China’s Coup Rumors: Signs of the Twilight of Centralized Government?

China’s political system has shown increasing signs of fracturing.

Writes the Wall Street Journal Editorial,

Rumors of a coup in Beijing ricocheted around the Chinese Internet on Tuesday and even caused the cost of credit default swaps on Chinese debt to rise slightly. That's remarkable considering there wasn't one iota of evidence that shots were fired at the Diaoyutai State Guest House or tanks were taking to the streets, as viral microblog posts had it.

But then consider that a month ago, Wang Lijun, an official of vice ministerial rank, sought asylum in the U.S. Consulate in Chengdu. Last week, his boss Bo Xilai, the popular party secretary of Chongqing, was dismissed from his post six months before a national leadership transition. In these strange days, it's easy to see why Chinese citizens may believe reports of a coup.

China is supposed to have "institutionalized" its leadership transitions so that such an upheaval could never happen. The outgoing Politburo Standing Committee hands over power to the anointed party general secretary and premier and picks the rest of the new Politburo. The Standing Committee also selects the two slightly younger men who will take over the top jobs 10 years down the road.

I have previously noted that like Europe, China’s top down politics has had a fragile and unsustainable relationship with snowballing forces of decentralization inspired by the growing political power of entrepreneurs, which eventually will lead to a head-on collision that would translate to a political upheaval.

We are seeing more signs of these developments.

Again from the same article, (bold emphasis mine)

The party has been able to keep internal strife under control by avoiding ideological struggle over the last 20 years. The factions have competed for important posts and the spoils of power, but they ruled by consensus. The public was simply told to believe in the myth of a monolithic party and ignore the men squabbling behind the curtain.

This technocratic pragmatism may now be breaking down. For instance, Bo Xilai appealed to leftists' disgust with bourgeois individualism and public unhappiness with income inequality, a tactic that alarmed some leaders. Since his dismissal, leftist websites and commentators have also been silenced.

But there are plenty of other voices on the "right" advocating liberal political reform. Ten years ago, the prospect of achieving middle-class incomes made most intellectuals unwilling to rock the boat. Now they feel secure enough to demand more rights. The party sees this as evidence of Western infiltration, and it is tightening control over the media and launching new campaigns to promote the spirit of self-sacrifice.

Entrepreneurs are indeed becoming a political force.

Either China's politics harmonize with the dynamics of the economy through decentralization, or China’s politics would regress to the Mao Zedong model which would close their doors to the world. My bet is in the former.

Yet any crisis or recession will likely accelerate this turbulent transitional process.

And as I earlier posted

Entrepreneurship will be the hallmark of the information age.

Interesting times indeed