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Mostrando postagens com marcador Xi Jinping. Mostrar todas as postagens
Mostrando postagens com marcador Xi Jinping. Mostrar todas as postagens

domingo, 18 de fevereiro de 2024

Xi Jinping perdeu controle dos mercados? The Economist

Xi Jinping perdeu controle dos mercados?

The Economist, Feb 17, 2024

Conforme a crise imobiliária arrasta a economia para a deflação, a confiança dos investidores se esvai gradualmente

Quem investiu este ano em ações chinesas tem empreendido uma jornada arrepiante. Mesmo enquanto o índice americano S&P 500 alcançou altas-recorde, as bolsas na China e em Hong Kong perderam US$ 1,5 trilhão apenas em janeiro. Pequenos investidores ventilaram sua frustração nas redes sociais chinesas. A queda foi tão brutal que em 6 de fevereiro emergiram boatos de que o presidente da China, Xi Jinping, chegou a ser alertado; no dia seguinte, o então diretor da agência reguladora de títulos e obrigações, Yi Huiman, foi demitido. Os preços recuperaram-se um pouco, conforme o Estado começou a comprar ações. Nos próximos dias, deverão apreciar ainda mais.

A uma certa distância, contudo, o desalento no cenário maior fica nítido. O valor de mercado das empresas em bolsas da China e de Hong Kong despencou cerca de US$ 7 trilhões desde o pico, em 2021 — uma queda de aproximadamente 35%, mesmo enquanto as ações americanas subiram 14% e as indianas, 60%. O declínio sinaliza um problema fundamental. Investidores externos e domésticos consideravam no passado o governo chinês um cuidador confiável da economia. Agora essa confiança tem se esvaído, com consequências severas para o crescimento da China.

Menos de uma década atrás, o humor nos mercados chineses era fervilhante. Investidores estrangeiros estavam ávidos para acessar o potencial da estrela econômica mundial em ascensão. A China crescia a um ritmo constante e impressionante, mais que 6% ao ano. Carteiras estrangeiras de investimento entraram com tudo quando os investidores de fora obtiveram acesso direto a ações chinesas por meio de Hong Kong, em 2014.

Quatro anos depois, a MSCI, uma firma financeira, começou a incluir ações da China continental em seus índices globais. O governo chinês, de sua parte, esperava profissionalizar seus mercados para atrair capital estrangeiro e qualificação, para construir uma classe de ativos para substituir o mercado imobiliário. Uma elite de empresários e investidores abastados emergia, exortada pelo próprio Xi a viver o sonho chinês.

O entendimento implícito era que, fosse qual fosse a política da China, era possível confiar em suas autoridades para orientar sua economia no sentido da prosperidade. A China continuaria a crescer num ritmo invejável, seus cidadãos ainda colocariam riqueza e estabilidade econômica acima das liberdades políticas, e investidores estrangeiros colheriam lucros fartos. Todos poderiam enriquecer.

O que deu errado? Um problema amplamente notado é a formulação política inconstante de Xi. As ações regulatórias sobre empresas de tecnologia adotadas em 2020 derrubaram a confiança dos investidores. A política covid-zero foi um fiasco. O governo foi hesitante em uma crise no setor imobiliário que consumiu poupanças e sentimentos — e arrastou a economia para a deflação, com os preços caindo em janeiro deste ano no ritmo mais rápido desde a crise financeira de 2007-09.

Pequim pretende evitar, corretamente, voltar a inflar uma bolha. Mas também quer evitar ajudas e colocar o foco do crescimento em setores de “alta qualidade” que, acredita o governo, ajudarão a China a rivalizar com o poder tecnológico, econômico e militar dos Estados Unidos. Mas os lucros diminuíram este ano até nesses setores. E falta à China o estímulo necessário.

Um fator menos observado é quanto amor pela China os investidores estrangeiros perderam. Eles têm de enfrentar não apenas a formulação política ruim, mas também o risco de que a piora da relação de Pequim com os EUA possa colocar em perigo seus investimentos. Eles têm vendido mais ações do que compram na China continental há meses. Ainda que administradoras de ativos vibrassem no passado com a inclusão da China em índices globais, agora elas estão formatando produtos que deixam o país de fora.

Em vez disso, os investidores estão de olho na Índia, com sua grande população, e no Japão, com sua tecnologia de última geração. Hong Kong também tem sofrido. Empresas da China continental são responsáveis por três quartos de sua capitalização de mercado. Em 22 de janeiro, a Índia superou a China brevemente enquanto quarto maior mercado de ações do mundo.

O mais preocupante de tudo é que investidores na China continental também estão perdendo a confiança. Depois de três décadas de crescimento extraordinário, os chineses ricos estão experimentando uma dolorosa mudança de sorte. Seus investimentos imobiliários e financeiros estão afundando, e pesquisas indicam que muitos executivos tiveram ganhos cortados no ano passado.

Evidências sugerem que mais capital está deixando a China. Quem não consegue contornar os controles chineses sobre capital ou move seu dinheiro para fundos do mercado monetário mais seguros ou escapa para fundos listados nas bolsas da China continental que acompanham ações estrangeiras.

Tudo isso prejudicará o crescimento da China. Nossa análise de pesquisas socioeconômicas sugere que um grupo pequeno mas influente de pessoas detém a maioria dos ativos financeiros da China. Suas circunstâncias estreitadas surtirão efeitos em cadeia, reduzindo o consumo e influenciando decisões de investimento. Investidores presos na China continental poderão ter pouca opção a não ser colocar parte de seu dinheiro conquistado a duras penas em ações.

Em contraste, poderá ser difícil convencer os estrangeiros a retornar. Isso terá um custo para a China, mesmo que investidores estrangeiros ainda tenham uma pequena parte de seus ativos financeiros. Ao longo dos anos, eles forneceram um útil controle externo sobre preços de obrigações. Além disso, sua entrada no mercado, uma década atrás, foi associada com mais gastos de capital e investimentos em pesquisa e desenvolvimento das empresas chinesas. Sua partida, inversamente, poderia atrapalhar a inovação.

Xi parece saber que algo vai mal. Além de demitir Yi, o governo limitou vendas a descoberto, e administradoras de ativos pertencentes ao Estado receberam ordens de comprar ações. Isso poderá sustentar os preços das ações por algum tempo. Mas interferências desse tipo só fazem transparecer a desconfiança da China em relação aos mercados, sublinhando por que os investidores partiram.

Tudo isso prejudicará o crescimento da China. Nossa análise de pesquisas socioeconômicas sugere que um grupo pequeno mas influente de pessoas detém a maioria dos ativos financeiros da China. Suas circunstâncias estreitadas surtirão efeitos em cadeia, reduzindo o consumo e influenciando decisões de investimento. Investidores presos na China continental poderão ter pouca opção a não ser colocar parte de seu dinheiro conquistado a duras penas em ações.

Em contraste, poderá ser difícil convencer os estrangeiros a retornar. Isso terá um custo para a China, mesmo que investidores estrangeiros ainda tenham uma pequena parte de seus ativos financeiros. Ao longo dos anos, eles forneceram um útil controle externo sobre preços de obrigações. Além disso, sua entrada no mercado, uma década atrás, foi associada com mais gastos de capital e investimentos em pesquisa e desenvolvimento das empresas chinesas. Sua partida, inversamente, poderia atrapalhar a inovação.

Xi parece saber que algo vai mal. Além de demitir Yi, o governo limitou vendas a descoberto, e administradoras de ativos pertencentes ao Estado receberam ordens de comprar ações. Isso poderá sustentar os preços das ações por algum tempo. Mas interferências desse tipo só fazem transparecer a desconfiança da China em relação aos mercados, sublinhando por que os investidores partiram.

https://www.estadao.com.br/economia/the-economist-xi-jinping-controle-mercados-acoes-china/

quinta-feira, 16 de novembro de 2023

Xi Jinping retraça a história das relações sino-americanas - discurso em San Francisco

 Galvanizing Our Peoples into a Strong Force  For the Cause of China-U.S. Friendship Speech

by H.E. Xi Jinping.

President of the People’s Republic of China

At Welcome Dinner by Friendly Organizations in the United States

San Francisco, November 15, 2023

Ladies and Gentlemen,

Friends,

It gives me great pleasure to meet with you, friends from across the American society, in San Francisco to renew our friendship and strengthen our bond. My first visit to the United States in 1985 started from San Francisco, which formed my first impression of this country. Today I still keep a photo of me in front of the Golden Gate Bridge.


Before going further, I wish to express my sincere thanks to the National Committee on U.S.-China Relations, the U.S.-China Business Council, the Asia Society, the Council on Foreign Relations, the U.S. Chamber of Commerce and other friendly organizations for hosting this event. I also want to express my warm greetings to all American friends who have long committed to growing China-U.S. relations and my best wishes to the friendly American people.


San Francisco has borne witness to exchanges between the Chinese and American peoples for over a century. A hundred and fifty-eight years ago, a large number of Chinese workers came all the way to the United States to build the first transcontinental railroad, and established in San Francisco the oldest Chinatown in the Western Hemisphere. From here, China and the United States have made many achievements—USD 760 billion of annual bilateral trade and over USD 260 billion of two-way investment, 284 pairs of sister provinces/states and sister cities, and over 300 scheduled flights every week and over five million travels every year at peak time. These extraordinary accomplishments were made jointly by our peoples accounting for nearly one quarter of the global population.


San Francisco has also borne witness to the efforts by China and the United States in building a better world. Seventy-eight years ago, after jointly defeating fascism and militarism, our two countries initiated together with others the San Francisco Conference, which helped found the United Nations, and China was the first country to sign the U.N. Charter. Starting from San Francisco, the postwar international order was established. Over 100 countries have gained independence one after another. Several billion people have eventually shaken off poverty. The forces for world peace, development and progress have grown stronger. This has been the main fruit jointly achieved by people of all countries and the international community.


Ladies and Gentlemen,


Friends,


The foundation of China-U.S. relations was laid by our peoples. During World War II, our two countries fought side by side for peace and justice. Headed by General Claire Lee Chennault, a group of American volunteers, known as the Flying Tigers, went to the battlefield in China. They not only engaged in direct combats fighting Japanese aggressors, but also created “The Hump” airlift to transport much-needed supplies to China. More than 1,000 Chinese and American airmen lost their lives on this air route. After Japan attacked Pearl Harbor, the United States sent 16 B-25 bombers on an air raid to Japan in 1942. Running low on fuel after completing their mission, Lieutenant Colonel James Doolittle and his fellow pilots parachuted in China. They were rescued by Chinese troops and local civilians. But some 250,000 civilian Chinese were killed by Japanese aggressors in retaliation.


The Chinese people never forget the Flying Tigers. We built a Flying Tigers museum in Chongqing, and invited over 1,000 Flying Tigers veterans and their families to visit China. I have kept in touch with some of them through letters. Most recently, 103-year-old Harry Moyer and 98-year-old Mel McMullen, both Flying Tigers veterans, went back to China. They visited the Great Wall, and were warmly received by the Chinese people.


The American people, on their part, always remember the Chinese who risked their lives to save American pilots. Offspring of those American pilots often visit the Doolittle Raid Memorial Hall in Quzhou of Zhejiang Province to pay tribute to the Chinese people for their heroic and valorous efforts. These stories fill me with firm confidence that the friendship between our two peoples, which has stood the test of blood and fire, will be passed on from generation to generation.


The door of China-U.S. relations was opened by our peoples. For 22 years, there were estrangement and antagonism between our two countries. But the trend of the times brought us together, converging interests enabled us to rise above differences, and the people’s longing broke the ice between the two countries. In 1971, the U.S. table tennis team visited Beijing—a small ball moved the globe. Not long after that, Mr. Mike Mansfield led the first U.S. Congressional delegation to China. This was followed by the first governors’ delegation including Iowa Governor Robert Ray and then many business delegations, forming waves of friendly exchanges.


This year, after the world emerged from the COVID-19 pandemic, I have respectively met in Beijing with Dr. Henry Kissinger, Mr. Bill Gates, Senator Chuck Schumer and his Senate colleagues, and Governor Gavin Newsom. I told them that the hope of the China-U.S. relationship lies in the people, its foundation is in our societies, its future depends on the youth, and its vitality comes from exchanges at subnational levels. I welcome more U.S. governors, Congressional members, and people from all walks of life to visit China.


The stories of China-U.S. relations are written by our peoples. During my first visit to the United States, I stayed at the Dvorchaks in Iowa. I still remember their address—2911 Bonnie Drive. That was my first face-to-face contact with the Americans. The days I spent with them are unforgettable. For me, they represent America. I have found that although our two countries are different in history, culture and social system and have embarked on different development paths, our two peoples are both kind, friendly, hardworking and down-to-earth. We both love our countries, our families and our lives, and we both are friendly toward each other and are interested in each other. It is the convergence of many streams of goodwill and friendship that has created a strong current surging across the vast Pacific Ocean; it is the reaching out to each other by our peoples that has time and again brought China-U.S. relations from a low ebb back onto the right track. I am convinced that once opened, the door of China-U.S. relations cannot be shut again. Once started, the cause of China-U.S. friendship cannot be derailed halfway. The tree of our peoples’ friendship has grown tall and strong; and it can surely withstand the assault of any wind or storm.


The future of China-U.S. relations will be created by our peoples. The more difficulties there are, the greater the need for us to forge a closer bond between our peoples and to open our hearts to each other, and more people need to speak up for the relationship. We should build more bridges and pave more roads for people-to-people interactions. We must not erect barriers or create a chilling effect. 


Today, President Biden and I reached important consensus. Our two countries will roll out more measures to facilitate travels and promote people-to-people exchanges, including increasing direct passenger flights, holding a high-level dialogue on tourism, and streamlining visa application procedures. We hope that our two peoples will make more visits, contacts and exchanges and write new stories of friendship in the new era. I also hope that California and San Francisco will continue to take the lead on the journey of growing China-U.S. friendship!


Ladies and Gentlemen,


Friends,


We are in an era of challenges and changes. It is also an era of hope. The world needs China and the United States to work together for a better future. We, the largest developing country and the largest developed country, must handle our relations well. In a world of changes and chaos, it is ever more important for us to have the mind, assume the vision, shoulder the responsibility, and play the role that come along with our status as major countries.


I have always had one question on my mind: How to steer the giant ship of China-U.S. relations clear of hidden rocks and shoals, navigate it through storms and waves without getting disoriented, losing speed or even having a collision?


In this respect, the number one question for us is: are we adversaries, or partners? This is the fundamental and overarching issue. The logic is quite simple. If one sees the other side as a primary competitor, the most consequential geopolitical challenge and a pacing threat, it will only lead to misinformed policy making, misguided actions, and unwanted results. China is ready to be a partner and friend of the United States. The fundamental principles that we follow in handling China-U.S. relations are mutual respect, peaceful coexistence and win-win cooperation.


Just as mutual respect is a basic code of behavior for individuals, it is fundamental for China-U.S. relations. The United States is unique in its history, culture and geographical position, which have shaped its distinct development path and social system. We fully respect all this. The path of socialism with Chinese characteristics has been found under the guidance of the theory of scientific socialism, and is rooted in the tradition of the Chinese civilization with an uninterrupted history of more than 5,000 years. We are proud of our choice, just as you are proud of yours. Our paths are different, but both are the choice by our peoples, and both lead to the realization of the common values of humanity. They should be both respected.


Peaceful coexistence is a basic norm for international relations, and is even more of a baseline that China and the United States should hold on to as two major countries. It is wrong to view China, which is committed to peaceful development, as a threat and thus play a zero-sum game against it. China never bets against the United States, and never interferes in its internal affairs. China has no intention to challenge the United States or to unseat it. Instead, we will be glad to see a confident, open, ever-growing and prosperous United States. Likewise, the United States should not bet against China, or interfere in China’s internal affairs. It should instead welcome a peaceful, stable and prosperous China.


Win-win cooperation is the trend of the times, and it is also an inherent property of China-U.S. relations. China is pursuing high-quality development, and the United States is revitalizing its economy. There is plenty of room for our cooperation, and we are fully able to help each other succeed and achieve win-win outcomes.


The Belt and Road Initiative as well as the Global Development Initiative (GDI), the Global Security Initiative (GSI) and the Global Civilization Initiative (GCI) proposed by China are open to all countries at all times including the United States. China is also ready to participate in U.S.-proposed multilateral cooperation initiatives. This morning, President Biden and I agreed to promote dialogue and cooperation, in the spirit of mutual respect, in areas including diplomacy, economy and trade, people-to-people exchange, education, science and technology, agriculture, military, law enforcement, and artificial intelligence. We agreed to make the cooperation list longer and the pie of cooperation bigger. I would like to let you know that China sympathizes deeply with the American people, especially the young, for the sufferings that Fentanyl has inflicted upon them. President Biden and I have agreed to set up a working group on counternarcotics to further our cooperation and help the United States tackle drug abuse. I also wish to announce here that to increase exchanges between our peoples, especially between the youth, China is ready to invite 50,000 young Americans to China on exchange and study programs in the next five years.


Recently, the three pandas at Smithsonian’s National Zoo in Washington D.C. have returned to China. I was told that many American people, especially children, were really reluctant to say goodbye to the pandas, and went to the zoo to see them off. I also learned that the San Diego Zoo and the Californians very much look forward to welcoming pandas back. Pandas have long been envoys of friendship between the Chinese and American peoples. We are ready to continue our cooperation with the United States on panda conservation, and do our best to meet the wishes of the Californians so as to deepen the friendly ties between our two peoples.


Ladies and Gentlemen,


Friends,


China is the largest developing country in the world. The Chinese people long for better jobs, better lives, and better education for their children. It is what the 1.4 billion Chinese hold dear to their hearts. The Communist Party of China (CPC) is committed to working for the people, and our people’s expectation for a better life is our goal. This means we must work hard to secure their support. Thanks to a century of exploration and struggle, we have found the development path that suits us. We are now advancing the rejuvenation of the Chinese nation on all fronts by pursuing Chinese modernization.


We are committed to striving in unity to achieve modernization for all Chinese. A large population is a fundamental aspect of China’s reality. Our achievements, however great, would be very small when divided by 1.4 billion. But a problem, however small, would be huge when multiplied by 1.4 billion. This is a unique challenge for a country of our size. In the meantime, big also means strength. The leadership of the CPC, the system of socialism with Chinese characteristics, and the endorsement and support of the people are our greatest strengths. China is both a super-large economy and a super-large market. Not long ago the sixth China International Import Expo was held, attracting over 3,400 business exhibitors from 128 countries including the United States. The exhibition area of American companies has been the largest for six consecutive years at the Expo. Modernization for 1.4 billion Chinese is a huge opportunity that China provides to the world.


We are committed to prosperity for all to deliver a better life for each and every Chinese. To eliminate poverty is the millennia-old dream of the Chinese nation, and prosperity for all is the longing of all Chinese. Before I turned 16, I was in a village in northern Shaanxi Province, where I lived and farmed with villagers, and I knew about their worries and needs. Now half a century on, I always feel confident and strong when staying with the people. Serving the people selflessly and living up to their expectations is my lifelong commitment. When I became General Secretary of the CPC Central Committee and President of the People’s Republic of China, 100 million people were still living below the poverty line set by the United Nations. Thanks to eight years of tenacious efforts, we lifted them all out of poverty. We realized the poverty reduction goal of the U.N. 2030 Agenda for Sustainable Development 10 years ahead of schedule. In the process, over 1,800 CPC members lost their lives in the line of duty.


Our goal is not to have just a few wealthy people, but to realize common prosperity for all. Employment, education, medical services, child care, elderly care, housing, the environment and the like are real issues important to people’s daily life and close to their heart. They are being steadily integrated into our top-level plans for national development, thus ever increasing the sense of fulfillment, happiness and security of our people. We will continue to promote high-quality development and deliver the benefits of modernization to all. This is the CPC’s founding mission and the pledge we have made to the people. It will surely be realized with the support of the people.


We are committed to well-rounded development to achieve both material and cultural-ethical advancement for the people. Our forefathers observed that “When people are well-fed and well-clad, they will have a keen sense of honor and shame.” Material shortage is not socialism, nor is cultural-ethical impoverishment. Chinese modernization is people-centered. An important goal of Chinese modernization is to continue increasing the country’s economic strength and improving the people’s living standards, and at the same time, enriching the people’s cultural lives, enhancing civility throughout society and promoting well-rounded development of the person. The purpose of the Global Civilization Initiative I proposed is to urge the international community to address the imbalance between material and cultural advancement and jointly promote continued progress of human civilization.


We are committed to sustainable development to achieve harmony between man and nature. The belief that humans are an integral part of nature and need to follow nature’s course is a distinctive feature of traditional Chinese culture. We live in the same global village, and we possibly won’t find another inhabitable planet in our lifetime. As an English saying goes, “We do not inherit the Earth from our ancestors, we borrow it from our children.” When I was Governor of Fujian Province in 2002, I called for turning Fujian into the first ecological province in China. Later when I worked in Zhejiang Province in 2005, I said that clear waters and green mountains are just as valuable as gold and silver. Today, this view has become a consensus of all the Chinese people. China now has close to half of the world’s installed photovoltaic capacity. Over half of the world’s new energy vehicles run on roads in China, and China contributes one-fourth of increased area of afforestation in the world. We will strive to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060. We have made the pledge, and we will honor it.


We are committed to peaceful development to build a community with a shared future for mankind. Peace, amity and harmony are values embedded in Chinese civilization. Aggression and expansion are not in our genes. The Chinese people have bitter and deep memories of the turmoils and sufferings inflicted upon them in modern times. I often say that what the Chinese people oppose is war, what they want is stability, and what they hope for is enduring world peace. The great rejuvenation of the Chinese nation cannot be achieved without a peaceful and stable international environment. In pursuing modernization, we will never revert to the beaten path of war, colonization, plundering or coercion.


Throughout the 70 years and more since the founding of the People’s Republic, China has not provoked a conflict or war, or occupied a single inch of foreign land. China is the only major country that has written peaceful development into the Constitution of the country and the Constitution of the governing party, thus making peaceful development a commitment of the nation. It benefits from and safeguards the current international order. We remain firm in safeguarding the international system with the U.N. at its core, the international order underpinned by international law, and the basic norms governing international relations based on the purposes and principles of the U.N. Charter. Whatever stage of development it may reach, China will never pursue hegemony or expansion, and will never impose its will on others. China does not seek spheres of influence, and will not fight a cold war or a hot war with anyone. China will remain committed to dialogue and oppose confrontation, and build partnerships instead of alliances. It will continue to pursue a mutually beneficial strategy of opening up. The modernization we are pursuing is not for China alone. We are ready to work with all countries to advance global modernization featuring peaceful development, mutually beneficial cooperation and common prosperity, and to build a community with a shared future for mankind.


Ladies and Gentlemen,


Friends,

The passage of time is like a surging river—much is washed away, but the most valuable stays. No matter how the global landscape evolves, the historical trend of peaceful coexistence between China and the United States will not change. The ultimate wish of our two peoples for exchanges and cooperation will not change. The expectations of the whole world for a steadily growing China-U.S. relationship will not change. For any great cause to succeed, it must take root in the people, gain strength from the people, and be accomplished by the people. Growing China-U.S. friendship is such a great cause. Let us galvanize the Chinese and American peoples into a strong force to renew China-U.S. friendship, advance China-U.S. relations, and make even greater contributions to world peace and development!

quarta-feira, 25 de outubro de 2023

FFAA da China: corruptas e sem controle do PCC? (China Talk)

O Imperador limpa o terreno... 

PLA Purges! What does it all mean for Xi and Taiwan Risk?

“Surprising and a little bit worrisome for China...” 

Yesterday Defense Minister Li Shangfu got officially purged. To discuss, we brought on Joel Wuthnow, a fellow at NDU. His research areas include Chinese foreign and security policy, Chinese military affairs, US-China relations, and strategic developments in East Asia. He joined ChinaTalk to discuss Xi Jinping’s recent purges of high-ranking members of the People’s Liberation Army, Xi’s larger vision for the PLA, and what all this internal turmoil might mean for China’s longer-term designs on Taiwan.

Key insights:

  • Over ten years after coming to power, Xi is still purging corruption from the military, reflecting his continued lack of trust in the PLA;

  • Corruption is historically endemic in the PLA in part because of its incentive structure, which makes graft a prerequisite for rising through the ranks;

  • Xi’s efforts to break up the PLA’s supervisory apparatus have only been partially successful (they’re still the same people even if they’re in a different department);

  • Amid the anti-corruption shakeup, China’s Rocket Force has been successfully developing hypersonic missiles, technology viewed as critical to countering US intervention in a regional conflict over Taiwan;

  • Despite Xi’s apparent distrust of his inner circle of military advisors, an echo chamber–induced invasion of Taiwan is still a live possibility.

Trust Issues in the PLA

Jordan Schneider: Xi Jinping’s got some trust issues. Over the past few months he’s run through a number of PLA generals he appointed less than twelve months ago! Joel, two-sentence overview: what has happened with these purges of late? 

Joel Wuthnow: There have been many purges inside China, even beyond the PLA. Qin Gang 秦刚 disappeared, a whole bunch of people from the defense industry up and disappeared. In the PLA, a number of senior generals are missing in action; right now, frankly, we don’t know where they are. There are a lot of rumors circulating about these key figures, including the Defense Minister [Li Shangfu 李尚福] and the former commander of the Rocket Force [Li Yuchao 李玉超]. It’s not a good look for Xi Jinping.

The fact that there are so many people missing all at once means that Xi has a lack of trust and lack of confidence in some of his senior leadership right now.

Jordan Schneider: From the PLA watcher community, I had one friend reach out to me who said he was bummed about all this! He’s been following Li Shangfu for a decade, and all of a sudden he’s gone.

Are you excited or sad to see your friends leave the stage? What’s the emotional response when you see a new round of crackdowns?

Joel Wuthnow: For me, the feeling is surprise coupled with curiosity. It’s a shocking state of affairs, and the reason is this: us PLA watchers all mostly assume that Xi’s really in charge of the machine over there, that he put his people into place, and that his political rivals were gone a decade ago.

So it’s really surprising to wake up and find that the Defense Minister, someone who is probably pretty close to Xi — he’s on the Central Military Commission — is just gone. It’s surprising and a little bit worrisome, if you think about its implications for China.

Li Shangfu, China's Defense Minister, has not made a public appearance since late August. The Print/ANI.

Jordan Schneider: I think we should start by unpacking the idea that Xi has controlled or put his stamp on the PLA. To do that, we need to start with a little bit of institutional history. What was the bargain that Deng Xiaoping gave the PLA coming into the 1980s?

Joel Wuthnow: Back in the 1980s, the PLA was governing society. They were stacked in the Politburo. They were a very important part of the leadership and had a huge amount of power. Then Deng Xiaoping said, “No, we’re going to focus on reforming the economy. We want to bring in technocrats, and we want the military to be put in its place and put back in its barracks.” He said to the PLA, “We want you to modernize, but we’re not going to give you that much money to do it.”

It didn’t seem like a great bargain for the PLA. They had to give up a lot of authority and status without getting a lot of money. So, Deng said, “Okay, go back to your barracks — but you decide what you’re going to do. We’re not going to look into your affairs or get too involved in your business.”

So, Deng gave the PLA a huge amount of autonomy, and this was acceptable to them.

However, this also created a situation that allowed the PLA to become very corrupt and very inward-looking — very secretive and poorly supervised by the Politburo and the senior civilian leadership of the Party. This is really the origin of a lot of the problems that we’re seeing today.

China doesn’t have Western-style civil-military relations where there’s a lot of civilian oversight of the military — political appointees, courts, judges, media. There’s really none of that in China. So that’s the situation that the PLA found themselves in: corrupt and secretive, though not rebellious — they weren’t starting military coups against the leaders, as you saw in 1991 with the Soviet Union. But they weren’t fully professional and or fully “clean.” So the seed for what’s going on today was planted about forty years ago — in the 1980s — with Deng Xiaoping.

Jordan Schneider: The reason the PLA was so ingrained in society was because Mao decided that they were the only way to get the country out of the Cultural Revolution. So it was basically PLA power or complete chaos. This resulted in a very awkward situation where, if you’re in the PLA — if you’re not about to fight a war anytime soon and everyone else is getting rich around you — the dominant strategies if you want to rise up and be successful are to either do things like import luxury cars and run hotels; or to just graft on the procurement that’s been allocated to your budget instead of doing what the Premier wants (which is to get you in tip-top shape to potentially deter adversaries and maybe even fight an aggressive war).

So, Jiang Zemin and Hu Jintao: what did they want to do, and how did they struggle to execute their vision of what the PLA should be doing in the 1990s and 2000s?

Joel Wuthnow: Jiang Zemin and Hu Jintao both basically wanted to make the PLA give up its business interests. The PLA was running all sorts of business empires as a way to make ends meet. Part of the way Jiang and Hu tried to undo this was by giving the PLA larger budgets; so in the 1990s and early 2000s, there were double-digit budget increases, as well as new rules and regulations.

A lot of the PLA’s operations, like the casinos and the luxury cars, were actually shut down — but this didn’t really change the basics: the PLA wasn’t well-governed or -supervised.

Rising in the ranks … a PLA promotion ceremony in July. Japan Times.

Jordan Schneider: To give folks a sense of just how broken the system was — there was not a way to rise up in the ranks without being corrupt? Because at a certain point you ended up having to buy your rank. All these positions had dollar amounts attached.

Say you want to get promoted and you don’t have a rich Chinese uncle that you can find to bankroll you. Who else might be interested in supporting folks getting promoted in the PLA system? Foreign intelligence agencies. So you end up with this very vicious cycle of the people who are getting promoted actually being the ones who are on the take from adversaries. This is the dynamic that Xi is facing as he comes to power in 2011 and 2012. Any other thoughts, Joel?

Joel Wuthnow: You’re right; it was really prolific, with schemes inside the general political department, which is like an HR system. Becoming a general had a renminbi 人民币 amount attached to it.

So when Xi comes to power in 2012, everybody who’s in the PLA is complicit in this system.

Xi’s dilemma was that he needed to fix the system, but couldn’t just get rid of everybody. So the top people on his list were those who were not only corrupt, but who were also associated with his political rivals. He focused first on Jiang Zemin’s people.

Jordan Schneider: So the hope was that you could scare people straight, while at the same time hopefully changing the institutional incentive such that everyone who may have had a dirty past ends up seeing the light, focusing on military national rejuvenation as opposed to making sure that their grandkids can have a beach house in Malibu, or what have you.

Joel Wuthnow: Exactly. But this isn’t to overstate or overplay the problem or imply that these guys are just sitting around doing corrupt schemes. Some of them are probably competent officers.

Reforming the PLA?

Jordan Schneider: So Xi starts off with a bang, throws a lot of folks out, including a lot of very senior folks, and then tries to build in some institutional reform so that this doesn’t happen again. At the same time he has a very ambitious vision for what he wants the PLA to achieve. So Joel, walk us through those two things: the reforms and his hopes for the PLA.

Joel Wuthnow: The reforms have many different pieces, some of which are about making the PLA a better warfighting organization, others of which are about making the PLA better managed. I’ll focus on the latter.

What Xi is trying to do is rearrange the system so that the people who are the supervisors — the internal control people — are a little bit disentangled from each other. Previously the General Political Department had all the power and was doing all the supervision. Corruption was investigated at that level. Xi Jinping broke up the General Political Department into a bunch of different components — financial auditors, anti-corruption people, military-court people. They’re all different from each other now; they don’t work for each other and are not part of the same bureaucracy.

These days, there are a few different control chains that come up independently to Xi Jinping’s level. He’s trying to eliminate corruption from that angle.

Ultimately, though, it’s a limited solution to the problem — because these are all still PLA officers. They all came up through the same corrupt system.

They’re all former GPD people, and they don’t work for each other anymore — but there’s no outside supervision or external control. So it is a reform that may make the system a bit better, but it doesn’t solve the fundamental problem, which is that the PLA is in its own little box.

Jordan Schneider: I assume another dynamic is that Xi has a very ambitious dream for the military power that China is able to project,which has led to 10% annual increases in the budget and, all of a sudden, a whole lot more money sloshing around than there ever has been in the history of this organization.

So the temptation is probably greater than it ever was in the Jiang and Hu eras, just because there’s so much more cash floating around.

Joel Wuthnow: There’s a lot of money sloshing around — the latest rumor is about the two guys from the Rocket Force [PLARF] who disappeared. That’s part of the PLA that’s undergoing a big expansion right now. They’re building silo fields; they’re building new ICBMs; they’re doing all sorts of construction there. The dominant rumor is that the entire leadership in the Rocket Force was in on some kind of scheme that’s not yet known, but it’s likely that there was so much money going into their strategic arsenal that the temptation was too great and the supervision was too limited and something got out of control, which led to Xi’s crackdown. But the details are totally opaque right now, and there are so many different rumors. It does seem to be about money.

Jordan Schneider: Can we get a two-second sidebar on what the Rocket Force is? It’s not something that most countries currently have.

Joel Wuthnow: It’s a little bit of a misnomer because they’re called the Rocket Force, but really this is the ICBMs, the land-based ballistic missiles. The Rocket Force runs most of the PLA’s nuclear arsenal for the PLA.

In addition to nuclear, they also manage the long-range conventional missile forces. You may have heard of the anti-ship ballistic missile or the DF26, the Guam killer. This is all part of the Rocket Force’s arsenal. It’s not so much rockets as it is ballistic missiles and cruise missiles.

Jordan Schneider: This is the really interesting internal contradiction here: on the one hand, something is wrong enough for Xi to want to fire these folks; but at least to outside observers, the Rocket Force has had some real technological successes. Can you talk a little bit about hypersonics and the broader development capabilities that the Rocket Force has presumably overseen?

Joel Wuthnow: The big thing with hypersonics is that it’s not like a ballistic missile. It’s a different trajectory. It’s not the speed — it’s that they’re very hard to track and intercept.

The reason why China is investing so much money in this is because it sees this technology as critical to countering US intervention in a regional conflict. China understands that we are reliant on large bases in the western Pacific, and they’re also aware that we’re building ballistic missile defenses.

It’s technologies like hypersonics that China thinks are an ace card, a game changer in terms of deterring, disrupting, and defeating us. Of course it’s also the case that the Chinese are just very, very good — historically and today — at missile forces and artillery and rocketry. 

It’s operationally very significant and they’re good at it; hence, there’s a whole lot of money going into hypersonics.

Jordan Schneider: To that point, we’ve seen very impressive tests, which is at least a data point that the Rocket Force isn’t wasting and stealing everything that’s going through their coffers.

Joel Wuthnow: Right, it’s not that this money is going for naught. The question for Xi Jinping is: if they haven’t been honest about the spending, are they hiding something? So this gets to trust. Showing off in parades and a successful test here and there is one thing, but if the balloon ever goes up, will this huge arsenal be reliable? It’s not just the missiles that have to work — it’s the satellites and the people that are sitting at the controls.

Jordan Schneider: How much less likely are you to start a war involving very tricky joint operations if you don’t have a ton of confidence in your generals?

Joel Wuthnow: My view is that you probably don’t want to go down that path. Xi seems to have confidence in what they’re doing right now in terms of coercion: sending planes slightly across the midline, sending a bunch of planes up into the ADIZ and so on. The PLA is able to do that, but when talking about the requirements of a war, so much more is on the line for him and the Party.

If Xi has questions about whether things are going to work and his people are competent, then the incentive to go down the warpath starts to decline very quickly. I think this internal dynamic is something we don’t pay enough attention to on our side.

What’s This Mean for the PLA’s Future?

Jordan Schneider: You wrote recently that there’s tremendous pressure on the PLA to demonstrate progress and prove that it deserves the government’s largesse. We’re at a moment where China’s macroeconomic health over the next few years is very unclear. Do you think there’s any potential that Xi becomes so frustrated and fed up with his current PLA that he decides to starve the beast a little bit, given competing priorities and the clear lack of trust that exists between him and his military?

Joel Wuthnow: I don’t expect that he’s going to cut the PLA’s budget. Xi talks about security all the time. He seems to be rather paranoid.

For example, he needed to be talked down back in 2020 when he thought the US was going to attack him. In October 2020, the PLA leadership seemed to genuinely fear that the US was going to attack them as part of a so-called “October Surprise,” and they needed to be reassured. This was the big story with General Mark Milleyhaving to reassure his PLA counterpart.

This incident speaks to the larger issue of paranoia: Xi thinks the US is out to get him, that we’re doing color revolutions — which doesn’t match with trying to starve the beast.

The PLA is also not an insignificant political actor. I think they need to have some level of autonomy and attention from the top. Xi’s going to keep giving them funds, and he’s going to hope that they’re using them in the right way, but I think he does feel the need to continue to make examples out of people and show that he’s serious about these problems.

Nicholas Welch: When Xi came to power, he fired a whole bunch of people. And then during the recent Party Congress in October 2022, he stacked the Central Committee with loyalists. But now he’s firing people again. Do you think that this move makes him more or less likely to be influenced by a so-called echo chamber and to make rational decisions?

Joel Wuthnow: If you’re China, how do you get into a war? If you look at a pure cost-benefit analysis, I think the costs are very high and the benefits are not necessarily huge. But how else can you get into a war?

One possible way would be an echo chamber. Say the PLA is making a case to you as the boss: we’re ready. So Xi Jinping gave the PLA a 2027 deadline; they need to be ready to go to war with Taiwan by 2027. When that day comes, he’ll be asking the PLA, “What’s your update? I gave you time, I gave you money, I gave you a whole lot of inspirational talk — have you done it at this point?” And who’s going to come to him and say, “No, sorry, boss, we need another five years”?

So this is a concern — that the PLA lines up and says, “We’re ready, we think America is in decline, they’re a paper tiger, and Taiwan is having a lot of their own problems.”

If Xi Jinping comes to trust that and makes a decision based on false optimism — a bit like Putin being misled by his generals and invading Ukraine — it’s something worth worrying about.

That’s a different way of plunging into a war than just saying, “I’ve counted my missiles and counted their air defenses, and mine are superior” — that’s a clinical cost-benefit. This is more based on what you believe the outcome will be, regardless of how you’re actually going to perform. That echo chamber is worth worrying about.

Jordan Schneider: Doesn’t that echo chamber scenario seem pretty unlikely right now, as Xi is firing top leadership?

Joel Wuthnow: That’s basically right. If you had asked me the question a year ago, right after the Party Congress when the entire narrative was, “Xi has installed yes-men who aren’t going to give him candid advice and are going to tell him what they think he wants them to” — I would have given you a firmer answer on the overconfidence bit.

Now, given the shock of people disappearing and what that means in terms of his confidence, I’d say the chances are less than they were a year ago, less than they were two months ago — but not zero. That’s the reason to keep worrying. Five years from now, when Xi is seventy-five and he’s surrounded by people who may be giving him simple answers, we don’t know if there’s a 1 or 2 percent chance that he’ll believe them. To me, that’s still worth worrying about. What we’re really talking about is a 1 or 2 percent chance of calamity, so that’s still a pretty huge expected problem.

China Talk

sexta-feira, 15 de setembro de 2023

Lula-Putin, vidas paralelas? A miséria moral do socialismo — Paulo Roberto de Almeida

Lula-Putin, vidas paralelas, e a miséria moral do socialismo

  

Paulo Roberto de Almeida, diplomata, professor.

Nota sobre certas incongruências do lulopetismo.

  

Lula teve de parar com sua ofensiva sobre temas que não consegue mais impor ao Congresso e se rendeu ao Centrão. Putin não consegue mais derrotar o país invadido e só avança para a retaguarda. Ambos perderam credibilidade no plano internacional. Quais convite para visitas ou perspectivas de viagens eles mantêm na agenda?

A Putin só restou o tirano mais desprezado e isolado do mundo como opção; nem a China pretende mais atar sua diplomacia a serviço de uma causa já notoriamente perdida. Lula teve de aceitar uma ampliação chinesa do Brics, outrora o seu maior projeto diplomático. O que sobrou a Putin no plano diplomático regional ou global? Pouquíssimas opções. O que resta a Lula como novas iniciativas internacionais? Apoiar o candidato peronista na Argentina? Ser líder de um fragmentado Sul Global? Apoiar Putin e Xi no quimérico projeto de uma “nova ordem global”?

Manterem-se no poder, com os meios que tiverem à disposição, parece ser o caminho mais previsível para cada um. Mas Lula vai continuar insistindo em apoiar seu amigo Putin, um ditador notoriamente de direita, inimigo de certas causas defendidas pelos companheiros?

Dito de outra forma: Lula vai insistir em continuar objetivamente apoiando Putin, independentemente do que isso significa para as relações do Brasil com parceiros ocidentais? A verdade é que, matematicamente, paralelas não se encontram nem no infinito!

Antes de ser uma questão geopolítica, diplomática ou econômica, a guerra de agressão da Rússia à Ucrânia é sobretudo uma questão MORAL, pela dimensão dos desastres humanos e sociais inéditos na Europa nos últimos 80 anos, talvez no mundo. O Brasil de Lula, infelizmente para todos nós e para a diplomacia brasileira, ficou do lado i-amoral! 

A longa marcha da Rússia para o declínio, parcialmente contida pela China, que também perpetra um erro estratégico ao lançar-se na aventura da “nova ordem global”. 

Lula, que não tem visão de estadista e tem raiva dos EUA, juntou-se, infelizmente para o Brasil, às duas autocracias. Antes de se dirigir a Nova York, passou por Havana, para uma reunião do G77 e encontros bilaterais com dirigentes comunistas de Cuba.

Cabe aqui minha avaliação dos regimes socialistas que conheci, que visitei, onde morei. As grandes lembranças que tenho de todos os países socialistas que visitei (conheci quase todos, e morei em um) são de estantes vazias de supermercados, uma total carência de itens básicos (supérfluos nem se cogita).

Na verdade, o que mais me impressionou, em todos os socialismos que visitei, conheci e até vivi, não foi nem a miséria material, comum a todos, mas a MISÉRIA MORAL, do Estado policial, do regime de delação, da decrepitude ética e da mediocridade intelectual. Um clima pesadíssimo!

A Rússia ainda vive num semi-stalinismo: pode não ter mais o Arquipélago do Gulag, mas sob Putin tem assassinatos, prisões arbitrárias, repressão total aos opositores, de fato a TODOS os democratas. O atual tirano pretenderia ser um Pedro o Grande e de fato é um Ivan o Terrível, eliminando todos os que possam lhe fazer sombra.

A China libertou-se da miséria típica dos socialismos graças à adoção do sistema capitalista, ainda que com muita intervenção estatal (ou melhor, do partido, que manda em tudo). Não é mais o totalitarismo arbitrário que já foi, mas virou uma autocracia pesada, com um novo imperador à frente do Partido e do Estado.

 

Paulo Roberto de Almeida

Brasília, 4479, 14 setembro 2023, 2 p.


domingo, 13 de agosto de 2023

China: será o centro da próxima crise na economia mundial? - Adam Tooze

Whither China? Part I - Regime impasse?

Whither China? 

With the inflation (or should we say price shock) drama in the West largely played out, there is no story more important in the world economy right now than the question of China’s future. 

The mood on China has shifted spectacularly in the last 18 months. Whereas once the prevailing impression was one of awe, now what prevails is a negative story. This is assembled out of data, official news from Beijing, quotations from off the record interviews with interlocutors in China and more or less commonplace assumptions about economic and political development. This may be bricolage. But it is the best we can do. There is not other way of forming a view. But in such moments it is a good idea to check our prejudices. 

On the podcast, Cam and I took on the challenge of making sense of China’s current situation. 

China's Economic Crisis

Ones and Tooze

In this mini-series of newsletters I want to review the main lines of interpretation in Western public debate about China. Six lines of interpretation immediately come to mind which will form the first installments in the series. 

(1) Part I - Regime impasse 

(2) Part II - Balance sheet recession 

(3) Part III - Keynesian structuralist 

(4) Part IV - Dual-circulation, Siege economy 

(5) Part V - Zero COVID in hindsight

(6) Part VI - One China or many Chinas? Regional economies and debt crises 

To make sure you get all the parts of the mini-series, sign up here and consider supporting the Chartbook Newsletter project. 

***

The news out of China is not good. Growth has slowed dramatically in recent years. Under the impact of zero-COVID it was sometimes brought to a halt. The recovery since the abrupt end of zero-COVID has seemingly run out of steam. The housing market is in crisis. China has been spared the inflation that afflicted the rest of the world. Instead seems to teeter on the edge of deflation. 

Reading the business-cycle is a difficult business at the best of time. Though one measure of inflation - CPI - moved into deflation this month, China’s core inflation actually appears to have bottomed out and ticked up slightly.

In recent months the export numbers have turned downwards. But this is against the backdrop of world historic export records in 2022. It was always a mistake to read those exports and the resulting giant trade surplus as signs of economic health. They were rather the opposite a symptom of sluggish domestic demand. 

For all the negative talk we should bear in mind that most economists both inside and outside China expect its economy to grow at 5 percent per annum. Whatever the fundamentals, it is a long way from Japan-style stagnation.

Source: FT

But, beyond the mood swings of the media cycle, what is going on is clearly very dramatic. We are witnessing a gearshift in what has been the most dramatic trajectory in economic history. The question is how to interpret it. 

***

The most obvious line for many Western interpreters to take is that China’s problems are basically political. Specifically they are to do with the unpredictable and ideologically motivated turns taken by Xi’s government, which themselves reflect the irredeemably authoritarian quality of the Chinese regime. Xi’s regime may undertake efforts to revive the economy with stimulus measures, but they lack conviction. 

This interpretation is common place in the West but it has been presented in quintessential form in recent weeks in essays in the twin flagship publications of American liberalism, one by Li Yuan in the New York Times and the other by Adam Posen in Foreign Affairs. The two pieces differ in style, in their sources and in the point they are trying to make. But they deliver a common message. The problems of China’s economy are political and though they center on Xi they go beyond him and concern the entire system. 

On the basis of her no-doubt excellent contacts in the Chinese business class Li Yuan paints a picture of a resentful stand off between “business owners” and the regime, an impasse which is resistant to any recent efforts by the party to raise spirits. 

Stocks on the mainland and in Hong Kong, where many of China’s biggest private enterprises are listed, fell on Thursday but regained their footing on Friday. Some entrepreneurs rushed to praise the guidelines in official media. But in private, others I interviewed dismissed the party’s pep talk in words that can be best translated as, “Save it for the suckers.” By now it’s obvious that the country’s economic problems are rooted in politics. Restoring confidence would require systemic changes that offer real protection of the entrepreneur class and private ownership. If the party adheres to the political agenda of the country’s paramount leader, Xi Jinping, who has dismantled many of the policies that unleashed China’s economy, its promises on paper will remain just words. 

Speaking to her off the record “business-owners” vented their frustrations with the regime. 

The stock markets’ reaction was very honest, one tech entrepreneur said. Investors sensed how desperate the party is, he said, and how meaningless the guidelines are. At its core, he said, the issue of confidence is a matter of government credibility. Beijing has lost nearly all its credibility in the past few years, he said. If it really wants to remedy the situation, it can at least apologize for its wrongdoings. He cited a document that the party issued after the Cultural Revolution admitting some of its mistakes under Mao Zedong’s leadership from 1949 to 1976. Other people pointed to similar steps the party took then, such as rehabilitating persecuted cadres and intellectuals. At the very least, they said, the government should release Ren Zhiqiang and Sun Dawu, outspoken entrepreneurs who are serving 18-year prison sentences after their arrests in the recent crackdown. Or, another entrepreneur told me, the government could return the fines it imposed on his company, which he believed served as punishment for not toeing the party line and as revenue for an overextended local government. He said he felt that he had been robbed. None of the business owners I talked to expects the government to take any of these steps. They all spoke on condition of anonymity for fear of punishment by the authorities. 

It is hard to know how seriously to take such spleen from aggrieved business people. Are they representative of opinion at large or is there selection bias at work, in that those who are most upset are also most likely to talk to a Western journalist. And how far are the grumpy views of frustrated managers, anywhere indicative of what actually gets done in business? In any case, Li Yuan uses these quotes to suggest that any bond of trust between the regime and vocal segments of business opinion has snapped. Though the regime in the summer of 2023 is trying to curry favor with business, everyone remembers the rollercoaster of recent years. 

In 2021, a commentary headlined, “Everyone can feel it, a profound transformation is underway!” was reposted on many of the most important official media websites. Praising the suppression of the private sector and the policy proposal known as “common prosperity,” the commentary said, “This is a return from capital groups to the masses, and a transformation from a capital-centered approach to a people-centered approach.” 

In the spring of 2023 the regime reversed course and turned back to private business:

“We have always regarded private enterprises and entrepreneurs as part of our own,” Mr. Xi said in March, repeating himself from 2018. The head of the National Development and Reform Commission, the country’s economic planning agency, held a series of meetings with business leaders, pledging support. Then came the 31-point guidelines. Most Chinese businesspeople support the government and willingly follow what it says. Still, the comments from some entrepreneurs on state media read more like pledges of loyalty to the party than authentic expressions of confidence. Ben Qiu, a lawyer who practices law in Hong Kong and the United States, summed up the executives’ comments in a social media comment: “The emperor’s clothes look fabulous.” … No matter how many supportive words the party offers now, it will be hard for the private sector to feel confident. 

Effectively, Li Yuan suggest that China is experiencing something akin to a “capital strike” spreading through the business community. And this matters, because of the overall weight of the private sector in China’s modern economy. 

The private sector … contribute(s) more than 50 percent of the country’s tax revenues, 60 percent of economic output and 80 percent of urban employment, according to none other than Mr. Xi in 2018. 

If Li Yuan had wanted data to back up her argument she could have turned to the output of the Peterson Institute for International Economics in Washington DC, whose team tracks the balance of public and private sectors in the Chinese economy. 

The data show a lurch towards the priority of state investment during the initial shock of COVID and no substantial recovery by the private sector since. So far at least the pessimism of Li Yuan’s informants is born out. 

The head of the Peterson Institute is Adam Posen who has emerged in recent months as perhaps the leading public critic of the Biden administration’s industrial policy. His latest piece on China in Foreign Affairs has to be read in this context. Posen is worried that America’s aggressive trade and industrial policies are based on a fundamental misdiagnosis of China’s situation and the Biden team are thus missing a historic opportunity to wrong-foot and undermine the authoritarian regime of the CCP. 

For Posen, Xi’s China has reached a tipping point, which unlike Li Yuan he traces less to China’s national history, than the general logic of authoritarian regimes. According to Posen, all authoritarian regimes suffer from a severe case of what is called “original sin”. The lack of credible legal constraints on action by the sovereign makes it hard to sustain a high-functioning economic regime. Since the reform period of the 1980s, the CCP has, in fact, been unusual in holding out for a relatively long time against the temptations of arbitrary rule. But in Xi’s third term the regime is finally succumbing to this universal temptation and - this is the crucial point - broader Chinese society is now waking up to this reality. 

Riffing on the famous Martin Niemöller poem - “first they came for the socialists” - Posen describes the unraveling of the bargain between the majority of Chinese and the regime. Most Chinese, Posen claims, live with an understanding that is summarized by the motto “no politics, no problems”. If you pursue your private interest at a distance from politics you could count on remaining unmolested. When Xi wielded his power versus corrupt officials at the top of a party to which 7 percent of the population belong, the rest of China was not displeased. When Xi came down on the tech oligarchs after 2020, the rest of society shrugged. But the extreme policy of zero-COVID in 2022 extended this domineering, capricious logic to the entire society.

Certainly the fiasco of COVID policy in 2022 delivered a severe shock to the authority of the CCP regime. But it is remarkable that Posen attributes so much significance to this one moment, as opposed to longer term factors stressed by critical analysts like Michael Pettis. After all, but for the total mishandling of the pandemic by the West, which massively amplified the second and third waves, China’s regime might well have emerged triumphant from the crisis. Beijing’s policy was not capricious as such, but lackadaisical when it came to vaccination and ineffective against highly-infections variants. 

In any case not only stresses the historical importance of the COVID shock, he claims that we can see an immediate impact of the new insecurity in the macroeconomic numbers. “In China’s case, the virus is not the main cause of the country’s economic long COVID: the chief culprit is the general public’s immune response to extreme intervention, which has produced a less dynamic economy.” The immediate reflection of this new anxiety appears for Posen in the dramatic surge in household bank deposits. 

On top of Li Yuan’s investment strike, Posen thus sees a comprehensive defensive retreat by Chinese society that is driven not by economic circumstances but ultimately by fear of the regime. 

Since Deng Xiaoping began the “reform and opening” of China’s economy in the late 1970s, the leadership of the Chinese Communist Party deliberately resisted the impulse to interfere in the private sector for far longer than most authoritarian regimes have. But under Xi, and especially since the pandemic began, the CCP has reverted toward the authoritarian mean. …. What remains today is widespread fear not seen since the days of Mao—fear of losing one’s property or livelihood, whether temporarily or forever, without warning and without appeal. … The COVID response … made clear that the CCP was the ultimate decision-maker about people’s ability to earn a living or access their assets—and that it would make decisions in a seemingly arbitrary way as the party leadership’s priorities shifted. 

SAME OLD STORY 

After defying temptation for decades, China’s political economy under Xi has finally succumbed to a familiar pattern among autocratic regimes. They tend to start out on a “no politics, no problem” compact that promises business as usual for those who keep their heads down. But by their second or, more commonly, third term in office, rulers increasingly disregard commercial concerns and pursue interventionist policies whenever it suits their short-term goals. … Over varying periods, Hugo Chávez and Nicolás Maduro in Venezuela, Recep Tayyip Erdogan in Turkey, Viktor Orban in Hungary, and Vladimir Putin in Russia have all turned down this well-worn road. 

Li Yuan avoids this kind of comparative historical rumination. But she makes a similar point by citing as a witness sociologist Sun Liping, who in recent essays has highlighted the sense of uncertainty afflicting Chinese society. Sun Liping is a well-known public intellectual who recently retired from Tsinghuawhere he taught sociology. 

“Why are many people saving money and cutting back on spending? Why are ambitious entrepreneurs reluctant to make long-term planning and investment?” Sun Liping, a sociology professor at Tsinghua University wrote in an article last month. “It’s because they feel uneasy.” He said that for China to get out of its slump, the government needs to create a business environment that can provide reassurance. … “Private enterprises don’t need support. They need a normal social environment” regulated by the rule of law.

Whereas Sun Liping calls for a reaffirmation of law, Posen points out the regime seems to be headed in the opposite direction, responding to emergency by demanding more discretion.

In March, China’s parliament, the National People’s Congress, amended its legislative procedures to make it easier, not harder, to pass emergency legislation. Such legislation now requires the approval of only the Congress’s Standing Committee, which is made up of a minority of senior party loyalists. 

Posen thus sees a spiraling breakdown of trust. The lack of trust undermines the credibility of policy. Businesses and householders no longer believe that stimulus means stimulus and that it will not be countermanded by some dramatic intervention of a punitive kind. This lack of credibility makes markets less responsive to policy. Less responsiveness to policy increases volatility as policy becomes less effective. Greater volatility increases the need to intervene. As Posen puts it: 

Once an autocratic regime has lost the confidence of the average household and business, it is difficult to win back. A return to good economic performance alone is not enough, as it does not obviate the risk of future interruptions or expropriations. The autocrat’s Achilles’ heel is an inherent lack of credible self-restraint. To seriously commit to such restraint would be to admit to the potential for abuses of power. Such commitment problems are precisely why more democratic countries enact constitutions and why their legislatures exert oversight on budgets. 

With Xi having undone the fragile equilibrium that allowed China for decades to avoid the usual fate of authoritarian regimes, China is now embarked on a road back to stagnation and serfdom. It is a vision worthy of Hayek.

You might think that this is all a little overdone and that to compare contemporary China with Venezuela is far-fetched. Indeed one imagines that Posen himself does not mean the point to be taken literally. What he is trying to do with this jarring comparison is to correct the blindspots of Western observers. He wants them to radically revise their outlook for China in a negative direction. 

Many outside observers have overlooked the significance of this change (the breakdown of trust and “Long-covid”). But its practical effects on economic policy will not go unnoticed among households and businesses, who will be left still more exposed to the party’s edicts. The upshot is that economic long COVID is more than a momentary drag on growth. It will likely plague the Chinese economy for years. More optimistic forecasts have not yet factored in this lasting change. To the extent that Western forecasters and international organizations have cast doubt on China’s growth prospects for this year or the next, they have fixated on easily observable problems such as chief executives’ fears about the private high-tech sector and financial fragility in the real estate market. These sector-specific stories are important, but they matter far less to medium-term growth than the economic long COVID afflicting consumers and small businesses 

The analysts of China that Posen most wants to reach are decision-makers in Washington. Posen is alarmed by the move to protectionism and confrontation towards China. He thinks this is dangerous, because increasing the risk of war, self-harming, because inefficient, and counter-productive, because it strengthens Xi’s regime. 

Western officials should adjust their expectations downward, but they should not celebrate too much. Neither should they expect economic long COVID to weaken Xi’s hold on power in the near future. … The perverse reality is that local party bosses and officials can often extract yet more loyalty from a suffering populace, at least for a while. In an unstable economic environment, the rewards of being on their good side … go up, and safe alternatives to seeking state patronage or employment are fewer. 

Faced with this situation, what Posen takes encouragement from is that some Chinese rather than turning to the regime for reassurance are opting for self-insurance i.e. are trying to opt out of the future as defined for them by Xi and the regime in Beijing. 

If CCP policies continue to diminish people’s long-term economic opportunities and stability, discontent with the party will grow. Among those of means, some are already self-insuring. In the face of insecurity, they are moving savings abroad, offshoring business production and investment, and even emigrating to less uncertain markets. Over time, such exits will look more and more appealing to wider slices of Chinese society. 

This is the opportunity that America’s present policy of confrontation is missing. 

Washington should think in terms of suction, not sanctions. … The United States should welcome those (Chinese) savings, along with Chinese businesses, investors, students, and workers who leave in search of greener pastures. … Removing most barriers to Chinese talent and capital would not undermine U.S. prosperity or national security. It would, however, make it harder for Beijing to maintain a growing economy that is simultaneously stable, self-reliant, and under tight party control. Compared with the United States’ current economic strategy toward China, which is more confrontational, restrictive, and punitive, the new approach would lower the risk of a dangerous escalation between Washington and Beijing, and it would prove less divisive among U.S. allies and developing economies. This approach would require communicating that Chinese people, savings, technology, and brands are welcome in the United States; the opposite of containment efforts that overtly exclude them. … If Washington goes its own way instead—perhaps because the next U.S. administration opts for continued confrontation or for greater economic isolationism—it should at the very least allow other countries to provide off-ramps for Chinese people and commerce, rather than pressuring them to adopt the containment barriers that the United States is installing. 

What Posen wants to offer is the opportunity for individual Chinese and their families to vote with their feet. His suggestion that the West should open “off ramps” for Chinese seeking to opt out of the Cold War is telling - off ramps being a phrase more commonly invoked nowadays in Washington to discuss possible peace terms with Putin. 

***

Thus, two pieces that are supposedly about the limit topic of disillusionment in business circles in China and China’s current economic difficulties, spiral into readings of world history. 

The most radical assumption of all is encapsulated in the subtitle of Posen’s Foreign Affairs article, which boldly declares that what we are witnessing in China is the “Same old story”. One should linger over this apparently casual remark. Though passing for social scientific common sense, it is a staggering claim to make. One is tempted to say - paraphrasing Samuel Johnson - that when an analyst says about China, with a bored shrug, that is the same old story, they are probably done with intellectual life. 

If it were true that anything about Venezuela or Turkey’s complex histories clearly anticipated that of China it should surely count, not as a confirmation of the some obvious piece of wisdom, but as a staggering and profoundly counter-intuitive discovery. These kind of comparisons again and again reveal the failure to grasp the sheer scale of the Chinese projects. This China that we are casually generalizing about, is a state whose population is the same as that of North America, South. America and all of Europe put together, under almost 80 years of uniquely transformative rule by a historically unique and still dynamic political party that directly inherits the DNA of the revolutionary era and self-consciously orientates itself towards avoiding the fate of the only regime to which it can, at a pinch, be meaningfully compared, namely the Soviet Union. 

As Robert Harding put it very nicely in the FT a few days ago:

China’s economy defies analogies. Just as its growth over the past four decades was unprecedented, its current difficulties — and it certainly has a problem, if not quite a crisis — are unique. It is not Japan in 1990, Korea in 1997 or the US in 2008. (AT: let alone Venezuela, Turkey or Russia)

It may be true that parts of Chinese society are for a variety of reasons suffering a crisis of confidence, but precision is called for. Adam Posen and Li Yuan talk in general terms about “confidence” and credibility, but their narratives and evidence actually pertain to three different groups. Households are the center of the Posen story. Presumably the households that count are actually the affluent upper 25 percent or so, concentrated in Tier 1 cities, who are responsible for most spending and saving. Secondly, there are the corporate chieftains who not only toe the line, but whose businesses also have really big investment budgets that are easy for the regime to inspect. And then, the third group, the nameless group of “business owners” who are Li Yuan’s interlocutors. Presumably they are not so large that they must be seen to conform, but they are significant enough to attract the attention of a New York Times correspondent and be worth quoting. 

Across these basic sociological divisions run questions of party membership, connection to provincial cliques and institutional connections to banks and other sources of funding. Those matter because what we in the end want to know is which of these groups is spending how much on consumption and investment and why. What kinds of things they are buying? What kinds of projects they are undertaking and how far this shows up in the macro data? If business confidence is shaken, what is the balance between large privates who are toeing the line and the mass of smaller private firms, where proprietorial dissatisfaction - expressed so graphically to Li Yuan - rules the roost? 

Above all what we need to know to arbitrate the basic causes of the current malaise is how far depressed private business investment is in fact due to the kind of sectoral issues that Posen so quickly dismisses. Since property is the main store of household wealth in China, is this not likely to be the main driver of uncertainty, rather than views about Xi, the party and the capriciousness of their rule. Li Yuan’s piece is about the latest stimulus package and the stock markets so you would not necessarily expect a long discussion of the real estate crisis. But it is truly remarkable how little space Posen in his Foreign Affairs article devotes to the drama of China’s housing market. 

At first glance this is doubly surprising because you might see the real estate slump as the single most important demonstration of the regime’s capriciousness. That is by all accounts how many property developers in China view the so-called “three red lines” policy that was announced in August 2020 at the peak of regime hubris. But before taking that interpretation at face value, ask yourself for a second how subprime mortgage lenders and dealers in MBS, or shareholders in AIG are wont to talk about the 2007-8 financial crisis. When tracking an unfolding economic crisis, who are the reliable informants? Whose opinions do we take at face value and whose do we take with a pinch of salt? Whose opinions matter because whether right or wrong they wield substantial power in the economy? Whose opinions can we discount on account of their powerlessness? 

My bet is that Posen steers clear of discussing the housing crisis - overwhelmingly the most important source of uncertainty in the Chinese economy right now - because it causes problems of his argument. He knows that it does not fit his overarching thesis that the regime’s authoritarianism is the main source of risk for the modern Chinese middle class and that this by itself makes Xi’s regime incapable of ensuring sustained economic growth. At a technical level, as Michael Pettis explains, the figures for bank deposits that Posen cites to underpin his case, reflect both an increased rate of savings by worried households and a reallocation away from riskier assets, more closely associated with risks in housing. They are, in other words, an indicator of specific as much as general uncertainty. This is not to deny that the repressive tendencies and the ideological intent of the regime are a source of risk for private business and private individuals. Of course, they are. But the regime also offers advantages and protections. And those are not merely cold comforts. One cannot sensibly generalize about a downward spiral into an increasingly abusive relationship, as Posen’s narrative suggests. Sectoral performance is not a detail. It is all important. What is decisive is whether Beijing gets policy right and this reflects specific issues of policy and political economy that go beyond the simple boundary between public and private. These more complex balances of interests were decisive in the handling of COVID, of the real estate crisis, of the debt crisis, in the economic war with the US. They will be the topic of further installments to come.