Serious Obstacles to Chinese President Xi’s Economical Reform


Chinese President Xi Jinping Photo: SCMP

Chinese President Xi Jinping Photo: SCMP

China’s loose money policy in the first quarter has brought about some economic growth so that Zhang Gaoli, the Politburo Standing Committee (PSC) member of the Chinese Communist Party (CCP) in charge of economy, is optimistic and said in a public conference late March, “From the numbers, I expect kai men hong (good start at the beginning of the year) in the first quarter. This year we tackle the difficulties. Next year will be blue sky and gentle water.”

Zhang was soon refuted by an “authoritative person” in the person’s interview with CCP’s mouthpiece People’s Daily. The report on the interview says that the mysterious authoritative person advocates L-shaped instead of U-shaped or V-shaped economic growth in order to conduct structural reform to substitute consumption- and innovation-led growth for debt-fuelled growth stimulated by loose credit.

Obviously, Zhang and other officials in charge of Chinese economy have disregarded Xi’s call for economic structural reform but kept on the old dangerous practice of seeking debt-fuelled growth in running China’s economy. Xi has been upset by them and wants to openly stop them by the authoritative person’s words.

Therefore, as soon as the report on the interview with the authoritative person was published, analysts speculate that the authoritative person is close to Chinese President Xi Jinping and has given the interview in order to put an end to the practice of seeking debt-fuelled economic growth that may finally lead to serious crisis.

In fact, judging by the slow progress of Xi’s economic reform, there has been the split on top of Chinese government on economic policies for quite a long time. It is time for Xi to resolve the problem once for all now. Therefore, soon afterwards, People’s Daily published a transcript of Xi’s long speech on his supply-side structural reform that the mysterious authoritative person advocated in the interview.

It has been a long split because as far back as in a speech in January, Xi wanted officials not to sing out of tune with the CCP central authority. The full transcript of the speech was not published by Chinese media until early May. Reuters quoted Xi in its report on that speech titled “China’s Xi says not stifling debate but wants everyone on same song sheet” on May 3 as saying that some officials cared only about forming their own cliques to advance their careers. Obviously Xi said that as he met dissents in carrying out his reform.

From that we see that Xi was so upset by Zhang’s statement of dissent in his March speech that Xi had to use the state media to quote an authoritative person in an interview to oppose Zhang. However, that seems not convincing enough. Xi has to have his own speech published to enhance his fire power against the dissents.

On the surface, the problem is due to Premier Li, Vice Premier Zhang Gaoli and others’ fear that the economic slowdown, if not stopped by loose-money stimulus, may lead to serious unemployment that will give rise to political instability. But Xi knows the obstacles lie deeper in the harm that the reform may do to powerful vested interests including those in steel, coal, building materials and property industries with excessive capacity that need ease credit for their survival. That is why he mentioned the cliques of officials who cared only about their own careers.

Like China’s feudal dynasties, the CCP dynasty is an absolute monarchy with Xi having final say, but even in Chinese absolute monarchy, powerful clique of officials might be able to stop an emperor in doing things that they regarded as against the rule.

For example, when Emperor Shenzong of the Ming Dynasty was unwilling to designate his eldest son as the crown prince to succeed him as he wanted to choose instead his third son as crown prince, officials fought for the eldest son for ten years as there had been the rule in the Ming Dynasty that an emperor should be succeeded by his eldest son. Emperor Shenzong punished the dissenting officials cruelly, beating some to death and sent quite a few others into exile but the clique of officials did not give up and continued their struggle for a decade until the emperor was forced to designate his eldest son as his heir.

China’s feudal emperors had officials’ loyalty due to the dominating Confucius philosophy but Xi does not as Confucius’ teachings, though influential, are not interpreted that way now as people are much more enlightened in interpreting Confucius philosophy.

What Xi has to rely on is his mastery of Chinese art for being an emperor, the most important part of which is the ability to find and use talents.

I have repeatedly mentioned in my previous posts, China’s future relies on Xi’s ability to find and wisely use talented people to help him. We will see in the next CCP national congress whether he is able to fill the PSC with talents chosen by and loyal to him to replace the old PSC members who have to retire at the congress due to old age.

SCMP publishes Shirley Yam’s article today titled “Xi Jinping in full control? What an anonymous interview tells you about power struggle in China” that regards the authoritative person as Xi himself. If that is true, Xi is now but a commander-in-chief without troops. An emperor unable to find and employ talents can achieve nothing. It Xi is such a commander-in-chief, he can never succeed in his supply-side economic structural reform and China will face the danger of economic collapse.

Comments by Chan Kai Yee on Reuters and SCMP’s report and article, which can be viewed respectively at http://www.reuters.com/article/us-china-politics-idUSKCN0XU07Y and http://www.scmp.com/business/article/1944690/xi-jinping-full-control-what-anonymous-interview-tells-you-about-power.

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One Comment on “Serious Obstacles to Chinese President Xi’s Economical Reform”

  1. Steve says:

    Currently, Every Country has a Hiccup in the production and consumption of goods and services and the supply of money. I believe it is a temporary dark cloud that will blow away. Careful management of available resources and management of money is dependent on the Treasurer and a team of economist and fund managers. If China’s economic management decline, the world will be in a financial crisis. Hopefully, all goes well and ends well.

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