Individualists tend to fetishize personal freedom and perceive the world as being made up of individual pieces and parts. This gives us a set of particular values that strongly influence the stories we tell. According to some psychologists, it’s a mode of thinking that arose from the physical landscape of Ancient Greece. It was a rocky, hilly, coastal place, and therefore poor for large group endeavors like farming. This meant you had to be something of a hustler to get by. The best way of controlling that world, in Ancient Greece, was by being self-reliant.

Because individual self-reliance was the key to success, the all-powerful individual became a cultural ideal. The Greeks sought personal glory and perfection and fame.

Compare this pushy, freedom-loving self to the one that emerged in the East. The undulating and fertile landscape in Ancient China was perfect for large groupish endeavors. Getting by would have probably meant being a part of a sizeable wheat- or rice-growing community or working on a huge irrigation project. The best way of controlling that world, in that place, was ensuring the group, rather than the individual, was successful. That meant keeping your head down and being a team player. This collective theory of control led to a collective ideal of self. In the Analects, Confucius is recorded as describing “the superior man” as one who “does not boast of himself,” preferring instead the “concealment of his virtue.” He “cultivates a friendly harmony” and “lets the states of equilibrium and harmony exist in perfection.”

For the Greeks, the primary agent of control was the individual. For the Chinese, it was the group. For the Greeks, reality was made up of individual pieces and parts. For the Chinese, it was a field of interconnected forces. Out of these differences in the experience of reality come different story forms. Greek myths usually have 3 acts, Aristotle’s “beginning, middle and end,” perhaps more usefully described as crisis, struggle, resolution. They often starred singular heroes battling terrible monsters and returning home with treasures.

Stories weren’t like this in Ancient China. This was a realm so other-focused there was practically no real autobiography for 2000 years. When it did finally emerge, life stories were typically told stripped of the subject’s voice and opinions and they were positioned not at the center of their own lives but as a bystander looking in.


Although Confucius did not advocate government by the people, he stated clearly that it should be for the people.

The fundamental concept of Confucius’ philosophy was benevolence: “Do not impose on others what you yourself do not desire.” When this principle was adopted by the government of a state, then the whole population would be benefited and, influenced by the example of their leaders, would likewise behave correctly. In such a state, life for all would be comfortable, the people would be easily governed, and would be ready to fight courageously against attack from other states. The problem was that conforming to the strict moral code which Confucius advocated was far from easy. His teachings were not readily embraced by the opportunist and often self-seeking society of his day, and although he travelled to several major states in an attempt to win over their rulers he was never given high office.


One of the first acts of the founder of the Song dynasty was to induce his generals to leave their posts in return for lavish pensions. The power of China’s neighbours caused a terrible dilemma for anyone who wished to exert supreme authority over all China, for to repulse raids from outside large standing armies had to be maintained near the frontiers, but the generals appointed to head these armies could easily become powerful enough to throw off central control. Thus it was necessarily either to risk invasion by reducing military strength, or to risk revolt by powerful Chinese generals. Having himself been placed on the throne by his army, the first Song emperor was only too aware of this problem. Whereas the Tang emperors had in general tried to maintain military strength, and had suffered loss of authority as a result, the Song dynasty usually chose to accept military weakness in order to reduce the risk of overthrow by their own subordinates. Barbarians could, after all, always be bought off, and under the Song they commonly were.


It should be noted that legal affairs in China were not handled in the European manner: civil matters were normally settled outside the courtroom, resort to legal process being had only in exceptional circumstances. Arrested criminals were considered guilty unless they could prove innocence. The courts were intended to be terrifying places, which good citizens would avoid at almost any cost, and to this end punishments were harsh. However, it is probably true that until the 19th century there were not more severe than in most European countries at the same period.


The similarity in many developments in Europe and China in the period 1000 to around 1800 should not, however, conceal the fact that imperial China and early modern Europe also differed widely in their assumptions and mindsets. The development of modernity in the Western world was underpinned by a set of assertions, many of which are still powerful today, about the organization of society. Most central was the idea of “progress” as the driving force in human affairs. Philosophers such as Descartes and Hegel ascribed to modernity a rationality and teleology, an overarching narrative, that suggested that the world was moving in a particular direction — and that that direction, overall, was a positive one.


But all the same, China before the mid-19th century did not share certain key assumptions of the emerging elite of Europe in the 16th to 19th centuries. China did not, during that time, develop powerful political movements that believed in flattening hierarchies: in the Confucian world, “all men within the four seas” might be “brothers,” but “all men” were not equal. Chinese thinkers did not stress the individuated self as a positive good in contrast to the collective, although there was a clear idea of personal development to become a “gentleman” or “sage.” Nor, overall, did it make the idea of teleology of forward progress central to the way it viewed the world: rather, history was an attempt to recapture the lost golden age of the Zhou and ways of the ancients, and rather than praising innovation and dynamic change in its own right, premodern China developed highly sophisticated technology and statecraft while stressing the importance of past precedent, and of order.


Confucianism is based on the ideas of mutual obligation, maintenance of hierarchies, a belief in self-development, education, and improvement, and above all, an ordered society. It abhors violence and tends to look down on profit-making, though it is not wholly opposed to it. The ultimate ideal was to become sufficiently wise to attain the status of “sage,” but on should at least strive to become a junzi, often translated as “gentleman,” but perhaps best thought of as meaning “a person of integrity.” Confucius looked back to the Zhou dynasty, a supposed “golden age” which was long-past even during his lifetime, and which set a desirable (but perhaps unattainable) standard for the present day.

Confucius’s opinions did not emerge from thin air: he lived during the period of the Warring States, a violent era whose values appalled him, and which fueled his concern with order and stability.


Bo had been tipped by many (not least himself) to rise to the highest level of politics, the Standing Committee of the Politburo, and his fall and subsequent trial and conviction were seen as his punishment for attempting to bypass the existing power networks.


China’s operation of law is still instrumental rather than principled. Though various aspects of corporate and criminal law have been revised, often with some operational success, the Party still stands above the law, making it hard to operate the “rule of law” in the classic sense.


One thing remains constant, however: the CCP has no intention of allowing any rivals even to think of attaining power in China.


For all the reforms of the past three decades, the Party has made sure it keeps a lock-hold on the state and three pillars of its survival strategy: control of personnel, propaganda and the People’s Liberation Army.


Ordinary citizens can sue the government in China these days, and many do, although they may stand little chance of success. But they cannot sue the Party, because there’s nothing to sue. It is dangerous and pointless to try to sue the Party. As an organization, the Party sits outside, and above the law. It should have a legal identity, in other words, a person to sue, but it is not even registered as an organization. The Party exists outside the legal system altogether. The Party demands that social organizations all register with government bodies, and punishes those which don’t.


In pronouncements on the legal system the Party regularly reiterates the law’s place in the political pecking order. Judges must remain loyal in order - to the Party, the state, the masses and, finally, the law, according to the report issued to the National People’s Congress in 2009 by the Supreme People’s Court.


No legal obstacle is so great that the Party cannot brush it aside. For the security services, the single line in the constitution about the Party’s leadership role of the country has always been sufficient legal basis to arrest any critic.


We are the Communist Party and we will decide what communism means.


The front stage of the government’s regulatory system remained intact on the surface. The local banks and regional regulatory authorities were outwardly undisturbed. Backstage, however, the Politburo had created an entire parallel policy universe, ‘a powerful yet mostly invisible party body for monitoring financial executives.’ Zhu and the Politburo did not bother to give these all-powerful party bodies any legal status, by putting bills through the legislature. Nor did they give them the stamp of government authority by publicly announcing their formation through the cabinet. The fact that these two committees had no lawful basis did not matter. The backing of the Politburo and the direct threat to the jobs of provincial bank executives were more than enough to galvanize local officials to sign up to Beijing’s plan to secure the Party’s economic base.


“The idea that the boards really run companies is basically as credible as the constitutional guarantee of free speech and religious freedom in China. It does not happen in reality,” the banker said. “At all the major state companies, the party meetings are held regularly before the board meetings. Operating costs, capital commitments and the like are discussed at the board meetings, but personnel remains in the hands of the Party. No matter how many independent directors there are and what oversight they provide, at the end of the day, if all management are appointed by the Party, nothing will change.”


The threat of an investigation by the commission is enough to send shivers down the spines of any party official, although not in the way many might think. Senior party members in China are much like members in the US military when it comes to criminal investigations. They cannot be arrested by civilian law enforcement bodies or other outside agencies for criminal offences until the allegations have been investigated by the Party first. The commission alone, as the Party’s in-house anti-graft body, has the right to investigate officials and detain them when it decides they have a case to answer. “The country has the country’s rules,” said one official, in explaining the system’s logic. “But in your house, you must follow the house rules, and they are the most important.”

The “house rules” are very simple. For any official it wants to probe, the commission must first get clearance by the party body one level up in the governing hierarchy. In other words, the more senior an official is, the more difficult it is for the commission to gain approval to investigate them. The stream of corruption cases in China and the ruthless justice meted out to those who fall foul of the system sometimes gives the impression of a Party committed to exterminating graft without fear or favour. Far from the modern-day Chinese version of Eliot Ness’s “Untouchables”, however, the commission is structured to keep its investigators in check. The approval process, with its bias towards protecting top leaders from any scrutiny at all, means the commission is dogged by politics, and political struggle, at every turn.


The biggest beneficiaries of the requirement for the commission to get political clearance from above to proceed with investigations are the country’s most senior leaders. Short of civil war, there is no mechanism by which the commission can get approval to investigate any of the nine members of the Politburo’s inner circle, unless they effectively hand themselves in. As the son of a former senior leader told me: “It is sort of a given that they are beyond the law.” By extension, their seniority protects their immediate family members as well, and reinforces strict taboos prohibiting public discussion of the private and business lives of top leaders and their kins.


Li had no direct contact with the Politics and Law Committee. Such party bodies prefer to exercise their control at one remove, through government organs or state-controlled professional associations.


As late as 2008, the top of the list remained a dangerous place. The richest man in China, Huang Guangyu, head of a national appliances chain-store network, Gome, with an estimated fortune of $6.3B, was detained for alleged insider trading in November 2008. The first reaction to the arrest of people like Huang was not, “what did he do wrong?”, but “who did he offend?” The high-profile arrests of rich businessmen and women, however, overshadowed a more important development. Entrepreneurs had been starved of bank capital, fenced out some of the most profitable sectors of the economy, often forced into unholy alliances with state partners and sometimes sent to jail. Despite these setbacks, private wealth had gradually become an indispensable part of the Chinese landscape.


In late 2008, Wang summed up the rules he had learnt for doing business as an entrepreneur in China. From the moment he established his private business, he said, he had been careful to take on a government shareholder, to give his company a “red hat”. “You take too much, the state is unhappy, and you take too little, you get upset with yourself,” he said. When this first state shareholder was replaced a few years later, he made sure his new partner was state-owned as well. The first rule, he said, was that you will not develop quickly without a “red hat”, or a state partner. And second, you had better be careful about making it big without one. He had no need to articulate the third rule, which he had learnt in the wake of 1989: to stay out of politics altogether.


Zhang understood in his bones the biggest threat posed by entrepreneurs: the creation of well-funded, self-contained private networks in society and business which no longer reported to the Party, or through it. Out of sight, they could become incubators for rival centres of power. The Party had long fretted about such a phenomenon, of “peaceful evolution”, the process through which the Party’s grip could be slowly eroded by groups not under its sway. In the words of the head of a US direct sales company in Beijing: “The Party doesn’t want any large organized group outside its ambit which can operate at scale, whether it is religious, political or just a large group. They simply do not want the competition.”


Liu had long before internalized the inbuilt bias against the private sector. In the twenty years to 2002, before the split with his brothers, his businesses had never relied on borrowing from the state banks. The banks hadn’t initially been interested in lending to the Liu brothers. And when the banks did start to chase their business, the Lius did not need them. Like most entrepreneurs, they had learnt to fund themselves from their profits. Once he accepted this was the way of the world in China, Liu said his attitude changed for the better. “Otherwise, you will be full of spite, and then either do nothing or do something extreme, which could be illegal.”

Liu’s hard-won self-reliance influenced more than just they way he did business. His determination to have a very disciplined relationship with officials and not do shady deals to get ahead also dictated the sectors he invested in. He gave up on real estate, he says, because he could not bear socializing with officials. “Real estate requires lots of insider trading, and constant wining and dining and gift-giving,” he said. Likewise, he decided not to list his new company on the stock exchange because this “would take a huge amount of personal energy on lobbying [the regulators] and various other government departments… and walking too close to the path of illegality.”


By the end of the course, the entrepreneurs had gained a new respect for the officials and the mammoth jobs. Individually, the officials were often responsible for the welfare and provision of services to tens of millions of people. They worked investment banker hours, were forced to spend long periods away from their families and had to endure three to four banquets a night, with endless toasts. They were competitive too, performing for and against each other, and for the powerful captive audience at the school. “The competition among them was much more fierce than among us - we were amateurs,” the entrepreneur said. “Once we were inside, be became great defenders of the system. It is kind of like the orphan principle. Once you are a part of a family, you stand up for it.”


China under Mao Zedong had much in common with other totalitarian systems. To borrow the oft-used phrase, terror was not just a side-effect of the system. Terror was the system for extended periods of Mao’s rule. In the last three decades, the Communist Party has turned that formula around. Terror is just a side-effect these days, used relatively sparingly and, in large part, reluctantly. In modern China, the system runs on seduction rather than suppression. It aims to co-opt, not coerce, the population. But even so, terror remains essential to the system’s survival and is deployed without embarrassment when required. An official once told me: “People need to fear the government in China, otherwise the country will fall apart.”


Then there is corruption. Certainly, China is deeply corrupt, but corrupt regimes can last a long time. The Chinese officials who do get arrested for graft generally fall into two categories, or something both. They are the losers in political power struggles, or their corruption has become so outrageous that it embarrasses the system, and thereby jeopardizes the game for everyone else. Corruption in China seems to operate more like a transaction tax that distributes ill-gotten gains among the ruling class. In that respect, it becomes the glue that keeps the system together.

For all the hullabaloo surrounding the perennial anti-graft campaigns, the risk of going to jail remains small even for officials caught with their hands in the till. Since 1982, about 80 percent of the 130,000 to 190,000 officials disciplined annually for malfeasance by the Party received only a warning. Only 6 percent were criminally prosecuted, and of them, only 3 percent went to jail.


Every Communist must grasp the truth, “Political power grows out of the barrel of a gun.” Our principle is that the Party commands the gun, and the gun must never be allowed to command the Party. Yet, having guns, we can create Party organizations. We can also created cadres, create schools, create culture, create mass movements. Everything in Yan’an has been created by having guns. All things grow out of the barrel of a gun. According to the Marxist theory of the state, the army is the chief component of state power.


In 1965 Edgar Snow asked Mao if a cult of personality was being fostered in China. Having admitted that there was some basis for saying so, Mao suggested that Khrushchev had fallen because he had no cult of personality at all. The implication was that Mao regarded his cult as a protection.


The Chinese are famous fo rigorous scholarship. True to that heritage, they do their homework. Mao once called Deng Xiaoping a walking encyclopedia. I can’t recall a single Chinese business executive or government leader right up to the top who didn’t come to meetings thoroughly prepared. They expect no less from us.


It holds facilities for training cadres in, among other things, urban planning and dealing with the media. We stopped at the crisis management center, where a group of officials from Hebei Province sat before large-screen televisions, working on an exercise that simulated the aftermath of an earthquake, complete with sirens, dazed victims, and importuning reporters.

There was a media center where cadres could receive training on how to give interviews, how to make speeches, even how to dress. There was a prep room where officials participating in mock interviews could first be made up and have their hair touched up. In one room, the comfy furnishings were configured to resemble the set of a morning talk show; another room, complete with host’s desk, was ready for a late-night chat.

The Party was preparing the CEOs of its state companies to deal with the Western press as they went global. I couldn’t help but be impressed by the magnitude of the effort being made and expenses being incurred to invest in China’s upcoming leaders. But I was struck by the paradox the Party faces. For all its efforts, what the Party must do, if it truly wants SOEs to evolve into global leaders, is the hardest thing yet. It has to find a way to set them free.


I recalled what President Hu had replied when President Bush had asked what gave him nightmares: having to create 25 million new jobs each year. The Chinese leadership sought stability above all else, and that meant having a strong economy. That in turn required additional market-oriented reforms and a mutually beneficial relationship with the US, its most important trading partner. The Communist Party had essentially make a deal with the people to provide prosperity in return for continued political power. But China’s continued success had given its citizens higher expectations, and these were growing more difficult to meet as many more social stresses accumulated - from dirty air and water to gnawing disparities in income distribution.


China’s concern for political stability allowed its people little latitude to discuss human rights issues or civil liberties, much less argue the merits of the Chinese system of government or one-party Communist rule. But the pragmatic Chinese leadership tended to take a different view of economics, and public discussion or criticism of government economic policies was more tolerated.


SOEs lost money in part because they had too many workers; if foreigners took control, they would lay off many employees - he estimated up to 80 percent. Doing that without an adequate social security system would threaten stability. China would have to build a safety net and in the meantime use the equity markets for its version of partial privatization.


She understood the importance of “face” and worried that we would send the wrong people to Hainan. If we sent junior bankers to talk about finance before a senior minister like Wu, we might lose any chance of a mandate right then and there.


As the country opened to foreign investment, almost every transaction was debated at the highest level of government; the decision making was complex, diffuse in that it involved the approval of many officials, and opaque to outsiders like us. Many memoranda of understanding were signed that went nowhere; informal negotiations took place with officials who lacked proper authority or couldn’t “sell” projects to their superiors. Moreover, China lacked a strong adherence to the rule of law. Instead, the rule of men was the norm, which meant that building strong personal relationships was essential for doing business. For this reason, I travelled frequently to China, especially in the early years. Over time we learned to identify the most viable transactions, involving the right clients and the support of the right Chinese advocates. But on any number of occasions as we were learning to work in China in the early days, we were disappointed by abrupt and bewildering changes in direction. The rug could be pulled out from under you at any point.


We came away with a crucial lesson: many officials could approve a deal, but it took only one well-placed official in a consensus-ruled system to kill it. We subsequently learned to spread our efforts wide to every conceivable person or agency that might have an interest in whatever we were focused on and to work relentlessly to bring them to our side.


Straight out, KS asked Goldman Sachs to spend $2M to buy advertising on it. He certainly did not need the money, and the amount in the absolute terms was trivial for him. I saw it even then as a symbolic gesture, but one that was very important to him because he wanted his sons’ first business venture to succeed.

After lunch KS walked me to the elevator and rode down with me, a gesture of such politeness and familiarity that I soon found myself adopting it with Asian visitors back home.

In the US some clients were nervous if you wanted to invest with them. In Hong Kong it was the opposite. Putting your money on the line alongside your clients’ earned you their trust and admitted you to the club.

We subsequently did quite a lot of work for KS and his companies, helping him to finance, buy, and sell a number of businesses. Making a simple $2M commitment didn’t win us these other assignments. KS was too good a businessman for that: we had to earn every bit of work we did for him. But it did get us a seat at the table so we could compete for the business, and it helped to make our name in Hong Kong, and later in China.


Both presidents of the Supreme People’s Court and the Supreme People’s Procuratorate were absent from the Central Committee.


On the individual-unit basis, central Party institutions are much more powerful than central government institutions. Heads of the Central Organization Department and Central Propaganda Department are both members of the Politburo and the Secretariat. Only one minister (Bo Xilai) managed to get into the Politburo, and none of the current ministers are members of the Politburo and the Secretariat.


Political elites can grant special deals, block access, or control public coffers. This kind of corruption, therefore, involves high monetary stakes and the allocation of valuable resources such as land and legislations. Conversely, rank-and-file bureaucrats exercise discretion only within their limited job scope, for example, processing permits or assigning school enrollment slots.


Access money, on the other hand, is the steroids of capitalism. Steroids are known as “growth-enhancing” drugs, but they come with serious side effects. And countries both rich and poor, in the West and the East, can fall prey to its temptation. From a businessperson’s point of view, access money is less a tax than an investment. For example, Chinese entrepreneurs are willing to bribe their way into legislative congresses because the benefits of networking with Party-state bosses more than offset the expense. Likewise, in the US, big corporations sink billions of dollars into lobbying every year because returns exceed costs. By enriching capitalists who pay for privileges and by rewarding politicians who serve capitalist interests, access money can perversely stimulate commercial transactions and investment, which translate into GDP growth.

Yet this does not mean that access money is “good” for the economy — on the contrary, it distorts the allocation of resources, breeds systemic risks, and exacerbates inequality. For example, in China, bank loans are disproportionately allocated to politically connected companies, forcing cash-strapped entrepreneurs to borrow from shadow banks at usurious rates, while connected companies, flush with excess credit, spend irresponsibly and speculate in real estate. Such distortions, however, are not captured in standard linear regressions that examine only annual income levels or growth rates.

The harm of access money blows up only in the event of a crisis.


First, the dominant type of corruption in China is access money — elite exchanges of power and wealth — rather than petty bribery or outright theft. The standard argument for how corruption impedes growth is that corruption lowers private investment, thereby reducing economic growth. What this argument misses is that access money may actually raise private investment — and ever spur over-investment, as seen in China’s real estate sector — thereby increasing growth, at least until the onset of a crisis.


Political elites have both career and financial incentives to enthusiastically foster development. It is often said that the promotion of local leaders is tied to economic growth, but in reality, the small number of seats for promotion means that not all leaders may aspire to higher office. The surer incentive, therefore, is financial: the more prosperous the local economy, the more local leaders will profit.


The more tax revenue a local government generates and the more non-tax revenue (such as fees and service charges) individual offices collect, the more fringe benefits they can provide to their staff members. To borrow a term from economics, fringe compensation in the Chinese bureaucracy functions as an “efficiency wage” — it not only incentivizes revenue-making effort but also deters bureaucrats from resorting to petty corruption.

Why did profit-sharing take root in the Chinese government but not in other poor, predatory states? I would point to Deng Xiaoping’s historic decision to open markets while maintaining the Party’s monopoly rule and giving communist officials a personal stake in capitalist growth. Corruption (rents) rewards their effort and participation. This stood in sharp contrast to the former Soviet Union, where sudden political and economic liberalization prompted the apparatchiks to defect en masse. Profit-sharing arrangements made Chinese officials “stationary bandits” who are invested in promoting collective welfare, as they can fleece off a percentage of gains, rather than “roving bandits” who just rob and flee.


Long-standing Western expectation of Chinese failure have perhaps unintendedly kept the regime alert.


A top politician is linked to an extensive network of former associates, proteges, and / or family members, who monopolize power in certain sectors of the economy. While the politician himself never or rarely accepts bribes, a massive amount of bribes flows through his network.


Echoing this argument, Sun agrees that whereas Russia is wrecked by lawless “looting,” China is marked by “rent-seeking” and “profit-sharing.”


China is often perceived as exceptional, but the situation today closely parallel the “taxless (public) financing” in America during the 19th century, when state governments built massive projects by selling bonds through investment companies and charters (monopoly rights) to business instead of raising taxes on residents. Taxless financing led to widespread corruption and incurred contingent liabilities (debt that manifests itself when projects fail to generate expected revenue). These accumulated risks eventually imploded in 1837 — America’s first great depression.


Thus understood, Bell’s praise of the Chinese political system as a meritocracy that select officials by “ability and virtue” misses a crucial reality: it is difficult for politicians to perform without political patrons and corporate clients.


While it is commonly assumed that patronage is in opposition to meritocracy, under the CCP, they go together. In most patronage-ridden systems, political patrons appoint unqualified clients into offices. Chinese political patrons, on the other hand, spot promising clients and nurture their competence over the course of their careers. As one Party school leaders explained to me, “It is their patrons who strategically arrange positions for [officials at lower levels], giving them an opportunity to prove themselves.” In other words, while we normally think of “merit” as intrinsic to individuals, in the Chinese political system, it is cultivated by political patrons. He added, “We are after all a top-down system, not elected by the people, so it is those on top who decide who gets to move along and ahead.”


The title is scintillating, but Wolf gets a fact wrong: China is not communist. Far from egalitarian, China has seen widening inequality, at a level exceeding even capitalist America. In practice, Chinese political economy operates not according to Marx’s exhortation of “each according to his needs” but rather by the principle of “each according to his ability and connections.” From this perspective, China is better understood as a capitalist dictatorship disguised as communist.


The most critical components of the political work system were the party committee system and the political commissar system. Except in tactical and emergency situations, the party committees discussed and made all the important decisions.

Under the collective leadership of the party committee, a dual commandership system gave the military commander and the political commissar equal ranks. The former was responsible for all military affairs, while the latter, who usually served as the secretary of the party committee, was in charge of promotion, security, propaganda, public service, and ideological indoctrination.


China is the only country with the economic scale and robust activity to match that of the US. Unlike the US, however, China is still at a relatively early stage of economic development. Its markets have progressively opened wider, and much basic infrastructure has been put in place, but its business environment is still raw and volatile, with a rate of change and pace of activity that is rivaled possibly only by Silicon Valley.


One question is in the mind of every fledging entrepreneur in the high-tech startups of Beijing’s Zhongguancun neighborhood, the fabrication hubs of Wenzhou, the industrial region of Dalian, and dozens of other Chinese business centers: “Why not me?” Success is all around them. Young Chinese businesspeople are driven by materialistic desire, eager to “catch up” with the rest of the world, and almost giddy with a sense of multiplying opportunity.


Many Westerners believe that the world, if left to its own devices, will find a natural order of its own — and that this is especially true of markets and other economic systems. The Chinese tend to believe that markets, like all complex systems, require constant monitoring and supervision in order to deliver their best results.


Just as many Westerners are waiting for the inevitable moment when China drowns itself in sub-optimal command-and-control-style bureaucracy, many Chinese leaders take it for granted that the US and other countries will render themselves impotent through cacophony and inefficiency.


Foreign companies are no longer needed to play the enabling role that Chinese businesses sought from them in the 1990s and 2000s. Chinese companies may not have all the access they would like to capital, technology, and know-how, but they are no longer starved of these things as they were 20 years ago. And when it comes to coping with the complexities of China’s markets and business environment, they are usually far better placed to come up with answers than even the most experienced of multinationals.


Although the Chinese government plans ultimately to liberalize financial markets, for now it will continue to maintain capital controls that prevent money from flowing into or out of the country in destabilizing volumes, a managed exchange rate that allows it to support export industries, and officially set interest rates that give banks the cheap money they need to make policy loans. And it will continue to pour enormous resources into scientific and technological research.


The challenge China’s business environment poses for its entrepreneurs is how to organize their companies to cope with this environment — to have the vision to see opportunities, the capabilities to seize and develop them, the toughness and resources to see off competition, and the political skills to stay onside with officials.


But a government rule saying that all provinces had to buy equipment from at least 2 suppliers opened the door for Huawei to become the 2nd provider in poorer, inland regions. Orders were small at first, which allowed Huawei’s engineers to gain experience at both installing equipment and seeing how what they made measured up against the systems from the international suppliers.


Thanks to its control over China’s main macroeconomic levers, the government retains the power to act whenever necessary. It can support exporters by manipulating the value of the yuan; through its capital controls, it can prevent money entering or leaving the country in destabilizing volumes; and, if necessary, it can stimulate short-term growth by making funding freely available through the state-owned banking system. Beyond this, it willingly allows private companies a largely free hand.


The burgeoning popularity of online entertainment places Youku and its rivals under close government scrutiny. Official media reports have suggested that some 2M “public opinion analysts,” divided between the Communist Party’s propaganda department, state-owned news Web sites, and other companies, monitor content and posts to make sure no sensitive material appears, or if it does, that it is taken down as soon as possible.

Every day, the government’s propaganda department issues instructions to companies telling them how to handle sensitive topics, for example, by only using reports from government news organs.


China’s entrepreneurs may be changing China, but they are not the people who are running the country. They know this, and will not overstep their position. Wang Jianlin, the CEO of Dalian Wanda and one of China’s richest individuals, has put it succinctly: “Be close to government, but far from politics.”


Surveys have repeatedly found that the country’s people are among the happiest in the world with their current economic situation and with their prospects for the future. The real threat to China’s future is not collapse, but that its ruler will fail to manage their country’s development.


The CCP has reorganized itself since its near-death experience in June 1989 as a body that is capable of change and evolution. Studying how organizations, especially ruling parties, have survived a long time has been a major preoccupation of the Chinese leadership in recent years.


The CCP enforces strict discipline and loyalty among its members. Party members are expected to follow party directives and maintain party unity.


Leninism promotes the principle of democratic centralism within the revolutionary party. This means that decisions are made democratically but are followed by unified action and strict discipline once a decision is reached. It emphasizes collective decision-making while maintaining strong central leadership.


Marxists envision a transitional period known as the dictatorship of the proletariat. This concept refers to the political rule of the working class to suppress the remnants of the capitalist class and establish the conditions for the eventual transition to a classless, communist society.


Much traditional Chinese art appeals to Western sensibilities because its aesthetics tend to avoid tension and insist instead on a softness and elegance of touch. The Western preoccupation with forthrightness and realism traditionally never found a home in Chinese art, which instead was more economical, metaphorical, and restrained. Contemplation of landscape art can be liberating and philosophically rewarding, for it reveals a vision of life that is very different from that in the West.

These opposing views resulted in 2 different philosophies. The West saw itself as more apart from nature and sought to dominate it, while the instinctive involvement of the Chinese in nature denied it the empirical, objective tools with which to dissect it. A more passive acceptance of nature meant that the existential conundrums infusing much of Western art found no place in traditional Chinese aesthetics. In Western culture, God is represented in human form. In Chinese philosophy, the Tao is the closest the Chinese come to expressing an overall deity, yet it is formless. Whether concerning landscape painting or the landscape itself, the Tao permeates without revealing itself.


Specific feelings are generally shunned in this style of painting; there is a pervasive mood but not particular message. This lack of focus reflects the Chinese desire to avoid the obvious and the clear-cut. The vaporous mood invites the viewer to enter and encourages him or her to be quiet, creating an unobtrusive and welcoming atmosphere.


Flashy displays often belong to those who have lost their way on the road to mastery. The Chinese call those who make a lot of noise “half a bottle of vinegar,” for the insubstantial sloshing sound it makes. True skill in gong can be elusive and difficult to retain, once discovered.


He was, even at this early stage, coming to the idea that political unity did not have to mean a uniform socioeconomic system, that one could do things differently in different parts of the empire.


To interpret Mao too literally, Deng told Hu Qiaomu — hitherto custodian of ideological rectitude — was to destroy the entire system of Mao thought. It was the essence of the thought that one had to follow — and this could not be done by focusing myopically on what Mao actually said.


Mao had been the party made flesh. To criticize him to roundly, as Deng would admit to President Bush in a moment of candor in early 1989, would be to deny an important part of the country’s history; it could lead to ideological chaos and political instability. And instability was the one thing Deng wished to avoid above all else; instability could tip into chaos, at which point all hopes of modernization could die. Seeking truth from facts and condemning past errors could go only so far. People need something to believe in. This the party would provide; it would merely add economic modernization to the canon.


“First: use. Second: criticize. Third: fix. Fourth: create.” — this was the path Deng saw for China — it had worked well for Japan. When Japanese scholars advised China to not focus exclusively on growth rates, but to develop infrastructure and energy, Deng paid attention.


The difference between Deng and Mao on political economy was tactical, not strategic. Mao too had grasped the idea that the economy was the final guarantor of national security; it was only that having understood as much, he had little idea of what to do. He would veer into the Great Leap Forward, suggest expanding the self-tilled land, but never expand it as much as needed; he would seek trade, but only in his final years did he allow Deng to exhibit a fervent commitment to it — and he was too proud and too insecure to relinquish full control of economic planning to someone who understood it better.


Taiwan was, however sensitive, however emotional, just one strand in a larger web of interests. China and America had their differences, but those differences had to be judged in a larger context — in which context, nurturing the Sino-American relationship was of key importance.


Deng Xiaoping did not like young people. He was wary of the dangers of youth protest: it was a group of protesting students, after all, young, innocent, asserting their rights to participate in the political process, who had rendered his son paraplegic and driven him into exile. There were things young people did not understand about the history of the party, of the revolution, of the bitter suffering that been life under the Gang of Four; they had not been through what he and his cohort had been through; they could not know the complexities of life. They need to be educated, trained to see that their interests and difficulties had to be judged in the context of what suited the country as a whole. Of course one wanted democracy. But democracy without centralized control at the top was useless. There had to be an organizing power with paramount authority — and this, it had to be made clear to the young malcontents, was the party. It was an old man’s grumble, but it was a heartfelt one; he would put all the resources at his disposal into making sure that youth did not run wild again.


A strange void had opened up in China with reform and opening, a nagging, spiritual hunger. Deng Xiaoping had opened the path to riches. There would be no more mass starvation. People could live in growing comfort; indeed, if they were enterprising, they could dream of making fortunes. But the price, whatever Deng’s claims to the contrary, had been faith in the old verities of Maoism: of equality and heroic struggle, of the Chinese people standing up to fight a common foe. Chen Yun had fretted about the ideological weakening of the party back in the Deng years, but it had been an abstract problem, not easily addressed; besides, China was too busy getting rich to grapple with the matter. Now Jiang found himself with a party confused about what it stood for and with a population that might well lose trust in its leadership.


Jiang was doing nothing less than constructing a communist canon for China. There were great thinkers, holy books — Marx and Engels, Mao and Deng — around which the country could congregate. In a sense, it did not matter that belief in Maoism had worn thin, that these were tired shibboleths that held no meaning for a tired people; it mattered only that they be repeated, be given lip service. Belief was something performed, rather than felt, a test of political fealty. Jiang himself was an agnostic on such matters; Joseph Prueher, commander of the US Pacific Command and later ambassador to China, would recall Jiang telling him that he would be glad to use any system of government that allowed him to maintain stability in his country of 1.24B.


The tacit bargain being offered was the same that which the CCP had struck with the majority Han: economic benefits, if uneven, in exchange for political obedience. Later, when violence flared in Xinjiang, Hu’s response would reflect the official mind’s basic understanding of how to keep the country together: he would call to suppress the violence ruthlessly but also speak of the need to guarantee the standard of living there. Functioning markets, water, electricity, heat: these are as much part of counterinsurgency as police work and brute force.


The stories of small entrepreneurs finding success and fortune that had been the life force of the eighties gave way to a different tale: that of large, well-connected firms using their ties to government officials to squash competition. Income inequality grew; the Chinese economy became one afflicted by crony capitalism. Both Jiang and Hu recognized the problem, and they knew it was existential. Corruption could eat away at the ties holding governed in loyalty to government; it could, if left unaddressed, bring the party down. The government would have to take effective measures to remedy the situation. There would have to be law, and the cadres would have to be schooled in it.


But the sheer size of the party made it tough to police all impropriety; besides, if they were serious about moving against corruption, Jiang and Hu might well have had to move against party members whose support they needed to stay in power. For all the considerable effort they would pour into the task, there was one central conundrum they could not overcome: how to devise a system of law to govern the party when the party itself was the ultimate arbiter of what the law said.


To Jiang, this talk of democracy was nothing but a pretext for meddling in the internal affairs of other states and imposing the West’s political and economic model on other countries. (It was astonishing how accurate this reading was: there were Western policymakers and intellectuals who thought that democracy would soon take over the entire world, simply because it was better. It was just that the rest of the world did not necessarily see it that way.)


This would have been suicidal, but it is astonishing how often governments and people in the throes of nationalistic fervor make suicidal decisions. Nationalistic sentiment in the Chinese population, certainly, was running high: a government more responsive to public pressure might well have felt obliged to do something violent and stupid.


“But for there to be trust there must first be understanding, and for there to be understanding there must first be communication,” said Jiang. It was vintage Jiang and it was perfectly true — and yet behind the whole questioning, there was a nagging anxiety: his troops communicating with the Americans, without the party, without him as organizing channel. The Americans were used to such exchanges; Jiang, coming from a place where keeping the state whole was a challenge, where soldiers grown too powerful had turned into warlords and thus broken the country, was not. It was important to remember and remind all necessary that the party was paramount over the military. Western enemies, bent on westernizing and splitting the PRC, were testing the PLA: they whispered temptingly of the troops’ “departification” and “depoliticization.” China would have to strengthen political training in the troops, make sure the men with guns were properly versed in ideology.


Part of what kept the problem manageable during their time was their sheer blandness of tone. Jiang and Hu had gone about grand strategy quietly, not altering much, trying, when possible, to be conciliatory. They sought simply to keep China on the course Deng had set — continue with reform and opening, seek a balance of power in a multipolar world, modernize the military, and keep China whole. There was something dull and uninspiring about their ways. But dullness can be a virtue — and it was a virtue that would shine all the brighter in the days of Xi Jinping.


The risk, of course, is blowback. Xi has identified himself so deeply with the anticorruption campaign that officials uncertain of their future might move to block him. It is particularly dangerous to target soldiers; these are armed men and women who could lash out violently, perhaps even seize power in a coup. So Xi seeks to inspire loyalty to himself, by creating as formidable a cult of personality as China has seen since Mao’s day. He drops into pork bun restaurants unannounced, to huddle with the masses. He and his wife are immortalized in songs, adoring if a touch saccharine. Young soldiers, who might follow the siren call of their superiors in revolt, are to remind that there is the law — and Xi is the embodiment of it. He mingles with the people, as he did during the Cultural Revolution, because he wishes only to serve them; he will fight on their behalf against the powerful who have robbed their wealth, as tirelessly as he carried those loads in Shaanxi. He is protector and defender of the law, of the people, of China; he is Xi Jinping.


There was, throughout this, an unwavering belief that the economy was one plank in the larger architecture of national security and that it would have to be treated as such. The economy, like everything else, was meant to keep China safe. This was the idea that lay at the heart of Mao’s misguided Great Leap Forward: the only way of ensuring the China could stand up against the larger superpowers was by outstripping them economically. And this was the idea that lay at the heart of Deng’s reform and opening: one needed to get China’s economy functioning in order to keep it secure. The fruits of that policy would ripen in the Jiang and Hu eras. China’s astonishing growth brought in a new tool of statecraft: economic diplomacy. Beijing could offer loans to win friends, or threaten to cease business if a foreign country’s policy ran counter to its interests.


Problems were inevitable. No grand strategy is perfect — and China’s geopolitical circumstances were such that life was always going to be difficult. Some of the problems were intrinsic to getting rich. To get rich is glorious, but in a capitalist system (and for that matter, in a communist one), there are winners and there are losers. There is incentive to cheat, exploit, steal — and one is better equipped to do that the closer one is to power. The state was bound to get entangled in the economy; since its officials were only human, they would take advantage of that entanglement. The insistence that there was only one legitimate institution of power would make it virtually impossible to tackle graft, for the party would have to be cop, judge, and enforcer all in one. Income inequality and corruption represented the dark side of the success.

Abroad too, success came with the seeds of failure. As with corruption, these failures were, to an extent, inevitable. If China succeeded in becoming powerful enough to be secure, its sheer size would terrify its neighbors, who would seek support from abroad.


We didn’t want to know how that happened as long as sales and profits increased. It wasn’t just ChinaVest, of course. Anyone doing business in China did it this way, circumventing the rules in search of profit. I quickly learned that in China all rules were bendable as long as you had what we Chinese called guanxi, or a connection into the system. And given that the state changed the rules all the time, no one gave the rules much weight.


For me, Robertson’s cultivation of Feng Bo peeled back the curtain on the inner workings of a political system that mouthed Communist slogans while the families of senior officials gorged themselves at the trough of economic reforms. These sons and daughters functioned like an aristocracy; they intermarried, lived lives disconnected from those of average Chinese, and made fortunes selling access to their parents, inside information, and regulatory approvals that were keys to wealth.


The Communist system of central control and economic planning struggled to adapt to the changing China. Old laws no longer had relevance. But when the Party wrote the new laws, the ministries intentionally included vast gray areas so that if the authorities wanted to target anyone for prosecution, they always could.


Mayor Chen Xitong had been accused of embezzling millions of dollars in a scheme to build vacation homes for the Party elite. His real “crime” was that he led the “Beijing clique,” a Party faction that opposed the “Shanghai clique,” overseen by Party chieftain Jiang Zemin.


And she networked like mad, cadging invitations to exclusive functions with senior officials of the CCP.

Whitney discovered that to unlock the door to success in China she needed two keys. One was political heft. In China, entrepreneurs only succeeded if they pandered to the interests of the Communist Party. Whether it be a shopkeeper in a corner store or a tech genius in China’s SV, everyone needed sponsors inside the system. The second requirement was the ability to execute once an opportunity arose. Only by possessing both keys would success be possible. That’s what Whitney set out to do and how I entered the picture.


Nothing was on paper; it was all done on trust. The arrangement generally followed the “industry standard.” Other families of high-ranking Party members extracted a similar percentage in exchange for their political influence. The template was always fungible and could be tweaked to accommodate investment opportunities as they arose.

Chinese officials, executives at state-owned companies, and private businessmen who were close to the Party presented insiders like Auntie Zhang with opportunities all the time, but the deals weren’t as sweet as those available to China’s red aristocrats. The red aristocrats got access to monopoly businesses. An example would be the contract to provide a kind of mineral water, called Tibet 5100, on China’s high-speed rail network. That reportedly was landed by relatives of Deng Xiaoping, who paid next to nothing for the rights to bottle the water in Tibet. From 2008 to 2010, the Ministry of Railways bought 200M bottles of the stuff. When the company listed on the HKSE in 2011, its market cap was $1.5B. The Deng family never commented on reports that it was linked to the firm. Anyway, Auntie Zhang couldn’t muster that kind of juice.


It’s hard to exaggerate just how much we needed capital in those days. This was a problem common to every entrepreneur in China. Given the multitude of investment opportunities during the boom-boom days of China’s economic rise, all of us were leveraged to the hilt. It was a sign of how crazy the Chinese market was and how much enthusiasm about China’s future coursed through society and the financial world. Everybody was laying maximum bets, and because of that, everyone was short of cash. Of course, many bets didn’t pan out. Two-thirds of the people on China’s 100 wealthiest list would be replaced every year due to poor business decisions, criminality, and / or politically motivated prosecutions, or because they’d mistakenly aligned themselves with a Party faction that had lost its pull.

Anyone running a sizable business was bound to be violating some type of law, whether it be environmental, tax, or labor. So while the returns could be lofty, you were always vulnerable. When the Chinese government passes a law it invariably makes it retroactive, so events that occurred years ago that had been unregulated could become crimes today.

Nonetheless, those challenges made no dent in the consensus that everything in China was pointing up. The 2000s were a decade of non-stop, double-digit growth, of huge ambition and tremendous success, of one of the greatest accumulation of wealth in history. If you weren’t fully leveraged, you were falling behind. If you weren’t fully leveraged, you were stupid.


Private sales of stock in unlisted firms are not done publicly. A large Chinese SOE is not going to announce that it wants to sell one of its investments to dress up its balance sheet and then offer the shares in a public auction. Only people within a limited network are going to get wind of it — no matter whether the deal is done in Beijing, London, or New York.

When Ping An listed on the HKSE, the share price jumped to 8 times what we paid for. We’d invested $12M, and all of a sudden we were looking at almost $100M.


I needed to learn everything from scratch. How tall should the warehouses be? What is the ideal distance between columns to allow a forklift to maneuver? What’s the height of a loading dock? The width of the roads? I had a huge dream in front of me, but in the winter of 2004, a whole year after we’d come up with the scheme, we still hadn’t broken ground. And building wouldn’t even be the hardest part. Far more torturous was getting the approvals.

To construct Beijing’s Airport City, we needed 7 seven ministries to sign off on almost anything we planned. And within these ministries there were layers upon layers of authorizations. In all, we needed 150 different chops, and every one was a story. It took 3 years just to start construction and even after that there were roadblocks aplenty. I stationed people outside the offices of officials from whom we needed a stamp. I sent people to hospitals to get chops form bedridden bureaucrats. My employees waited for months trying to curry favor with officials, bringing them fine teas, doing their errands, taking them to saunas, looking after their wives and kids.


But even when we thought we’d smoothed things over with the bigwigs, we’d still confront problems at lower levels. Section chiefs, bureau chiefs, and division chiefs ran their departments like personal fiefdoms. They could give you a thousand reasons why an approval had been held up. They’d never refuse outright; they’d just tell you to wait. They wielded so much power that they were known throughout the Chinese system as the Bureau Chief Gang or the Chuzhang Bang.


We played a similar game with a vast array of bureaucrats. Each approval was obtained through connections. Each connection meant an investment in a personal relationship, which meant an awful lot of effort and even more Moutai. Forging personal ties and establishing guanxi was the most difficult part. Guanxi wasn’t a contractual relationship per se: it was a human-to-human connection, built painstakingly over time. You had to show genuine concern for the person. The tough part was that I had so many relationships that needed managing, but I also had a project on my back with a deadline. I had to squeeze all of these interactions into a pipe, and the diameter of the pipe was time. Obviously, I had to delegate, but the more I got directly involved in relationship building the more approvals we received.


But even when we obtained them at the national level, we still required the cooperation of officers on the ground. In fact, it often didn’t matter if the minister was on board. His underlings could always scotch the deal. They’d raise a bunch of totally legitimate, execution-level issues that sounded reasonable. Because the minister didn’t concern himself with minutiae, he’d just say, “sort it out as soon as you can.” In that way, control of the project leaked from the top of the bureaucracy to the bottom.


Paulson and others interpreted Wang’s and Zhu’s moves as a way to privatize China’s economy. But actually, the Party’s goal, apropos of Deng Lin’s worries, was to save the state-owned sector so that it could remain the economic pillar of the Party’s continued rule. This was one of the many instances where Westerners thought they were helping China evolve toward a more pluralistic society with a freer market when in reality they Party was actually employing Western financial techniques to strengthen its rule.


Getting Sun a minister’s position was hard work. To become a minister in China you need an unwavering advocate on the Standing Committee of the Politburo and you need to make sure that none of the other members opposes your rise.


In China, officials never reveal their ambitions in public. Biding one’s time is a key tenant of Sun Tzu’s Art of War. But behind closed doors, Sun moved aggressively. He paid special attention to one contender, whose CV mirrored that of Sun.


During his many trips to the capital, Sun sought Whitney out. He was obsessed with Hu’s meteoric rise. Late at night, Whitney and Sun would meet at a teahouse on the east side of Beijing to discuss how Sun could beat Hu for the top spot.

The life of an ambitious official involved constant dining out. On many evenings in Beijing, Sun would attend 3 dinners. One at 5:00 featured subordinates, people who had request or needed things to do. A second dinner at 6:30 was reserved for his superiors or political equals. Important political business was transacted in these gatherings. The third dinner at 8:00 was with people with whom he felt more comfortable. By the time he arrived there, he’d already be reasonably drunk, so he’d want an environment where he could drop his guard. Around 10:00, after the final meal, Sun would text Whitney and they’d meet in a private room at the teahouse and linger past midnight.

Seeing Whitney at that late hour underscored how much Sun valued their ties. It showed that they were so friendly that they could disperse with the formality of a meal and focus on the content of their communication: how to help Sun move his pieces on China’s political chessboard. Whitney noticed how tense Sun was, how worried he became at one point when he fell several months behind Hu in promotions, and how intent he was on catching up.


At Aspen, I learned how people with money had always participated in the political process. China’s system was the outlier in that sense, denying its capitalist class a say in the direction of the country. But those of us who identified as capitalists wanted a voice. We wanted protection for our property, our investments, and other rights. We wanted, if not an independent judiciary, at least a fair one where judgments were made on the basis of law and not on the whims of the local Party boss. We craved predictability in government policies because only then could we invest with confidence.


But the changes, subtle at first but then unrelenting, prompted me to reconsider. As the going got tougher in Beijing, as opposition to our ideas grew within the airport bureaucracy, my view shifted. I came to believe that in China a long-term business model wouldn’t work. I began to understand what some of my entrepreneur friends had been telling me all along: the smart way to do business in China was to build something, sell it, take money off the table, and go back in. If you invest $1 and you make $10, you take $7 out and reinvest $3. But if you keep $10 in, chances are you’ll lose it all.

The Party seemed increasingly threatened by entrepreneurs. A segment of society with means was getting more independent. Entrepreneurs like us were pushing for more freedom, more free speech, and in a direction that was less under the Party’s control. The Party was very uncomfortable with us wading into waters that it controlled.


The Party had other ways to push people like us back into line. Whereas we’d once dared to think that we could constitute an independent force, the Party made it clear that we were still just cogs in its machine, little screws in a big system designed to perpetuate the Party’s rule. Men like Jack Ma, or Pony Ma, might have untold wealth on paper, but they were compelled to serve the Party. Soon the Party would be passing laws such as national security legislation that obligated all companies in China, if directed, to spy for the state.


Li Peiying’s fatal mistake was speaking too much. Generally, if you’re arrested for corruption in China, you’re supposed to shut up. The CCP functions like the Mafia; it has its own code of omerta. But, I was told, Li Peiying revealed all his dealings with senior Chinese officials. The people handling the investigation didn’t know what to do with his testimony since it touched the Party’s highest levels, including the family of Jiang Zemin. Li also lacked the blood connections into the system that could have spared his life.


Wang went to Bo Xilai’s office and told him. Bo took that as an implicit threat. In his mind, as a loyal police chief, Wang should’ve just quashed the case and made it go away. Bo jumped up from behind his desk and slapped Wang with a force hard enough to puncture Wang’s eardrum. Bo then fired Wang and had him place under investigation for corruption.


In Sun’s case, from the day he made minister of agriculture in 2006 he’d focused like a laser on moving up the chain. He’d told Whitney that as long as he didn’t slip up, he was going to end up on the Politburo’s Standing Committee and if he wasn’t going to be president he’d be the premier. He made every move with his eyes on the prize.

The Party alleged that Sun paid for prostitutes and took bribes. But we knew him well. He didn’t lust for money or sex. He lusted after power. Why would he run after women or a few million dollars when he had a nation of 1.4B people potentially in his grasp.

From what Whitney and I had observed, the guys who succumbed to the temptations of corruption were usually about to retire and seeking to feather their nests, not the ones vying to rule the country. We’d watched Sun spend his career carefully insulating himself against allegations of malfeasance. While he was in Shunyi, he had done influential people favors by doling out land parcels, but in a strictly legal sense that wasn’t corruption. But Xi Jinping and his minions had apparently decided to concoct a case against him, so there was nothing he could do. Throughout China’s history, so many emperors have killed off princes. This was just more of the same.


The second is how much politics played a role in these events. Whitney got the divorce case moved to Beijing because she thought she could play her guanxi game and determine the settlement. Right in the middle of one hearing, the judge excuse himself to take a call. Here it comes, I said to myself. She’s making a move behind the scenes to get the judge to rule in her favor.


For years, Western commentators insisted that people like Wolfgang who’d been educated overseas were agents of change in China — that they’d imported universal values from the West and push China in a better direction. But people like Wolfgang never saw themselves in that role. His interest was in China’s remaining the way it was. That’s what made him a very rich man and allowed him to reap the benefits of two systems at once, the freedoms of the West and the managed duopolies of authoritarian China.

The more I saw of Wolfgang and others like him, the more I viewed them as highly competent enablers of an increasingly toxic affliction, Chinese Communism. In exchange for a pot of gold, they’d sold their souls. Whitney and I had played by the rules they and their parents had set, and we’d prospered. But we knew the rules were skewed. Whitney was comfortable staying inside this skewed system; I wanted out.


Societies and nations tend to think of themselves as eternal. They also cherish a tale of their origin. A special feature of Chinese civilization is that it seems to have no beginning. It appears in history less as a conventional nation-state than a permanent natural phenomenon. In the tale of the Yellow Emperor, revered by many Chinese as the legendary founding ruler, China seems already to exist.

The Yellow Emperor has gone down in history as a founding hero; yet in the founding myth, he is reestablishing, not creating, an empire. China predated him; it strides into the historical consciousness as an established state requiring only restoration, not creation. This paradox of Chinese history recurs with the ancient sage Confucius: again, he is seen as the “founder” of a culture although he stressed that he had invented nothing, that he was merely trying to reinvigorate the principles of harmony which had one existed in the golden age but had been lost in Confucius’s own era of political chaos.


China’s splendid isolation nurtured a particular Chinese self-perception. Chinese elites grew accustomed to the notion that China was unique — not just “a great civilization” among others, but civilization itself.


But unlike Machiavelli, Confucius was concerned more with the cultivation of social harmony than with the machinations of power. His themes were the principles of compassionate rule, the performance of correct rituals, and the inculcation of filial piety. Perhaps because he offered his prospective employers with no short-term route to wealth or power, Confucius died without achieving his goal: he never found a prince to implement his maxims, and China continued its slide toward political collapse and war.


Confucius preached a hierarchical social creed: the fundamental duty was to “Know thy place.” To its adherence the Confucian order offered the inspiration of service in pursuit of a greater harmony. Unlike the prophets of monotheistic religions, Confucius preached no teleology of history pointing mankind to personal redemption. His philosophy sought the redemption of the state through righteous individual behavior. Oriented toward this world, his thinking affirmed a code of social conduct, not a roadmap to the afterlife.


The Emperor did not hold “summit meetings” with other heads of state,; instead, audiences with him represented the “tender cherishing of men from afar,” who brought tribute to recognize his overlordship. When the Chinese court deigned to send envoys abroad, they were not diplomats, but “Heavenly Envoys” from the Celestial Court.

The organization of the Chinese government reflected the hierarchical approach to world order. China handled ties with tribute-paying states such as Korea, Thailand, and Vietnam through the Ministry of Rituals, implying that diplomacy with these peoples was but one aspect of the larger metaphysical task of administering the Great Harmony. With less Sinicized mounted tribes to the north and west, China came to rely on a “Court of Dependencies,” analogous to a colonial office, whose mission was to invest vassal princes with titles and maintain peace on the frontier.


When foreign dynasts prevailed in battle, the Chinese bureaucratic elite would offer their services and appeal to their conquerors on the premise that so vast and unique a land as they had just overrun could be ruled only by use of Chinese methods, Chinese language, and the existing Chinese bureaucracy. With each generation, the conquerors would find themselves increasingly assimilated into the order they had sought to dominate. Eventually their own home territories — the launching point of their invasions — would come to be regarded as part of China itself. They would find themselves pursuing traditional Chinese national interests, with the project of conquest effectively turned on its head.


A turbulent history has taught Chinese leaders that not every problem has a solution and that too great an emphasis on total mastery over specific events could upset the harmony of the universe. There were too many potential enemies for the empire ever to live in total security. If China’s fat was relative security, it also implied relative insecurity — the need to learn the grammar of over a dozen neighboring states with significantly different histories and aspirations. Rarely did Chinese statesmen risk the outcome of a conflict on a single all-or-nothing clash; elaborate multiyear maneuvers were closer to their style. Where the Western tradition prized the decisive clash of forces emphasizing feats of heroism, the Chinese ideal stressed subtlety, indirection, and the patient accumulation of relative advantage.


Where the skillful chess player aims to eliminate his opponent’s pieces in a series of head-on clashes, a talented wei qi player moves into “empty” spaces on the board, gradually mitigating the strategic potential of his opponent’s pieces. Chess produces single-mindedness; wei qi generates strategic flexibility.


What distinguishes Sun Tzu from Western writers on strategy is the emphasis on the psychological and political elements over the purely military. The great European military theorists Clausewitz and Jomini treat strategy as an activity in its own right, separate from politics. Even Clausewitz’s famous dictum that war is the continuation of politics by other means implies that with war the statesman enters a new and distinct phase.

Sun Tzu merges the two fields. Where Western strategists reflects on the means to assemble superior power at the decisive point, Sun Tzu addresses the means of building a dominant political and psychological position, such that the outcome of a conflict becomes a foregone conclusion. Western strategists test their maxims by victories in battles; Sun Tzu tests by victories where battles have become unnecessary.


For China’s classical sages, the world could never be conquered; wise rulers could hope only to harmonize with its trends. There was no New World to populate, no redemption awaiting mankind on distant shores. The promised land was China, and the Chinese were already there.


It was hard, the chairman said, for people to overcome the habits of 3K years of emperor-worshipping tradition.


They had never conceived their security to reside in the legal arrangement of a community of sovereign states. Americans to this day often treat the opening to China as ushering in a static condition of friendship. But the Chinese leaders were brought up on the concept of shi — the art of understanding matters in flux.

When Zhou wrote about reestablishing friendship between the Chinese and American peoples, he described an attitude needed to foster a new international equilibrium, not a final state of the relationships between peoples. In Chinese writings, the hallowed words of the American vocabulary of a legal international order are rarely to be found. What was sought, rather, was a world in which China could find security and progress through a kind of combative coexistence, in which readiness to fight was given equal pride of place to the concept of coexistence.


One cultural trait regularly invoked by Chinese leaders was their historic perspective — the ability, indeed the necessity, to think of time in categories different from the West’s. Whatever an individual Chinese leader achieves is brought about in a time frame that represents a smaller faction of his society’s total experience than any other leader in the world. The duration and scale of the Chinese past allow Chinese leaders to use the mantle of an almost limitless history to evoke a certain modesty in their opposite numbers. The foreign interlocutor can be made to feel that he is standing against the way of nature and that his actions are already destined to be written as a footnoted aberration in the grand sweep of Chinese history.


Many cultures, and surely all Western ones, buttress the authority of the ruler by demonstrative contact of some kind with the ruled. This is why in Athens, Rome, and most Western pluralistic states, oratory was considered an asset in government. There is no general tradition of oratory in China. Chinese leaders traditionally have not based their authority on rhetorical skills or physical contact with the masses. In the mandarin tradition, they operate essentially out of sight, legitimized by performance. Deng held no major office; he refused all honorific titles; he almost never appeared on TV, and practiced politics almost entirely behind the scenes. He ruled not like an emperor but as the principal mandarin.


The Chinese leadership would not let ideological constrain their reforms; they would instead redefine “socialism with Chinese characteristics” so that “Chinese characteristics” were whatever brought greater prosperity to China.


In all Chinese societies, ultimate reliance is placed on family members, who in turn benefit in ways determined by family criteria rather than abstract market forces.


The students did not set out to pose a mortal challenge to what they knew was dangerous regime. Nor did the regime relish the use of force against the students. The two sides shared many goals and much common language. Through miscommunication and misjudgment, they pushed one another into positions in which options for compromise became less and less available. Several times a solution seemed just within reach, only to dissolve at the last moment. The slide to calamity seemed slow at first but then accelerated as divisions deepened on both sides. Knowing the outcome, we read the story with a sense of horror that we receive from true tragedy.


My opposite numbers had a genuine difficulty; they could not understand why the US took umbrage at an event that had injured no American material interests and for which China claimed no validity outside its own territory. Explanations of America’s historic commitment to human rights were dismissed, either as a form of Western “bullying” or as a sign of the unwarranted righteousness of a country that had its own human rights problems.


The attempt to alter the domestic structure of a country of the magnitude of China from the outside is likely to involve vast unintended consequences. American society should never abandon its commitment to human dignity. It does not diminish the importance of that commitment to acknowledge that Western concepts of human rights and individual liberties may not be directly translatable, in a finite period of time geared to Western political and news cycles, to a civilization for millennia ordered around different concepts. Nor can the traditional Chinese fear of political chaos be dismissed as an anachronistic irrelevancy needing only “correction” by Western enlightenment. Chinese history, especially in the last 2 centuries, provides numerous examples in which a splintering of political authority — sometimes inaugurated with high expectations of increased liberty — tempted social and ethnic upheaval; frequently it was the most militant, not the most liberal, elements that prevailed.


Observe carefully; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.

Enemy troops are outside the walls. They are stronger than we. We should be mainly on the defensive.


But even as tides were shifting, Chinese leaders projected a fiery sense of independence. They masked their concern by missing no opportunity to proclaim that they would resist outside pressure to the utmost. As Jiang insisted to me in 1991: “We never submit to pressure. This is very important. It is a philosophical principle.”


All of these incidents, each of which had its own rationale, were analyzed in China in terms of the Chinese style of Sun Tzu strategy, which knows no single events, only patterns reflecting an overall design.


Beijing retained its characteristic willingness to adjust to changes in alignments of power and in the composition of foreign governments without passing a moral judgment. Its main concerns were continued access to oil from the Middle East and protection of Chinese investments in Afghanistan’s mineral resources. With these interests generally fulfilled, China did not contest American efforts in Iraq and Afghanistan (and may well have welcomed them in part because they represented a diversion of American military capabilities from East Asia).


In the Chinese view, the pursuit of a currency policy that favors domestic manufacturers is not an economic policy so much as an expression of China’s need for political stability. Thus in explaining to an American audience in September 2010 why China would not drastically revalue its currency, Wen Jiabao used social, not financial arguments: “You don’t know how many Chinese companies would go bankrupt. There would be major disturbances. Only the Chinese premier has such pressure on his shoulders. This is the reality.”


In a separate passage, Liu comments favorably on the role of traditional Chinese Emperors, whom he describes as acting as a kind of benevolent “elder brother” to smaller and weaker countries’ kings.


Where the Confucian tradition prized universal harmony, Mao idealized upheaval and the clash of opposing forces, in both domestic and foreign affairs (and, indeed, he saw the two as connected — regularly pairing foreign crises with domestic purges or ideological campaigns).