Wednesday, July 29, 2009

Truth and Steel in China

New America Media, News Analysis, Xujun Eberlein, Published: July 29, 2009

(Note: the following text is my original draft, slightly longer than the NAM published version, and with links to sources. - Xujun)

Two seemly unrelated but notable events took place in China on Friday, July 24th. In the morning, the official news agency Xinhua published an article titled "Ten Suggestions for Local Governments on How to Respond to Internet Opinion" on its website. In a commanding tone, the article tells local governments:

When sudden incidents occur, the government should aim at the earliest time to issue press releases, grasp the right to speak, create first impressions, and lead the initiative. "Crisis management" is actually "crisis communication management." For example crisis management expert Norman Augustine advocates to "tell the truth and tell it fast." Some of the local governments in China sum up their experience as "reporting facts fast, reporting causes with caution." The "open government information regulations" require "being open as the principle, not being open as an exception."

(Update: I just saw that Danwei has a full translation of the "ten suggestions" today - h/t ESWN.)

Its bureaucratic style notwithstanding, the call to "tell the truth and tell it fast" coming from a government mouthpiece surprised some Chinese dissidents who have long been protesting China's strict media control. An active dissident on Twitter dismissed the article as "just some journalist's opinion," even though the official tone of the article suggests a high level policy instruction disguised as an opinion piece, which is not unusual in China.

As if setting up an immediate reality test for the government's new media policy, that very day a large mass incident erupted in Tonghua, Jilin. Thousands of workers of the Tonghua Steel Corp protested a private takeover of their enterprise, which had a 50-year history of state ownership. The steel factory had already suffered a failed privatization attempt from the same company. It was recovering from that and last year's financial crisis, when the renewed and expanded ownership was announced. Angry workers beat to death the new general manager appointed by the private company, Jianlong of Beijing, on his first day at work. The workers gradually dispersed only after the Jilin provincial government announced its on-the-site decision to have the private company withdraw from Tonghua Steel's business. Some Chinese netizens called the event "the first workers movement since 1949" – the year Communist rule in China began.

As a test of the new media policy, it seems to have failed. For three days, China's media kept totally silent on the shocking incident, not even the independent and daring papers such as Caijing said a word. On every commercial web portal, posts and discussions on the Tonghua riot were quickly deleted. The Western media first learned the news from a Hong Kong human rights group and reported the incident briefly on the 25th , all in a monotonous and minimalist way, quoting the same source.

Meanwhile, Chinese netizens acted quicker than the government's media controllers, and one detailed anonymous eye-witness account landed on overseas Chinese websites and was circulated around the world. It could no longer be deleted. (An English translation of this account can be found on Hong Kong-based ESWN, one of the most popular China blogs.) So far no Western media outlet has cited the far more informative account, whose content seems to be verified by various sources, including the government's own belated reporting. The speed of selection and elimination by internet surfers is amazing, and the quality control of the selection process is even more impressive.

China's media waited until July 27 to react. Curiously, this time English reporting led the way. The first report I found was published on China Daily's English site, titled "Manager killed in plant riot." This was followed by Chinese language reports that tagged along in a few major papers (apparently the smaller papers were still waiting to see which direction the wind was blowing). While the Chinese media did not follow the aforementioned policy advice to "tell the truth fast," they nonetheless acted according to the second part of it, i.e., "reporting causes with caution." Those articles were terse and dry reports with little analysis.

To be fair, for government-controlled media with a reputation for directing public opinion and suppressing real journalism, the attempt to "tell the truth" should be viewed as progress. The problem, however, is that the aforementioned policy suggestions treat telling the truth as a tactic rather than a principle; its author(s) apparently have not forgotten Mao's famous teaching, "Policy and tactics are the life of the Party."

While delayed factual reporting is better than no or distorted reporting, continued disillusion comes from the Jilin provincial government's bizarre media stance. On Monday afternoon, it issued a press release defending its failed effort to privatize Tonghua Steel, calling the takeover plan "carefully researched" and its implementation "legal," while using customary language to accuse "a small number of individuals agitating others who didn't know the truth" and starting the riot.

Though the Tonghua riot appears to be anti-privatization, internet accounts of the incident indicate that the primary cause of the workers' resentment was income polarization and crony capitalism. The general-manager who was beaten to death, Chen Guojun, was said to have an annual salary of 3 million yuan; in comparison, a Tonghua Steel worker's income may be as low as 200 yuan per month. Meanwhile, the Jilin provincial government's alliance with the private enterprise Jianlong was seen as an attempt to sell out the steelworkers to fill the pockets of the rich and powerful. The owner of Jianlong is said to have deep family connections with high-level government officials.

Whether or not the Tonghua workers' accusation of "collusion between government and rich businessmen" is true, crony capitalism is certainly an acute reality in China that has been addressed by many scholars, notably Tsinghua University's sociology professors Sun Liping and Qin Hui. An MIT economist, Yasheng Huang, also discussed it in his recent book, Capitalism with Chinese Characteristics : entrepreneurship and the state. An American journalist, Philip Pan, vividly described such realities in his book Out of Mao's Shadow. In my own exchanges with many people in China early this year, such behavior seems quite common. The institutional cause of China's crony capitalism is the lack of checks on power. As such, political reform is more and more urgently called for. Without political reform, the great achievements of China's economic reform might one day be destroyed by social upheavals caused by wealth polarization.

The media policy prescribed by the Xinhua article, even if it were followed, does not address this problem. While quick reporting might dampen the escalation of netizen outrage, it does not help the steelworkers. These stalwart symbols of labor's contribution to Communist China point at the necessity of new reform, and not new tactics.


Unknown said...

Interesting to find such a perspective, Xujun. I think there is far more to be learned about our world through reports like this rather than relying on the television talking heads.

Anonymous said...

Connection between money and power, seriously, is there any place that can actually avoid that?

No policy is implemented overnight in China, as you should know. If this policy can achieve its goal: dampen the escalation of netizen outrage, then it is a great success.

perspectivehere said...

"The institutional cause of China's crony capitalism is the lack of checks on power. As such, political reform is more and more urgently called for. Without political reform, the great achievements of China's economic reform might one day be destroyed by social upheavals caused by wealth polarization."

And what is the institutional cause of crony capitalism in the U.S. that has led to the collapse of the financial system and economy, and which will lead to huge tax bills for American taxpayers going forward? Is political reform also called for? What kind of reform will prevent lobbyists and special interests from protecting their tax breaks and their industry exemptions?

My point is that if a 2 party democratic system, free media, rule of law etc. does not prevent crony capitalism from happening in the US, why should polital reform in China prevent crony capitalism there?

Regarding wealth disparity, $3m RMB for a GM of a steel company is less than US$400,000. This is small change compared to the tens of millions that U.S. CEO's make. Have you considered the income gap between American CEO's and ordinary workers? This is much higher than at most Chinese companies, where outrageous salaries for CEOs are not widespread.

The real problem in China is that there are too many workers, resulting in depressed wages.

Would privatization help? Well for the workers that remain, yes. To become "modern and efficient", privatized SOE's need to lay off poorly producing workers, retain a smaller more productive workforce, pay higher wages to both workers and managers, and earn a higher return to capital for the investors.

This is somewhat different from how it is done in developed countries, where many manufacturing businesses will have reached the limit of efficiency with existing workers (diminishing returns). So instead, they will close down the factory, lay off all the workers, pay the hatchet man managers very well to fire people, and move the factory production to lower cost environments, like China, giving tax breaks for all the losses to the investors.

Our economic and political system is made to favor those with capital to invest.

State owned enterprises, while inefficient from a use of capital standpoint, are clearly preferred by some workers, as they get job security.

What is a better "social good" - job security for what may be inefficient workers (as under the SOE system), or better return on capital (whereby the investors will reward more productive workers and managers with higher salaries?) If investors earn $50 million from their investment, is not paying $400k to the GM who manages the enterprise the least they can do? Should they pay the GM less?

Article 14 of Charter '08 calls for privatization of all state owned enterprises. cui bono?