Xi Jinping's historic power grab in China

[DOR]

Great find on this resource!

However, China state council also wrote this in 2015:

http://english.gov.cn/news/video/201...5190586155.htm

Echoing findings by Fortune:

http://fortune.com/2015/07/22/china-...ernment-owned/

And People's Daily also notes continued dominance of state sector companies in strategic sectors of the economy:

http://www.chinadaily.com.cn/busines...t_30328022.htm

Finally, here's the US government's big picture analysis of SOEs in China:

https://www.export.gov/article?id=Ch...ed-Enterprises

The findings of the various reports and your statistics are easily reconciled once we realize that:

1. Your statistics only cover certain sectors of the Chinese economy.
2. Fix asset investments statistics count commercial real-estate and buildings but not public infrastructure.
3. Although SOEs now have a minority of GDP and employment, they dominate the commanding heights such as banking and infrastructure
4. Full control of strategic industries and direct control of 30% to 40% of GDP allow government to be THE dominant driving force in the economy to an extent far greater than in Western market economies.

Hence, in a very real sense, the Chinese economy is still a state centered, command driven economy.

So, you like the China Statistical Yearbook? Great.
I’ve been using it since the 1978 edition. Having it on-line means I don’t have to input every digit anymore. Saves a ton of time. But, remember: quantity may have a quality all its own, but is isn’t the same as quality.

Sort of like the People’s Daily. Before they started publishing an English edition, it was pretty easy to recognize the pure propaganda value inherent in the paper. Once it came out in English, suddenly people started to believe it. Very strange.

“Data for private companies is more difficult to come by, but a look at the 2015 China’s Top 500 Enterprises . . .” right there you have hit the nail on the head: the statistical authorities don’t have much data on private sector companies (“hard to come by,” as if that wasn’t true everywhere), so they tend to ignore them. Same for smaller companies, which are the backbone of the economy.
If you can’t easily measure it, ignore it.
Oh, and 2015, which means 2014 data, at best.
Same as Dr. Scissors.

As for Fortune and the US government, you won’t find data that they don’t get from the official sources. The exception might be trade, where the US generates its own data. The only original data Fortune has is magazine advertising and circulation.

As for “my statistics” only covering sectors of the Chinese economy, well let’s just agree that the portion of the economy that I did cover – which you pointed to, such as retail – is oceans more than the portion of the economy where you actually brought some data to the game.


- - - - -

If I was one-tenth as sure of myself in the subject of the armed forces -- of which I am but a casual student -- as you are in your confidence in the inner workings of China and its economy -- several very worthy people around here would have handed me my head, and probably a vacation, long ago.

[citanon]

citanon,



Derek Scissors probably didn’t deliberately set out to deceive, but if you look to the American Enterprise Institute for analysis of how much of China’s economy is state-owned, well don’t be surprised if the data is twisted in a way that delivers an “us good, them bad” kind of message.

Dr Scissors (whom I’ve met, briefly) uses data from the China Statistical Yearbook, and by following his links you get to the 2014 edition. Change the URL to 2017 and you can find the data below. (I’m using the term “non-private” to signal that it’s everything that isn’t strictly private. You’ll want to do your own calculations.)

2016 Urban employment (Table 4-1)
Non-private 23.7% _ _ _ Private 76.3%

2016 Total investment in fixed assets (Table 10-1)
Non-private 31.4% _ _ _ Private 68.6%

2016 Retail corporations (Table 15-1)
Non-private 5.6% _ _ _ Private 94.4%

2016 Retail employment (Table 15-1)
Non-private 11.4 _ _ _ Private 88.6%

2016 Retail purchases (Table 15-1)
Non-private 13.5% _ _ _ Private 86.5%

2016 Retail sales (Table 15-1)
Non-private 5.5% _ _ _ Private 94.5%

http://www.stats.gov.cn/tjsj/ndsj/2017/indexeh.htm

Great find on this resource!

However, China state council also wrote this in 2015:

http://english.gov.cn/news/video/201...5190586155.htm

Echoing findings by Fortune:

http://fortune.com/2015/07/22/china-...ernment-owned/

And People's Daily also notes continued dominance of state sector companies in strategic sectors of the economy:

http://www.chinadaily.com.cn/busines...t_30328022.htm

Finally, here's the US government's big picture analysis of SOEs in China:

https://www.export.gov/article?id=Ch...ed-Enterprises

The findings of the various reports and your statistics are easily reconciled once we realize that:

1. Your statistics only cover certain sectors of the Chinese economy.
2. Fix asset investments statistics count commercial real-estate and buildings but not public infrastructure.
3. Although SOEs now have a minority of GDP and employment, they dominate the commanding heights such as banking and infrastructure
4. Full control of strategic industries and direct control of 30% to 40% of GDP allow government to be THE dominant driving force in the economy to an extent far greater than in Western market economies.

Hence, in a very real sense, the Chinese economy is still a state centered, command driven economy.

[Double Edge]

The middle income gap mainly seems to apply to a couple of places where the rise in GDP per capita (which isn’t income) stalled out after hitting anything from $1,000 to $10,000. Countries with this problem are said to have poor investment and industrial diversification. Doesn’t sound like China to me: Household private consumption expenditure has grown 9.3% a year in the past decade, which doesn’t exactly sound like stagnation to me. Capital investment rose about 10% p.a.

There's that theory about their economic strategy out the window. Back to the drawing board.

Deng Xiaoping dealt with the steaming pile Mao left behind, while battling his co-Elders over policy, ideology and succession. By the time Jiang Zemin accidentally came to power, the old guys were pretty well spent. Deng made sure the next generation -- Li Peng and Yang Shangkun, in particular -- didn't derail Jiang, but that's about it.

Jiang didn't give Hu Jintao the support he needed to succeed, partly because Jiang's family was knee deep in corruption. By the time Xi Jinping got the nod, people at the top apparently were ready for a strong leader. Those who weren't, well they didn't last very long.

I remember you telling me the trouble Jiang had and just being puzzled. Authoritarian, efficient bla bla. Then we hear Hu isn't strong enough and here we are with Xi who also isn't strong.

It's not Mao that Xi is trying to be keeping aside the personality cult, China wants another Deng. No leader since has come close.

Pragmatic and powerful. Second phase of development. Those are mighty big shoes to fill.

So what killer ideas are going to enable that second phase.

Jury's still out.

[astralis]

what's particularly interesting for me is how the old mid-90s/early-2000s half-hearted reforms-- "village democracy", "intraparty democracy", etc-- have all been decisively squashed. same with a lot of the polite fiction of separation between party and government.

the whole term-limits issue is a side-show compared to the immense amount of centralization coming around with the recent changes to the party-government structure.

[DOR]

Dodging the middle income trap ? this could be a powerful motivator to future economic policies.

I hear this term supply side structural reform in the CSIS video that i don't quite understand as one way

Problem is this is a Ten year project. Have to be really patient to assess progress

It surprises me how much of a mess there was that Xi had to attempt to fix. Was apparent in Hu's time already but he lacked the power to do anything about it.

Five years alone just to gain control of the military, security services, party bureaucracy and propaganda. Break the back of numerous opposition factions. Economy was on auto pilot. Just concentrated on the political.

This is the real china, what is surprising is i'd have thought this was Deng's job. Right the ship and make this big shift in focus. It's not what i expected to hear thirty years later.

Because i can't shake this perception that authoritarian regimes are supposed to be efficient and slick. Forced marches into various sectors ultimately making them leaders. Steel, shipbuilding, solar. How do pull that off if there is a weakness of direction. There can be no forced march in such a case.

The middle income gap mainly seems to apply to a couple of places where the rise in GDP per capita (which isn’t income) stalled out after hitting anything from $1,000 to $10,000. Countries with this problem are said to have poor investment and industrial diversification. Doesn’t sound like China to me: Household private consumption expenditure has grown 9.3% a year in the past decade, which doesn’t exactly sound like stagnation to me. Capital investment rose about 10% p.a.

Deng Xiaoping dealt with the steaming pile Mao left behind, while battling his co-Elders over policy, ideology and succession. By the time Jiang Zemin accidentally came to power, the old guys were pretty well spent. Deng made sure the next generation -- Li Peng and Yang Shangkun, in particular -- didn't derail Jiang, but that's about it.

Jiang didn't give Hu Jintao the support he needed to succeed, partly because Jiang's family was knee deep in corruption. By the time Xi Jinping got the nod, people at the top apparently were ready for a strong leader. Those who weren't, well they didn't last very long.

[Double Edge]

The track record is four decades, not three. It started when Mao died, September 9, 1976.

A short list of the current problems (a/k/a the Politburo agenda)
1. Keeping the CCP in power (always top of the list). This includes maintaining national security; national sovereignty; and economic stability.
2. Managing what people both inside and outside China think of China. Think of tools like Rmb0.5 per post and Confucian Institutes.
3. Steadily building up national power vis-à-vis the United States, and slowly but surely limiting the US’ ability to project power into China regional spheres of influence. Asymmetrical warfare, area denial and a lot more that other folks around here can explain better than I.

Dodging the middle income trap ? this could be a powerful motivator to future economic policies.

I hear this term supply side structural reform in the CSIS video that i don't quite understand as one way

Problem is this is a Ten year project. Have to be really patient to assess progress

It surprises me how much of a mess there was that Xi had to attempt to fix. Was apparent in Hu's time already but he lacked the power to do anything about it.

Five years alone just to gain control of the military, security services, party bureaucracy and propaganda. Break the back of numerous opposition factions. Economy was on auto pilot. Just concentrated on the political.

This is the real china, what is surprising is i'd have thought this was Deng's job. Right the ship and make this big shift in focus. It's not what i expected to hear thirty years later.

Because i can't shake this perception that authoritarian regimes are supposed to be efficient and slick. Forced marches into various sectors ultimately making them leaders. Steel, shipbuilding, solar. How do pull that off if there is a weakness of direction. There can be no forced march in such a case.

[Double Edge]

I don’t think I understood three-quarters of your post, but according to the OECD there have been nine recessions in China since 1978.
https://fred.stlouisfed.org/series/CHNRECDM

Interesting graph, but there are three ways to interpret the data. My first impression was to look at the area under the graphs as the extent or duration of the recession

Using this interpretation, longest recession i see is Sept 1996 to May 1997

[DOR]

So there is a rash of defaults the CCP makes good all the losses? CCP sets the values based on the arbitrary power granted by the sovereignty of the PROC. You lose money you will carry on as usual. Has the CCP succeeded where Long-Term Capital Management failed. There will never be recision in China?

I don’t think I understood three-quarters of your post, but according to the OECD there have been nine recessions in China since 1978.
https://fred.stlouisfed.org/series/CHNRECDM

[Dazed]

T
As for bank loans, there’s a whole lot of smoke and no one’s quite sure how much fire.
Consider that the overwhelmingly vast majority is domestically denominated, i.e., renminbi loans. That instantly eliminates the possibility of a Latin American or Asian Financial Crisis type problem. Next, cut out of your view any loan by a state-owned bank to a state-owned enterprise. That’s a simple accounting issue: who takes the loss is a policy decision, not a crisis.

So there is a rash of defaults the CCP makes good all the losses? CCP sets the values based on the arbitrary power granted by the sovereignty of the PROC. You lose money you will carry on as usual. Has the CCP succeeded where Long-Term Capital Management failed. There will never be recision in China?

[DOR]

I don't understand the data. Can you not be cryptic?

Also, thinking about the bad debts owed by SOEs to SOBs in terms of real goods and services, isn't it a huge misallocation of resources that produces things people don't want thus reducing people's standards of living?

How countries fail economically:

Option 1. Too much foreign debt, fixed exchange rates, hot money flows, devaluation and as a result an inability to repay the foriegn debt.
China can't have that problem, because the debt is in Renminbi.

Option 2. Massive money supply increase to pay for peace-inducing consumption. Inflation and devaluation results. Alternatively, overly tight money growth leads to economic contaction and deflation.
China has a money supply that is rising in line with nominal economic growth, so that isn't a problem.

Option 3. Banks lend too much money on terms that are unsustainable. Something Goes Wrong and the borrowers can't repay the loans. The banks fail and the public loses their deposits.
China's banks have a bucket load of bad loans, but they also have -- thus far -- comprehensive government support, both from a capitalization basis and from the fact that the SOEs can be instructed to pay back loans to any state bank at any time.

Yes, it is a misallocation of resources. But, when standards of living skyrocket for decades on end, that misallocation doesn't seem quite so dangerous. Misallocations are expensive, but crises are far, far more expensive and generally result in angry mobs changing governments. China doesn't have that risk.

[hboGYT]

The track record is four decades, not three. It started when Mao died, September 9, 1976.

A short list of the current problems (a/k/a the Politburo agenda)
1. Keeping the CCP in power (always top of the list). This includes maintaining national security; national sovereignty; and economic stability.
2. Managing what people both inside and outside China think of China. Think of tools like Rmb0.5 per post and Confucian Institutes.
3. Steadily building up national power vis-à-vis the United States, and slowly but surely limiting the US’ ability to project power into China regional spheres of influence. Asymmetrical warfare, area denial and a lot more that other folks around here can explain better than I.

Yes, there are times when the leadership has to scramble to catch up.
I never said they don’t fuck up.
What I said was they have a long track record, etc., etc.

As for bank loans, there’s a whole lot of smoke and no one’s quite sure how much fire.
Consider that the overwhelmingly vast majority is domestically denominated, i.e., renminbi loans. That instantly eliminates the possibility of a Latin American or Asian Financial Crisis type problem. Next, cut out of your view any loan by a state-owned bank to a state-owned enterprise. That’s a simple accounting issue: who takes the loss is a policy decision, not a crisis.

Now, having chopped the problem into pieces, let’s toss out the foreign-invested enterprises because that’s not China’s problem. Sure, if they all go bust at the same time a lot of people will be laid off, but foreign enterprises have assets that can be taken as collateral.

What we’re left with is an unknown amount of debt. We then have to figure out how much of it is good, bad and awful. Since we don’t have the credit rating on that debt, the issue can’t be defined very precisely. So, we have to use proxies and unfortunately, the one journalists use are the worst ones of all: gross debt, gross debt-to-assets, gross debt-to-GDP and so forth.

For those who believe the data,
Percent change per annum (nominal)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2002-11 _ _ 2012-16
GDP _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16.1% _ _ _ 9.2%
Deposits of financial institutions _ 41.3 _ _ _ _ 13.2
Loans of financial institutions _ _ _37.3 _ _ _ _ 14.2
M-0 money supply _ _ _ _ _ _ _ _ 26.5 _ _ _ _ _6.1
M-1 money supply _ _ _ _ _ _ _ _ 37.1 _ _ _ _ 10.9
M-2 money supply _ _ _ _ _ _ _ _ 40.0 _ _ _ _ 12.7

Source: data.stats.gov.cn

The website hasn't updated with full-year 2017 data, but it won't change much from the above.

I don't understand the data. Can you not be cryptic?

Also, thinking about the bad debts owed by SOEs to SOBs in terms of real goods and services, isn't it a huge misallocation of resources that produces things people don't want thus reducing people's standards of living?

[DOR]

The track record is four decades, not three. It started when Mao died, September 9, 1976.

A short list of the current problems (a/k/a the Politburo agenda)
1. Keeping the CCP in power (always top of the list). This includes maintaining national security; national sovereignty; and economic stability.
2. Managing what people both inside and outside China think of China. Think of tools like Rmb0.5 per post and Confucian Institutes.
3. Steadily building up national power vis-à-vis the United States, and slowly but surely limiting the US’ ability to project power into China regional spheres of influence. Asymmetrical warfare, area denial and a lot more that other folks around here can explain better than I.

Yes, there are times when the leadership has to scramble to catch up.
I never said they don’t fuck up.
What I said was they have a long track record, etc., etc.

As for bank loans, there’s a whole lot of smoke and no one’s quite sure how much fire.
Consider that the overwhelmingly vast majority is domestically denominated, i.e., renminbi loans. That instantly eliminates the possibility of a Latin American or Asian Financial Crisis type problem. Next, cut out of your view any loan by a state-owned bank to a state-owned enterprise. That’s a simple accounting issue: who takes the loss is a policy decision, not a crisis.

Now, having chopped the problem into pieces, let’s toss out the foreign-invested enterprises because that’s not China’s problem. Sure, if they all go bust at the same time a lot of people will be laid off, but foreign enterprises have assets that can be taken as collateral.

What we’re left with is an unknown amount of debt. We then have to figure out how much of it is good, bad and awful. Since we don’t have the credit rating on that debt, the issue can’t be defined very precisely. So, we have to use proxies and unfortunately, the one journalists use are the worst ones of all: gross debt, gross debt-to-assets, gross debt-to-GDP and so forth.

For those who believe the data,
Percent change per annum (nominal)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2002-11 _ _ 2012-16
GDP _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 16.1% _ _ _ 9.2%
Deposits of financial institutions _ 41.3 _ _ _ _ 13.2
Loans of financial institutions _ _ _37.3 _ _ _ _ 14.2
M-0 money supply _ _ _ _ _ _ _ _ 26.5 _ _ _ _ _6.1
M-1 money supply _ _ _ _ _ _ _ _ 37.1 _ _ _ _ 10.9
M-2 money supply _ _ _ _ _ _ _ _ 40.0 _ _ _ _ 12.7

Source: data.stats.gov.cn

The website hasn't updated with full-year 2017 data, but it won't change much from the above.

[Double Edge]

There's that matter of bank loans.

Hot topic in India these bad loans.

I have this theory. Shortly after the sub prime crisis G20 finance ministers got together and decided the best way to prevent that crisis from spreading further was to keep the taps flowing. That is allow credit with maybe not so tight restrictions as would normally be present. In a way overriding existing protections to avert any business confidence crisis

So long as credit was available people would not be spooked. They'd build, orders would be made, the next six months would be predictable

Some enterprising people figured this out and took advantage of the system. The results are coming out now.

People speculate we're only seeing the tip of the iceberg, its actually a lot worse and all the usual hype bla bla

[Dazed]

There's that matter of bank loans.

http://www.scmp.com/business/banking...verything-else

Garcia Herrero said that Chinese banks’ problems with liquidity, solvency and profitability were all deteriorating.

Liquidity – banks’ access to short term cash to meet their obligations – is particularly a problem for mid tier and smaller Chinese lenders that do not have access to the vast deposit bases of their larger competitors.

These banks need easily accessible cash to fund their lending and investments, and are forced to look to increasingly unstable and costly sources to obtain it, such as borrowing directly from the interbank market, issuing further wealth management products, negotiable certificates of deposit and short term debt instruments.

China bans new deposit certificates, tightening screws on interbank lending to curb risks

The problem is that regulators, concerned about mismatches between banks lending or investing over long durations and borrowing over short, have looked to crack down on each source of funds in turn, in what Natixis analysts describe as a game of regulatory cat and mouse. This is driving the banks to look to newer, even less stable and more costly sources to fund their day to day activities.

[Officer of Engineers]

Regardless of what anyone (including me) thinks of the actual actions they take, the Chinese leadership has a very long track record of identifying problems early on, coming up with solutions and then implementing those solutions in a timely manner.

Doesn't mean that they don't fuck up. Pollution controls. Building code enforcements. Ghost cities. Tianamen aftermath. Nuclear proliferation to Pakistan. North Korea.