China's New 'Bling Empire' in Democracy's Way

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Wednesday November 18, by Jerome F. Keating Ph.D.

Unlikely and strange as it may seem, changes, serious changes, continue now in the alleged "Middle Kingdom" China. They are conflicting changes whose directions may not necessarily be for the better. Some will champion these changes while others will try to contest them or spin them into minimalism. Few could have anticipated them especially with all of their ramifications, but when examined more deeply they remain changes that will draw future battle lines and despite wishful promises, they will shatter both the dreams and illusions of many.

Start with the latest revealing confluence of events. The first big exposure came with Erwan Rambourg's new book, The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun, published in August. This book has a challenging and provocative title and the author, the Managing Director of HSBC and co-head of Global Consumer and Retail Equity Research is well qualified to talk on the subject i.e. marketing and in particular China's "increasing and volatile demand for luxury items." That is his topic, but the "dynasty" that lay behind his talk is the real change and revelation.

Converging with this publication is a contrasting event with different exposure and consequences, namely that of power and control versus promises and hope. This event began in Hong Kong a month after the book was published. The protests in Hong Kong reflect changes in a totally different arena - the political arena - and they focus on a different fact, namely that Beijing promised Hong Kongers the right to elect their leaders 20 years after the 1997 handover. Now, however, some 17 years later, Beijing is reneging on that promise and granting the people of Hong Kong the right to choose between two to three candidates vetted by Beijing. In its continued controlling style, Beijing claims that Hong Kong obviously did not read the fine print in its promise.

What is the backdrop? Step back about one hundred years to the year 1911. At that time, Sun Yat-sen had a stillborn dream for a democratic and republican China with a proposed government of the people, by the people and for the people. Sun's revolutionary dream took down the Qing Dynasty but it did not create the republic that Sun wished. Sun's dream got sidetracked by Yuan Shi-kai, warlords and eventually the Civil War between the Chinese Nationalist Party (KMT) and the Chinese Communist Party (CCP).

The fall of the Qing Empire instead echoed the opening line of the Romance of the Three Kingdoms, "The empire long divided must unite, long united must divide. Thus it has ever been." The Manchu Qing had created and united a more expansive empire than the Han Ming ever had but that Manchu empire long united did eventually divide and it remained thus divided until the CCP eventually united it (without Mongolia) in 1949.

The key point, however, beyond division or unity, is that the CCP in no way has followed the dream of Sun Yat-sen. Instead it created another empire, its own empire with a new privileged class - moneyed. After Mao's cultural and economic disasters, this new empire was rescued by Deng Xiaoping who embraced a pragmatic capitalism figuring that whether the system is black or white, economic results were of central importance. Rambourgh whimsically or cleverly has aptly termed this new empire, "the Bling Empire." The name not only rhymes with Ming and Qing but also seriously reflects the new true determinant of a twisted Confucian hierarchy in the empire - the buying power of merchants.

Those who follow wealth would know that China under Dengism increased enormously in wealth. As of this year, China became second only to the US in both the number of billionaires and the number of millionaires that it has. This is a strange and unusual statistic for a country that proposes to be communist or at least socialist.

Ironically in this new empire, the way to advancement has also changed. One no longer needed to pass any type of imperial exams; one has to be either a descendant of the ruling families of the Central Committee or one needs the right connections and drive to accumulate wealth and buying power. And there is more.

That China is the most populous country in the world is common knowledge, but few grasp what that actually translates into. China has an estimated population of 1.357 billion people, a figure nearly four times that of the USA's 316 million. China has currently about 2.38 million millionaires. However even if China increased its millionaires a hundred fold it would still have some 1 billion poor who live in the urban/rural divide. While a privileged few roam the world, the one-party state oligarchy prevents both urban migration with strict imperial control of the household registration system (hokou) and international travel with extremely limited visas as well.

If these could be seen simply as statistics, there would be little problem, but what Rambourgh brings out is that these statistics reflect more. Only 4 per cent can travel and the few are becoming the major consumers of luxury items worldwide and that they account for 35 percent of luxury sales. It may be 50 per cent by 2025. These four percent are the drivers of the luxury consumption market. Rambourgh ponders what would their buying power be if eight per cent were allowed to travel.

Rambourgh is on the lecture circuit with this; he will be in Taiwan in November. While brand name companies are no doubt licking their chops at these predictions of consumerism, they are also trying to figure out the shifting consumption taste of these new buyers. Wealth is glorious, so how can brand names get their piece of the pie?

As the business world salivates over its new challenge, examine what Hong Kong's protests have exposed. Hong Kong (where Rambourgh lives) has already experienced this new wealthy class first hand and ironically calls them "locusts." Hong Kong has also experienced first hand the one party-state control of this new dynasty and it sees it for what it is, a century after Sun Yat-sen's dream. In 17 years the simple promise of popular suffrage remains unachievable even for the special administrative region that has the "privilege of one country and two systems."

One thinks of the misinterpreted and misapplied quote of Zhou EnLai. When asked about the impact of revolutionary happenings in France. Thinking of the late 1960s, he said, "It is still too early to tell."

Switch and ask has Sun Yat-sen's 1911 dream of a democratic republic for China had any impact? The facetious answer comes, "A century later, it is still too early to tell."

The reasons why the attempts to root out China's inherent corruption will fail, is material for another piece. Rambourgh still predicts that the wealth of the few in China is here to stay, so what will the new empire do as the economic engine begins to slow down? The oligarchs that rule from Beijing will not sacrifice money and power. And pipedream pundits who still try to say that democracy will come to China had best seek a new answer.

Taiwanese, initially drawn like moths to the fires of this new wealth, are finally starting to realize how this new and unrelenting dynasty threatens their democracy. And what of Sun Yat-sen's dream for China? It is gone with the winds of change in the Bling Empire. What will replace it is still too early to tell, but it will not be a democracy.