A Body, a Scandal and China

By NICHOLAS D. KRISTOF

IT all began with a dead body, in a hotel in the Chinese city of Chongqing. The corpse belonged to a British businessman who was said to have drunk himself to death — odd, considering that he rarely drank.

Then a vice mayor sneaked out of town, by some accounts disguised for a time as an old lady, and entered the American Consulate in Chengdu to whisper a tale of murder. Now China has erupted in its biggest political storm since the Tiananmen democracy movement was violently crushed in 1989.

One of China’s most prominent politicians, Bo Xilai, has been kicked out of the Politburo. His wife is detained on suspicion of murdering the British businessman in a dispute over his fee for supposedly smuggling ill-gotten family money abroad.

Their son, Bo Guagua, who once drove up to the United States ambassador’s residence in a red Ferrari to pick up Jon Huntsman’s daughter for a date, is studying at Harvard’s Kennedy School of Government — but seems to have vanished lately. And if you’re wondering how Bo Xilai managed on a minuscule state salary to pay hundreds of thousands of dollars for Guagua to study in Britain and now the United States (where he downgraded to a Porsche), well, great question!

The scandal is the talk of China, and the government has lost control of the narrative. This scandal may have far-reaching effects on the national leadership, and it should, for it points to a larger truth: China’s political model is simply running out of steam.

“Bo’s downfall shows the need to restrict government power,” Caixin, a daring Chinese magazine, declared in an editorial, adding, “At this stage of its development, China offers too many temptations, and the collusion of money and power is commonplace.”

Even good people are on the take in China these days, because everybody else is. Chinese doctors take cash from patients’ families before surgery. Journalists take bribes to write articles. Principals take money to admit students.

One Chinese friend of mine was a judge in corruption cases, and made a good living taking bribes from defendants. Another friend, the son of a Politburo member, was paid several hundred thousand dollars a year simply to lend his name to a real estate company.

Officials have a maddening sense of entitlement. When I lived in China, my wife and I once attended a party with many middle-age officials (including one now in the Politburo) and a crowd of trophy female secretaries. One cabinet minister mistook my wife, who is Chinese-American, for a secretary and crassly made moves on her. Let’s just say that my wife ruined his evening.

The scale of corruption has become mind-boggling. Zhang Shuguang, a railways official, managed to steal $2.8 billion and move it overseas, the state news media have reported. A Chinese central bank report suggested that 18,000 corrupt officials had fled China and taken $120 billion with them. The average take was almost $7 million per person.

The backdrop is the staggering wealth enjoyed by the elite. More than 300 million Chinese lack access to safe water, but one tycoon’s home I visited had an indoor basketball court, a movie theater and a pond with rare fish worth up to tens of thousands of dollars each.

In Chinese, the words for power (“quan”) and money (“qian”) sound alike, and in China one often translates into another.

The rumors, which I can’t confirm, are that Bo Xilai’s wife was moving money abroad through the British businessman, Neil Heywood, and that they bickered over his fee. When he threatened to expose her, the theory goes, she arranged to have him poisoned. This is mostly rumor: Bo’s defenders think he is being framed by his political rivals.

China’s political system has managed daunting challenges, but it is showing serious cracks. For years, reformist leaders from Li Ruihuan to Wen Jiabao have been arguing for political reform, and party officials themselves increasingly see the need for more accountability and oversight.

China’s leaders could have paid attention to work years ago by a Chinese journalist, Jiang Weiping, suggesting corruption by Bo Xilai. Instead, they imprisoned the journalist.

There is considerable dissatisfaction, even within Communist Party circles, with the way the political system has been frozen under the outgoing party leader, Hu Jintao. Power is expected to pass this fall to a new Communist Party leader, Xi Jinping, who seems more open to liberalization. Let’s hope so, for China’s sake.

Ordinary Chinese view the contradictions clearly. You see that in the jokes making the rounds in China, like this one:

Three men meet in Qincheng Prison, where political offenders are often kept. The first one says: I am jailed for opposing Bo Xilai. The second says: I’m here because I supported Bo Xilai. And the third says: Dang it, I am Bo Xilai.

In November, 14 U.S. intelligence agencies issued a report describing a far-reaching industrial espionage campaign by Chinese spy agencies. This campaign has been in the works for years and targets a swath of industries: biotechnology, telecommunications, and nanotechnology, as well as clean energy. One U.S. metallurgical company lost technology to China’s hackers that cost $1 billion and 20 years to develop, U.S. officials said last year.

“It’s the greatest transfer of wealth in history,” General Keith Alexander, director of the National Security Agency, said at a security conference at New York’s Fordham University in January.

REPORT: China Is Selling Tons Of Counterfeit Military Equipment To The Department Of Defense 

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In it he notes:

China gives its manufacturers whatever advantage it can over U.S. and other foreign competitors.

China provides massive loans at below-market interest rates, cheap or free land, extensive tax breaks and other subsidies in its effort to advantage domestic industry. It imposes restraints on the export of key raw material inputs. It requires U.S. companies in China to transfer their technologies to Chinese partners. And it engages in a large-scale manipulation of its currency in order to make its exports significantly cheaper.

….

Last month, for instance, China imposed new import duties on U.S. automobiles in what was widely viewed as a response to complaints filed by U.S. solar producers about unfair Chinese trade practices. The U.S. ambassador to the Word Trade Organization recently warned China to stop using “intimidation as a trade tool.”

How to read this. First, this is nothing new and something this site has been covering for five years now. Generally I’m of the view that most politicians, and I put Rep. Levin in this group, only get out in front of a parade after the parade has started to march. So what this op-ed, i.e., going public, implies to me is that businesses are starting to realize the trade terms they have had with China is not as desireable as they thought. All of these businesses thought - well its a billion person market! What they’ve lost sight of, and may be coming to the realization, is that China will use them as long as they are useful. When they’re no longer useful, as in no more technology worth stealing, they will turn the market over to their own companies.

What the US has though is leverage. Its our market. They need to export their unemployment to us. They do not buy enough from the rest of the world thus resulting in trade surpluses to them.

Anyone who tells you China is financing the US debt should not be listened to. They do not understand trade economics. The US is in the power position here, not China. Unfortunately we have not used it. Maybe companies, and thus the politicians, are starting to wake up that the US needs to do something and that we have actions we can take.

As the article points out,

Legally, Ford may have a difficult time winning any damages against the state-owned carmaker, experts say.

“Suing in China is a rather daunting procedure,” said Jim Hall of 2953 Analytics LLP. “It’s difficult to say what’s going to happen when talking about copyright problems.”

Ford would likely have to file a lawsuit against the Chinese government, which may or may not hear the case, Hall said.

Whether government-owned or private, Chinese automakers employ thousands of workers and serve as economic anchors within their communities, said Ken Duck, U.S. partner for Boss & Young, a Shanghai-based law practice. Duck specializes in cross-border transactional work. “Social stability within the local government or the loss of social stability is a huge concern in terms of employment and housing issues,” said Duck, whose office is based in Troy. “It’s really a macro issue. Anything potentially destabilizing to the community would be a factor in (a judge’s) thinking.”

So, when is our government going to stand up for our workers?

 ”The Chinese have attacked every major U.S. company, every government agency, and NGO’s. Their attacking the Chamber of Commerce is part of a pattern of their attacking everything in the US. If you’re working on U.S.-China relations with an NGO, government agency, you can be sure the Chinese are reading your emails and on your computer,” Richard Clarke, former White House counter-terrorism adviser, told ABC News.

“You stack all of that up and I think there’s a case to be made that this may be the greatest transfer of wealth through theft and piracy in the history of the world and we are on the losing end of it,” said Sen. Sheldon Whitehouse of Rhode Island.

This IS the new cold war. The Chinese appeared to be focused on Asian-oriented trade policy information within the Chamber’s internal communications and files. That is was the military means it was government directed.

The money quote:

“They are stealing everything that isn’t bolted down, and it’s getting exponentially worse,” said Representative Mike Rogers, a Michigan Republican who is chairman of the Permanent Select Committee on Intelligence.

Remember - Rogers is a former FBI agent. He knows something about criminal activity.

The report goes on:

 China has made industrial espionage an integral part of its economic policy, stealing company secrets to help it leapfrog over U.S. and other foreign competitors to further its goal of becoming the world’s largest economy, U.S. intelligence officials have concluded in a report released last month.

This is warfare. It does not involve physical bodies but is just as targeted.

A short drive from the city of Yan’an, a 100-yard elevated section of that highway stands dormant with nothing on either side.

“From April until now, the subcontractors on this road haven’t been paid any money,” says Cui Jinmin, who ran a crew of about 15 workers here. “There’s nothing we can do. The road’s owner [the local government] has no money; we can only wait.”