China’s Xi Has to Fight on with Vested Interests for Supply-side Reform


Chinese President Xi Jinping whose supply-side structural economic reform meets official resistance. Photo: SCMP

Chinese President Xi Jinping whose supply-side structural economic reform meets official resistance. Photo: SCMP

While Zhang Gaoli, the Politburo Standing Committee member and vice premier in charge of economy, is optimistic for a debt-fuelled U-turn recovery. Chinese President Xi Jinping had Chinese Communist Party (CCP) mouthpiece the People’s Daily publish first an authoritative person’s views and then Xi’s January long speech that denounce debt-fuelled recovery and advocate Xi’s supply-side structural economic reform that seeks substituting consumption- and innovation-led growth for debt-fuelled growth.

Xi has got the status of paramount leader able to silence dissents so that there is no debate concerning his reform, but powerful officials in charge of economy including Premier Li Keqiang and PSC member and Vice Premier Zhang Gaoli, simply do not carry out Xi’s reform and instead, continue to pursue debt-fuelled growth.

According to SCMP’s report today “‘Don’t wait, waver, hide or hesitate’: Xi Jinping on ‘supply-side’ reform”, Xi had to hold a meeting yesterday of the Central Leading Group on Financial and Economic Affairs to tell officials to implement his reform.

SCMP says CCTV quotes Xi as saying in the meeting, “All regions and all departments must unify their thoughts and actions to stay in line with the decisions [on reform] made by the party’s Central Committee.” “Don’t wait because of the heavy burden, or waver because of the extreme difficulties, or hide because of the risks, or hesitate because of the pain.”

Has Xi convinced Li and Zhang? It does not seem so.

SCMP says in the report, “However, in an apparent defence of its economic achievements, the State Council yesterday published three articles on its website, arguing that the county’s economic growth had remained stable, the economic structure had improved, and people’s living standards were on the rise.

“Although the mainland has pumped an unprecedented amount of credit into the economy – which slowed significantly in April, the country’s monetary and credit growth was ‘still stable and normal’ overall, according to a statement on the government website.”

Xi has to continue his fight for his supply-side structural economic reform.

Comment by Chan Kai Yee on SCMP’s report today, full text of which can be viewed at http://www.scmp.com/news/china/economy/article/1946073/dont-wait-waver-hide-or-hesitate-xi-jinping-supply-side-reform

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One Comment on “China’s Xi Has to Fight on with Vested Interests for Supply-side Reform”

  1. Reader says:

    CHANGE AS A CONSTANT : RESTRUCTURING, RETOOLING, RESIZING

    Any competent Chairman, Board, and CEO would obviously retool and resize the company if the long term trend and prospects is very clear that the market for any particularly product is or service is changing.

    Such “sunset” markets could be due to new innovative products better able to meet market needs such as Steve Jobs’ touchscreen datalinked smart phones versus Nokia’s “dumb” handphones, changing demographics such as the bulk of the large “babyboomers” generation moving into retirement age thus reducing property demand and risky investments but creating new “sunrise” businesses in healthcare, cruise tours, etc., or urgency of switching environmentally damaging energy usages such as coal to non polluting renewable energies such as solar, wind etc., leading to downstream industrial changes from fossil fueled internal combustion engine cars to electric or fuel cell propelled cars, demand for iron, and so forth and on.

    Any Company and its top management failing to foresee such trends or changes or unable to identify new products, services will generally doomed the company to losses and eventually bankruptcy. Management likes to talk about “forward planning” and being “ahead of the curve”, so likewise the same for a relatively large “corporation like “China Inc.”. What are the attributes applicable to a competently runned company applies equally to a large corporation. The rules and requirements of management are generally the same although the goals may be slightly different for some “companies” or government department, agencies, ministries, boards, etc., but ultimately the same as the financial and economic health of a country depends on a profitable trade balance and balance sheet. Non profit units in government bodies such as free health services or free education are but loss leaders leading to an overall competitive and financially sound economy or country.

    Singapore is an example par excellent of a well managed country in terms of its economy in particular (although its non profit seeking one could be better). Their ministers and department heads appeared to be people who are generally well selected, having the attributes of strategic thinking, honesty and ability. Ministers and heads of departments are expected to be able to predict and foresee what is to come and thereby prepare for and undertake the necessary action; some corrective, some less but all nonetheless reshaping the industries – old or new – in terms of retooling and resizing. Management in private companies are expected to do likewise for their respective companies.

    Change is a constant, like it or not. While “consumption” is a laudable theory, the world is limited in its ability to “buy”, just like the direct selling companies. Once the ponzi scheme-like global market is exhausted, it collapses. The scheme depends on a continuing injection of new markets – “investors” or “consumers” – to create continuous “growth” to pay its upliners. Thus when the market of people available to “invest” is depleted, the music stops and the downliners – the latest recruits or investors – are caught with their pants down and loses their money which at this point constitutes a very large pyramid base. Imperial Washington’s economic system foistered on the world is like one huge ponzi scheme controlled and headquartered in New York’s Wall Street.

    No economy can grow forever unlike ponzi schemes or Imperial Washington’s economic “globalist” policy. The classsic Keynesian economies must be allowed to run its course of up and down, of boom and bust, and not interfered with as Greenspan and Bernanke did with money printing in particular. The stock market is not a real economy and should not be all and end all. It should reflect the real economy of boom and bust. Unfortunately the American model has become a golden goose for the ultra rich who has hundreds of billions if not trillions of money invested in funds managed by hedge funds managers and cannot accept or even contemplate the “market” ever going down wiping billions or millions off their investments. What more, as a financial mechanism seeking to encourage more “investment” transactions, more instruments are created, like those in a Casino based on a speculative and ultimately fraudulent business model, only the vested interests like the banks, brokers, hedge fund managers are the ultimate winners siphoning billions from mainstreet and the man in the street while loading them evermore with loans and debts to fuel their “ever growing” stock market securities investments but at the same time encouraging the stock listed companies to continue making profits at all expense by moving to lower waged countries.

    Singapore for example, has in a way, seen the effects of it lesser educated blue collar workers affected by cheap immigrant labor while America and Europe has seen its workers losing their jobs to lower wage countries. China too will or already seen this trend when its labor intensive factories moved to Vietnam or Myanmar. More and more workers will be affected in the future as more robots come onto the industrial scene or as more countries turned protectionist against lower waged countries. More and more lesser educated will be jobless. The “free market” theory will be ditched as tariffs goes up.

    So what does this all portend for China? For one, it has to accept that retooling and resizing is a normal constant but the government must and should have a special fund to help retrain and reeducate all employees affected. Since such changes are a constant, free tertiary education in terms of tuition fees, and health care should be made universal. Even a basic income is sine qua non to a mentally healthy, anxiety-less, and secure populace. Second, hard decisions must be made. Administration cannot avoid hard decisions to restructure overcapacities in some industries if the trend or changes are permanent. Third, ensure real thinkers in top management and not just doers. There are just too many of the latter around; Pretenders in high offices. Without top thinkers at the cutting edge, the ship or plane (society, country) heads God-knows-where. Fifth, review and restructure the debt fuelled economic system. Curb speculative industries to stop it contaminating the real industries; Curb greed. The economy should not be based on greed and fraud. Have a system that can predict demand and supply – whether nationally, locally, regionally or globally – and build your economic model from there. Just like any good old fashion organic growth company. How much central control or free market combination with caveat emptor for the enterprises, that’s for the government to decide; but they mus know what’s the demand supply equation on a real time basis at all times. Sixth, the rest, one leaves it to the government. This comment here is just to provide some thought on the matter.

    Good luck with Beijing’s decisions and policies. May it grow to have a reputation and image like Singapore, South Korea and Japan – modern, educated, intelligent, adaptable, resilient countries and people.

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