Asia Centre

According to the official press, the number of political players not issued from the ranks of the Chinese Communist Party is rising. There are over 180,000 "non communist" deputies in the People's Congress and in local People's Congresses, an increase of over 50 % in five years.

The number of non-communists in the consultative conferences at national and local levels is said to have reached 340,000, as against 240,000 five years ago. 19 ministerial posts in the central authorities are said to be held by people from outside the CCP, an increase of 26 % over the same period.

The nature of the roles they play has also evolved, from posts in the fields of education and culture to a "wider range of fields".

Moreover, concerning the choice of delegates for the 17^th Central Committee, the provincial committees have been asked, for the first time, to "sound out the opinions of other parties before making a selection of candidates". With this in view, the CP's Central Committee, the Council of State  and the Ministries, since 2002,  has held 18 meetings bringning together people who were not members of the CCP in order to inform them of key decisions taken and to ask for their points of view.

Such ameeting took place between Wen Jiabao, the Chinese Federation of Industry and Commerce, non-communist  experts and the leaders of eight other parties: the Revolutionary Committee of the Kuomintang, the China Democratic League, the Association for the Democratic National Construction of China, the Chinese Association for the Promotion of Democracy, the Chinese Peasants and Workers Democratic Party, Zhi Gong Dang, the Jiusan association and the Taiwan League for Democratic Self-government^[1].

The meeting was aimed at eliciting suggestions from its members about the country's financial reforms, monetary policies and the regulation of bank loans in China.

Minsheng is an oddity on the Chinese financial landscape: it is China's first entirely private bank. In this article the Zhongguo Jingji Zhoukan, published by the very official People's Daily group, sings the praises of the company on the occasion of its tenth birthday.

Zou emphasises that the creation of Minsheng in 1996 was the end of an era. Before then, banks had a single shareholder, very low profits and major quantities of bad debt (the well-known NPL, or non performing loans). The system was dominated by the four big State commercial banks, whose restructuring had not yet been really undertaken.^[1] The direct consequence was a dangerous weakening of the banking sector. Minsheng is therefore considered to be "the first experiment in the reform of the Chinese financial system" (中国金融体制改革的第一块试验田). It was successfully floated on the stock market in 2000, and succeeded in applying innovative management and in obtaining major returns on investment without accumulating NPL.

The idea officially emerged during the 7^th Congress of the National Federation of Industry and Commerce (全国工商联), in 1993. The non-state enterprises^[2]  took the opportunity to complain of the lack of non-state financial structures and of the difficulties they faced in obtaining loans. These complaints were subsequently reported to the Council of State Affairs (CSA) by the Federation's president, Jing Shuping. It was then that he had the idea of setting up Minsheng.

The article does not state what happened between 1993 and 1996. However, the bank was officially registered on February 7 1996. In the interval, Jing Shuping had obtained the blessing of then Prime Minister Zhu Rongji. The first innovation was that Jing Shuping stated his determination that Minsheng should have shareholders' meetings, a board of directors, an auditing committee, a commercial network and independent management. To Zhu Rongji, Minsheng constituted the first step in the reform of the commercial banking sector.

The bank's management agree that the story of Minsheng can be divided into three stages.

On December 1^st 1996, 59 companies became shareholders in the bank with an initial capital of 1.38 billion yuans. As well as its "western-style" functioning, Minsheng chose to innovate in two other areas in comparison with its Chinese competitors. Firstly, from 1996, it hired Price Waterhouse Cooper to audit its accounts. This was the first time a Chinese bank had called in international auditing consultants. Secondly it chose to put profits at the heart of its strategy, by linking its employees' salaries to the bank's profits^[3]. 

The bank thus expanded in the first few years, until the end of 1999. It opened branches in the cities of Shanghai, Shenzhen, Wuhan, Taiyuan, Dalian, and Hangzhou, and developed international services as well as a range of activities.

2.       Crisis and restructuring, 1999

However, by the end of 1999 the bank had accumulated 8.72 % of NPL. Its capitalisation had fallen to 800 million yuans. The management then began to consider restructuring.

3.       A new team and more expansion, from 2000 to today.

In April 2000, the bank elected a new president of its boeard of directors: Dong Wenbiao. It then embarked on "the development fast track". (民生银行发展进入快车道). At the end of 1999, the bank's total assets amounted to 25.6 billion yuans ;  a year later they had risen to 69.7 billion. The total of loans extended rose from 18.9 billion in 1999 to 37.6 in 2000.

Since then, the bank has been quoted on the A market, and its capitalisation reached over 20 billion in 2005 (as against the initial 1.3 billion at its creation). An IPO was also planned on the Hongkong market in 2005, but indefinitely postponed because of the overly large number of mainland companies who chose that moment to seek flotation on the stockmarket^[4]. 

Minsheng : results in 2006 

Billions of RMB

To these results must be added an NPL rate of 1,21 %, the lowest in the country.

At present, Minsheng's new president, Eddie Wang, has stated his desire to develop retail banking and consumer loans, and to reduce the bank's dependence on capital. For example retail banking activities presently amount to 15% of Minsheng's total activities, as against 3% in 2003, the objective being to reach 30 % in 2008.

Dong Wenbiao hopes eventually to make Minsheng into a bank which can take on its competitors in the international market. He sees the fourth and next stage in the bank's history as that of its international expansion.

How can this success be explained ? 

Firstly the bank has developed a real capacity for management innovation. Its Guangzhou subsidiary, set up on December 18 1996, is mentioned as an example. The article refers to structural reforms in the functioning of management and organisation which this subsidiary has undertaken, but does not state their exact nature.

Zou sees Minsheng's success as above all to be found in a culture of respect for the rules (合规文化), in particular those concerning NPL (see the Cooke ratio in the Basle 1 agreements).

Also to be noted is Minsheng's determination, since its creation, to function in the manner of a western bank, thus setting itself apart from its Chinese competitors. It is probably this foreign-inspired management which allowed it to achieve such a low rate of NPL.

Moreover the bank does not hesitate to call on personnel with solid experience of foreign banks. Eddie Wang, who was appointed president in July 2006, was previously president of HSBC China. It seems that the bank has gone so far as to develop a policy aimed at attracting qualified personnel from these foreign banks: the bank's cadres include former cadres from Citibank, HSBC, UFJ, etc. Also to be noted is the SAP (Systems, application, and products for data processing) agreement between Minsheng and Accenture.

This praise may seem surprising on the part of an organ of the official press. All the more so as a few months ago Minsheng was the target of criticisms from the Party. At the time the bank was targeting foreign shareholders who, given Minsheng's particularly dispersed shareholder structure, were likely to become the majority. The bank would then have come under foreign control, which was something the authorities could not accept.

This article may be a manifestation of a real Chinese desire to reform the banking sector, and to tighten links with powerful players in the non-state sector.

The second half of 2006 marked an important turning-point in Sino-Japanese relations: Shinzo Abe's decision to make his first official visit since his appointment as Prime Minister to China (rather than to the United States), and the North Korean nuclear test, contributed to a warming of relations between the two Asian giants.

The leaders of the two countries were also able to meet at the APEC summit, thus putting an end to five years of political coldness in an economically heated context.

These two articles reflect both the viewpoint of the official press and that of a researcher from the prestigious research centre for international relations, who is now part of the Chinese government, and highlight the consensual nature of Sino-Japanese relations: in content, the analyses diverge little, particularly in the distance they keep from the subject in question. Sino-Japanese relations are not presented as being as fundamental for China as they may be for Japan or for Asia. The "readjustment" (调整) of Japan's China policy is indeed remarkable and is to be favourably received, but it is up to Abe to maintain the momentum. Just beneath the surface of these texts lies the idea that the continuation of warmer relations depends only on the decisions of the Japanese government, and that this warming is an implicit signal of Japan's return to the Asian community after the distance maintained by Koizumi.

The initiative for this change in political line is entirely attributed to Abe (in relation to overtures said to have been made on the Chinese side) principally for domestic political reasons. The overture towards China is said to have been used by Abe to set himself apart fom Koizumi and to score points on the domestic front, before having to take action on more highly-charged matters. The undeniable success of his foreign policy is said to make it possible for Abe to stabilise his political situation, at least in the short term.

While the authors present the "proactive" attitude adopted by Abe towards China as positive, necessary and important (especially to Japan's national interests), they also refer, in passing, to its pragmatic and even opportunistic side.  A certain ambiguity emerges from their analyses: on the one hand they assert that Abe's readjustment of Japanese policy is a change of form more than of content, but on the other they elaborate on the positive consequences of joint Sino-Japanese action on a regional level, taking the improvement in relations as a fait accompli. While criticising Shinzo Abe's conservative and nationalist tendencies, the possibility that the visits to Yakusuni might begin again and the desire to contain China, they are already announcing a new future for East Asia.

The opportunities are indeed many and important: consolidating an economic partnership which in 2006 saw bilateral trade reach 200 billion dollars and Japanese investment in China reach 5.7 billion dollars (by October 2006), and broadening it to include science and technology, energy and environmental protection; providing joint leadership to the Asian community and reinforcing strategic, military and economic cooperation in East Asia. Moreover China offers undeniable economic perspectives to Japan, and is already the engine of an economic growth which has been sustained for fifty-eight months (which is longer than its fifty-seven month period of growth in the 1960s, as Wang notes).

The authors note that the vicious circle of mutual distrust has now been broken, and could open the way to more extensive cooperation on the denuclearisation of the Korean peninsula and the economic and political integration of Asia. This integration could then further consolidate the Sino-Japanese partnership. The (real or imaginary) rivalry for the domination of Asia thus seems to be brushed aside by the authors. Once the "political obstacles" (which is to say the visits to Yasukuni Temple and the question of history) have been set aside, bilateral relations can only improve. Moreover 2007 marks the 35^th anniversary of the normalisation of diplomatic relations, and can thus only be promising on the bilateral level.

However the authors also put forward a few reservations, as certain factors could still alter the situation, and political tensions which can not be so quickly erased may reappear:

1.       The emergence of China and "the assertion of its development model" run the risk of arousing apprehension in Japan and giving rise to an increase in nationalism, a tendency which the conservative Shinzo Abe could encourage. The pursuit of the "normalisation" of Japan and the project for creating an American-style National Security Council^[1] could only exacerbate tensions between the two giants.

2.       Japan still promotes an ideology and values aimed at limiting China's political influence. Declarations about an Asian community based on the spread of freedom, of democracy and the rule of law, as well as the inclusion of New Zealand and Australia are no more than ways of asserting Japan's leadership role and of helping to encircle (围堵) China. Likewise, efforts aimed at setting up an economic partnership agreement "merely counter efforts towards a free trade zone between China and the ASEAN countries". As Asian integration progresses, the "Japanisation" of Asia and the "imposition of the Japanese model" will become increasingly sensitive questions.

3.       The question of transparency and of modernisation in the military field: Wang sees the military question as producing a twofold problem: firstly Japanese aspirations in the field, exacerbated by the Korean nuclear test which gave rise to debate about the nuclearisation of the country, and secondly references made in Japanese defence White Papers to the lack of transparency in the Chinese military, serve only to stimulate an arms race.

4.       Moreover the question of Yasukuni temple has not been settled. In the short term, it seems the question has been resolved, but in the long term, in the context of reviving nationalist sentiment in Japan, the visits to the Yasukuni temple could again become a source of disagreement. Abe has only made "vague statements" (表态模糊) on the subject and could well, as he stated before he was elected, go there himself. Moreover, reform of the basic law on education is said to aim at reinforcing patriotic and nationalist themes in school texts, and at minimising the lessons of history^[2]. 

While the tone used by Wang remains relatively moderate, referring to problems to be managed constructively by both sides, the Huanqiu Shibao is more demanding where the Japanese leaders are concerned, making any improvement in relations conditional on the continuation of the search for and destruction of all traces of Japanese chemical weapons in China, in accordance with the decision taken in 1997 during the UN's Convention on the banning of chemical weapons.

Lastly the question of Taiwan does not fail to appear: although Wang does not refer to it, it is brought up by the Huanqiu Shibao rather as a reminder to Japan of what China considers to be the rules of the game: "Japan should assert its support for the One China policy, not have official relations with the island and not support Taiwanese independence".

In this research article, Yu Hsiao-yun offers an in-depth analysis of the structure of relations between the Chinese Communist Party and the Kuomintang. It aims to show how the two political parties have sought to reestablish official contacts in a climate of mutual hostility at government level, and to build new kinds of relations and interactions. The author offers a study of the relations between the two parties and seeks to determine the possible directions these recent political developments could take. As he sees it, the future of these relations remains subject to the problem of the institutionalisation of the decisions taken by the two political parties, and only a Kuomintang victory in the 2008 presidential election could make possible the perpetuation of this novel relationship.

On April 26 2005, the President of the Kuomintang and the General Secretary of the Chinese Communist Party decided to establish a "Forum between the two political parties of the two shores" (dang dui dang de liang an zheng dang gao feng hui). The two parties agreed on the necessity of "peaceful development of the two shores and [on] a common vision" (liang an heping fa zhan gongtong yuanjing) and officially agreed to recognise the existence of the 1992 consensus and to fight against Taiwanese independence (fan taidu). It was the first time since 1945 that such a meeting had taken place between the two hostile parties. On April 13 2006, in accordance with what had emerged during the meeting between Hu Jintao and Lien Chan (lien-hu huitang gongshi) the two parties organised an "Economic Forum of the two shores" (liang an jingji lun tan) whose participants included four vice-presidents of the Kuomintang and 50 of Taiwan's most influential big business leaders. At the end of this economic forum, fifteen measures were announced in the fields of agriculture, medecine and education, the principal aim of whose content was to give Taiwanese products privileged access to the Chinese market and to win the support of Taiwanese public opinion. On October 17 of the same year, the two parties organised a "Forum on agricultural cooperation between the two shores" (liang an nong ye hezuo luntan). The Communist Party announced the broadening and deepening of agricultural measures for Taiwan, with ten principal measures whose objective was to offer financial support and guarantees on the protection of Taiwanese brands and production techniques, and the rights and interests of Taiwanese farmers. On another level, the Foundation for trade between the two shores (Haixia liang an faxue jiaoliu zujinghui) and the Chinese Foundation for legal studies (zhongguo fa xue jiaoliu qijinghui) jointly organised a "Forum for legal studies between the two shores of the Strait" (haixia liangan faxue luntan) in order to consider the problems linked to the financial and trade environment between the two shores as well as questions relating to the protection of investment. In December 2006, the two parties established a "Youth Forum between the two shores" (liangan qingnian luntan) with the objective of increasing exchanges and cooperation among the young in the economic sphere, in scientific development and in the creation of shared structures.

The author then describes the environment in which relations between the two political parties began, emphasising the the contrast between the robustness of economic and trade relations and the coldness of political relations. On the historical level, the Kuomintang, under the presidency of Lee Tenghui, had developed secret high level exchanges with China in the 1990s while the two unofficial associations, the SEF (Strait Exchange Foundation) and the ARATS (Association for Relations Across the Taïwan Strait), had served as institutional frameworks. The two associations had thus carried out relatively transparent exchanges by means of semi-government agents. Most of the exchanges were of a governmental kind and therefore limited. President Lee Tenghui's visit to Cornell University in the United States in 1995 and the first election by direct universal suffrage of the Taiwanese President in 1996 provoked the missile crisis and the two associations definitively and totally ceased their exchanges. In 2000, after the democratic changeover of political power at the top of the Taiwanese state and under the government of the Progressive Democratic Party (PDP), Chinese and Taiwanese policies between the two shores maintained a prudent conservatism on the level both of governmental interaction and exchanges through secret channels. But at the same time, on the economic, commercial, cultural and human levels, exchanges between the two shores experienced unprecedented growth^[1].

The author then notes the space left open to the Kuomintang by the conservatism and the passivity of President Chen Shui-bian's policy towards the mainland. According to the author, Chen limited himself to respecting his commitment to the five negatives and continued to refuse to recognise the 1992 consensus and the One China principle. On the level of economic policy between the the two shores, the principles of "active opening and efficient management" having mutated into "efficient opening and active management" brought the development of trade to a deadlock^[2]. This is where the author considers that the political space left to the Kuomintang represented a deciding factor in the construction of a new relationship with the Chinese Communist Party. Thus, as he sees it, it was the Kuomintang's experience and competence in the economic management of relations between the two shores which made it possible for the party to seize the issue. According to the minutes of the meetings of the Central Committee which the author quotes, on May 17 2000, Lien Chan had suggested, under the auspices of the "Guidelines for national unification", building "brotherly relations of peaceful competition" (heping bicai xiongdi guanxi), broadening exchanges and increasing agreements in the hope of building cooperation based on mutual trust (yijiu huxin hezuo) in order to create mutual respect in the framework of a mutually beneficial relationship (huzhong shuangying). Among Lien Chan's proposals, that  of building inter-party communication between the two shores (liangan zhengdang jiuliu goudong) sought to show the space for development of these relations between the two shores which the Kuomintang could take on and manage. Things were decided in 2001, when the vice-president of the Kuomintang Wu Po-hsiung met the Chinese vice-president Qian Qichen on the mainland. This was an informal meeting which, according to the author, made possible the beginning of relations between the two political parties. Despite the promulgation of the anti-secession law on March 3 2005 and the atmosphere of crisis thus produced, on March 28, vice-president Chiang Pin-kun led a Kuomintang delegation to China and met the director of the bureau of Taiwanese Affairs Chen Yunlin, thus making possible the beginning of official relations between the two political parties. In April 2005, Lien Chan began his journey for peace (heping zhi lu) and the economic Forum between the two shores (liangan jingmao lutan) was launched in October 2006. Sixty years on, the Chinese Communist Party and the Kuomintang returned to the establishment of official channels of communication on an unprecedented scale, putting an end to hostile relations.

On a political level, the Kuomintang was ready to face this renewal with political arguments and concrete proposals. The Kuomintang defined relations between the two shores in accordance with the Constitution of the Republic of China, a constitutional China (xianfa yi zhong). The party's mainland policy was organised in accordance with the guidelines for national unification and under the principle of "One China, different interpretations". Opposition to Taiwanese independence, and reunification in the long term (pu ji tong), were defined as the guiding principles of relations between the two shores, which were moreover described as two separate but equal political entities (duideng fenzhi zhuantai). It was a question of avoiding war, of actively promoting peace, and of creating, on the level of trade, a stable and mutually beneficial interaction. On the wider level of economic policy, the Kuomintang suggested a policy aimed, on the one hand, at attracting an ever-increasing number of foreign companies and investors to Taiwan and allowing the integration of foreign companies with a strategy of penetrating the Chinese market, and on the other hand, at a large scale negotiation with China concerning the sharing out of production tasks and economic and trade cooperation. According to the author, the Kuomintang's ambition was to build with China a form of normalisation of relations and a platform for systematic communication (zhiduxing de goutong pintai), and to make possible the creation between the two parties of an elite forum (liangan minjian qinying luntan) and a system of support for Taiwanese entrepreneurs (taishangfuyu jizhi)

On the level of the party's strategy, the author examines how the Kuomintang cleared the political ground necessary for the construction of this new relationship. In the face of the PDP government's refusal to recognise the One China principle and the 1992 consensus, and because of the limitations imposed by its status as an opposition party, the Kuomintang decided to organise its argumentation around the idea of national prosperity (mingsheng), with the objective of building coherence into its approach to exchanges with the other shore. This approach also corresponded with the atmosphere which has characterised relations between the two shores since the PDP came to power: considerably cooler official relations and flourishing human relations (guanfang leng, renmin re). The Kuomintang's approach has had concrete effects in the desire to open Taiwan to tourism, to normalise air links and to solve the problem of equivalences between educational qualifications. On the political level the Kuomintang was planning to organise a second Peace Forum before the 2008 presidential election, in order to discuss political questions, military affairs and national defence. Lastly, on the cultural level, the Kuomintang had the intention of creating a dynamic of powerful cultural exchanges. On the Parliamentary level, the Kuomintang's strategy was to build a solid alliance with People's Party —whose positions on relations between the two shores are similar— with the objective of establishing a majority which would make it possible in particular to revise the texts governing exchanges between the two countries (liangan renim gangxi jiaoli). According to the author, this strategy aimed, in the perspective of the 2008 presidential election, to prove to the Taiwanese electorate that the Kuomintang, unlike the PDP, has the competence and the experience necessary to manage relations between the two shores. The Kuomintang was trying to put across the following message: "The PDP is incapable of managing relations between the two shores and above all does not want to take measures which are beneficial to Taiwan. Thereore it's up to the Kuomintang to do it". Whether or not the PDP agreed with these proposals was not the Kuomintang's principal preoccupation; because of the ideological character of the PDP's approach. The Kuomintang therefore positioned itself from the point of view of the economic interests of the Taiwanese as a whole. This approach, according to the author, has made possible a political opening in relations between the two shores and may condemn the PDP to supporting the status quo for some time. The author concludes by emphasising the fact that the Kuomintang has exchanged its old position in favour of reunification for a position in favour of peace, and remains convinced that not stepping over the Chinese red line of independence will make it possible to assure the development and economic integration of the two shores. He then examines the Kuomintang's optimism on the question of the international space of Taiwan and on confidence-building measures on the military level.

The author then briefly deals with the points of political convergence between the Chinese Communist Party and the Kuomintang. As he sees it, the fourth generation of Chinese leaders has renewed Chinese reunification strategy, by basing themselves on China's economic emergence and on Taiwan's increasing interest in the Chinese market, thus creating a number of new cards in its confrontation with Taipei. Chinese tactics have become more sophisticated, and their application more flexible. In September 2004, during the 16^th Communist Party congress, Hu Jintao took control and completely reformulated Beijing's Taiwan policy. It abandoned a posture of negotiation in favour mild attacks (rouxing gongshi). In 2005, apart from the passing of the anti-secession law and the strong pressure maintained on the Taiwanese independence movement, Beijing used a new strategy of "cold management" (leng zhuli), relied on Washington to keep up strong pressure on the Taiwanese on the one hand, and sought to profit from the divisions in Taiwanese society to pursue an attack on all fronts (quanmian shu gong) on the other. These two facets were accompanied by a desire to set aside the conflict over sovereignty and to woo Taiwanese public opinion. In these circumstances the points of agreement between the Kuomintang and the Chinese Communist Party increased and made it possible to arrive at a consensus: a common struggle against the Taiwanese independence movement under the aegis of the 1992 consensus. The experience and the competencies of the Kuomintang and its status as the opposition party also made it the obvious partner with whom to build a platform for political dialogue. At the same time, the fact that the slogan "one country, two systems" appears to have been abandoned is an illustration of Beijing's desire to help the Kuomintang return to power in 2008. The two political parties have thus become partners and together can influence the outcome of the 2008 presidential election. In this sense, they have already created a new status quo in the Strait, cooperating in order to maintain stability and wielding influence over the political climate. In the framewok of this new balance which is characterised by cooperation accompanied by competition and by ever stronger US involvement, the three parties can reduce the influence of foreign elements on the resolution of the conflict and, for the first time, the people on both shores can take decisions about the rhythm which should be applied to developments between the two shores of the Strait, and manage the business which concerns them themselves.

The author then asks the question of the effectiveness of this new structure for interaction.  As he sees it, China holds a position with a number of advantages and considerable capacity to inflict damage while only the Taiwanese people and Parliament can exercise a certain kind of influence over the evolution of relations between the two shores. The author considers that in such conditions the PDP government is condemned to passivity. As he sees it, China, by working with the Kuomintang within the framework of the interparty economic Forum, has succeeded in generating support among the Taiwanese on the questions of opening up the island, of Chinese tourism and of the normalisation of air links. In order to face the danger of Taiwan being marginalised and and sucked into the Chinese sphere of influence, it is imperative that the PDP develop a new policy and find a way to influence the new status quo. The control and restriction measures put in place by the government during 2006 showed how it sought to avoid being subjected to the influence of the common approach of the political parties, thus highlighting the latter's the influence and effectiveness.

The author concludes by emphasising the dangers which threaten the permanence of relations between the Kuomintang and the Chinese Communist Party. As he sees it, the Chinese reunification strategy which aims to hand out economic benefits to Taiwan by relying on a common prosperity could be limited if it does not produce very concrete results for Taiwanese entrepreneurs. The second danger which threatens the collaboration between the two political parties is linked to the Kuomintang's status as the opposition party. According to the author, only a Kuomintang victory in the 2008 presidential elcetion can make it possible to maintain the advantages of inter-party cooperation. He notes the lack of concrete results in the dossiers on the normalisation of direct air links and raises the question of the institutionalisation of the measures adopted by both political parties. Taking as examples the relations developed between the political parties in the two Germanies or in the two Koreas, the author emphasises the impossibility for the Kuomintang and the Chinese Communist Party to make their their cooperation evolve towards institutionalisation if the Kuomintang is defeated in the 2008 presidential election, especially because of the chronic lack of confidence shown towards the PDP by Beijing.