Another miraculously
clear day outside. Keep it coming. Sun
shining off a blue metallic vase on the porch.
Green stems, red chilies hanging in a garland.
A mosquito, that mosquito, flying around in full view as he
crosses the lines of sunlight. You’re
the same guy who was flying around my head a few hours back when I was trying
to mediate, aren’t you? I never killed
him then and he never got his needle nose up into my blood either. And there in the dark we kept up our dance
regardless, him with his smell and his sonar drawn to my heat avoiding my
hand. Me with my ears inescapably tuned
to his infernal whining.
Speaking of needles and blood, I was pleasantly surprised to
hear The Velvet Underground’s “Heroine” on Chinese pop radio yesterday. A young Chinese D.J. was driving a tribute to
Lou Reed, who had recently passed. There
I was speeding along the third ring road with John Cale’s distorted electric violin
screeching away in perfect dissonance with all the sunny construction sites off
to my left and my right. How is that Lou
gets to sing about how the vile opiate “shoots up the droppers neck” to the
people of Beijing and nonsense about drunken parties by the likes of Katy Perry
is banned by censors? http://www.theguardian.com/world/2011/aug/24/banned-china-lady-gaga-perry
I am a mere armchair censor. I have
faith that those wiser guardians of Zhongnanhai have Katy’s risk potential
properly factored.
Yesterday I was on about light matters like “faith” and how
we or at least I approach news stories in China as opposed to news stories
concerning the United States differently.
Here are some assumptions: U.S.
policy decisions are slow and tortuous, indecisive but along with the imperfect
representative democracy that architects the process, they are ultimately more
stable and sustainable than those of an autocracy. In China decisions can be more swift and
thoroughgoing once the Party is largely aligned, because there is only one
Party and its decisions come ex cathedra,
and as a result they can be breathtaking and broad but ultimately less stable
and sustainable.
Here then are two interesting articles to consider in
parallel: The first is a report from the Chinese publication, Global Times,
suggesting that the top government think tank, the Development Research Center
of the State Council, will be issuing a broad reform plan at the coming third
plenary session of the State Council. http://www.globaltimes.cn/content/820690.shtml#.UnW185Rgaqx
The Plenum will begin this Saturday. (No weekend downtime for those tireless
mandarins). The reforms pending, it has
been suggested, will necessarily be “bold” and "broad, with major strength, and will be
unprecedented." The usually conservative
paper further hinted: “This needs to take on the powerful groups such as the
public sector and State-owned enterprises.”
What are we to expect from this? Are we back to 1898 and with President
McKinley appointing a U.S. Industrial Committee to bust up the trusts? The CCP
doesn’t allow any one State Owned Enterprise (SOE) to ever really be a
monopoly. They are coordinated as duopolies or three and four player markets in
Petroleum, Telecom, Insurance, etc. and all are clearly allowed to thrive by
the will of the Party. Beneath these
tall trees comparatively less innovation or creative disruption takes place on
the jungle floor. What will the SOE
reform look like and will entrenched power groups find ways to resist or indeed
fight back? Will that mean a period of
comparatively less domestic stability as the transition is navigated?
Meanwhile economist Steve Roach has an interesting article
explaining why the U.S. debt-ceiling debacle may have jolted P.R.C. policy
makers to definitively begin the economic decoupling built up over the last two
decades to its current $2 trillion dollar exposure. http://www.project-syndicate.org/commentary/on-what-the-us-debt-ceiling-fiasco-should-teach-its-largest-foreign-creditor-by-stephen-s--roach
China has bought U.S. Treasuries so as to park nearly 60%
their savings surplus into U.S. dollar instruments. This, as they need to slow and hedge on the
appreciation of the Ren Min Bi against the dollar. Inflation would otherwise have been a drag
against China’s export led economy. This
has kept U.S. interest rates down and allowed for big benefits to U.S.
consumers for cheaper Chinese imports.
And Roach suggests that while this served both countries interests in
the past, on account of their tremendous savings imbalance, it will not hold.
If the debt ceiling shenanigans were a wake up call to the
CCP and if they are suggesting bold reforms for as early as this Saturday what
are we in store for? The Party’s current
Five Year Plan from 2011 has already called for a shift from export led growth
to domestic private consumption. If a
“rebalancing” policy is enacted and, as Roach suggests, the demand for foreign
exchange reserves reduces sharply, America will suddenly find securing external
capital, much more expensive. Papers
like the Global Times call for a de-American-ized world, which sounds
provocative but may be just spin, for what is inevitable and practical when
viewed from Beijing. For China this is a rational decision, needed to drive
domestic growth (and to ensure stability and the Party’s continued rule.) And it
is unlikely to be seen in such reasonable macro-economic terms in Washington.
It may be an interesting week of news once the Plenum kicks
off.
In the post 9-11 world America focused on potential military
threats from global jihadist terrorism.
Economically China and the U.S. became ever more mutually dependent
partners in a symbiotic surplus/debt strategy.
What will the next decade look like as the global war on terror, winds
down, America pivots to Asia and China is notably less interested in buying
U.S. securities? What happens to the
relationship when one side finally takes steps to assert an economic reprioritization
that will not be to the other’s short-term benefit?
Invariably, the U.S. will react to another country's policy
initiatives that could have a drag on the U.S. economy, first by means of
rhetoric. Both the Republicans and the
Democrats will presumably frame any Chinese reforms as designed, in part to
hurt the United States. Will the Democrats simply blame the Republicans for
having expedited Chinese thinking to this point of departure? Will
Republicans counter that this is part of China’s willful economic strategy to
hobble the U.S.? Will either party
humbly acknowledge that the Chinese decision may be reasonable objectively and
get down to the hard work of reducing the debt that has grown to where it
is? Neither party will react well to
having the issue forced upon them, by an outside power, particularly from China.
And if the U.S.is then forced to make difficult choices to service
its debt, and interest rates rise and consumer prices all rise, will the whole
of the country increasingly see China has adversarial not just in word, but in
deed? The relationship, already frayed militarily,
technologically, will have little of any silver lining left to point to without
the economic underpinning of the last two decades, firmly in place. The mutual dependency had gone a long way to
keeping everyone engaged and civil. We
may be in for a rough patch.
I have some “faith” that Chinese side is not prepared at
this point upset the U.S.- China relationship lightly. Because their circumstances are more fragile
they must of necessity 未雨绸缪[1], or plan prudently. If
they initiate significant reform next week, they will have already thought
through how to proceed incrementally, if only because they still need a strong
and stable U.S. for now, to orchestrate their development initiatives. They’ve come to learn how our party politics
work and have probably done some anticipatory thinking for the United States in
this regard.
I also have some well placed faith that most American
leaders have a haughty disdain for China, and will be surprised when the
Chinese act willfully, even if gradually, to develop their own growth strategy,
to America’s detriment. American
politicians with their hands forced will be incapable of blaming themselves and
rather, will further aggravate the demonization of China.
This is something American leaders should have acted on,
should have planned for, and now they
will have to react to. In the long run
America has great wherewithal rise to this challenge, such as this. But it is not clear to me that relative
interstate harmony with China will survive the effort.
By this time next week we should know more.
[1]
wèiyǔchóumóu: lit. before it
rains, bind around with silk (idiom, from Book of Songsd); fig. to plan ahead /
to prepare for a rainy day
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