The international financial crisis has brought the underlying tensions in Mainland China between strengthening the rule of law and fostering economic growth to the fore. The case of the export-driven economic powerhouse Guangdong Province illuminates the priorities of the Chinese government and the implications that the economic downturn may have for the rule of law across the Mainland.

The Political and Economic Background
In the midst of an economic boom in December 2007, Chinese President Hu Jintao unveiled his “Three Supremes” policy during a speech to the Party’s central Political-Legal Committee. In it he asserted that “in their work, the grand judges and procurators shall always regard as supreme the party’s cause, the people’s interest and the constitution and laws” in descending order of importance. This policy comes in the wake of several years in which the Party focused on bolstering the professional competence of all those involved with the legal system. As preeminent Chinese legal scholar Jerome Cohen noted, this change in policy has “demoralized many professionally oriented members of this rising legal class [and they have been] subject to intensive political indoctrination in the theory of three supremes.”

This sense of demoralization may derive in part from the fact that the two most important “Supremes”—the party’s cause and the people’s interest—can be understood in economic terms. The Party and many outside experts believe that China needs to maintain an 8% economic growth rate in order to provide jobs for all of the new entrants into the labor force. Without an 8% growth rate, the Party fears that it will be faced with massive levels of unrest that may challenge its monopoly over political power.

Mr. Zhou Tianyong, a scholar at the Central Party School where the next generation of top cadres is trained, has warned that the economic growth rate may drop to 7.5% in 2009. Signs of this slowdown are already apparent: the officially announced growth rate for the fourth quarter of 2008 was 6.8% and approximately 20 million of the country’s 130 million migrant workers have been unable to find work and have therefore returned to the countryside. Mr. Zhou warned that in such an economic environment “[t]he redistribution of wealth through theft and robbery could dramatically increase and menaces to social stability will grow.” He continued, “this is extremely likely to create a reactive situation of mass-scale social turmoil.” Given that the country experienced 87,000 “mass incidents” (protests) in 2005, when the economic growth rate was 10%, the potential for widespread destabilizing “mass incidents” in lean economic times is high.

Guangdong Province
The case of Guangdong Province provides insight into the practical implications that of the “Three Supremes” policy has had on the government. During his speech at the 2009 Davos World Economic Forum, Chinese Premier Wen Jiabao noted that, “The current crisis has inflicted a rather big impact on China’s economy. We are facing severe challenges, including notable shrinking external demand, overcapacity in some sectors, difficult business conditions for enterprises, rising unemployment in urban areas and greater downward pressure on economic growth.” Although Guangdong posted a record high export total of $39.1 billion in September 2008 that accounted for 28.7% of the country’s total exports, more than 15,500 businesses in Guangdong were shuttered during the first 10 months of 2008. Nearly half of these closings occurred in October. In response to these bleak numbers, Guangdong Communist Party Chief Wang Yang repeatedly applauded the closing of such “backward enterprises” in late 2008 because they would allow Guangdong to “empty the bird cage for new birds to settle down.” Yet this official optimism quickly soured and a new, more aggressive policy aimed at maintaining economic productivity was announced shortly thereafter.

On January 6, 2009, the Guangdong Province High People’s Procuratorate, which is mandated to issue arrest warrants, issued an Opinion that instructed its officials on how to proceed with their work. The key section of the Opinion, the “Six Nos“, reads as follows: “not to arbitrarily freeze bank accounts of an enterprise; not to arbitrarily seal accounting books of an enterprise; not to cut communication channels of an enterprise; not to arbitrarily release any report that would hurt an enterprise’s reputation; not to arbitrarily detain any key technicians of an enterprise; and not to affect an enterprise’s negotiations on a major project or its production by law enforcement.” This Opinion can be read as a concrete manifestation of the “Three Supremes” policy insofar as it forces the procurator to refrain from upholding its duty to prosecute those who break the law when doing so may have a negative impact on the economy.

Conclusion
In his speech at Davos Premier Wen asked rhetorically, “Will China’s economy continue to grow fast and steady?” His response: “Yes, it will.” Whether or not the Premier’s optimistic economic forecast will be judged prescient remains to be seen. What is clear, however, is that through the announcement of the “Three Supremes” policy and delineation of the Opinion in Guangdong, the Chinese leadership has bet that subverting the rule of law—and not strengthening it—is the most effective way to overcome the international financial crisis.

Yet the “Three Supremes” policy must also be understood within the context of domestic Chinese politics. Throughout the past decade, Chinese economic growth has hovered around 10%. Moreover, the economy has continued to grow at a dizzying speed since Deng Xiaoping began the “reform and opening” process 30 years ago. Indeed, almost all Chinese entrepreneurs have not experienced an economic downturn, or even a slow growth rate—they only know explosive growth. I believe that one of the implications of this growth is that the expectation of breakneck economic growth has been built into the national subconscious of all of the Chinese people, businessmen and proletariat alike. This national subconscious is much different than that in the West, where no country has experienced sustained 10% growth in generations and political frustrations are relieved through elections.

In short, these heightened expectations pressure the government into an almost monomaniacal quest to maintain growth—law and environment be damned. Yet by essentially prohibiting the prosecution and detention of suspected white collar criminals in Guangdong, the provincial government may be weakening the very legal institutions and practitioners that are most well equipped to spur economic growth by requiring transparency and ensuring an equal playing field for management and workers alike.