Monthly Archives: May 2012

Today’s China Readings May 14, 2012

In response to unexpectedly weak economic data the People’s Bank of China announced a 50 basis points reduction in banks’ required reserve ratio. Analysts now expect further easing, China bears are rejoicing that the end is nigh, and pundits like Walter Russell Mead are writing that “Authoritarian modernization always works until it quite suddenly doesn’t.” Gordon Chang no doubt has an already written his “I Was Right” essay and in it probably asks “what is 11 years of being wrong in the overall arc of Chinese history…?”

Is it really that bad here? As usual, I don’t actually know, though things are clearly slowing. In general I resist the extremes of both sides of the binary China boom and China bust argument and tend to believe things have always been messy here, they always will be, and that the economy, and the government, are more likely to muddle through than to either collapse or take over the world. But the “Coming Muddle-Through of China” will never sell as a book.

In a blockbuster article the Financial Times writes that Bo ally [Zhou Yongkang] gives up China security roles. The article jibes with some strains of the virulent rumors spreading around Beijing. The surprise is not that Zhou would go into powerless retirement after the 18th Party Congress–pretty much everyone paying attention in Beijing believes this–it is that he has already been reduced to a figurehead. The article concludes with the statement that “Some officials within the party, including premier Wen Jiabao, are trying to push through political reforms that would move China towards western-style democracy while hardliners, including Mr Zhou, are opposed to such a move.” The western-style Democracy claim is highly suspicious and makes me wonder how much the FT reporters are being spun by Zhou’s rivals and/or by people who want to secure a better historical legacy for their patron(s).

Related to that comment on political reform, today’s People’s Daily has devoted all of page 5 to a special section on the progress of political reform in China, led in by a front page article on the topic. This related article–人民日报整版谈政治体制改革：绝不照搬西方模式–claims that a Western-style political model is not in the cards for China. After I posted a link to this on my Sina Weibo a friend retweeted it to her 4.6 million followers and now there are hundreds of interesting and mostly skeptical comments about this topic.

Speaking of rumors and reporting on Chinese politics, this is the first time that China a leadership succession has really mattered to global financial markets. Reports of factional fighting and political instability can move markets. Last week Reuters reported out another rumor that has been making the rounds, that the Party was considering delaying the 18th Party Congress. I had heard the same rumor, from good sources, but in their version the idea was raised by some but quickly rejected as a bad idea. Reuters knows that this kind of news can have a real financial impact, as they write that “delay could also further unnerve global financial markets whose perception of Chinese politics as a well-oiled machine has already been shaken this year by the extraordinary downfall of an ambitious senior leader, Bo Xilai, in a murder scandal.”

What Reuters did not mention is that at the conclusion of the 6th Plenum of the 17th Party Congress in October 2011, before there were any indications of problems for Bo Xilai or political instability in general, the Party publicly stated that the “Communist Party of China to hold 18th national congress in 2nd half of 2012“. So unless the 18th Party Congress is held after December 31, 2012, it may be hard to argue there has been a delay.

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