National Socialism with Chinese Characteristics

Meet He Di, the insider trying to save the Chinese Communist Party from itself.

BEIJING — Two years ago, one of China's most successful investment bankers broke away from his meetings in Berlin to explore a special exhibit that had caught his eye: "Hitler and the Germans: Nation and Crime." In the basement of the German History Museum, He Di watched crowds uneasily coming to terms with how their ancestors had embraced the Nazi promise of "advancement, prosperity and the reinstatement of former national grandeur," as the curators wrote in their introduction to the exhibit. He, vice-chairman of investment banking at the Swiss firm UBS, found the exhibition so enthralling, and so disturbing for the parallels he saw with back home, that he spent three days absorbing everything on Nazi history that he could find.

"I saw exactly how Hitler combined populism and nationalism to support Nazism," He told me in an interview in Beijing. "That's why the neighboring countries worry about China's situation. All these things we also worry about." On returning to China he sharpened the mission statement at the think tank he founded in 2007 and redoubled its ideological crusade.

He's Boyuan Foundation exists almost entirely under the radar, but is probably the most ambitious, radical, and consequential think tank in China. After helping bring the Chinese economy into the arena of global capital through his work at UBS, He now aspires to enable Chinese people to live in a world of what he and his ideological allies call "universal values": liberty, democracy, and free markets. While the foundation advises government institutions, including leaders at the banking and financial regulators, its core mission is to "achieve a societal consensus" around the universal values that it believes underpin a modern economic, political and social system.

"This is the transition from a traditional to a modern society," He says.

The challenge for Boyuan is that "universal values" clash with the ideology of the Communist Party, which holds itself above those values. "Boyuan is like the salons that initiated and incubated the governing ideas of the French revolution," says David Kelly, research director at a Beijing advisory group who has been mapping China's intellectual landscape. "They explicitly want to bring the liberal enlightenment to China."

The 65-year-old He is at the forefront of an ideological war that is playing out in the background of this week's epic leadership transition, where current Chinese President Hu Jintao officially yielded power to Xi Jinping. At one pole of this contest of ideas are He's universal values; at the other, the revolutionary ideology of the party's patriarch, Mao Zedong. This battle for China's future plays into the decade-long factional struggle between Hu and his recently resurgent predecessor, Jiang Zemin. Jiang's ideological disposition has evolved in chameleon fashion but in recent years he has hinted that if the party remains inflexibly beholden to Mao Zedong-era thought and Soviet-era institutions then it faces a risk of Soviet-style collapse.

When He Di stepped down as chairman of UBS China in 2008 -- after leading the investment banking capital raising charts for four straight years -- UBS gave him an office, a secretary, and a salary with no minimum work requirements. He continued to find UBS lucrative deals, capable princelings to hire (such as the son of former Vice Premier Li Ruihuan) and introductions to wealthy private banking clients. The Swiss bank also gave him $5 million to inject into Boyuan, just weeks before the 2008 global financial crisis, without any strings attached except the appointment of a UBS representative on his board, according to Boyuan representatives. He tipped in $1 million of his own as he redeployed his resources to build a platform for ideas. "One day I picked up the phone and called potential board members." he said. "I called 6 or 7 ministers or vice ministers, without any hesitation."

Boyuan's Beijing headquarters is an elegantly renovated courtyard home on the north side of the city. Behind He's desk is a wall of books on history, philosophy, and reform. Over a simple lunch of braised vegetables and endless cups of tea, he told me how his commitment to liberal values is rooted in a strand of Communist Party tradition that flourished in the 1980s and has since been subordinated but not entirely vanquished. "My grandfather and father were all fighting to establish not dictatorship, not feudalism, but so that people at the grassroots could enjoy a good life." He's grandfather was a vice-minister in the Kuomingtang government that ruled China until the Communists defeated it in 1949; he was beaten to death during the Cultural Revolution.

He's father was an influential agricultural minister in the reformist 1980s, a talented agricultural scientist respected for his integrity who helped guide China's peasants to shed the communal owning of land. This was China's moment of enlightenment, He says, where the revolutionary veterans respected the judgment of peasants and entrepreneurs alike to choose what to plant, what to make, and how to take it to market. The trick was simply to get out of the way. "At that time, the top leaders really understand the concept of so-called ‘universal values,' which means human rights and allowing the people freedom to choose what they want," says He. "They respected the abilities of the people, reflecting a universal value not necessarily coming from the West but based on human beings basic needs."

He had originally intended the Boyuan Foundation to be a retirement pursuit, a project of collective self-enlightenment with close childhood friends. His worries grew as he watched a fellow princeling, Bo Xilai, breathe new life into the spirit of Mao and whip up a popular frenzy in Chongqing, the inland mega-city Bo governed. As he watched Chinese citizens embrace modernity and the party-state slide back toward the revolutionary ideology of his childhood, his ambitions turned from supporting China's modern evolution to saving it.

When He returned to Beijing after his visit to Berlin in late 2010, he discovered that renowned scholars had been investigating those same parallels, even if they could not publicize their work. Shanghai historian Xu Jilin had traced China's leftward turn (leftists in China are the more conservative faction, who favor a more powerful state) to the 1999 U.S. bombing of the Chinese Embassy in Yugoslavia which grew into a "nationalist cyclone," a moment when China's rising pride, power, and the political phenomenon of Bo Xilai started to gain momentum. "Statist thinking is gaining ground in the mainstream ideology of officialdom, and may even be practiced on a large-scale in some regions of "singing Red songs and striking hard at crime," Xu said in a recent talk delivered to the Boyuan Foundation. "The history of Germany and Japan in the 1930s shows that if statism fulfils its potential, it will lead the entire nation into catastrophe."

Xu's antidote is right out of the Boyuan mission statement: "What a strong state needs most is democratic institutions, a sound constitution and the rule of law to prevent power from doing evil," says Xu.

He Di believes the overwhelming majority of Chinese people are on his side. "If you test how many Chinese people really want to return to Mao's period, to become North Korea, I don't believe it's 1 percent of them" he said.

He's adversaries -- many of whom call for a return to the ideals of a Maoist era -- are skeptical of private capital, appalled by rampant corruption, and antagonistic towards what they see as dangerous Western values. These adversaries, whose heroes include the fallen political star Bo Xilai and the politically wounded corruption-fighting general Liu Yuan, have a term for everything that He Di's Boyuan represents: "The Western Hostile Forces." Luckily, He has the chips to play in such a high-stakes game.

Besides his own princeling roots, which protect him from the state, He has the backing of his foundation's chairman Qin Xiao, who held a ministerial-level position as chairman of one of China's top state-owned financial conglomerates. Boyuan's directors include Brent Scowcroft, the former U.S. national security advisor. The Boyuan steering committee includes the publisher of the path-breaking investigative magazine Caijing, a son of one of the most important generals of the revolution (Chen Yi), and a group of officials who, between them, manage the largest accumulation of financial assets in the history of global capital.

He's childhood friends who have worked closely with Boyuan include the governor of the People's Bank of China, Zhou Xiaochuan, and Wang Qishan, the financial-system czar who is set to enter the Politburo Standing Committee, China's top decision making body, this week. They, along with several other princelings who have risen to the top of Chinese finance, became close friends, ironically, when they were red guards, fighting "capitalist roaders" in Mao's Cultural Revolution in the late 1960s.

Many of the protagonists at Boyuan have levers of the state at their disposal, and are organizing and challenging the party line in ways that would lead ordinary citizens to be branded as dissidents. Further in the organization's background, offering moral and practical support, are members of some of China's most powerful families -- including former security chief Qiao Shi, former premier Zhu Rongji, and former president Jiang Zemin.

He traces China's spiritual and policy drift to 2003, the year in which the team of then President Jiang and Premier Zhu entrusted the party and government apparatus to their successors Hu and Wen Jiabao. He says the administration moved away from "opening and reform" -- former leader Deng Xiaoping's policy of bringing China in line with the rest of the world -- and the resulting vacuum was filled with counterproductive criticism of privatization and reform. Leaders are isolated from their mid-level officials, each bureaucracy is siloed from the next, and there is no framework to mediate their interests or debate the wider merits of any particular proposal, he says. And once they started back down the old road of central planning, high-ranking officials grew addicted to the power it brought them. "The current leaders have really disappointed because I don't know what they believe," says He. "They were educated by the party, the old doctrines of Marxism, yet they lack growth experiences at the grassroots. They are really engineers who still want to enjoy the dividends from the previous generation leadership."

He believes in China's ability transform itself but knows it might not happen easily. He thinks Mao was an aberration who hurt his family's 100-year quest to bring China into modernity. Mao saw peasants and workers as an undifferentiated mass to be organized and mobilized, but not respected -- a man who represents China's past and used communism instead of Confucianism as his doctrine of control. "Mao called himself Qin Shihuang plus Stalin," He said, referring to China's first emperor. "He used revolution to repackage China's despotic tradition and crown himself emperor."

When Deng and his successors committed to the market they also committed to the values that underpinned it, He says, including the ideal of law. Hu, by contrast, eviscerated the integrity of the individual, and his administration's combination of extreme nationalism, extreme populism, and state capitalism means that history can repeat itself, He warns.

And that's why the Nazi exhibit scared him so.



What Do Rural Chinese Villagers Think About Their New Bosses?

As it turns out, not much.

QIANDONGNAN, China — Guizhou is China's poorest province, 1,000 miles from Beijing. People here earn perhaps $2,500 per year, less than half the average national wage. Its scruffy towns sit waiting for China's storied economic miracle to transform them too, while millions of peasants -- many of them ethnic minorities -- work the flooded rice terraces carved into the steep sides of Guizhou's saw-tooth valleys, just like their ancestors before them. Americans who fret about being overtaken by China should come here to reassure themselves.

From these villages, the 18th Party Congress currently being held in Beijing, where President Hu Jintao will officially yield power to his successor, Xi Jinping, feels very remote indeed. Yet the political and economic trajectory that China's leaders are mapping out will determine the future of Guizhou, just like China's other regions. So what do the people here make of it all? What do they expect from their leaders? Are they even paying attention?

The answer to the last question, at least, is easy: Even in Langde, a small Miao minority village, the Congress is impossible to avoid. Like many of China's ethnic minorities, Miao people often wear traditional dress and live in quaint wooden houses -- all of which makes their world feel more like a film set for a Song dynasty costume drama than part of free-wheeling, 21st- century China. But banners hung in the village exhort the villagers to support "The Big 18," common shorthand for the Congress. A big video screen shows the opening ceremony in the village square, a courtyard normally reserved for singing and dancing during traditional Miao festivals. And on the morning the Congress opens, speeches by the No. 1 and No. 2 men in the Communist Party, Hu Jintao and Wu Bangguo, bellow out over loudspeaker.

It's Wednesday, Nov. 7, day one of the Big 18, and peasant Chen Donglu is watching the Congress on TV in his home, friends and family crowded beside him (Chen's name has been changed; the names of other villagers have been omitted, in case the authorities take issue with their views). Chen is in his thirties; when he entered his house, he was wearing the somber blue smock and cap that Miao men traditionally wear. But he was just entertaining some tourists, he explains, and promptly pulls off his old-fashioned clothes to reveal a tracksuit. Most of Chen's guests, when asked by the foreigner in their midst, profess an indifference to politics; one young woman even admits to never having heard of president-in-waiting Xi -- though her compatriots find this ridiculous.

Chen, however, says he is upbeat about the Party Congress. "After the Big 18 things are really going to change," he insists. "First, they're going to give us more money. Then we need more new roads." Warming up after a few cups of homemade rice wine, Chen complains that Guizhou has been neglected, while flashy eastern cities like Shanghai have hoarded all the wealth. Now it's Guizhou's turn for a government windfall, he reckons.

Similar complaints about Guizhou's predicament can be heard in Madang village, down the valley from Langde, where a middle-aged woman sits in her home making indigo cloth under posters of the Communist Party's early leaders: Mao Zedong, General Zhu De, and their comrades. It is still day one of the Big 18, but she is unmoved by all the fanfare. It won't make any difference, she says, because only the rich stand to benefit from China's development. She is unimpressed by suggestions that the government has made progress improving the lives of the poor. "I meet a lot of poor people around here," she replies, "and many of them are really struggling. The government needs to do more to help them." And the images of the old Communist Party leaders? "They're just pictures," she says. "Everybody has them."

Guizhou is hardly a hotbed of simmering rage that could threaten the party's rule, but the locals are resentful that China's economic miracle might pass them by. Outgoing Chairman Hu should certainly know this: He ran Guizhou from 1985 to 1988. People here mainly recall that Hu did a competent job, though they struggle to remember any specific achievements that might have earned him promotion. But this fear of the have-nots accounts for all those red banners strung up in these out-of-the-way villages: The bosses want the people at the bottom to know that they are still part of the picture being painted by those at the top.

The good news for the leadership is that these challenges have buyable solutions. In villages like Langde, change means more money, not abstractions like political reform. "Ordinary people just don't care about politics," a shopkeeper in Xijiang, another Miao village, tells me. "There's only one political issue that interests them: Japan and the Diaoyu Islands" (islets known in Japan as the Senkakus). Guizhou is a very long way indeed from the East China Sea, the scene of China's long-running territorial dispute with Japan. But even here, people seem more inclined to kick the Japanese than to ponder the political choices of their own government.

Only a few people appear truly engaged with the political implications of the Big 18. Back in Langde, Chen, who actively follows politics, is highly skeptical of the prospects for political reform: "There's just no way," he says. (Hu's opening address to the Congress, where he said "we must unswervingly follow the path of socialism with Chinese characteristics," suggests his pessimism may be well founded.) But one of Chen's other guests, a young woman who earlier expressed political disinterest, suddenly warms to the theme. "I think we will start having elections within 10 years or so," she offers. "China is just changing too fast [for Beijing not to introduce them]. But it will be an election between two Communist Party candidates; there will still only be one Party. Look at Taiwan! It's such a mess: They have all those parties and none of them ever agree on anything." That's democracy, I suggest; the parties aren't meant to agree. But that doesn't compute with this crowd. "The Chinese system can't accept more than one party," she repeats. "We have a saying: If the party dies, the country dies." The others nod.

This impression that the party is the sole heir to China's political future seems almost universally held, outside the dissident community. Nobody is able to envision China as anything other than a political monopoly. Democracy, elections, and reforms are all familiar concepts, but ones couched as intra-party possibilities. In other words, there might be an election one day, but it would be Xi Jinping versus Li Keqiang, the man expected to be China's next premier, not dissident Liu Xiaobo.

Another Miao villager, also from Xijiang, was anything but dismissive of the Big 18. Asked to name his favourite Chinese leader, he opted enthusiastically for Hu Yaobang, a reformist party secretary from the 1980s. Praise for Hu then flowed into an unprompted account of why political reform should now be Xi's priority after the Congress. "Actually our government is quite good," he said, "already much better than in Thailand." (Bangkok is closer to Xijiang than Beijing.) "But now is the time for political reform," he continues, "after so long focusing only on economic reform."

This villager didn't really understand what a politically reformed China would look like, or if he did, he wasn't going to share it. "How would an election in China work? I have no idea. I suppose the richest person in China would simply become the president," he says. Money rules Chinese politics, he adds, even at village level, where they already have elections. "We all got to vote, but of course the winner was an extremely rich man. You have to be rich to become the leader." He hasn't heard about cases like the October New York Times report attributing $2.7 billion to Premier Wen Jiabao's family, but says he has no trouble believing them. The party has, after all, acknowledged that it has a problem with graft. Even President Hu openly warned this week that corruption is a cancer that threatens to terminate China's one-party system.

No one spares a kind word for Bo Xilai, the disgraced party chief of nearby Chongqing and now the official villain of the Big 18. Guizhouers want a better deal, but not the sort that the left-leaning Bo offered. "Bo was a bad guy," concludes a third Xijiang villager, who happened to be party to the previous conversation. "He had no new ideas of his own, so he just used those old ideas from the Mao era. I thought it was quite dangerous."

These political discussions, though, never go far. The red banners supporting the Big 18 are intended to engage country folk with the party, but not with politics. Guizhou people watching the Congress have exactly the same questions as foreign China-watchers. What are the leaders thinking? What will they do? What can they do? Like foreigners they fumble blindly for answers, and ultimately they have no say over how those answers will be reached.

It is for this reason, perhaps, that by day two of the Party Congress, the villagers already seem to have moved on. In the palpably poor town of Chong'an, Miao people are oblivious to all the Beijing committees and the slogans; those who have TVs have switched them off and instead are celebrating their New Year with singing, dancing, and -- the main attraction -- buffalo fights. Those bright red banners rhapsodising the Big 18 are here too, but the villagers ignore them. As the water buffalo smash each other in the mud and the spectators crow in delight, I lamely ask a few of Chong'an's peasants how this rivals the wall-to-wall coverage of the Party Congress for entertainment. Most mutter that it's all the same to them, claim disinterest, or visibly recoil at the intrusion. Finally, an old farmer, irritated, turns his only eye on me. "Just watch the cows," he says.

Trefor Moss