During the go-go-aughts, the Chinese Communist Party presented itself to the world as the great statist alternative to the United States. The merger of Communism and corporatism then spread its wings in 2008 and protected the world from the financial crisis that Wall Street spawned – at least that’s the story in Beijing. The reality was very, very different.
Recently, even the cadres in Zhongnanhai (Beijing’s version of the Kremlin) have come to terms with the fact that their breakneck growth of the last decade was a massive bubble fueled by state-owned enterprises borrowing heavily from state-owned banks on overvalued property seized by the state from peasants and workers. There were, however, some loans that were based on genuine collateral – i.e., actual assets. Even if the stuff was also overvalued, it was at least stuff.
Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place.
Thus do the demands of accountability in a 21st Century economy meet the corruption that is a staple of a decaying, 20th Century dictatorship.
This is yet another example of the rot that infests the CCP. The Bo Xilai example may be the most dramatic, but it was not atypical. For nearly every cadre, the Chinese Communist Party membership card is a license to steal: land from peasant, wages owed to workers, budget appropriations from state agencies, and especially loan money from state-owned banks. When it comes to bank loans, the cadres follow the Henry Hill school of economics: “No one’s gonna pay for it anyway.”
Except that there will be people who pay for it: foreign investors who lose their shirts and their intellectual property; cadres in the wrong faction who find themselves in prison (while the ones in the right faction take the stuff for themselves); and as always, the Chinese people, more of whom will be forced out of their homes, paid less (if at all), and see prices go through the roof they don’t have. At some point, they will decide enough is enough and take their country back.