May 7, 2007: While the Communist Party controls the Chinese government, the central government is losing control at the local level. It's all about money. It's all about the rapidly growing economy, and corruption. The corruption is increasingly out of control, with government officials (most also members of the Communist Party) owning or controlling most of the country. About half of the Chinese work force is employed by state owned enterprises. These companies are much less efficient than those in the private sector, but the government can't privatize them without risking creating millions of angry, unemployed workers. All the growth has come from the private sector, which was let loose about two decades ago. Back then, 40 percent of the entrepreneurs setting up private companies were government officials. Today, it's nearly 70 percent. That's got a lot to do with the corruption. Government officials cooperate with each other to hobble mere citizens trying to start a business. Moreover, the local governments are increasing their power, at the expense of the central government. They do this by grabbing more of the taxes, before the central government can get at it. The central government is increasingly worried about the amount of influence the local government has on local police and, more worryingly, military units based nearby.

The corruption translates into about ten percent of the GDP, and that's money outside the control of the central government. Anti-corruption campaigns have learned that, if a dirty official has enough cash, and bought friends, he cannot be convicted. The government has found that even a lot of bad publicity won't bring down the bad actors. A corrupt official with half a brain buys himself the favor of local media.

Most Chinese entrepreneurs work the system. The government officials may be crooks, but for the right price, you can do business with them. However, the majority of Chinese are getting screwed, and the increase in violent demonstrations and attacks on officials is worrisome. The widespread availability of the Internet and cell phones makes it easier to organize mass opposition. This worries many government officials, both the honest ones and the corrupt.

From a military point of view, all this corruption has a positive angle. The Chinese military is also quite corrupt, and this prevents modernization efforts from being as effective as they could be. Chinese leaders know that too many of their generals are more concerned with getting rich, and hanging on to their money, than in developing effective ways to conquer Taiwan, or defend China from attack. At the same time, the Taiwanese do business by local rules on the mainland. This keeps Taiwanese espionage efforts going (everything is for sale, including military secrets), and makes Taiwanese businesses profitable on the mainland. That profitability means many Chinese businessmen, who are also government officials, don't want to destroy the value of their own assets by trashing Taiwan in a war.