April 21, 2011
The People’s Republic of China (China) remains a communist dictatorship even as it actively practices capitalism. The decision by the Chinese Communist Party (CCP) to embrace capitalism is a realistic decision made possible by a radical shift in Confucian values in early 19th century China during the final period of the Qing dynasty. A new form of Confucianism, Kaozheng, introduced evidenced-based thought and real world application of values to Confucian ethics (Spence, 1991).
The application of Kaozheng, in a period of difficult economic development caused by communist economic principles, compelled the CCP to adopt capitalism as the only means to ensure the CCP’s survival. Under the leadership of Deng Xiaoping, the CCP introduced “market reforms” in 1987 that resulted in the CCP announcing a new “responsibility system” allowing certain capitalist practices, and “special economic zones” in 1992. Foreign corporations were invited to invest in China and employ the millions of unemployed urban and rural workers who were viewed by the Party as a threat to political stability. Within two years the special investment zones were replaced by the ability to invest anywhere in China. The influx of investment and the demand created for Chinese businesses to serve the needs of new foreign businesses required a viable banking and financial system.
The CCP shaped the banking system to be the primary source of all investment and capital in the nation. The CCP controls all aspects of the banking system, and this control is designed to allow the CCP to direct all fiscal, monetary, and economy policies in ways that support the CCP’s ability to remain in power (Walter & Howie, 2010). Every aspect of banking in China is designed to serve the CCP’s strategies for domestic and foreign policies. Tight control of the banking system, combined with limiting the... [continues]
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