Politics of Corruption in Contemporary China (Westport, CO and London: Praeger, 1994), p. 42.
WING-CHUNG HO
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era represents ‘the worst form’ of its kind as the system allowed the bureaucratic
bourgeoisie to recklessly feather their nests at the public’s expense.
21
After the communist takeover, Mao Zedong (1893 – 1976) was cautious about the
idea of developing the bureaucracy into a quasi-autonomous ‘national capitalist
class’. At the close of the Mao era, the political and economic roles played by
‘national capitalists’ were small under the planned economy. It was not until Deng
Xiaoping, who institutionalized bureaucratic power and introduced a market
economy in the late 1970s, that a bureaucratic capitalist regime was re-created to such
an extent that, according to Meisner, it ‘seemed to hark back to economic practices
common during the imperial and Guomindang [Nationalist] eras’.
22
As China accelerated its market reform, key state corporations were set up or
restructured into comprador-type trading organizations which carried out business
deals with foreign companies. Taking advantage of the influence of their parents or
in-laws in the bureaucracy, many children of high-level cadres took leading roles in
these organizations and began to make huge personal gains. Scholars have suggested
that the business of these organizations was destined to be lucrative as the well-
connected bureaucratic bourgeoisies were able to purchase raw materials or
commodities at a national (i.e. below-market) price and reap surpluses by selling in
the market.
23
Real competition did not exist as unconnected companies were easily
crippled by the highly corrupt bureaucratic hurdles in the names of certification,
taxation requirements and quota systems. A brief discussion of four major
state-controlled trading organizations founded in the early reform period will suffice
to illustrate the nature of bureaucratic capitalism re-emerging under Deng’s regime.
China International Trust and Investment Corporation (CITIC)
Founded in October 1979, CITIC had as its mission to utilize foreign investment and
introduce advanced technology and equipment to promote China’s modernization.
24
The first president of CITIC was the well-known ‘national capitalist’, Rong Yiren
(1916–2005), former vice-president of the People’s Republic;
25
but, for most of the
time since its foundation, CITIC had been headed by Wang Jun (1941–) son of
another former vice-president, Wang Zhen (1908–1993).
26
Wang Jun began as a
department manager in 1979 and was subsequently promoted to the posts of general
manger and chairman in 1993 and 1995, respectively. In 1992, CITIC was said to be
China’s largest foreign investment firm.
27
21. Fairbank, The Great Chinese Revolution, p. 264.
22. Meisner, The Deng Xiaoping Era, p. 319.
23. Wu Jing-lian and Zhao Ren-wei, ‘The dual pricing system in China’s industry’, Journal of Comparative
Economics 11, (1987), pp. 309–328; Cheng Li, China’s Leaders: The New Generation (Lanham, MD: Rowman and
Littlefield, 2001), p. 137.
24. Anonymous, ‘The “Everbright Organization” and its Chairman Wang Kuang-ying’, Issues & Studies 21(3),
(1981), pp. 142–147, esp. p. 142.
25. Rong Yiren was vice-president during 1993–1998.
26. Wang Zhen was vice-president during 1988–1993, virtually the predecessor of Rong Yiren.
27. Eric Hyer, ‘China’s arms merchants: profits in command’, The China Quarterly 132, (1992), pp. 1101–1118,
esp. p. 1113.
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In 1990, CITIC took over a Hong Kong-listed company Tai Fu Development
Group and established CITIC Pacific Ltd, which became an eminent ‘red chip’
28
corporation in British-ruled Hong Kong. Rong Zhijian (1942–) son of Rong Yiren,
had been the chairman of CITIC Pacific Ltd until he was forced to step down in April
2009 after a financial scandal. As for the ‘parent’ of CITIC, Wang Jun remained in his
position until he resigned in 2006. His position was then taken by another princeling,
Kong Dan (1947–) whose father, Kong Yuan (1906–1990), was former head of the
Investigation Department of the Chinese Communist Party (CCP) and mother, the
mishu (personal secretary) of former premier, Zhou Enlai (1898–1976).
29
China Poly Group Corporation (Poly Group)
Polytechnologies Inc. was established in 1983 under the control of the People’s
Liberation Army (PLA). It was first officially registered as a civilian corporation
under CITIC. In essence, Polytechnologies Inc. is operated by the Armaments
Department of the PLA General Staff, and has developed into a globally known arms-
trading organization.
30
Like CITIC, the top management of Polytechnologies Inc.
exhibited a high degree of nepotism characteristic of the bureaucratic capitalism of
the time. The company is staffed by generals and colonels who are close relatives of
party leaders. These include, according to Meisner, the son-in-laws of Deng Xiaoping
(He Ping), of former Party chief Zhao Ziyang (1919–2005) (Wang Zhihua), and of
former President Yang Shangkun (1907–1998) (Wang Xiaochao). The department’s
general director is Major General He Pengfei, the son of the legendary Red Army
marshal He Long (1896–1969).
31
In 1992, the State Council approved the establishment of the Poly Group on the
basis of Polytechnologies Inc. The following year, Poly Group took over 55% of a
Hong Kong-listed company (Continental Mariner Investment Co. Ltd), and set up its
first international financial arm, Poly (H.K.) Investments Ltd. Since then, the
company has extended its business from arms merchandizing to coal-mining, iron ore
and crude oil exploration investment, real estate development, and cultural and arts
businesses. From 1993 to 2007, Wang Jun (also the chairman of CITIC) was also the
chairman of Poly Group, and He Ping (1946–) the general manager. He Ping was
made chairman when Wang Jun resigned in 2007.
China Everbright Group (Everbright)
Everbright was founded in 1983 originally ‘for the purpose of importing advanced
industrial technology’.
32
In the same year, Everbright was affirmed by the State
Council as a ministry-level company. Its first chairman, Wang Guanying (1919–)
was a brother-in-law of Liu Shaoqi (1898–1969), former national president and a
28. ‘Red chip’ corporations refer to business organizations which are controlled, either directly or indirectly, by
organizations or enterprises that are owned by the state, provinces or municipalities of China. The word ‘red‘
represents the People’s Republic of China and the CCP.
29. Kong Dan had been vice-chairman and president of CITIC since 2000. See also Cheng, China’s Leaders.
30. Hyer, ‘China’s arms merchants’.
31. Meisner, The Deng Xiaoping Era, p. 35.
32. Ibid., p. 328.
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contemporary of Mao Zedong.
33
From 1990 to 1996, Everbright expanded its
business to the financial sector and started to invest in Hong Kong’s capital market.
China Everbright (Group) Co. Ltd was established in 1990, and soon China
Everbright Bank and Everbright Securities were set up. In the late 1990s, Everbright
specialized in financial services, including asset management, direct investment,
brokerage and investment banking in the Greater China region. Kong Dan—a
princeling and currently chairman of CITIC—joined Everbright when it was founded
in 1983. In 1996, Kong became the general manager of the company. Before Kong
left for CITIC in 2000, he was vice-chairman and president of Everbright. In the first
half of the 2000s, Everbright’s development was almost stagnant as it was involved in
the factional politics characteristic of the bureaucratic capitalism emerging in the
early 1990s—a case we will return to later.
Kanghua Development Corporation (Kanghua)
Kanghua was founded in 1984. Headed by Deng Pufang (1944–) son of Deng
Xiaoping, Kangua was supposed to be a trading organization ‘run by and for China’s
disabled people’.
34
However, it quickly turned into Deng Pufang’s private club which
recruited many princelings and personal friends to make huge personal fortunes.
As estimated by Cheng, at its climax, Kanghua had over 200 princelings as its
managers and representatives.
35
Some princelings later moved up to prominent
leadership posts. For example, Kanghua’s general manager, Yu Zhengsheng (1945– )
[son of Huang Jing (1912–1958), former Mayor of Tianjin; also brother of Deng
Pufang’s elementary school classmate] was later promoted to party secretary of
Hubei and is now party secretary of Shanghai. Unlike the three companies mentioned
before, Kanghua was only short-lived. In 1988, an order was issued by the State
Council to investigate corruption and other illegal business in state-backed
companies, and Kanghua was one of the targets of investigation. Kanghua was closed
down with a fine of US$3 million.
36
The dismantling of Kanghua was widely
reported in the People’s Daily in late August 1989. This incident coincided with a
critical moment in China’s modern history. One should be reminded that a major
force driving millions of people all over China to take to the streets in May and June
1989 was rampant official profiteering (guandao).
As shown above, almost all the leading positions of the four companies were
occupied by children and close relatives of party veterans. Such a high degree of
nepotism, together with little separation between the state and the enterprise, made
the bureaucratic bourgeoisie enjoy particularistic access to the state apparatus and
national resources in the creation of wealth. Evidently, the beneficiaries of this
system were exclusively those related to or within the political networks of
princelings constituted by several key family conglomerates, such as the Wang, the
Deng and the Kong families. In the late 1980s, the wider public felt strongly that a
33. Anonymous, ‘The “Everbright Organization” and its Chairman Wang Kuang-ying’, p. 143.
34. Cheng, China’s Leaders, p. 136.
35. Ibid., p. 136.
36. Bruce Gilley, Tiger on the Brink: Jiang Zemin and China’s New Elite (Berkeley, CA: University of California
Press, 1998), p. 158.
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small circle of bureaucratic bourgeoisie were taking advantage of the new market
opportunities and making huge pecuniary gains while outsiders were being left
behind suffering from poor living standards and high inflation. Liu Binyan—a well-
known critic of the CCP—succinctly describes these networks of princelings as ‘a
new bureaucratic bourgeois stratum’, and its impact on society ‘is much more
harmful’ than the bureaucratic bourgeoisie that existed under the Nationalist
regime.
37
He explains that the ‘new’ bureaucratic bourgeoisie in the late 1980s had
more assets at its disposal, and no fear of law and order as well as of public opinion.
These ‘new people’ controlled the power to trade or distribute public goods for their
own benefit, and even worse, used their ‘political connections to engage in illegal
activities to sell and resell the state’s resources, products and raw materials’.
38
It came as no surprise that when Jiang Zemin (1926–) chaired his first politburo
meeting in late July 1989 that he issued a seven-point circular formally banning the
children and spouses of senior cadres from operating companies.
39
One month later,
Deng Pufang became the most spectacular princeling tripped up and subsequently
reported in the official media. However, it became apparent that Deng Pufang was
more a showcase than a real effort to crackdown on top-level corruption and
cronyism. In fact, Jiang’s edict quickly lost its legitimacy as the 1990s witnessed the
emergence of an even more powerful, both politically and economically, bureaucratic
bourgeoisie stratum, or what Gao coins a new ‘comprador class’, which was
constituted by children and prote
´
ge
´
s of the nation’s leaders. The following
discussions outline the rise of three prominent bureaucratic capitalists in post-Deng
China.
40
The new ‘comprador class’ in post-Deng China
Jiang Mianheng: ‘Shanghai’s King of IT’
Jiang Mianheng (1952–) is the elder son of Jiang Zemin. Born in Shanghai, Jiang
Mianheng obtained his bachelor degree in nuclear science at Shanghai’s Fudan
University in 1977, and a master’s degree in semiconductor material studies at The
Chinese Academy of Sciences (CAS), Beijing in 1982. After working for some years
at the Shanghai Institute of Metallurgy (SIM)—one of over 100 research institutes
affiliated with CAS—Jiang Mianheng began to pursue doctoral studies in the United
States in 1986. Five years later, he graduated from Drexel University with an
electrical engineering doctorate. Before re-joining SIM as a scientist in 1993, he
worked at the Hewlett Packard Company in Palo Alto, California for this
postgraduate training. In 1994, having no experience in management and presumably
little capital and no financial credentials, he became the director of Shanghai Alliance
37. Liu Binyan, Tell the World: What Happened in China and Why, trans. by Henry L. Epstein (New York:
Pantheon Books, 1989), pp. 164–165.
38. Ibid., p. 165.
39. Gilley, Tiger on the Brink, p. 158; Matt Forney, ‘Plugged in: Chinese leader’s son builds an empire in the
phone business’, Wall Street Journal (Eastern edition), (11 January 1999), p. A1; J. Kynge and R. Mcgregor, ‘It is a
glorious thing to be allowed to join the party .. .’, Financial Times, (6 November 2002), p. 21.
40. Gao Mobo, The Battle for China’s Past: Mao and the Cultural Revolution (London and Ann Arbor, MI: Pluto
Press, 2008), p. 183.
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Investment Ltd (SAIL). The company was established by the Shanghai municipal
government in September 1994 with registered capital of US$200 million.
41
Three
years later, Jiang Mianheng was promoted to director of SIM virtually without having
made any significant contributions to science. Since then, he has become an active
cadre-cum-entrepreneur. At SIM, he was a scientist, but at SAIL, he was actively
seeking opportunities to expand his business empire and invest in key municipal
telecommunications projects. For example, through holding major shares in the
Shanghai Information Investment Corporation, SAIL was involved in an US$8.5
billion project to improve Shanghai’s information technology infrastructure for
telecommunications, the Internet and cable networks in Shanghai, as well as the
country’s first cable networks which could offer cable television, Internet access and
telephone services in the early 2000s.
42
In 1999, Jiang Mianheng was once again ‘airlifted’ to become vice-president of
CAS, and once again his promotion was based on ‘zero scientific research
contributions whatsoever’.
43
One should be reminded that CAS is a state apparatus
with close military ties. In an interview in 2003, Jiang Mianheng revealed that he was
entrusted with a space exploration project of which he had no professional knowledge
once he became vice-president of CAS.
44
In 1999, China Netcom was founded.
Although Jiang Mianheng was only a board member, he was ‘the actual head of the
company’.
45
Two years later, China Netcom obtained a US$300 million investment
from Goldman Sachs and the media tycoon Rupert Murdoch with an obvious breach
of the country’s ban on overseas equity in the telecommunication sector. This
investment quickly paid off when China Netcom became the major beneficiary of the
new restructuring plan promulgated toward the end of 2001. The plan decided to
inject the network assets of ten northern provincial regions of China, and the whole
business of Jitong Communications Corporation (Jitong) into China Netcom. Jitong
was a state corporation authorized to carry out communications research and product
development, and build, operate and manage information network services
throughout China. Consequently, by mid-2002, China Netcom—only three years
after its foundation—became the third biggest telecommunications operation holding
30% of the national trunk line transmission network assets. In 2004, China Netcom
was listed both on the Hong Kong and New York exchange markets. By 6 October
2008, the last trading day of China Netcom in both markets, the company was worth
US$25.9 billion. Just for the sake of illustration: if Jiang Mianheng simply cashed in
12% of China Netcom, he would be the wealthiest man in the 2008 Forbes’ list of
Chinese tycoons.
41. Bo Zhiyu, China’s Elite Politics: Political Transition and Power Balancing (Singapore and Hackensack, NJ:
World Scientific, 2007), p. 246.
42. Eric Harwit, ‘Telecommunications and the Internet in Shanghai: political and economic factors shaping the
network in a Chinese city’, Urban Studies 42(10), (2005), pp. 1837 –1858.
43. Bo, China’s Elite Politics, p. 369.
44. ‘An interview with CAS vice-president and Deputy General Commander of China’s first manned spaceship
project, Jiang Mianheng’, Guangming Daily, (17 October 2003).
45. Bo, China’s Elite Politics, p. 247.
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Li Xiaopeng: ‘King of Asian Power’
Li Xiaopeng (1959–) is the elder son of former premier Li Peng (1928–) who, like
Jiang Zemin, was a hard-line victor of the 1989 uprising. It is a well-known fact that
the electricity industry is the traditional power base of Li Peng who was trained in
hydroelectric engineering in Moscow in the late 1940s, and began his career in power
sector administration, eventually becoming chief of the Ministry of Electric Power in
1983. It is thus not coincidence that his son Li Xiaopeng also trained in electric
engineering. After graduating from North China Electric Power University in the late
1970s, Li Xiaopeng began to work as an engineer in state institutions. In 1991, Li
Xiaopeng joined Huaneng International (Huaneng) as an assistant to the general
manager. Since then, Huaneng grew with an astonishing speed. It was first listed on
the New York stock exchange in 1994, then in Hong Kong in 1998. By the end of
1999, Li Xiaopeng was the general manager and board chairman of Huaneng. Under
his leadership, Huaneng completed the acquisition of New York-listed Shandong
Huaneng in a US$730 million deal in the next year. Huaneng then became, and still
is, the largest of the five independent power producers (IPPs) in China. Following
this, Li Xiaopeng was named ‘King of Asian Power’.
The ‘independent’ status of Huaneng is questionable as it is widely believed to be a
family enterprise under the control of the Lis. In November 2001, an intriguing article
entitled ‘Huaneng the Magic’ was published in a leading Chinese financial journal
(Securities Weekly). The author—who was later arrested—hinted that Li Xiaopeng
and Zhu Lin (Li Peng’s wife) had control over Huaneng and were profiting from their
powerful connections. The article also cast doubt on how Huaneng could have passed
through the administrative hurdles to be listed in the US, then Hong Kong without the
existence of strong political patronage.
46
Closely related to Li Xiaopeng in the electricity industry is his sister, Li Xiaolin
(1961–). Li Xiaolin is currently chairwoman of another IPP called China Power
International Development Ltd (China Power). China Power has been listed on the
Hong Kong exchange since 2004. Li Xiaolin is also chairperson of another Hong
Kong listed company, China Power International New Energy Holding Ltd. In 2008,
Li Xiaolin was named one of the International 50 Most Powerful Women in Business
by Fortune. To date, and only taking into consideration the valuation of the listed
companies mentioned above, Li’s family is said to control total assets worth nearly
US$14 billion; and as much as 15% of electricity generation capacity in China.
47
Li Xiaopeng is also progressing well in his political career. In 2007, he was elected
as an alternate member of the Central Committee in the 17th CCP Congress. The next
year, he made a surprising move, stepping down from the chairmanship of Huaneng,
and became deputy governor of Shanxi Province—an area where there is rich natural
deposits of coal whose market price is vital to the production costs of electric power.
The move was unanticipated as the board of Huaneng had only approved the new
term of Li Xiaopeng’s chairmanship one month before he moved to Shanxi. It is
46. One month later, on 8 December 2001, an interview of Zhu Lin was published in Legal System News
(Fajibao). She declared that she never had an illegal bond, and was never president or general manager of any
companies.
47. Shai Oster, ‘Attraction of business is powerful for Ms. Li, China’s “princelings”’, Wall Street Journal,
(15 May 2006), p. B1.
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expected that Li Xiapeng will progress to full membership of the Central Committee
in 2012, and become a member of the Politburo in 2015.
Hu Haifeng: Chief of Tsinghua Holdings
Hu Haifeng (1971–) is the son of Hu Jintao. Much like his father, Hu Haifeng
graduated from prestigious Tsinghua University in Beijing. After graduating with a
masters degree in engineering physics in the mid-1990s, Hu Haifeng joined NucTech
as an assistant to the general manager. Under Tsinghua Holdings, NucTech is a
world-leading company on manufacturing high-technological products, including
scanners for shipping, trucking containers and railway cars, and luggage scanners and
metal detectors for airports. Since Hu Haifeng became NucTech’s president in the
early 2000s, the company has been granted a near monopoly by the central authorities
for selling security equipment to airports in China.
Hu Haifeng did not attract much public attention until 2009 when his name was
connected to a corruption case. In 2007, Nuctech won a US$55.3 million Namibian
contract for airport scanners. Later, a report by Namibia’s Anti-Corruption
Commission discovered that US$12.8 million of payments for the deal were diverted
from Nuctech to a Namibian consulting firm. This has resulted in speculation that the
consulting firm helped NucTech win the large government contract through
bribery.
48
Before the news became public, Hu Haifeng was promoted to the post of
party secretary of Tsinghua Holdings in 2008. One should be reminded that Tsinghua
Holdings was founded in 2003 when Hu Jintao began to grasp supreme power in the
party-state. The State Council approved the setting up of the company with a
registered capital of US$243 million. Tsinghua Holdings currently oversees over 20
state-held high-technology firms spun out of Tsinghau University, and NucTech is
one of them. To keep him further away from business, Hu Haifeng ostensibly
resigned all his business positions in October 2009 and was appointed deputy
secretary-general of Tsinghua University.
A synoptic view
The above illustrations of the rise of several bureaucratic bourgeoisie set the stage for
a synoptic view on the nature of bureaucratic capitalism in the post-Deng era.
The increasing financial marketization of state corporations
One implication is that the increasing financial marketization of bureaucratic
corporations on foreign and local stock exchanges had rapidly multiplied the size of
assets controlled by the bureaucratic bourgeoisie. This observation then raises a
complex issue as, theoretically, the ownership (control) and management of stock-
holding enterprises are separated. In China, however, the state holds major shares in
all large listed, state-backed corporations. Furthermore, effective monitoring systems
48. Anonymous, ‘Firm of Hu’s son gets scanner pact at China airports’, Wall Street Journal, (13 December 2009),
p. B1.
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are not in place to increase the transparency of management in these corporations.
Under these circumstances, the bureaucratic capitalists who are supported by those
who possess more political power will gain more control of the corporations, and
have more room to manage them like private firms. This explains the reason behind
why the China Netcom Group was widely said to be ‘Jiang Mianheng’s company’,
49
and Huaneng has been described as ‘a typical family enterprise’ under the control of
the Lis.
50
In juxtaposition with this phenomenon is the issue of inter-generation
transfer of bureaucratic capital since there is no guarantee that the one who is
politically powerful at present will be so in the future. The will to maintain the
privilege of powerful family conglomerates in the market partly explains the reason
behind the strong motivation for the powerful bureaucratic bourgeoisie to seek to
excel in the political realm—a point that I will revisit later.
Along this line, the more recent developments in bureaucratic capitalism have
also prompted important transformations of traditional bureaucratic enterprises.
For example, as mentioned in the foregoing discussion, CITIC, Poly Group and
Everbright have come to harness huge economic capital in stock markets since the
1990s. One consequence—as shown in Table 1—is the extensive diversification of
business in a way that which seems to create further leverage for the bureaucratic
bourgeoisie to turn public assets into private gains. For example, after Wang Jun
‘retired’ from CITIC in 2006 and Poly Group in 2007, he immediately became the
chairman of a private firm, China Natural Gas Investment Ltd (Natural Gas). Natural
Gas was established in 2007, and Poly Group was reported to be its major shareholder
with the US-based Private Equity Management Group a strategic partner. Planning to
make US$608 million in investments in Xinjiang, Natural Gas was later allegedly
involved in a financial scandal involving misappropriating investors’ money. Wang
Jun was even tagged as the ‘Chinese Madoff’.
51
Another example was Rong Zhijian.
After he was forced to step down from CITIC Pacific Ltd in 2009, he established two
private companies, Glory Star Development Ltd and Regent City Enterprises Ltd,
which made investments in real estate projects in Hainan. Rong Zhijian was
suspected to have used his former connections in CITIC Pacific Ltd to seal a land-
purchasing deal at a price at least three or four times lower than the market value.
52
Bureaucratic capitalists are protected
It has been increasingly apparent that the children and relatives of top leaders are
more protected than punished in the face of corruption charges. Unlike the allegations
regarding Deng Pufang, which led to the dismantling of Kanghua, no verdict was
openly made against the young Jiang, Li and Hu. This logic can be further illustrated
by the allegation against Li Xiaopeng’s misuse of public funds in 1999. Under the
instruction of Zhu Rongji, premier at the time, the audit department unprecedentedly
announced a report regarding the financial problematic behavior of 53 state council
49. John Pomfret, ‘Lines crossed in China’, Washington Post, (17 August 2002), p. A01.
50. Matt Forney, ‘Key Chinese hard-liner loses influence’, Wall Street Journal (Eastern Edition), (30 August
2000), p. 22.
51. ‘Wang involved in Taiwanese version of Madoff case’, Mingpao, (18 April 2009).
52. Hui Hang, ‘An expose of CCP princeling tycoons’, Open Magazine, (1 June 2010), pp. 22 –25.
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Table 1. Selected state corporations listed on the stock exchange
Listing year (place) Main business Market capitalization (US$ million)*
CITIC
CITIC Pacific Ltd 1990 (HK) Power generation, aviation, civil infrastructure and
communications, etc.
8,313
Asia Satellite Telecom. Hldg
Ltd
1996 (HK) Satellite communications 697
CITIC Resources Hldg Ltd 1997 (HK) Production and sale of aluminum smelter,
coal, manganese, crude oil, etc.
1,442
CITIC 21CN Co. Ltd 2004 (HK) Provision of telecommunication and
information value-added services, etc.
623
China CITIC Bank Corp.
Ltd
2007 (HK, SH) Banking, financial and insurance services 36,427
CITIC 1616 2007 (HK) International voice, video call,
short message hubbing services, etc.
844
Dah Chong Hong Hldg
Ltd
2007 (HK) Sales of automobile, food and logistic services 1,829
Poly Group
Poly (HK) Inv. Ltd 1993 (HK) Property investment and management;
hotel and restaurant operations; etc.
4,128
Poly Real Estate Gp.
Co. Ltd
2006 (SH) Property investment and management 7,351
GCL-Poly Energy Hldg Ltd 2007 (HK) Manufacture of polysilicon and related products 4,506
Everbright
China Everbright (Gp.) Co.
Ltd
1990 (HK) Financial services 3,826
China Everbright Int’al Ltd 1990 (HK) Construction and environmental protection
project operation, etc.
7,447
Sun Life Everbright Life
Insurance Co., Ltd
2002 (SH) Financial and insurance services 95,768
Everbright Securities Co. Ltd 2009 (SH) Financial and insurance services 7,447
China Everbright Bank 2010 (SH) Banking, financial and insurance services 20,368
Note:
*
Based on the stock price as on 22 September 2010 (Bloomberg.com and AAStock.com); exchange rate: US$1 ¼ HK$7.78 ¼ RMB6.71.
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units, and Huaneng was found to be involved in misappropriating US$8 million of
public funds.
53
However, Li Xiaopeng was proven to be well protected as both his
business and political career have progressed since then.
Business leaders become political leaders?
As embodied in the cases of Jiang Mianheng, Li Xiaopeng and Hu Haifeng, powerful
bureaucratic bourgeoisie do not just enter the economic realm and never leave it as
described in the popular discourse of ‘going to sea’ (xiahai). Rather, they can return
to the center of politics, which is another feature unique of bureaucratic capitalism in
the post-Deng era. In the past, one did not see or expect to see traditional powerful
bureaucratic bourgeoisie such as Deng Pufang, Wang Jun and Rong Zhijian take part
in high-level politics or attain high-level political posts, such as becoming a politburo
member. However, astute commentators have explained that, for example, Jiang
Mianheng’s repeated attempts to be elected to the CCP Central Committee and the
surprising move of Li Xiaopeng to be deputy governor of Shanxi were attempts to
enter the politburo in the future.
54
Both seem to understand that a higher post in the
political ladder not only provides a stronger boost to their business empire, but also
makes the economic wealth under their control more secure. On this point, Meisner’s
remarks are suggestive. He observes that in the misty realm of transition from
pseudo-socialism to bureaucratic capitalism, laws and regulations were applied only
arbitrarily or often simply ignored to guide the behavior of the powerful bureaucratic
bourgeoisie. But, one principle is clear and has been applied consistently, which is
‘the higher the bureaucratic rank, the less there was to fear’.
55
To speak of the possibility that entrepreneurs can become top political leaders harks
back to the ideological slogan of the ‘Three Represents’ first introduced by Jiang Zemin
in February 2000, and which became the guiding ideology of the CCP at its 16th
Congress in 2002. Insisting that the ‘Three Represents’ be put into the constitution
before he stepped down from the post of party secretary, Jiang Zemin essentially
suggested an ideological shift of jettisoning the proletarian roots of the CCP and seeking
a broader appeal by representing the importance of wealthy capitalists.
56
Arguably,
Jiang’s theory might carry an ideological legitimization of accepting bureaucratic
bourgeoisie into the political center in the future, including his own son.
The future of Chinese politics
What implications are likely to be brought about in future politics by the rise of a
small circle of wealthy and powerful bureaucratic bourgeoisie? One concern is
whether the rapid accumulation of wealth and the will of the privileged to secure
53. Chen Ling, ‘Playing the market reform card: the changing patterns of political struggle in China’s electric
power sector’, China Journal 64, (2010), pp. 69– 95, esp. p. 88.
54. For example, see ‘Jiang Zemin paves the way for his son to be CCP Central Committee member’, Hong Kong
Economic Times, (3 December 1999).
55. Meisner, The Deng Xiaoping Era, p. 321.
56. Dickson, Wealth into Power; Kynge and Mcgregor, ‘It is a glorious thing to be allowed to join the party ...’;
Emily T. Yeh and Joanna I. Lewis, ‘state power and the logic of reform in china’s electricity sector’, Pacific Affairs 77
(3), (2004), pp. 437–465, esp. pp. 438–439.
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private gains would prompt changes in the political system, or even lead to
democratization. On this point, Dickson, who bases his analysis on ‘crony
communism’, has portrayed a pessimistic picture; he writes:
[The] growing shared interests of China’s communist officials and capitalist businessmen
are creating an environment that supports the status quo rather than one in which
capitalists are motivated to press for change. ... [Hence,] [i]n the short run and for the
foreseeable future, it seems more likely to lead to a continuation of authoritarian rule
under the Communist Party, as top leaders look for ways to govern better but not
necessarily more democratically.
57
The present discussion has generally supported Dickson’s conclusion, but based on a
slightly different logic of arguments. Unlike the traditional bureaucratic capitalists,
the emergence of the new comprador class did not originate from a political
consensus after the establishment of the People’s Republic. Rather, it was more based
on the realization of the personal greed of a couple of winners of political struggles in
the late 1980s. These winners—in particular, Jiang Zemin and Li Peng—had
successfully grasped the opportunity of having almost full control of the state
apparatus, and formulated policies and environments in favor of their children and
prote
´
ge
´
s in certain market sectors. In order to ensure that their pecuniary benefits
wealth could be subject to inter-generational transfer, the political power of the
powerful family conglomerates needs to be retained and enlarged. It thus explains the
strong motivation of the bureaucratic bourgeoisie to climb up the political ladder.
This is how economic greed fuels political greed, and vice versa, and the cycle
repeats itself from one generation to the next. Therefore, the ‘tipping point’ for
radical political change, such as democracy, is not likely to occur at the top level of
the CCP. In the meantime, as Dickson rightly observes, there has been a combination
of ‘the elitist pro-growth policies’ in favor of the bureaucratic capitalists and ‘the
populist goals’ which attempt to dampen the resentment of workers and peasants
suffering from rampant social inequalities. However, these ostensible ideological
struggles at the top level between elitism and populism are not likely to bring about
democracy, but only to preserve the wealth and power of the privileged.
Another political consequence will be the persistence of rampant corruption at the top
political level. This conclusion is in line with many scholars who have examined the
increasing collusion between the state authorities and the market.
58
For example, Lu has
suggested that the emergent ‘bureau-preneurialism’ through which the state is involved
in profit-generating activities by seizing opportunities provided by the reform, brings
about the problem of ‘organizational corruption’. By ‘organizational corruption’, Lu
attempts to portray a corruption beyond the individual level; he means ‘the actions of a
public agency that, by exploiting its power in regulating the market or its monopoly over
vital resources, are aimed at monetary gains for the organization’.
59
In relation to
bureaucratic capitalism, the present analysis suggests that as the market is increasingly
controlled by bureaucratic bourgeoisie belonging to powerful family conglomerates, the
57. Dickson, Wealth into Power, pp. 239–242.
58. For example, Sun, Corruption and Market in Contemporary China; Lu, ‘Booty socialism, bureau-preneurs,
and the state in transition’; Dickson, Wealth into Power; Gong Ting, The Politics of Corruption in Contemporary
China.
59. Lu, ‘Booty socialism, bureau-preneurs, and the state in transition’, p. 275.
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separation between the public and the private becomes even more blurred. Having been
the vanguard of China’s pioneering transition towards the marketeconomy,the offspring
and prote
´
ge
´
s of the CCP’s highest leaders are motivated to use the vast sums of capital
under their control to consolidate political power and attack others from opposing
political factions. In fact, to use money to buy political loyalty is driven not only by
parochial political interest, but also by the very institutional arrangement where the
political structure and the market opportunity are closely linked. In explaining the
existence of a ‘great deal of American corruption’ back to the 1950s, C. Wright Mills has
already pinpointed that it was the ‘concentrated and linked’ nature of ‘political
institutions and economic opportunities’ that motivates the power elite to use public
office for private gain. He further remarks that,
Political men can grant financial favors only when there are economic men ready and
willing to take them. And, economic men can seek political favors only when there are
political agents who can bestow such favors.
60
The stories of young Jiang, Li and Hu suggest that the current bureaucratic capitalism
exhibits an institutional arrangement in which the distance between ‘political men’
and ‘economic men’ can be very slight.
What the foregoing analysis offers, however, is not only that the close relationship
between political and economic elites fuels the problem of rampant corruption that
plagues China. It also implies that particular anti-corruption measures in the
economic field will be increasingly used as political weapons in high-level factional
politics. As more and more market sectors are penetrated by coalition-specific
bureaucratic bourgeoisie, any single economic measure could be taken as a political
move, offensive or defensive, to strengthen alliances and jeopardize opponents.
In fact, to see high-level political infighting being enshrined in the economic field is
no longer new in post-Deng China. A typical case worth mentioning is the political
struggles between Zhu Rongji and Li Peng back in the early 2000s when Zhu was
premier and Li, chairman of the National People’s Congress. In 2001, several high
officials in banking and finance who ascended under Zhu Rongji were prosecuted.
One of the most important cases was the arrest of Zhu Xiaohua, former chief of
Everbright, who was sentenced to 15 years in prison for taking bribes.
61
One year
later, Zhu Rongji ordered a corruption investigation into the former head of the State
Power Corporation (SPC)
62
Gao Yan, who was widely known to be Li Peng’s
prote
´
ge
´
. Gao reportedly fled the country in September 2002.
63
60. C. Wright Mills, The Power Elite (London and New York: Oxford University Press, 1956), p. 346.
61. Erik Eckholm, ‘Chinese power company chief flees the country and scrutiny’, New York Times, (20 October
2002), p. 8.
62. SPC is a holding company which owns most of the infrastructure and all or part of the shares in the subordinate
power companies. It plays a key role in planning investment, and in planning power supply and demand. [See Philip
Andrews-Speed and Stephen Dow, ‘Reform of China’s electric power industry challenges facing the government’,
Energy Policy 28, (2000), pp. 335– 347, esp. 337.] It controls the grid, as well as about half of China’s generating
capacity. The other half is shared by a number of IPPs. [See ‘Something rotten in the state of China’, The Economist,
(16 February 2002).]
63. It this case, Li Peng was unable to protect Gao Yan from the investigation’s probable charges, which focused
on his activities while serving as governor of Yunnan several years before (1995–1997). Some called Gao a
‘sacrificial lamb’ as Li Peng’s family still maintained their control over the industry after the case. [See Tim Oakes,
‘Building a Southern dynamo: Guizhou and state power’, The China Quarterly 178, (2004), pp. 467 –487.
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The last political consequence of the emergent bureaucratic capitalism to be
highlighted here is its implications in the political succession of the CCP. At the heart
of factional politics under bureaucratic capitalism lay a tension, if not a contradiction
or antimony, between the interests of the public and that of powerful family
conglomerates. This tension will prompt the powerful bureaucratic bourgeoisie to get
involved in the ‘king-making’ process, if not actually being ‘kings’ themselves, in
order to ensure longer term preservation of their privilege. What is of high relevance
here is the ‘return-route’ of the bureaucratic bourgeoisie back to central politics
mentioned in the foregoing discussion. Today, it is too early to say if Jiang Mianheng,
Li Xiaopeng or Hu Haifeng will gain supreme power in the near future.
64
However,
no matter who is the future ‘successor’ of the CCP party secretary, he or she must in
one way or another yield to the power, or even promise to proliferate the interests, of
existing powerful families otherwise he or she will not reach positions of power. The
negative social consequences of this system can be far-reaching as the present system
is likely to bolster and sustain the privileges of a small number of wealthy families,
which create a social triage that produces enormous inequalities between the
privileged minority and the disadvantaged majority. An official report has already
revealed that 90% of Chinese billionaires are children of high-ranking party officials;
and, the richest among them are the princelings who used their position to pass the
laws that have transformed public resources into private gains.
In sum, the present paper argues that there exists a small number of wealthy
bureaucratic bourgeoisie who are highly protected by their politically powerful
fathers or patrons, and some who are ready to surrender their business positions and
take up top political posts. Although what has been covered here is only a small
aspect of the topic, it represents a microcosm of core tensions that need to be
mentioned when discussing future factional politics of China. Everybody knows that
to develop a ‘harmonious society’ is the signature ideology of Hu Jintao since he took
over supreme power in 2004. However, as the market is now controlled by powerful
bureaucratic bourgeoisie and is increasingly being turned into a political tug-of-war,
the CCP, while constantly talking about ‘harmony’, do not provide it.
64. If I have to pick one who is likely to have a promising political career, I would pick Li Xiaopeng. As deputy
governor of Shanxi, he is now gaining experience in local governance. He is already an alternate member of the CCP
Central Committee. All these criteria are almost prerequisites for one to ascend to the top of the Chinese political
system. Furthermore, his public image is better than Jiang Mianheng. Moreover, by 2022, when Xi Jinping finishes
his second term of office, Li will be 63-years-old which is, in Chinese politics, the ‘prime’ age to take up supreme
leadership posts. Jiang Mianheng will then be too old and Hu Haifeng maybe a bit too young.
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