In Broken China, Business Week asserts that “Beijing can’t clean up the environment, rein in stock speculation, or police its companies”:
A more intractable problem is China’s power structure itself. Although Beijing holds a monopoly on politics, local Communist Party officials enjoy wide latitude over social and economic affairs. They also have huge professional and financial incentives to spur GDP growth, which they often do by ignoring regulations or lavishing companies with perks. As a result, China has built a bureaucratic machine that at times seems almost impervious to reform. Even if Beijing has the best intentions of fixing problems such as undrinkable water and unbreathable air, it is often thwarted by hundreds of thousands of party officials with vested interests in the current system.
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The roots of China’s ersatz capitalism go back to devil’s bargains made in the 1980s and ’90s to accelerate China’s takeoff. Late paramount leader Deng Xiaoping declared it was O.K. to “get rich,” a green light for legions of cadres to discard their Mao suits and rush into business, often by setting themselves up as middlemen or grabbing stakes in communal assets. Beijing also granted great latitude to provincial and local officials to manage development and social services such as education and health care. The two requirements: Remain loyal to the party and meet high economic-growth targets.The system spans China’s 657 municipalities, 2,862 counties, and 41,636 townships. Because roughly 70% of a typical official’s annual performance assessment is based on GDP growth, says University of Michigan Sinologist Kenneth G. Lieberthal, the cadres shower local businesses with perks. These can include access to cheap credit, land, licenses, protection from competitors, and exemptions from regulations. The opportunities for graft are staggering. “What is unsaid, but understood, is that if your locality becomes wealthy, so do you,” Lieberthal says. “Instead of the Chinese Communist Party, it ought to be called the Chinese Bureaucratic Capitalist Party.”