I am traveling again this week so there will not be another issue until at least Wednesday Beijing time. I will be on Twitter @niubi.
Today’s Links:
THE ESSENTIAL EIGHT *
THE ESSENTIAL EIGHT1. The Coming Chinese Crack-Up – WSJ We cannot predict when Chinese communism will collapse, but it is hard not to conclude that we are witnessing its final phase. The CCP is the world’s second-longest ruling regime (behind only North Korea), and no party can rule forever. // David Shambaugh oped. I think his scenario has a <10% probability, and the probability of a “Crack-up” may even be lower now than it was in 2011-2012. Xi’s apparent control of the PLA and security services, the instruments of hard power I discussed last summer, should make it much harder for anyone to mount significant resistance in an organized way against what Xi, and the support from many quarters for what Xi is doing should not be underestimated. Shambaugh does a smart job hedging by leaving the timing open-ended, so he has all the upside of possibly being right and little downside of being “wrong” as he can always say “not yet”. Interestng that there seems to be a new surge of “coming collapse of China” prognosticating
Related: Don’t expect reform from China’s new leaders – The Washington Post – David Shambaugh 11.15.2012 For his part, Xi, like Hu, remains a cipher: We do not know whether he is a closet reformer, a real reformer or another apparatchik-technocrat. His background suggests the last. At least he smiles and has a warmer public persona than the wooden Hu. Nonetheless, Xi & Co. will be trapped by these and other powerful vested interests that strangled the would-be reforms of Hu’s more progressive advisers and the acolytes of his predecessor, Jiang Zemin. To break the Iron Quadrangle and launch the much-needed new reforms will require enormous vision and willpower on Xi’s part, an investment of huge institutional resources to buy them off, and time. It will be at least two years before Xi can consolidate his power and be in a position to tackle the powerful vested interests that run China today. And it is not clear that he is even so inclined. //worth noting that Shambaugh misread Xi and the state of elite politics back in November 2012
Related: Michael Auslin: The Twilight of China’s Communist Party – WSJ 1.29.15 “I can’t give you a date when it will fall, but China’s Communist Party has entered its endgame.” So says one of America’s most experienced China watchers to a small table of foreign diplomats at a private dinner in Washington, D.C. The pessimism from someone with deep connections to the Chinese government is notable. Washington should start paying attention if it wishes to avoid being surprised by political earthquakes in the world’s second-largest economy. // wonder if Shambaugh attended this dinner..He and Auslin seem to be on the same page
Related: Here Is Xi’s China: Get Used To It | ChinaFile – Arthur Kroeber 12.2014 A different view from an equally experienced China watcher…confused yet? // China is a successful authoritarian developmental state which is now rich enough to start setting its own rules rather than just accepting other peoples’. That is the Xi project. To recognize this fact does not require one to celebrate it, or to ignore the costs of the authoritarian strategy…China, to steal John Connally’s famous phrase about the dollar, is its own country, and other people’s problem. It will develop in its own way, on its own terms, and others will just have to work with it as best they can
Related: The Sinocism China Newsletter For 11.16.12 | still sticking with what I wrote at the end of the 18th Party Congress in November 2012 // Watching Xi’s remarks I was struck by his three references to “中华民族伟大复兴” (translated as “great renewal of the Chinese nation” or “great Chinese renaissance”) and his omission of most of the standard ideological benchmarks. “中华民族伟大复兴” is not a new term and has historically been used by Deng Xiaoping and many others as the justification for reform. On November 15 Xinhua in 述评：循序渐进，中华民族复兴路线图清晰可见 discussed Deng’s plan for the renewal and said that the roadmap for the “great renewal of the Chinese nation” is getting clearer. Xi’s repeated mention of this goal may be another sign that will see a more nationalist China during his rein. The Party knows it needs more than “Scientific Development”, “The Three Represents”, “Marxism”, “Mao Zedong Thought” or “Socialism with Chinese Characteristics” to justify its rule. And that is why I think we will see attempts at reforms, though nothing like the political reforms Westerners and liberal Chinese hope for. The great renewal of the Chinese nation will not happen without significant changes to the economy, and a real crackdown on corruption (calling Wang Qishan…) Some will argue that it will also not happen without wholesale political reform, but Xi Jinping and the new leadership are unlikely to agree. Expect Xi Jinping to be a reformer, but possibly a hardline nationalist one. Be careful what you wish for?
2. China Blocks Web Access to ‘Under the Dome’ Documentary on Pollution – NYTimes closing the barn door after 100m+ people watched it…seems a bit counterproductive but perhaps they decided that sentiment was becoming hard to manage?// The website of People’s Daily, the official party newspaper, had initially promoted the video and posted an interview with Ms. Chai, but those had been deleted by Friday morning. The censors’ guillotine fell a day after the start of the annual session of the National People’s Congress, the party-controlled legislature that is supposed to represent official candor and accountability.
Related: President Xi to give iron hand to polluters – Xinhua President Xi Jinping vowed here Friday to give an iron hand to any polluters in the smog-choked country. “We are going to punish, with an iron hand, any violators who destroy ecology or environment, with no exceptions,” said Xi, while reviewing the work report of the State Council together with National People’s Congress (NPC) deputies from Jiangxi Province. He asked the Chinese to protect ecology and environment like to “care one’s own eyes and life,” showing his resolve to curb widespread pollution that the world’s second largest economy is battling. “Protecting environment is ensuring livelihood,” Xi said.
Related: [视频]【新常态 新成效】共建绿水青山 同享生态红利新闻频道央视网not “under the dome”…CCTV Evening News Sunday top story on fighting pollution
3. Move Over Mao: Beloved ‘Papa Xi’ Awes China – NYTimes.com Li Datong, a political commentator in Beijing, said many of those who came of age in the 1960s and ’70s were especially unsettled. “It’s ridiculous that he’s pulling the personal cult ploy,” he said. “The Chinese propaganda apparatus, with its instinct of sucking up to the supreme leader, is partly to blame, but the problem is that he hasn’t moved to stop it. Obviously he is indulging this, which to be honest makes us very uneasy.” Despite their misgivings, many liberals said they doubted Mr. Xi would go so far as to revive the excesses of the Mao era. // What is going on really does not look anything like the cult of Mao. Don’t get me wrong, this is not a positive development, but it still looks to me as something fundamentally different from what occurred under Mao (FWIW here is my turgid masters thesis on Mao Badges and their role in the Cult of Mao). The “cult” looks like it is designed to signal to the party that Xi is in control, like a marketing campaign that says “resistance is futile” aimed at anyone in party/PLA who is not getting on board with the reform agenda and the corruption crackdown. And there are plenty of sycophants and opportunists inside and outside the system who are going to overdo it. There is also little evidence of any attempts at using the masses, in fact it looks like the opposite is happening if you consider how they effectively killed Weibo and especially its participation in the corruption crackdown
Related: A Modern Cult of Personality? Xi Jinping Aspires To Be The Equal of Mao and Deng | Willy Lam The Jamestown Foundation The lack of obvious achievements for economic reform has reinforced the belief that Xi is consolidating power out of a Maoist-style self-aggrandizement rather than a genuine commitment to Deng-style liberalization. // I think it is far too early to conclude this
4. Battered women in China could finally get a measure of legal protection – The Washington Post China stands on the verge of passing a landmark new domestic violence law, a victory decades in the making that owes much to the extraordinary, and very different, stories of two battered women whose suffering helped prompt a national debate.
Related: China detains five rights campaigners who planned Women’s Day protest | Reuters Lawyers for two of the activists told Reuters the five women, who are from three cities, were detained by police on March 6. They were organizing demonstrations in several cities over the weekend against sexual harassment on public buses. One of the women detained, Li Tingting, known by her pseudonym Li Maizi, is best known for organizing a campaign for gender-neutral toilets. Another activist, Zheng Churan, was detained in the southern city of Guangzhou. Both are in their early 20s. Three other campaigners were detained in the eastern coastal city of Hangzhou and in Beijing.
Related: You won’t believe what Youku and Baidu have as their Women’s Day doodles: Shanghaiist The lackluster Women’s Day doodles found today on the homepages of Youku and Baidu have become objects of ridicule for reinforcing gender stereotypes of women after a post by a Chinese illustrator went viral on Weibo.
5. Foreign banks tighten lending rules for China state-backed firms-Reuters The January-dated DBS document said: “Not all SOEs receive the same degree of government support. It is our further belief that the differentiation of such support will widen in the future as the government continues to pursue market economy.” DBS will now divide SOEs into tiers according to their likely level of government support, with subsidiaries considered more risky than top-level holding companies. Group companies that are not consolidated into the parent SOE’s financial statements will be evaluated as an ordinary borrower, the decision grid shows. DBS effectively acknowledges that lenders can no longer take for granted implicit support from above. “Compared to ordinary corporates, implicit support obtained from the parents of SOEs are subject to higher risks because of the risk of policy and people changes,” the document said. // how much of recent capital outflows comes from the unwind of commodity financing?
Related: Legal power of local government pledges in China rejected｜WantChinaTimes In line with China’s increasing moves towards a market-oriented economy, the country’s Supreme People’s Court recently ruled the legal power of pledges extended by local governments to be invalid, according to Shanghai’s National Business Daily. The paper noted however that the ruling will have little impact as most financial institutions have long regarded such pledges as merely a bonus when evaluating loan applications from financing platforms and enterprises under the auspices of local governments.
6. China’s February Exports Rise 48.9% – Bloomberg Business Exports gained more than 48 percent from a year earlier, the customs administration said in Beijing on Sunday. That compared with the median estimate for a 14 percent jump in a Bloomberg survey of analysts. Imports slid more than 20 percent, leaving a trade surplus of $60.6 billion. A recovering U.S. has helped underpin China’s economy as it seeks to cut down excess capacity and transition to a reliance on domestic demand rather than infrastructure investment. Today’s skewed numbers also reflect other factors, including the timing of the lunar new year holiday, plunging commodity prices and an effort to clamp down on capital outflows via faked trade receipts.
7. Why do we care about Xiaomi? — Benedict Evans we now appear to have at least a couple of Chinese companies doing what was supposed not to be possible – low-margin companies using commodity components and a commodity OS, yet achieving differentiation in design, software and services. This is a great illustration of the fact that looking at China alway challenges your assumptions about what’s inevitable in technology. Hardware companies doing good software and UI? Commodity box-shifters learning design? How far might that spread?
8. Contrarian highlights from China’s Government Working Report 2015 | chiecon Below are the less glamourous highlights not being washed through mainstream media, yet it’s these changes that will have more of an impact on people’s livelihoods. Hence these are the trends in China’s real economy to look out for, and will influence anyone doing business in China or picking China stocks over the following years.
You can read the rest of today’s newsletter here.