China's Party Split: Peril in the Making?

July 28, 2004
Summary


Battle lines have been drawn between President Hu Jintao and former
President Jiang Zemin in the struggle for ultimate leadership in
China. The opponents, facing off over the critical issues of economic
controls and relations with Taiwan, have more clearly defined their
positions in recent weeks. Although the conflict is contained in
Beijing, consensus will be difficult to achieve, creating a dangerous
-- and possibly disastrous -- situation.


Analysis


Former President Jiang Zemin fired a series of salvos at President and
Communist Party General Secretary Hu Jintao on July 27, marking the
latest skirmish in the leaders' ongoing political rivalry. During a
senior-level seminar on Jiang's political theory -- attended by Hu,
other politburo members and top military leaders -- the former
president insisted the People's Liberation Army should be equipped
with the latest technology for the strategic goal of winning
information warfare. Jiang also urged the government to "speak the
truth" and "report actual conditions."


Not the usual political rhetoric, Jiang's comments were meant to
counter Hu's recent policy statements concerning the military -- Jiang
is chairman of China's Central Military Commission -- and to criticize
the government's handling of the economy. While competing factions
remain split over policy, consensus for solutions to the country's
most important problems will be difficult to reach -- and friction
over either issue could spark a disaster.


Hu prompted Jiang's comments when he interjected his own views on
China's military affairs during a Politburo study group July 24. He
told China's highest cadre of leaders the country should "promote the
coordinated development of national defense-building and economic
construction" and "unswervingly persist in the way of peace
development." Hu, it appears, is against sacrificing China's economic
development for a confrontation in the Taiwan Strait.


In Jiang's view, Hu overstepped his bounds by weighing in heavily on
Jiang's arena of military affairs -- especially Taiwan. His call for
more advanced technology for the military was meant to assure his
constituency that, despite Hu's comments, China's large defense budget
would not be slashed.


Jiang took the attack a step further and subtly criticized the Hu
government's economic policies. Jiang's call for greater government
truth and clarity comes after Yao Jingyuan, the State Statistical
Bureau's chief economist, apologized for raising doubts about the
government by revising past gross domestic product figures. On July
16, Yao's office raised its GDP estimate for the second quarter of
2003, which revealed less-than-expected growth (9.6 percent) in the
second quarter of 2004. Yao's statistical slight of hand caused
analysts to doubt results of the Hu government's attempt to control
over investment and bulging bubbles in China's economy.


Hu and Premier Wen Jiabao are split with leaders loyal to Jiang over
government economic controls implemented to cool the overheating
economy. Chen Liangyu, Party chief in Shanghai and a member of Jiang's
faction, confronted Wen during a recent Politburo meeting, claiming
the controls endanger China's economy. Hu and Wen's economic policy,
which favors more equitable economic growth than China experienced
during Jiang's administration, aims at building a "relatively well off
society." China's northeastern rust belt will be the biggest
beneficiary of the plan.


Jiang and his associates, however, have built political and financial
fiefdoms in Shanghai and along China's prosperous seaboard, and are
concerned the government's economic controls will undercut their power
and their fortunes. They also fear the administration's policies are
too radical and prematurely could end the country's economic boom, if
not start it on a destructive downward spiral.


If provincial and municipal leaders take their cue from Jiang and
resist Hu's and Wen's economic controls -- lending restrictions, for
example -- the polices will become extremely difficult to enforce. The
situation could cause China's economy to suffer severe disruptions,
instead of the "soft landing" the government is trying to engineer.


The rift in the Party also could cause a crisis with Taiwan. As head
of the Military Commission, Jiang is expected to take a hard line on
Taiwan, as China's sovereignty and territorial integrity are involved.
He most likely wants to avoid a conflict that could prompt a U.S.
intervention -- and result in a disastrous military defeat. However,
he does not want China to appear weak either, and can thus be expected
to champion a tough response to Taiwan President Chen Sui-bian's move
for the island's independence.


Jiang's impetus to push a hard line could gain momentum and lead to an
undesired confrontation in the Taiwan Strait. Alternatively, if Taipei
receives mixed signals and sees opportunity, it could be tempted to
push harder for independence, creating a volatile situation.


The political struggle between Hu and Jiang has been in high gear
since the Hu took office in March 2003. Until recently, the two camps
lacked salient issues to debate, so the battle constituted a series of
mostly behind-the-scene moves and counter moves that had little effect
on major government policies. Taiwan's creeping steps toward
independence and China's faltering economy are defining the conflict.


Supporters of competing policies eventually will line up behind their
proponents, making a consensus on either issue very difficult -- or
impossible -- to achieve. When debate on the issues can be postponed
for lack of urgency, failure to agree is of little concern. When a
crisis erupts over Taiwan or the economy, it could prove catastrophic.