The Sinocism China Newsletter For 11.09.12

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Hu Jintao delivered his work report (Xinhua English highlights) on the opening day of the 18th Party Congress. China Daily reports that he set out a path for the future to:

Unswervingly follow the path of socialism with Chinese characteristics, combat corruption and lose no time in deepening reform, including political reform.

Today’s People’s Daily has the key excerpts in 坚定不移沿着中国特色社会主义道路前进 为全面建成小康社会而奋斗–胡锦涛同志代表第十七届中央委员会向大会作的报告摘登.

Hu also pledged unremitting efforts to combat corruption (Xinhua):

If we fail to handle this issue well, it could prove fatal to the Party, and even cause the collapse of the Party and the fall of the state,” Hu warned in a keynote report at the opening of the 18th CPC National Congress…He asked leading officials of the Party to exercise strict self-discipline and strengthen supervision over their families and staff.

Reuters writes that China’s Hu promises economic reforms, higher incomes. The focus on household income is a positive sign, and we should learn more details from the income distribution reform plan that is due by the end of the year.

Caixin examines the key points of Hu’s report in 精读十八大报告之一:市场经济与法治国家精读十八大报告之二:长期坚持科学发展观 and 精读十八大报告之三:从民生到社会管理.

Hu’s report was well-received by the audience, and one delegate says her hands went numb from so much clapping during his speech (代表陈叶翠:鼓掌35次 手都拍麻了_网易新闻中心 ).

Foreign observers were not so positive.

Qian Gang of the China Media Project analyzed the work report and concluded that the old guard is strong:

My preliminary conclusion: conservative forces within the Party are still very powerful. According to the line marked out by the political report to the 18th National Congress, there is very little prospect that substantive moves will be made on political reform.

The Financial Times writes that Hu Jintao dashes hope for political reform and the New York Times reports that Departing Chinese Leader Tries to Cement Legacy Opposing Reform.

On Thursday the Wall Street published part one of a debate between Cheng Li and Minxin Pei about China’s Prospects for Political Reform. Cheng Li has been surprisingly optimistic about the likelihood of significant reforms, primarily because he (as I do) believes that the Party recognizes the magnitude of the problems and knows that without significant reforms things may go off the rails.

Is meaningful reform off the table, as these early Western reports suggest, or is it too early too tell?

The lead piece on Caijing’s commentary channel (刘锋:中共十八大报告的改革回应透视-财经网) is not so pessimistic but does conclude that some of the more aggressive reform expectations are likely to remain unmet:


Jamil Anderlini looks at the growing gap between reality and China’s ever greater expectations:

I spoke to a professor of politics at one of China’s most prestigious universities who assured me that within three years the Chinese people would take to the streets to demand that the government relinquish power. I listened to a group of drivers, whose job is to ferry diplomats and senior party officials around Beijing’s gridlocked streets, cursing in earthy Mandarin about the “turtle’s egg” Communist party and how it wouldn’t be around in five years..

The Communist party and its leaders are well aware that its subjects are becoming less patient and more demanding and that its minions are getting out of control.

On Thursday, in his speech to the assembled nomenklatura of the Communist party, President Hu Jintao acknowledged that “social problems have increased markedly” under his decade of rule.

Something has to give.

The Internet in Beijing is still not working so well. Today Bloomberg’s Editorial page weighs in on China’s Internet policies. In Mr. Xi, Tear Down This Firewall!, Bloomberg makes a proposal that will drive US-listed firms nuts, and probably out of the US markets:

To push for change to China’s intranet means finding a way to target Baidu and other domestic providers. Legislative proposals to require U.S.-listed companies such as Baidu to disclose their censorship arrangements to investors make sense if they are tailored in a way that doesn’t swamp an already overburdened Securities and Exchange Commission.

Today’s links:


PBOC’s Zhou Says China’s Economy Improving as Data Due – Bloomberg Some indicators are rebounding and the economy is stabilizing, Zhou Xiaochuan, head of the People’s Bank of China, said yesterday in Beijing at a briefing during the Communist Party’s 18th Congress. Ma Jiantang, head of the National Bureau of Statistics, said separately that people will be “more confident” about the fourth-quarter expansion.

Railway Investment to Increase Next Year, Ministry Says – Caixin – can they get the financing?// Railway fix-asset investment (FAI) is expected to increase in 2013, exceeding this year’s 630 billion yuan, a spokesman for the Ministry of Railways says. Railway infrastructure investment alone would exceed 500 billion yuan, he predicted.

China May Make First High-Speed Train Orders Since Crash – Bloomberg – China may issue at least 38.4 billion yuan ($6.2 billion) of high-speed train tenders within the next two months, ending a more than yearlong hiatus following a fatal crash.

High local debt levels coming under control |Latest News | – The whole of the country’s local government debt amounted to 9.25 trillion yuan ($1.48 trillion) at the end of September, Shang Fulin, chairman of the China Banking Regulatory Commission, said during a session of the 18th National Congress of the Communist Party of China, which opened on Thursday.

Fitch China broad credit picks up in Q312, but growth has limits | Reuters– Fitch’s measure of broad credit includes shadow and offshore sources omitted from the central bank’s official total societal financing metric. “This marks the fourth year in a row that net new credit will exceed one-third of GDP,” said Charlene Chu, Head of Chinese banks’ ratings at Fitch.

‘Read our lips: China is not deleveraging’ | FT Alphaville – Standard Chartered’s increasingly bullish China team are arguing that fears of an aggressive deleveraging process are wide of the mark.

Exclusive: Talks set with China on audit documents – U.S. official | Reuters – The upcoming meetings will focus on access to audit documents and could result in a “major breakthrough,” though obstacles remain, said James Doty, chairman of the Public Company Accounting Oversight Board, in an interview.

Beijing’s central business district faces tenant changes|Economy|News| – In 2012, housing vacancy rates in Beijing’s Grade A office buildings reached the bottom while their rent has climbed by 20%. Rent in Shanghai’s CBD in the same period has risen only nearly 3% and that in Hong Kong has dropped.

China Economic Watch | Paths Toward Rebalancing the Chinese Economy-Lardy – bear case seems a bit bullish…// To get a better idea about how economic rebalancing in China might unfold, it is useful to sketch out some possibilities. We have modeled what we think are some possible paths for Chinese economic rebalancing based on changes in investment, consumption and net export growth over the next decade.

Guest post: China’s “revolutionary” financial reforms gather pace FT Beyondbrics–Qu Hongbin is chief economist, Greater China, at HSBC//  We expect a broad wave of deregulation, with interest rates set to be liberalised, the bond market likely to double in size, and the renminbi becoming convertible within five years. These changes should not only make capital allocation more efficient, boosting the private sector, but also provide the middle class with greater choices about where to put their money so they can earn a higher return and therefore spend more. This should help rebalance growth



德江:根本就不存在“重庆模式”_网易新闻中心 – Chongqing Party Secretary and likely PBSC member Zhang Dejiang says there is no “Chongqing Model”

Harvard-Trained Communists Vie for Influence as Party Gathers – Bloomberg – if professors or administrators affiliated w Harvard’s programs are allowed to have consulting businesses, these programs must be great for relationships and opening doors// Harvard’s Kennedy School has been expanding its offerings to Chinese officials and executives at state-owned enterprises since the first program — for senior leaders at the vice- minister level — began in 1998, sponsored by Hong Kong’s New World Development Co. About 150 officials have been through the program since its inception, with 20 each year at most, Saich said.

Chinese Village’s Disillusion Shows Limits of Liberalization – – some of the media who covered this story may share Zhuang’s sentiments…//I was full of hope but now I realize how naive I was back then,” said Zhuang Liehong, a member of the new committee, recalling efforts by villagers starting in 2009 to petition Guangdong authorities for help that culminated in the election of protesters. “I feel disappointed,” he said, sipping tea with his wife in their living room just off Wukan’s main street. “Things are obviously not as easy as I thought they were.”

Advice for China’s new guard – The Washington Post – The Washington Post asked influential thinkers in China and the United States for their advice to Xi Jinping and others in China’s next generation of leaders.

CCP congress enters the Weibo era – China Media Project – Whether or not the 64-page political report offers anything new is a question that may take days to answer. But it is interesting indeed to see Chinese discussing its language on social media platforms, searching for clues about the direction of domestic politics and making their own feelings and criticisms known (however ephemerally).

人民日报-Classic People’s Daily Front Page Today –



China sets foreign policy course |Latest News | – While expressing willingness to cooperate with other nations, China also underscored its resolution to protect its national interests and “never yield to any outside pressure”.

China to speed up full military IT application: Hu – Xinhua | – China should strengthen the development of new- and high-technology weapons and equipment, speed up the complete development of modern logistics, train a new type of high-caliber military personnel in large numbers, intensively carry out military training under computerized conditions, and enhance integrated combat capability based on extensive IT application, Hu said.

Hu calls for efforts to build China into maritime power – Xinhua | – “We should enhance our capacity for exploiting marine resources, resolutely safeguard China’s maritime rights and interests, and build China into a maritime power,” Hu said in a report to the 18th National Congress of the Communist Party of China.

China submarines to soon carry nukes, draft U.S. report says | Reuters – China appears to be within two years of deploying submarine-launched nuclear weapons, adding a new leg to its nuclear arsenal that should lead to arms-reduction talks, a draft report by a congressionally mandated U.S. commission say

The Naval Diplomat Run Silent, Run ‘Soviet?’ – And three, it’s unclear to me how occupying the Senkakus would significantly tighten Chinese ASW defenses in southern waters. Admiral Kawamura furnishes few details inJapan Times, so it’s hard to say what he has in mind.

Cross-province patrol begins in South China Sea |Politics | – An insider told China Daily that a high-level maritime interests protection office was established recently with heads of the related ministries or administrations on board.

公司专题 – 千亿资金“搭桥” 治疗国产飞机“心脏病” – China Securities Journal special section on the business of building a chinese jet engine

BBC News – President Barack Obama to visit Burma– He will meet opposition leader Aung San Suu Kyi and President Thein Sein. It is part of a three-leg tour from 17 to 20 November that will also take in Thailand and Cambodia.



Islamic Roots of Identity in Xinjiang, China | Asia Pacific Memo – Although the people known today as Uyghurs only adopted their current ethnic name in the early 20th century, many of their 19th century ancestors also saw themselves as a distinct group. To distinguish themselves from their neighbours, they usually called themselves “Musulmanlar” (Muslims), and sometimes referred to their language as “Musulmanche” (Muslimese). These terms were used even to distinguish themselves from other Muslims, like Muslim Kirghiz groups or the Sino-Muslims.



Hong Kong Taipan Rebuffed by China Digs Into U.S. Natural Gas – Bloomberg – Richard Elman, a high school dropout who turned Noble Group into Asia’s largest commodities trading house, is pouring money into natural gas companies in what he calls one of the fastest-emerging markets: The U.S.

5 thoughts on “The Sinocism China Newsletter For 11.09.12

  1. I suspect that, while people are growing more impatient with the pace of reform (particularly economic) and the Party is well aware of this and will likely attempt some minor reforms (economic, mainly), it will not be enough in the short term to  temper expectations nor to lower the temperature of the populace. However, the likelihood that the grumbling of people will lead to the Party going away or a full-scale revolution (as you intimate in your lead-in, please correct me if I’m wrong) seems less likely. It is easy to complain, it is more difficult to rise up and, while there have been localized protests and this is worrying, the government will do whatever measures are necessary in the short term to ensure survival.

    Of course, I have typically found your analysis to be very good (and I thoroughly enjoy your views and links daily) so it’s also possible I’m very wrong. Thanks.

    • Thanks. I would be among the last to suggest the party would go away (see ) . But without at least a shift in expectations through a reinvigoration of the reform effort, I think you will see a growing exacerbation of already significant social contradictions

      • It’s interesting to note, as I recall from an old PoliSci class, that revolutions typically do not take place when tyranny is high and people are barely surviving (see N. Korea today) but instead when countries are improving their standards of living but not fast enough for citizens who have heightened expectations. Just a thought…

  2. The Party has undertaken significant reforms only twice since Mao’s death: 1) in the late 1970s following the dramatic failure of Mao’s policies, and 2) following the events of 1989 and the collapse of the USSR. In both cases, a sense of real existential crisis compelled the Party to change – i.e., the leadership (or much of it) genuinely believed that, absent a brisk and meaningful change of course, the Party’s days were numbered. My guess is that, in spite of all the talk about corruption and inequality, there is still not the same sense of crisis now. Genuine reform – not just noodling around at the margins – will come only after a Ghost of Christmas Future moment. Such a moment could very well happen. After all, the shine has worn off the China Model, the economy appears much less robust than it once did, the international environment is proving vastly more troublesome, Chinese society is growing increasingly fractious, and the wealth gap continues to grow. (I was in a meeting yesterday with 8 or 10 Chinese colleagues. After asking them what they thought of the ongoing congress and Hu’s recent speech, the meeting quickly devolved into a bitch session about China and the Party. Hu’s promise that wages would double by 2020 was countered with the suggestion that housing prices would rise even more quickly. No one express faith in the Party’s ability to truly reform itself. It was very interesting to listen in as my Chinese colleagues let loose.)

    The Party is simply too conservative, cautious, and jealous of its own prerogatives to willingly reform itself. Indeed, perhaps the Party believes that it can’t reform much further without giving its enemies the means to further undermine it. In his recent book on the Party, David Shambaugh writes about how the Party’s efforts to adapt to changing circumstances (e.g., the collapse of the USSR) over the years has led to “atrophy” – i.e., a diminishing ability to control how the Chinese people think and behave. I don’t doubt that many Party leaders believe that real reforms will lead to further atrophy of the Party’s power. It’s the slippery slope argument. In the Chinese context, the word “reform” is pleasant-sounding code for “perfecting and consolidating Party rule.” Absent real crisis of the kind the Party faced in the late 70s and late 80s, there will be no genuine reform. Until then, expect lots of propaganda and the odd policy or two.

    Walking between the Beijing train station and Chongwenmen the other day, I saw one really long propaganda banner on the south side of the road encouraging people to uphold “Socialism w/ Chinese Characteristics, Deng Xiaoping Theory, the Three Represents, and Scientific Development.” Nothing about Mao Zedong Theory. Interesting.

  3. The second operative word in the subtitle of Shambaugh’s book is “adaptation” (the entire title is “China’s Communist Party: Atrophy and Adaptation”). In the spirit of giving credit where credit is due, I must admit that the Party has, as Shambaugh suggests, proven to be adaptable. Nevertheless, I wonder if further adaptation by the Party won’t necessarily lead to even more atrophy. I simply see no way for the Party to deliver on its promises without weakening itself. History shows that few regimes are able to reform themselves without inviting collapse. The Party’s recent decision to investigate democratic reform in Korea and Taiwan may indicate that China’s leadership: 1) is serious about the need to reform, and 2) knows how risky reform is. I’m pessimistic. Very glad I live in relatively secure Beijing and possess a U.S. passport.

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