China: The Perils of Prosperity

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October 4, 2006: China is jailing senior officials for corruption. But those going down are also people who do not belong to the faction that now runs the party. So the current anti-corruption drive is partly to eliminate those opposed to the current top dogs in the Communist Party. It's believed that corruption is so entrenched that, if all corrupt officials were investigated, most of the senior leadership of the party would be at risk. This would not work, because there would be a rebellion of the bulk of the senior officials. But the corruption is beginning to threaten the economy, because a lot of it involves making massive unsecured loans to government owned companies that are likely to fail anyway. This is putting the banking system at risk, and with it economic growth and stability.
The corruption in the Communist Party is the most recent manifestation of an ancient Chinese tradition. For thousands of years, it was understood that if you became the leader of a province, country, city, or even just a country town, you could demand bribes to do your job, and make as much money as you could, as long as there was no rebellion. Deja vu.
October 3, 2006: Taiwans $4 billion purchase of 66 U.S. F-16 fighters has been suspended, and may be cancelled. The former ruling party of Taiwan, the KMT, has been opposing major weapons purchases, and is instead pushing for unification with China. The KMT was the losing side in a Chinese civil war, and came to Taiwan in the late 1940s and took over. But over the next forty years, the native Taiwanese regained power, and now the KMT has given up it's long-held goal of regaining control of all of China.

 

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