G-20 News

Analysis: Xi’s left turn towards socialist China is real

Katsuji Nakazawa is a Tokyo-based senior writer and columnist at Nikkei. He spent seven years in China as a correspondent and later as head of the Chinese bureau. He is the 2014 recipient of the Vaughn-Ueda International Journalist Award for International Reporting.

TOKYO – The shock that rocked Hangzhou, the capital of Zhejiang province, and all of China cannot be overstated.

China’s top anti-corruption agency said on Saturday that the city’s top official, Chinese Communist Party Secretary Zhou Jiangyong, was under investigation for alleged serious violations of disciplinary rules and laws. party.

The 53-year-old was considered an “insider” of President Xi Jinping’s powerful Zhejiang faction, also known as the “New Zhijiang Army”.

While details of the allegations against Zhou remain unclear, officials, experts and observers in China immediately made the connection.

Zhejiang Party Secretary Zhou Jiangyong is under investigation by China’s top anti-corruption agency. © AP

As regular readers of this column are well aware, Hangzhou City and Zhejiang Province are special for two reasons.

On the one hand, Hangzhou is Xi’s political base. As a top Zhejiang official, he lived for many years in the picturesque capital – known for West Lake, a UNESCO World Heritage Site. Current senior officials in major Chinese municipalities such as Beijing, Shanghai, and Chongqing have all been Xi’s subordinates since his time in Zhejiang; they form the new Zhijiang army.

Zhou Jiangyong quickly rose through the ranks in Zhejiang and was seen as close to Xi’s inner circle.

Some political experts had predicted that as a promising next generation leader in the Zhejiang faction, Zhou would soon be promoted to governor of another province.

Second, Zhejiang Province is known as the birthplace of private enterprises in the country. The region has achieved self-sustaining economic development that does not rely on state-owned enterprises or bureaucrats.

Chinese e-commerce giant Alibaba Group is headquartered in Hangzhou.

This may be a clue to Zhou’s investigation. Zhou is close to Alibaba founder Jack Ma Yun. Since Hangzhou’s economy is heavily dependent on Alibaba, it’s no surprise that Zhou, the city’s top official, is in close contact with Jack Ma.

Was Zhou Jiangyong’s close relationship with Alibaba co-founder Jack Ma Yun a problem? © AP

On August 17, four days before Zhou’s investigation was announced, Xi gave a keynote speech that will have a significant impact on China’s future development.

The speech to the party’s Central Financial and Economic Affairs Committee was Xi’s first public appearance after a summer hiatus during which he and other outgoing leaders are said to have met with retired officials at the “Beidaihe Meeting” annual closed session in the resort town of Hebei Province.

Xi has used the term “common prosperity” up to 15 times. It was not hard to imagine that the leader who also serves as the party’s general secretary received a stamp of approval for advancing politics in Beidaihe.

In the name of common prosperity, Xi pledged to expand the size of the middle-income group, increase the income of the low-income group, and “adjust excess income,” including through the distribution of income. income and tax system in three stages.

These measures are likely to become basic policy in the future as the Xi administration monitors the sixth plenary session of the 19th Party Central Committee this fall and thereafter the next five-year national party convention in fall 2022.

Hints aimed at targeting the wealthy run counter to former Supreme Leader Deng Xiaoping’s policy of “letting some people get rich first” and signal a shift to the left towards a distinctly socialist China.

Xi Jinping speaks at a press conference after the G-20 summit in Hangzhou in 2016. He formed his faction in the city years earlier. © Reuters

The important point is that Zhejiang has been designated as a model area for achieving this common prosperity.

Xi is very familiar with Zhejiang and Hangzhou in particular. He’s probably envisioning a scenario in which the public realizes that dominant private companies are no longer reigning. This will probably take place first in Hangzhou and then across the country.

This is why Zhejiang, home to many large private companies, was chosen rather than Beijing, the stronghold of public enterprises, as the model area of ​​common prosperity.

By preying on the rich, it is impossible for the Hangzhou local government to come to terms with large target companies.

The crackdown on senior official Zhou was therefore probably an attempt to demonstrate the seriousness of the return to socialism. While purging another initiate might be painful for the faction, it was a necessary sacrifice.

For his part, Zhou miscalculated the proper distance between political leaders and private companies.

A Hong Kong newspaper reported allegations that the family of the former senior Hangzhou official acquired shares in Ant Group, Alibaba’s financial arm, before the company’s planned IPO. Ant Group released a statement on Sunday night, a day after the investigation was announced, categorically denying the Zhou family’s alleged purchase of shares in the company.

Ant Group “strictly followed laws and regulations” as part of an “open and transparent” IPO process, the company said. He added: “Rumors about [a] some people taking shares in the company are bogus, let alone buying or suddenly redeeming shares. “

A Hong Kong newspaper reported allegations that Zhou Jiangyong’s family acquired shares in Alibaba’s financial arm, Ant Group before the company’s planned IPO. © Reuters

Along with the investigation into Zhou, the party’s Central Commission for Discipline Inspection announced that it had launched a broad campaign to eliminate inappropriate government-business ties. Some 25,000 officials will be investigated.

The announcement signals that no stone will be overlooked. The survey will cover not only local bureaucrats but also their spouses, children, spouses of their children and former local bureaucrats who have retired in the past three years.

“Zhejiang is a region which has the most developed private-sector economy,” said a Chinese businessman familiar with the local situation. “There are countless families who have, say, an older brother working as a bureaucrat and a younger brother being a hugely successful business executive. If the links between government and business are looked at, issues big and small, including those involving family members, will certainly appear.

About five years ago, Xi began to advocate for a “new kind of government-business relationship.” This means that while listening to the voices of struggling private businesses with familiarity and earnestness, and while solving problems, politicians must maintain their purity and not take advantage of their power for personal gain.

Admittedly, the remarks are difficult to dispute. But how will China “adjust excess income” while maintaining private sector strength in the medium to long term?

It seems easier said than done.