China’s political divisions, and its effects – Victor Shih

The dismissal of flamboyant political leader Bo Xilai shows a new political landscape, where different political factions are becoming more prominent, says political analyst Victor Shih in The New Republic.

The New Republic:

“Power is increasingly decentralized to different factions,” says Victor Shih, a political scientist at Northwestern University. Among the “vested interests” represented in the halls of power, there are the princelings, who hold a great deal of sway as the sons of the old revolutionary vanguard; the top executives of state enterprise, shaping policy-making from their ministerial seats in government; and powerful, well-connected regional leaders demanding resources from the capital. These and numerous other factional alliances are defined by networks of personal relationships, running through all levels of government, from China’s top policymaking body, the Politburo Standing Committee, to the Party magistrates in China’s cities and provinces. Whereas the top party ﬁgure once had supreme authority, attention now “must ﬁrst and foremost” be paid “to the interests of the factional groups,” Shih told me, for it is the core elite from these groups “that ultimately decides policies, promotions, and even the political survival of the President of China.”

But whatever their disparate objectives, each faction has gained from China’s furious economic growth, with wealth and political power increasing as a result of money flowing freely through their respective spheres of control. How convenient, then, that they also hold the purse-strings of finance through China’s state-controlled banks—banks whose reserves can be quickly mobilized for extending loans to projects championed by influencers in the party. It stands to reason why these vested interests haven’t been eager for the easy money to stop, and in fact have been cheerfully flexing their political muscles to direct investments into their own jurisdictions. “As long as you have politically powerful enterprises, as long as you have a banking sector which is dominated by the state and the Chinese Communist Party, there will be very high incentives to over-invest,” Shih says.