(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000606200001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: January 12, 2017
• Document Release Date: March 4, 2011
• Sequence Number: 1
• Publication Date: July 9, 1986
• Content Type: MEMO

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DATE ---f- ~-n, ~;
DOC NO ?4 R
OCR 3 Z8,2
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
9 July 1986
China's Conservatives: The Old Guard at Bay
Summary
Tensions between leadership groups generally identified as
conservatives and reformers have dominated Chinese politics and
economics since Deng Xiaoping assumed power in 1977. Our analysis
suggests that in recent weeks the conservative wing has suffered a major
setback and for the present has lost its ability to obstruct the reform
program. The diminishing of conservative influence, in our estimation, will
lead to even more activism in reforming the economy, greater freedom to
experiment, and higher tolerance for open debate about implementing
This memorandum was prepared by I (Office of East Asian Analysis. 25X1
Information available as of 9 July 1986 was used in its preparation. Comments and
queries are welcome and may be directed to the Chief, Domestic Policy Branch, China
Division, OEA 25X1
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A variety of evidence suggests to us that the so-called conservative group in
China's leadership has suffered a defeat in recent months that has left it unable for the
present to interfere with the reformist agenda.' Chen Yun, the dean of China's
economic planners and a leading conservative critic of recent reforms, has withdrawn to
the south of China, where he is in apparent semiretirement. His recent appearances
have been ceremonial. Press summaries of a recently published edition of Chen's works
have had a reformist twist; one article highlighted a speech Chen made in 1962 stating
that China should look to foreign models, among others, for solutions to economic
problems--significant because one of Chen's consistent criticisms of reform has been
that it leans too heavily on foreign concepts.
Politburo member Peng Zhen, a powerful conservative figure because of his
strong ties to the security apparatus and long party career, has begun singing a
reformist song. He recently praised the contributions to China's development made by
the Rong family of Shanghai, one of China's wealthiest capitalist families before 1949
and now prominent in marketing and investment strategies for the reforms. In a speech
published in March, Peng argued that those who label a stress on Marxist study
"conservative" mistake the intent of those who--like Peng--have called for more
attention to Marxist fundamentals because the essence of Marxism is reformist. We also
believe, based on press reports, that Peng's influence in the security
organs has slipped badly, further evidence of his declining political fortunes.
President Li Xiannian, the third party elder usually identified as a conservative
leader, has made no appearances for over a month, cancelling some scheduled meetings
with foreign visitors. The Chinese press reported that he is in the hospital recovering
from a cold. Given Li's age--77--these reports could be true, but political illnesses are
common in China. The timing of Li's "cold" suggests that he may simply have sought a
face-saving way to retire from the political scene. Whatever the case, Li's absence
weakens conservative influence in policymaking.
An additional indication of reformist strength is the number of reform initiatives
now being debated. Some of these--enterprise bankruptcy, unemployment insurance
and labor mobility, for example--are radical reforms in the Chinese context. We view
the absence of conservative carping or statements "qualifying" reform
initiatives--commonly heard as recently as last winter--as particularly significant. F
Although analysts of Chinese politics commonly speak of two competing
groups--reformers and conservatives--it is important to note that all of the top
leaders came to their positions as reformers, intent on undoing the damage of the
Maoist years. Although two camps gradually emerged as the reforms progressed and
disagreements over the scope, pace, and specifics of reform arose, the spectrum of
disagreement is much narrower than previously.
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How It Happened
We believe the anticorruption campaign that began in January was particularly
damaging to the conservatives. The reformers had two goals in their management of
the campaign beyond the obvious one of attacking economic crime:
? To coopt the campaign and deny the issue to the conservatives, who were trying
to use charges of corruption to discredit the reforms.
? To manipulate the campaign to bring direct personal pressure on conservatives
and their supporters. F__1 25X1
The reformers adopted stringent measures to bring corruption under control,
particularly in the central party and government apparatus. Prosecutions for economic
crime were stepped up, and reform leaders warned that officials would not be spared if
they--or their family members--were found guilty of crimes. Through a series of
personnel moves, reformers asserted organizational control over the anticorruption drive.
Bringing the campaign home to the conservatives, reformers first investigated the
children of some senior conservative leaders--including Peng Zhen and Chen Yun--and,
through leaks to Chinese controlled papers in Hong Kong, made these investigations
public knowledge. Peng's daughter had been 25X1
questioned and possibly arrested. Rumors appeared suggesting that Chen Yun's son--a
municipal party official in Beijing--was under suspicion for using his position for
personal gain. The son of a former Shanghai party secretary, a steadfast opponent of 25X1
liberalization policies while in office who was rumored to have had Chen Yun's support,
was executed. Children of other central leaders who supported the conservatives, such
as theorist Hu Qiaomu, were also reported to be under investigation for corruption. F-1
Significantly, none of the openly announced targets of the anticorruption drive
have been identified with the reformist group, even though there is evidence to suggest
that some reformers' family members have been involved in questionable economic
activities. In our view, this is an important indication of the strength of the reformers;
they have managed to take credit for the crackdown, protect their families, and threaten
opponents who persist in criticizing reform. For instance, Peng's daughter was
reportedly cleared of charges, but we speculate that Peng struck a bargain with the
reformers on her behalf. His dramatically altered public statements coincide with the
reported moves against his children.
Some conservatives were still willing to take on the reform policies, however. In
March, 1986, the conservatives began another attack on reformist theories by criticizing
an article written the previous November by a little-known philosophy professor under
the pseudonym Ma Ding. The Ma Ding article had harshly criticized traditional Marxist
economic theory and argued that economists should concentrate on pragmatic,
policy-oriented studies. According to pro-reform Hong Kong journals, the conservative
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attack--which accused Ma Ding of having sold out to capitalism--was orchestrated by
central-level conservative ideologues Hu Qiaomu and Deng Liqun. F__1 25X1
Reformers again turned the issue on the conservatives, counterattacking with a
flood of articles extolling academic freedom and supporting economic debate as
necessary to advance modernization. For example, the 30th anniversary of the famous
"Hundred Flowers Campaign" of 1956 was marked not only by articles singing the
praises of the campaign's spirit of free inquiry but also by unusually blunt attacks on the
repressive antirightist campaign that was launched in 1957 in reaction to the
enthusiastic outpouring of critical writings during the campaign. Commemorative
articles described the repression as a tragic mistake that had cost China the fruits of
many of her best minds. The recent pro-reform propaganda barrage--and rapid
disappearance from the media of articles critical of Ma Ding and his approach--was a
clear demonstration of the strength of the reformist position. Even Hu Qiaomu--whose
son has also reportedly been under investigation--recently made a speech in favor of
The second echelon conservatives may have underestimated the extent to which
their leaders' teeth had been drawn, in our view. The conservative coalition was
vulnerable because of the tenuous nature of the ties among its leaders. The
conservatives, essentially brought together by a querulous distaste for certain
side-effects of reform and shared alarm at rapid change, never had an agreed-upon
alternative program to propose. Deng, taking advantage of the fragility of their alliance,
was able to shatter their unity.
Deng's tough political tactics successfully isolated Chen Yun, potentially the most
powerful of the conservative critics because of his immense prestige. Chen continues
to receive respectful treatment, and has not--as most of the other conservative leaders
have--publicly changed his tune. But he appears increasingly to be treated as a
venerable relic, a respected veteran, to be admired but not heeded.
Our conclusions are admittedly speculative, given the scarcity of information
about upper-level political decisions. Nonetheless, we believe the the conservatives
exercise far less influence than they did six months ago, and that they are now not a
dangerous obstruction to reform progress. Many other potential challenges still
exist--resource constraints, scarcity of trained middle-level managers and officials,
disgruntled conservatives left in the middle ranks--but in our view the opposition now
lacks a leadership around which to coalesce. This development reduces one serious
obstacle as the reformers prepare to tackle the very tough economic and political
problems the reforms still face.
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Implications
We expect that the reformers will take advantage of their opportunity and move
decisively during the rest of the year to reduce even further party and government
interference in enterprise management. Freer from considerations of leadership politics
than in the past, the reformers can return to their economic agenda. Specifically, we
look for the reformers to:
? Curtail the role of government in the economy by restricting the scope of
planning.
? Begin experiments with a short-term capital market.
? Implement policies to foster labor mobility.
? Increase foreign borrowing and promote more foreign investment.
We believe the diminution of Peng Zhen's influence, in particular, also makes
Deng's succession arrangements easier. Peng enjoyed great prestige and influence in
important sectors of the government, and was not considered a supporter of Hu
Yaobang. In the past we have considered Peng a possible successor to Deng's position
as power broker should Deng die first, but we now consider that less likely. It is too
early to draw conclusions on how the power shift will affect the whole package of
succession arrangements. It is possible, however, that the absence of the conservative
threat could lead to greater fractiousness within the reform group, which might lead to
some rearrangement of the succession package.
On several occasions in the past, reformers have successfully countered
conservative offensives only to be met with another in a few weeks or months. This
time, however, there is reason to believe the reformers have won a more substantial
victory. Never before has the reform camp moved as aggressively and personally
against conservative targets; the investigations of family members and implied threats of
future actions demonstate a new willingness in reformers to get tough and perhaps
signal that their patience with conservative obstructionism has at last run out.
The reformers, by undermining the conservative wing at the top levels of
leadership, have also constrained the ability of middle level conservative sympathizers to
interfere with reform. Lacking protection from the top, these officials will, in our view,
be much more circumspect about obstructing reform initiatives in future--especially
because one tactic in the reformers' current campaign has been to single out for attacks
in the press some midlevel cadre who attempted to stifle reform.
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Reformers still face many serious problems, and a severe economic setback could
provide conservatives with ammunition to renew their attack on the reform
group--which has effectively pegged its legitimacy to economic success. Under these
conditions, it is possible that, should Pang Zhen outlive Deng Xiaoping, he might change
his tune and make a play to become the power broker among the leadership. To do so,
however, would probably still entail significant risks for Peng's family; we believe the
reformers would still be in a position to use that threat against Peng. Moreover,
because the reform group is now freer to press ahead with institutionalization of
reforms--including continued personnel moves to reduce the number of uncommitted
midlevel cadre--the conservatives would likely have even less support in the rank and
file than at present. It would be premature, considering the nascent state of so many of
the reforms and the inherent risks in redirecting a society, to predict that the reformers'
problems are over. But we believe their latest victories reduce a significant threat and
strengthen the reformers' hand for the future.
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SECRET
Distribution:
National Security Council
1 - David Laux, Senior Assistant for China, Taiwan, and Hong Kong,
Room 302, OEOB
Department of State
1 - James Lilley, Deputy Assistant Secretary, East Asian and Pacific
Affairs, Room 6205
1 - Richard Williams, Director, Office of Chinese Affairs (EAP/C),
Room 4318
1 - Joan Plaisted, Deputy Director of Economic Affairs, Office of Chinese
Affairs (EAP/C), Room 4318
1 - John Danylyk, Chief, INR/EC Communist Economic Relations Division,
Room 8662
1 - G. Eugene Martin, (EAP/CH), Room 4318
1 - Doug Paal, Policy Planning Staff, Room 7330
1 - Tom Fingar, Chief, INR/EAP/CH, Room 8840
1 - Chris Clarke, INR/EAP/CH, Room 8840
Department of Defense
1 -I DIA/DB-2B, Room C2837, DIAC
1 - DIA/JSI, Room 1C945
1 - Lieutenant Colonel Eden M. Woon, Office of the Joint Chiefs of Staff,
China Plans and Policy, FESA J-5, Room 2E973, Pentagon
1 - DIA/AT-3/China, Room 1120, Pompano
Plaza West
1 -I Chief, B441, Room 1W140, National Security Agency,
Ft. Meade
Central Intelligence Agency
1 - DDI (7E44)
1 - NIC/ Analytic Group (7E47)
1 - NIO/EA (7E62)
1 - NIO/Econ (7E47)
1 - D/OEA (4F18)
2 - C/OEA/CH (4G32)
1 - OEA Production Staff (4G48)
1 - C/OEA/SDS (4G32)
1 - C/OEA/CH/DEF (4G32)
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1 - C/OEA/CH/DEV (4G32)
1 - C/OEA/CH/DOM (4G32)
1 - C/OEA/CH/FOR (4G32)
1 - PDB Staff (7G15)
5 - CPAS/IMC/CB (7G07)
1 - CPAS/ILS (7G50)
1 - CH/EA/~ (51D38)
1 - C/EA/0 (5E-18)
1 - C/PES (7G15)
1 - C/DO/PPS (3D01)
1 - D/OLL (7B24)
1 - SRP (5G00)
1 - OCR/CH (1H18)
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