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Chinese Communist Party

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Xi Forever

On Monday the Chinese Communist Party’s Central Committee approved a proposal that the country’s president no longer be limited to two five-year terms of office. On Thursday the National People’s Congress will rubber-stamp the change. And that will be the end of three decades of consensus-seeking collective leadership in the CCP. The god-king model is back.

President Xi Jinping has spent his first five-year term eliminating all his powerful rivals (generally on corruption charges), and now his victory is being enshrined by a change in the constitution.

The change does not mean “that the Chinese president will have a lifelong tenure,” said an editorial in the state-owned Global Times. But the paper also quoted Su Wei, a prominent Communist Party intellectual, who said that China needed a “stable, strong and consistent leadership” from 2020-2035. No need to wonder who that might be, although Xi Jinping would be 82 by 2035.

Shades of Mugabe, I hear you thinking, although Xi commands a country around a thousand times richer than Zimbabwe. He is now effectively president-for-life, or at least until things get so bad that the people around him decide they have to overthrow him, as Mugabe’s cronies eventually did. And although Xi obviously thinks being president-for-life is a good idea, it is not.

Being president-for-life certainly wasn’t a good idea for former Soviet leader Leonid Brezhnev, who was also effectively in power for life. In his case that was eighteen years. It became known as the ‘era of stagnation’, and only seven years after Brezhnev died in 1982 the whole Communist empire in eastern Europe collapsed.

Alerted to the danger of leaving somebody in power too long by the collapse of the Soviet Union, the Chinese Communist Party has kept its leaders on a short leash since the early 1990s. They got two five-year terms, no more, and they had to keep the support of other members of the Central Committee or it might even be just one term.

It has worked pretty well, as dictatorships go. There have been no more maniacs in power like Mao Zedong with his crazy Great Leap Forward and Cultural Revolution, which killed millions and cost the country two decades of economic growth. During the past quarter-century of cautious, consensus-based politics, China’s economy has grown about tenfold.

That pace of growth cannot continue no matter who is in power, but it is very important for the Party’s survival that the economy does continue to grow. There is certainly no evidence that one-man rule will provide that growth better than the existing system, so why (presuming that he is a loyal Communist) has Xi decided to overthrow it?

Mere personal ambition is one obvious possibility, but there is probably more to it than that. Xi’s father was Communist royalty – one of the founders of the Party, and at one time its General Secretary – and he himself was a ‘princeling’ who spent his early years in very comfortable circumstances. Then in 1966, Mao launched the Cultural Revolution.

Xi’s father was expelled from the Party and publicly humiliated. He himself was sent to the countryside at the age of 15 to “learn from the peasants”, and ended up in a work camp digging ditches. For some years he actually lived in a cave (although it had a door). But he survived, and he was eventually to allowed to join the Party, move back to the city, and go to university.

It all left a lasting impression on the young Xi. He knew that working hard, keeping your nose clean, and even rising to high rank cannot protect you in an essentially lawless one-party state if Party politics takes the wrong turn. So he really only had two choices: work to change the Party into a law-abiding entity (which is probably impossible), or take control of the Party and keep it forever.

He has chosen the latter course, and in terms of protecting himself it is probably the right choice. “I think he will become emperor for life and the Mao Zedong of the 21st century,” said Willy Lam, former Hong Kong democratic politician and now politics professor at the Chinese University of Hong Kong. And that is precisely the problem.

Xi no doubt justifies his actions to himself by believing that he is the indispensable man for China’s modernisation, but the cemeteries are full of indispensable men. The longer you are in power, the more poor or at least sub-optimal decisions you make – and when the passage of time makes the mistakes obvious, you are obliged to defend them although a successor could just drop them and move on.

Xi is not likely to “do a Mao” and unleash chaos in China. He is intelligent and he works hard. But the mistakes will accumulate nevertheless, and stagnation awaits.
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To shorten to 725 words, omit paragraph 4. (“Shades…not”).

China: Another Chairman Mao?

Opening the National People’s Congress in Beijing last Saturday, Prime Minister Li Keqiang set China’s growth target for the coming year at 6.5-7 percent, the lowest in decades. Only two years ago, he said that 7 percent was the lowest acceptable growth rate, but he has had to eat his words. He really isn’t in charge of very much any more.

The man who is taking charge of everything, President Xi Jinping, is now turning into the first one-man regime since Deng Xiaoping in the 1980s. The “collective leadership” of recent decades has become a fiction, and Xi’s personality cult is being vigorously promoted in the state-controlled media.

Xi has also broken the truce between the two major factions in the Chinese Communist Party, who might be called the “princelings” and the “populists”. Xi, as the son of a Communist Party revolutionary hero who ended up as vice-premier, is princeling to the core. His centralising, authoritarian style is typical of this privileged breed.

The populists, like Li Keqiang, are generally people who grew up poor, usually in the interior, not in the prosperous coastal cities. They rose to prominence more by merit than by their connections, and they are more alert to the needs of vulnerable social groups like farmers, migrant workers and the urban poor. Most of them have come up through the Communist Youth League, and are known in Chinese as tuanpai (“the League faction”).

Frightened by the non-violent demonstrations that challenged the Communist Party’s monopoly of power in 1989, for almost three decades these two factions have carefully shared power and never attacked each other in public. Xi has now broken that non-aggression pact, authorising open attacks on the “mentality” of the Communist Youth League in the media.

The friction between the factions has grown so great mainly because the Chinese economy is stumbling towards a crisis. Neither faction has a convincing strategy for avoiding the crisis, but each has come to believe that the other’s political style – authoritarian for the princelings, populist for the tuanpai – will make matters worse.

The Communist Party’s dictatorship is founded on an unspoken contract with the population: we will provide constantly rising living standards, and in return you will not question our authority. But no economy can grow at 10 percent a year forever, or even at the currently advertised rate of 6.5-7 percent.

In fact, China’s growth rate actually collapsed about seven years ago, but it has so far been hidden by a binge of debt-fuelled investment. When most of the world went into a deep recession after the financial crisis of 2008, the Chinese regime artificially kept the country’s growth rate up by raising the proportion of GDP devoted to investment in infrastructure to an incredible 50 percent.

In the following five years, China was building a new skyscraper every five days. It built more than 30 new airports, subway systems in 25 cities, the three longest bridges in the world, more than 10,000 km (6,000 miles) of high-speed railway lines, and 40,000 km. (26,000) miles of freeways. Tens of thousands of high-rise residential towers went up around every city.

But the new towers remain largely empty, as do many of the freeways. These are investments that produced jobs at the time, but will not produce an adequate return on investment for many years, if ever. And to finance all this, the government let the country’s debt burden explode, from around 125 percent of GDP in 2009 to 220 percent now.

All of this investment has been counted in the GDP figures, but up to half of it, or maybe even more, is bad debts that will eventually have to be written off. If only half of it is bad debts, then China’s GDP growth in the past five years has really been around 2 percent, not 7-8 percent.

The crisis can be disguised for a while longer by printing more money, which the regime is doing. But that is putting downward pressure on China’s currency, the yuan, which is currently over-valued by around 15-20 percent. Devaluation would give a temporary boost to China’s exports, but it could also trigger an international trade war that would drag everybody’s economy down.

So at the moment China is spending $90 billion in foreign exchange each month to keep the value of the yuan up, but even with its immense foreign exchange reserves that is an unsustainable long-term policy. Sooner or later there is going to be a “hard landing”, and the regime’s very survival may be at risk.

There is no evidence that President Xi Jinping has a better strategy for mastering this crisis than the rival faction, but the storm is obviously approaching and he is battening down the hatches.

In his view, that means taking absolute power and building a personality cult of a sort that has not been seen in China since the demise of Mao Tse-tung. He is certainly not a vicious megalomaniac like Mao, but he clearly believes that he will need total control to get through the storm without a shipwreck.
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To shorten to 725 words, omit paragraphs 9 and 10. (“In the…now”)

China: the Dead Cat Bounce?

A few weeks ago, at the height of the panic in the Chinese stock markets, a sour joke was doing the rounds: “Last month, the dog was eating what I eat. Last week, I was eating what the dog eats. This week, I think I’ll eat the dog.” A lot of people have lost a lot of money.

The Chinese governent is permanently terrified. It is terrified of climate change, of slowing economic growth, even of a fall in the stock market – of anything that might cause the population to turn decisively against it. When you are running a 66-year-old dictatorship, and your only remaining credibility in the public’s eyes is your ability to keep living standards rising, any kind of change is frightening.

How terrified is it? Consider its reaction to the recent sharp fall in the two main Chinese stock markets. China has a capitalist economy, albeit a highly distorted one, and stock markets are a normal part of such economies. They go up, they go down, and normally governments do not intervene in the process.

The Chinese stock markets have recently been on a roller-coaster ride. After treading water for years, prices exploded in June 2014. Over the next year, there was a 150 percent average rise in prices on the Shanghai Composite exchange, and almost 200 percent on the Shenzhen. Obviously this was not sustainable, especially since growth in the real economy has been falling for years. A “correction” was inevitable.

It came with a bang, on 12 June of this year. Since then prices have fallen 30 percent on the Shanghai market, 40 percent on the Shenzhen. Around $4 trillion in paper values have been wiped out – but so what? Chinese stock prices are still far higher than they were a year ago. Indeed, at an average of 20 times earnings they are still overvalued by real-world standards.

Why would any government intervene over this? Some investors will win, some will lose, and it will all work itself out. But the Chinese government intervened in a very big way. First it cut interest rates to the lowest level ever. When that didn’t stop the slide in prices, it banned large investors (holding more than 5 percent of a listed company’s shares) and all foreign investors from selling their shares for six months.

It encouraged around 1,300 Chinese companies – half the stock market – to suspend trading in their stocks. It forbade any new listings (IPOs) on the markets. It even ordered a state-backed finance company to make new loans to people who want to make bigger bets on the stock market than they can afford.

Anything and everything to stop the prices from falling, and lo! They did stop. Last week, prices even rose a bit.

This may just be what traders call a “dead cat bounce” – if the price falls from high enough, there is bound to be a little bit of a bounce at the bottom – but that is mainly of interest to Chinese investors. The interesting question for the rest of us is: why did the Chinese Communist regime do all this?

Because there are 90 million private investors in the Chinese stock markets. They tend to be older (two-thirds of them didn’t finish high school), they have been betting their savings on the market – and according to state media they have lost, on average, 420,000 yuan ($67,000) in the past six weeks.

That would be no problem if you were already in the market a year ago: you would still be well into the black. But a great many of the private investors piled in very late in the game – 12 million new accounts were opened as recently as last May – and they have already lost their shirts. They would have lost their skirts and trousers too if the government did not stop the collapse in prices.

So the regime intervened. This may be because the Chinese Communist Party loves the citizens so much that it cannot bear to see them lose. It is more likely to be because it is frightened that those tens of millions of stock-market losers (who were officially encouraged to invest) will start protesting in the streets. Whether the Chinese regime’s power is secure or not, it certainly does not FEEL secure.

This latest government action is part of a pattern that extends back to the global bank crisis of 2008, after which China was the only major country to avoid a recession. It did so by flooding the economy with cheap money. So few people lost their jobs, but the artificial investment boom created a bubble in the housing market that is now starting to deflate: millions of properties lie empty, and millions of mortgages are “under water”.

Sooner or later, this game is going to run out of road. The risk is that China’s road ends where Japan’s thirty years of high-speed growth ended in the late 1980s, with a collapse to 2 percent growth or less and a quarter-century of economic stagnation. China is around the thirty-year point now, and its regime is doing all the same things that the Japanese government did just before the collapse there.
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To shorten to 725 words, omit paragraphs 7 and 11. (“It encouraged…afford”; and “That would…prices”)

How Many Chinese Are Enough?

19 October 2007

How Many Chinese Are Enough?

By Gwynne Dyer

Even before the 17th congress of the Chinese Communist Party began last week in Beijing, it was clear that at least one policy was not going to change: the one-child policy. “Because China has worked hard over the last 30 years, we have 400 million fewer people,” said Zhang Weiqing, minister in charge of the National Population and Family Planning Commission, earlier this year.

In the eyes of the policy’s supporters, that justifies the infringements on people’s freedoms that are involved. True, a few women (or a few million women) were dragged off to have forced abortions in the bad old days, but now it’s much more civilised. Besides, the end justifies the means, doesn’t it?

Not having 1.7 billion people now (and not having over two billion in twenty years’ time) is clearly a desirable outcome for China. Even with decades of high-speed economic growth, there is a limit to how many people China can feed and clothe and house. But did the regime really have to impose such a draconian birth-control policy in order to stay within that limit?

The doubters point out that the Chinese government’s “soft” birth-control policy in the 1970s — encouraging later marriage, fewer births and longer birth intervals — brought the total fertility rate (i.e. lifetime babies per woman) down from 5.7 in 1970 to 2.9 by 1979. That is one of the fastest drops in the birth-rate seen anywhere at any time — and it happened BEFORE the “hard” one-child policy was introduced in 1980.

Critics also point to the Indian experience, where an early experiment with enforced birth-control measures in the 1970s created such a backlash that nobody has dared to suggest it since — and yet, they argue, India’s birth-rate has also plummeted over the subsequent generation. From a total fertility rate of 6.3 in 1960, it has fallen to only 2.8 this year. The famous “demographic transition” from high birth-rate, high death-rate societies to longer-lived communities with lower birth rates still works its magic eventually. But it does take its time.

Compulsion does make a difference. India and China both started out in the 1960s with very similar fertility rates, and at that time China’s population (648 million) was much bigger than India’s (433 million). But by 1980 China’s fertility rate was already down (without compulsion) to the rate that prevails in India today. With compulsion, it has fallen even further, to little more than half the current Indian fertility rate. So China’s population will level off at around 1.4 billion by 2020, while India’s will go on growing to at least 1.7 billion.

How much difference does that make in practice? A lot. If China had taken India’s approach, its population would probably reach 2 billion before it stopped growing. For every two Chinese in the country we know, there would be three instead. That could easily be the margin between success and disaster.

China’s economic miracle (ten percent growth for the past two decades) skates permanently along the edge of environmental calamity. Just breathing the air in Beijing is the equivalent of smoking twenty cigarettes every day. The country has lost almost 7 percent of its farmland to development in the past decade. Dozens of cities are already experiencing severe water shortages. It’s bad enough with the present population of 1.3 billion. What would it have been like without the one-child policy?

In large parts of the world, it is not politically acceptable to suggest that the sheer number of people can be a problem. Population control is startlingly absent, for example, from discussions about how to minimise climate change. It’s partly out of concern for the religious sensibilities of some people, and partly because of the human rights issues that it raises.

In addition to the human rights abuses implicit in the one-child policy, there are grave demographic implications. One is the shrinking number of people in the working-age population who have to provide for a relatively large aged and retired population. Another, specific to societies where sons are seen as far more desirable than daughters, is a wave of selective abortions and female infanticide.

This is hardly unknown in India either, but in China, because of the one-child policy, it has taken on the dimensions of a plague. Girls are in such short supply that it is estimated that by 2010 there will be 37 million young Chinese men with no prospect of ever finding a wife.

There have been relaxations in the one-child policy over the years — ethnic minorities are largely exempt from the rules, and rural families whose first child is female are allowed a second try — but almost two-thirds of Chinese families really do have only one child. And the fact that the government is determined to retain the policy suggests that it intends to bring the population down in the longer run, whatever the collateral social damage.

Most ecologists would say that China is well beyond its long-term “carrying capacity” even with its present population. Maybe the government is actually listening to them. Maybe it also knows that climate change will not be kind to China. There are things worse than a one-child policy. Famine, social disintegration and civil war, for example.

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To shorten to 725 words, omit paragraphs 10 and 11. (“In addition…wife”)