There is a hoary [if you pardon the pun] tradition among the mainline media to always give the Chinese Communists the benefit of the doubt, so to speak.
It goes back to the World War II days in the Nationalist refugee capital of Chungking when Gen.George Mashall tried for two years to foist a coalition government with the Communists on Generalissimo Chiang Kai-shek, ostensibly to fight the Japanese more efficiently. And the accompanying press mob was telling us that the Chinese Communists weren’t really Stalinists, just “agrarian radicals”. Three-quarters of a century and more than 50 million man-made Chinese victims later, something like that is still going on today.
All evidence points to a Chinese crackup or an explosion of violence against its neighbors and the U.S. – or both.
But the distinguished “Old China hand”, Keith Bradsher, the Hong Kong bureau chief of The New York Times, is still having a hard time with it. After recounting some of the current China economic horrors, he says “That makes it difficult to discern the underlying health of the economy…” Yeah! Difficult!
That was the week of the Chinese New Year when bloody rioting broke out in Hong Kong between the locals, increasing deprived [how ironic!] of their freedoms under the British colonial rule, which Beijing had promised on “the return” to the Motherland. It was another expression of Communist Party boss Xi Jinping trying to make himself a new Mao Tse-tung in an unprecedented crackdown on the always intimidated opposition in a one-party state.
For the record, here is a brief accounting:
- Every Chinese who can is turning his ren min bao [the yuan] into dollars to get them out of the country – and that includes the billionaires created by its miraculous two decades of high growth, and high Party officials. The huge Chinese reserves of $3.23 trillion [January 2016] were hit with a net outflow of $637 billion in 2015. Beijing is faced with the dilemma of printing more yuan to buy more dollars in the market but which would encourage the flow, or trying to wait it out as the value of their currency dips and the drain on foreign exchange/and a questionable currency reserve continues. Then there is the question of official counts. Investor Kyle Bass estimates that China’s liquid foreign reserves are $2.2 trillion at most, compared with the People’s Bank of China’s [central bank] $3.23 trillion count.
- Beijing escaped the worst effects of the world financial crash of 2007-8 by throwing the largest credit/stimulus ever conceived, $580 billion, into the economy in 2008-09. But it unleashed a credit, and in turn an infrastructure,bubble — with lending in 2008 totaling RMB 9.6 trillion, nearly half of that year’s GDP – and with literally whole ghost cities being built with no one manning them. That credit binge still hangs over Chinese banks.The country’s biggest banks’ earnings for the quarter ended in September dripped from rates above 20% a few years ago to virtually nothing now. For the country’s eight biggest lenders average profit growth was just 0.7%. For the top four [government-owned and therefore Party directed], it was 0%.
- China is still recording a massive trade surplus: $63 billion reported in January. But China’s trade contracted significantly more than economists had expected, as the world’s second economy suffered weak global demand, a slowdown at home and no real movement toward the stated goal of a consumer economy. Exports fell 6.6 per cent in renminbi terms on an annual basis, compared with forecasts for an increase of 3.6 per cent. Imports slid 14.4 per cent against expectations of a 1.8 per cent rise, according to [always suspect] government data. Dong Tao, an economist at Credit Suisse in Hong Kong:” China’s economy is in a cyclical downturn but it will probably take structural reforms to get Chinese growth back. Progress on the reform side has been slow and will probably continue to be slow, which will drag down growth further.”