Connect with us

Economy

Why The Naivete In Misreading Xi’s Furtherance of One-Man Rule and State-Domination Of The Economy? – Forbes

Published

 on


It is hard to find a Western observer surprised by Xi Jinping’s “election” to an unprecedented third term at October’s twice-a-decade session of China’s Communist Party’s National Congress. Outcomes of the Party’s important meetings are always highly choreographed.

But Xi’s elevation of his closest—and relatively unknown—cronies into the Party’s inner-most circle of power, the Standing Committee, by replacing four widely familiar veterans of the Committee’s seven members was seen as a shocker to most outsiders. It shouldn’t have been. Xi was formalizing his already entrenched one-man rule.

At the same time, his pronouncements before the Congress about the urgency to redouble reforms to reinforce the state’s role as the primary engine to spur China’s economic growth—which Party members wholeheartedly endorsed—also seemed like news, especially those who for years, if not decades, have been hoping against hope that market forces in Communist China were on the ascendency.

Genius Dog 336 x 280 - Animated

Xi’s Consolidation of One-Man Rule Is Not Surprising, But Entails Significant Risks

The perception that the most important policy decisions Xi took over his previous two terms were the product of collective decision-making was naïve. Now to mitigate any risk of the emergence of such a dynamic going forward, especially as he ages, Xi has moved decisively to surrounded himself by a group of his own “yes-men.” Literally. In contrast to the past twenty-five years, not a single woman is now a member of the Standing Committee. So much for today’s brand of Chinese Communism having any semblance of gender equality.

In contrast to the outside world, few of these changes have gone unnoticed by an increasing swath of Chinese society—although it is highly rare, if not dangerous, for discussion of such matters to take place publicly. Why? Because China’s populace is well aware of Xi’s unabashed drive—and ability—to transform China into a totalitarian state, a metamorphosis that has intensified unchecked throughout his tenure.

The ubiquitous presence of multiple government surveillance cameras at every street corner, building entrance or transport hub throughout China’s urban and rural areas equipped with sophisticated facial recognition technologies has hardly been lost on the citizenry. While still exceedingly rare, that eruptions of public discontent have begun to emerge, such as protest banners draped from a bridge as well as loudspeaker chants blasting Xi at a major thoroughfare in Beijing at the onset of the Party Congress, were very limited in scale, they do reflect increased brashness by a part of the domestic population.

While the rest of the world may not yet have fully caught on—or refuses to believe the era of a façade plurilateral government in China is over—for many Chinese, collective rule was largely a mirage for years under Xi. I say this based on many years working on the ground across China—visiting large and small cities, in the North, the East, the South, the West and in the Center; being inside numerous Chinese state-owned enterprises, banks and investment funds, as well as in Sino-foreign joint ventures; and in many meetings with government officials, at the Central, Provincial, and City and town levels.

While most Chinese publicly expressed the perspective that the country was collectively governed (and still do so), in private—at least among friends they trust—there is an acknowledgement that one-man rule was—and remains—the reality. In my last visit to China, just prior to the onset of the Covid pandemic, one of my Chinese friends in Beijing referred to Xi as a “thug.”

Like some of his smarter predecessors, Xi is no dummy. He made (and makes) his colleagues feel as if important policy decisions were (are being) collectively decided. While the execution of policies was (and still is), carried out by officials at different levels subordinate to Xi, underlings rarely had (have) the autonomy to wholly call the shots themselves.

Here’s the rub—or more accurately the rubs—for Xi:

First, he needs to walk a fine line creating incentives for subordinates to discharge their duties in a manner consistent with the dictates coming from above. In part, those incentives stem from fear of retribution if policy implementation does not go as planned. Colleagues are not immune from telling superiors when they witness decisions/conduct that are inconsistent with orders from above. It is not difficult to believe that in such an environment, payments can be made to quash informants. As in other countries, China is not immune to the practice of corruption.

Second, it goes without saying that the scale of China is huge—both spatially and in terms of size of population. Unless the strong man at the top is able to institute credible mechanisms of sufficient depth and breadth nationwide to ensure there is effective centralized discipline, with rigorous checks and balances, errant conduct will undoubtedly take place. The real question then becomes one of: how much of such conduct occurs, especially conduct that is ultimately central to the success or failure of the set of decisions at hand.

Finally, increasing numbers of Chinese—especially those that are the most educated—travel widely around the world, including performing research in advanced foreign laboratories, attending Western universities, working in some of the largest Western multinational companies, and travelling as tourists.

The result? They experience firsthand cultures where there is decentralized decision-making; where procedures are questioned and, indeed, can well change; and where heterogeneity of thought and self-empowerment are often the order of the day. Upon their return to China, such experiences invariably color these persons’ thought processes and influence their expectations. To be sure, some of fully reassimilate; but for others, their expectations may well have permanently changed.

These pose fundamental dilemmas for Xi’s rule: How will he address, if not contain, the inevitable challenges engendered by this process? History teaches countries’ leaders that trying to put that genie back in the bottle is fraught with significant risks to their tenure.

Did Markets in Modern China Ever Triumph Over the State?

In the 1980s and 1990s, in the aftermath of the economic havoc wrought by Mao Zedong’s sweeping command and control regime, Deng Xiaoping initiated market-oriented reforms of China’s lumbering state-owned-enterprises (SOEs).

Some of these initiatives were truly creative, for example allowing SOE managers to enter into contracts permitting them to exercise some discretion in setting prices; choosing certain cities as testbeds to experiment in other forms of liberalization, which, depending on their outcomes would be replicated (or modified) and deployed elsewhere in the country; opening up certain portions of the country (and sectors) to foreign investment; and allowing for the creation of “non-state” enterprises, especially in townships and villages.

Couched as “experiments” by Deng’s economic tsar, Zhu Rongji, the enthusiasm generated by these reforms was palpable. But they also engendered rivalry. In time, tensions arose within the Party between the politically powerful bureaucrats overseeing the moribund SOEs obligated to carry on their payrolls underemployed (or unemployed) workers “from cradle to grave,” and the officials in charge of enterprises engaging in the profitable entrepreneurial activities engendered by these reforms, especially regarding the allocation of investment capital by the state.

Not surprisingly, the interests of the SOEs claimed the upper hand of the Party, by then firmly under the control of Xi Jinping during his first term. While Xi mouthed the words of reform, his actions have been a far cry from those of Deng; and the actions of Xi’s lieutenants bear little resemblance to those of Zhu.

Observers of the outcomes from the Party Congress who expressed surprise over Xi’s continued embrace of a state-dominated “socialist market economy” where the private sector plays a minority role clearly have not been paying attention to the circuitous, if not contradictory, actions taken by Xi in the two years running up to the Congress. In particular, in September 2020 under Xi’s direction, the Party issued in the Peoples’ Daily a formal “Opinion,” followed by a set of “Instructions,” that declared the “non-public sector is a critical part of the Socialist Market Economy”. Indeed, the Party placed emphasis on a dictum that the private sector will be crucial for building a “modern socialist power.” In a word, the Party has embellished Xi’s economic philosophy that China can have its cake and eat it too.

With the decisions taken by the Congress, Xi has surely succeeded in further consolidating his political authority in China so that he is second to none. He believes he has ushered in an era that for the foreseeable future he will be both insulated from any political intrusions at home and can operate on the world stage, especially in the business and economic arena, with a long leash.

While Xi proclaimed at the recent Party Congress that China’s economy is “resilient,” the fact is there are very high economic stakes associated with Xi’s exaltation. He faces the challenge of now bearing sole responsibility for making a multitude of leadership decisions in the most complex political economy environment modern China has ever witnessed. His task is to ensure that every step of the way China’s intertwined state-dominated financial and industrial sectors, which still comprise the country’s backbone and are the Party’s raison d’etre, do not come undone and push the Chinese economy into a hard landing. Should that occur, that would be Xi’s downfall.

In effect, owing to the machinations Xi undertook during the previous Party Congress—in 2017—to ensure his ideology was enshrined while he was still alive, he was able to accomplish the amazing feat of formally placing himself and Mao on equal footing as the principal co-architects and co-thought-leaders of what is today the second largest economy on earth.

Most important for those looking for further movement by China towards a more open economy—one where competitive forces are able to flourish, there is adherence to transparent, rules-based transactions and property rights, and governance institutions are in sync with international norms—Xi’s newly elevated status at the more recent Party Congress will surely be a significant disappointment.

As in the past, Xi did not take advantage of this pivotal opportunity to finally bite the bullet and signal the need to unwind some of the most egregious contradictions inherent in the Party’s ‘socialist market economy’ paradigm underway since the early 1990s, which, year after year, have become increasingly evident as structural constraints on China’s long run growth.

Three of the most prominent of these are: (i) the incestuous relationship between the four large state-owned banks and the largest state-owned enterprises (SOEs), where the banks pretend that the money they give to SOEs are loans, and the SOEs make believe they pay back these debts to the banks; (ii) the inability to fulfill the government’s stated goal of transforming China into a bona fide consumer-led economy as long as the Party continues to hold dear and make sizeable capital investments in the already bloated industrial sector; and (iii) the inevitable tug of war between the interests of government and those of business that arises when the former, which is imbued with a focus on attaining social and political objectives, is the latter’s primary shareholder and slated to pursue commercial ends.

Unfortunately, it’s because of these unaddressed contradictions that over the last several years China’s economic chickens have begun to come home to roost. As the country continues its shift towards a lower pattern of growth and potentially an economic crisis, Xi may well regret that at the beginning of his third term, just as he did at the beginning of his second term, he has chosen to simply kick the economic reform can down the road.

Does this seem to worry Xi? Not one bit. At the closing of the Congress, he proclaimed: “Just as China cannot develop in isolation from the world, the world’s development also needs China.”

Adblock test (Why?)



Source link

Continue Reading

Economy

The Autocratic Recession – Will China’s Handling Of COVID Sink Its Economy?

Published

 on

I am in the middle of writing a book on French democracy, and not for the first time I wonder if I have the wrong country. Often in recent months I have felt I should have been scribbling about America or the UK, but now unrest is bravely picking up in Iran, and then, surprisingly we have the most political, widespread and angry outbreak of protests across China. It might well be too bold a view to say that the democratic recession is coming to an end or has troughed, but a ‘Spring’ in autocratic countries would be a welcome development, provided it ends well (please note that 15 of the 16 countries in the last ‘16’ round of the World Cup are democracies’).

China is crucial and fascinating here. Having crowned himself as leader for ‘a very long time’ and triggered a transition from one party to one man, Xi Jinping’s hubris could not have been greater (see an earlier note ‘The Red Curtain’), and this has now been punctured by public calls for his resignation.

Having enjoyed an easy two years whilst the rest of the world suffered greatly, China is now mired in COVID, direly so in the context of the government’s autocratic and heavy-handed crackdown. In some ways it has had little choice. Chinese vaccines are not as effective as Western ones and a very large number of older Chinese people have not had a booster jab.

Public Health

Neither does China have the public health infrastructure of the West. It has, on a per capita basis, one seventh of the nurses that Germany has, and one tenth of the ‘emergency’ hospital beds of Germany (though, life expectancy in China surpassed that of the US this year, still well behind the EU). It could not cope with a public health emergency – by the standards of how America dealt with COVID, China could suffer 4 million deaths, or 2.3 million using Taiwan as a benchmark. In that respect, a harsh lockdown makes some sense.

Genius Dog 336 x 280 - Animated

What is new, is that the lockdown has given the bulk of China’s population a bitter taste of

autocracy. In some cases, factory workers have been treated in a way that makes Oliver Twist’s trials look like a luxury holiday. Granted that the lockdown cannot end immediately and must endure till the spring in some form or other, there are two very important, long-term questions to answer.

The first is whether the manifestation of Xi Jinping’s autocratic strategy breaks the patience of the Chinese people, and the contract between the people and the state (CCP). Second and relatedly, is whether autocracy is bad for productivity, and if so China hits the productivity wall and regresses. In my view, in the grand scheme of strategic competition between China and the US, this is far more an important issue that a potential invasion of Taiwan.

Productivity

Chinese growth is slowing and like many other countries it may be in a recession. More tellingly, its trend rate of growth has come down significantly (3%) and given worsening demographics, stronger productivity is really the only recourse to higher growth. This is why autocracy is a problem.

To parse the academic work in this field, autocracy and rising productivity can go hand in hand in early developmental economies, but as the very different paths of North and South Korea show, the development of strong institutions and potentially a democracy, pays a sizeable economic dividend.

There is a good deal of evidence to show that political instability or sharp, negative changes in institutional quality can damage productivity. Turkey is another good example of a thriving economy shrunk by deepening autocracy and corruption.

At the other end of the spectrum, the consistently most productive and innovative economies are those countries (Nordics, Ireland, Switzerland for instance) with the best institutional and democratic ‘quality’. They exemplify open economies and open societies.

Cracks are now starting to show in the Chinese model. That Jack Ma only feels secure in Tokyo suggest that there are limits to entrepreneurial leadership in China. The property and shadow banking system are under stress and the disconnection of China from the rest of the world (diplomatically, flow of people) are just some of the factors that will curb innovation, risk taking and productivity in China.

Any talk of a ‘rising’ in China is misplaced, and equally the place of Taiwan is not fundamental to China’s progress. However, if it is to become a dominant power its economy must develop structurally, and this is where autocracy may become the biggest obstacle that China faces.

Source link

Continue Reading

Economy

Charting the Global Economy: Inflation Eases From US to Europe

Published

 on

(Bloomberg) — Inflation around the world is finally coming off the boil, but that’s providing only some comfort to global central bankers who view price pressures as remaining far too intense.

In the US, so-called core inflation, which excludes food and energy prices, rose a below-forecast 0.2% in October from a month earlier. Euro-zone annual inflation slowed in November by the most since 2020, but still remained elevated at 10%.

Despite the cooling, there’s still evidence that inflation could prove more enduring. US employers added more jobs than forecast and wages surged by the most in nearly a year. And in the UK, employers are still confident they can pass on higher costs to consumers, while inflation expectations are stubbornly high.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

Genius Dog 336 x 280 - Animated

World

Global inflation is showing signs of having peaked, although a likely slow retreat from multi-decade highs means it will remain a bugbear for central banks into 2023.

Factories in Europe and Asia struggled in November due to weakening global demand, with the pressure unlikely to let up in the months ahead. Business surveys by S&P Global pointed to shrinking activity and a dire outlook in wide parts of both regions.

Ghana’s central bank increased its benchmark interest rate to the highest level in more than 19 years to cool persistent inflation. Thailand and Guatemala also hiked, while central banks in the Dominican Republic, Mozambique and Botswana held steady.

US

US employers added more jobs than forecast and wages surged by the most in nearly a year, pointing to enduring inflationary pressures that boost chances of higher interest rates from the Federal Reserve.

A key gauge of consumer prices posted the second-smallest increase this year while spending accelerated, offering hope that the Fed’s interest-rate hikes are cooling inflation without sparking a recession. The personal consumption expenditures price index minus food and energy, which Fed Chair Jerome Powell stressed this week is a more accurate measure of where inflation is heading, rose a below-forecast 0.2% in October. Core services costs also moderated.

Europe

Euro-zone inflation slowed for the first time in 1 1/2 years, offering a glimmer of hope to the European Central Bank in its struggle to quell the worst consumer-price shock in a generation. Inflation eased to 10% in November from a year ago, helped by smaller price advances in energy and services.

Polling reveals mounting regret among the British people who voted to leave the EU in 2016, largely due to concerns about the economy. Business investment has suffered more than Germany, France and Italy. Investment has lagged all Group of Seven advanced economies since the Brexit referendum.

Inflation pressures in the UK economy showed only limited signs of abating in November, with companies expecting to raise prices by 5.7% in the coming 12 months.

Asia

China’s imports from South Korea fell by more than 25% last month to the lowest level since February 2021. The drop is another indicator of how the Beijing government’s Covid Zero policy is weighing on consumption and global demand.

Japan’s businesses increased spending for the fourth straight quarter amid sharply weaker yen levels, an outcome that is likely to help improve the economy’s weak performance in the third quarter.

Emerging & Frontier Markets

Chile’s economic activity unexpectedly rose in October on a jump in mining output and a resilient retail industry, as annual inflation begins to ease from a multi-decade high.

Mexico posted record remittances in October, as workers living abroad continued sending cash back home and propping up the country’s economy. Money sent home by Mexicans who are mainly living in the US totaled $5.36 billion in October.

–With assistance from Philip Aldrick, Andrew Atkinson, Maya Averbuch, Matthew Boesler, Max de Haldevang, Claire Jiao, Simon Kennedy, Matthew Malinowski, James Mayger, Yoshiaki Nohara, Reade Pickert, Craig Stirling, Alex Tanzi, Alexander Weber and Erica Yokoyama.

Source link

Continue Reading

Economy

Anxious About The Economy? ‘Career Cushioning’ May Be The Answer

Published

 on

Layoffs and worries about the economy may be eclipsing your enjoyment of the holiday season—and even hopes for next year—but you can stay ahead of the game. One way to do that is by career cushioning—taking a proactive approach to explore the job market and start looking for a new job before it’s absolutely necessary.

It’s crucial to be cautious about career cushioning, though. You don’t want your employer to mistakenly believe you’re not committed to your current role, and you don’t want to get distracted or spend limited time chasing opportunities you’re not necessarily interested in. There are ways to be both cautious and active in a pre-emptive job search.

Job Insecurity and Recession Fears

If you’re feeling a bit unsettled about the future or your career, you’re not alone. In fact, 66% of respondents think a recession could cause layoffs at their organization, according to a study by Clarify Capital. In addition,

  • 81% of people are personally concerned about losing their job.
  • 37% of respondents don’t believe they could handle being laid off either emotionally or financially.

Potential recession is impacting the ways companies manage as well. Fully 70% of people say potential recession has impacted raises at their organization, 65% say it has impacted productivity and 61% report it’s had an effect on hiring. People are most concerned within the business and information industry (66%), the finance and insurance industry (61%) and the education industry (58%).

Genius Dog 336 x 280 - Animated

The threat of recession also has an emotional effect as 45% report feeling stressed, 36% say they’re scared or depressed and 25% report feeling demotivated.

Given this data, it’s exactly the right time to motivate your next steps and start career cushioning.

Getting Empowered

Fortunately, you can take action—and just by doing so, you’ll contribute to your wellbeing. In fact, when you’re stressed about something, you tend to feel happier and healthier when you take proactive steps to respond. The reason: You’re taking control and reminding yourself of the ways you’re capable of creating your own future—and these are very good for you.

When you’re thinking about taking proactive career steps, you’ll want to consider growth and security which comes from both inside and outside the organization. If you get laid off, you’ll want a strong contingency plan outside your current employer, but if your job is in jeopardy, you might also find another role internally which could be a great next step. Don’t assume security will come only from outside the company.

#1 – Reflect and Assess

One of the first things you can do to be proactive about your career is to reflect on your desires and assess your situation. Consider what you love to do and what you have to do in your current role. Look for as much alignment as possible. Also assess your organization. Is there strong direction and purpose provided by leaders you want to follow? Do you have an opportunity to influence? Are there clear practices which make it easy to get things done? Can the organization adapt over time? And are there opportunities to grow with colleagues you appreciate? All of these are ways to evaluate whether your job or your company are places you want to stick around.

#2 – Develop Your Network

This tip won’t come as any surprise, but how you develop your network—more than its size—is perhaps the most important consideration. Networks work best when they’re based on reciprocity. People want to help you, but they’re most motivated to do that when you’ve also helped them, or when they can expect you will support them in the future.

As you’re taking action to cushion your career, it’s the perfect time to reach out without asking for anything. You can just check in with people you respect—with no agenda—just letting them know you’re thinking of them. You can share an article or an idea with someone because you think they’d value it. You can have coffee (virtual or otherwise) just to stay in touch. The point is to nurture your network and keep it fresh by adding value for others and staying on people’s minds—and to do this with contacts who are both internal to your company, and external.

As you’re strengthening your network, be sure to cast your net broadly. A study by MIT found most of your opportunities come not from your primary network of your closest connections, but from your secondary or tertiary connections. This is because with more distance from you, people have access to information you likely don’t have—about new opportunities or emerging potential for new roles.

#3 – Volunteer

Volunteering may seem removed from career development, but data demonstrates those who volunteer in their communities have higher salaries and benefit from more job growth over time. In particular, a study published in Social Science Research found volunteering tends to give people a bump in their salaries and a study by the Center for Economics and Policy Research found links between volunteer work, higher wages and improved likelihood of employment.

When you volunteer, you build your skills and develop your capabilities. If you’re doing the books for the nonprofit focused on refurbishing bicycles for the underserved, you’re continuing to develop your financial and analytical skills. Or if you’re swinging a hammer, building homes for people in your community, you’re also developing team and communication skills.

Volunteer work is also great for building relationships with people who can help you along the way. The person weeding the community garden next to you may be the president of a company or the person serving next to you at the soup kitchen may be an influential recruiter.

#4 – Stay Informed

When you’re being proactive, it’s also wise to stay informed about trends, dynamics of the labor market and companies which interest you. Stay current on the industries which are growing and thriving so you know where to focus an external search if you need one. Be aware of the kinds of jobs which are in higher demand so you can build skills in those directions. And consider the areas of the country where jobs are most prevalent. All of these will help you be ready if you need to go from proactive exploration to actively looking for your next role.

The most resilient people do three things. First, they stay informed. Next, they make sense of what they’re hearing. And third, they respond, improvise and solve problems based on what’s happening and what it means to them.

If you learn the market is hot for workers within the tech industry in North Carolina, you might expand your network in the industry, sign up for alerts about jobs that become available in the field and learn more about what it’s like to live or work in the area. You might even put your ear to the ground and seek information about a new focus your current company has on digital innovation—so you can position yourself in that direction.

When you’re more knowledgeable, you’ll be more confident and able to respond and take action, but you’ll also be more articulate and impressive in an interview as well.

#5 – Be Present and Engaged

Perhaps the most significant thing you can do to cushion your career is to perform brilliantly in whatever role you have currently. Demonstrate commitment, invest energy and give your best in whatever you’re doing. Colleagues and leaders will value and respect you when they see your contribution and experience your engagement—and these will set them up to support you in getting to the next step whenever the time is right.

The Next Opportunity

Recession, layoff and job changes can be scary. But they’re less frightening when you’re prepared and when you’re making your own decisions—taking action to have not just a soft landing, but a forward bounce which will allow you to grow and develop your career in the midst of challenges.

Source link

Continue Reading

Trending