Category Archives: Politics & Society

China Kicks Schools Football Up A Notch

A Song Dynasty painting by Su Hanchen, depicting Chinese children playing cuju.

A Song Dynasty painting by Su Hanchen, depicting Chinese children playing cuju.

ONE AREA IN which China is not an emerging power but wishes it was, is football. As our man among the muddied oafs has noted before, China quietly harbours ambitions of staging a FIFA World Cup.

However, for now, the national team, still recovering from the corruption and match-fixing scandals that beset the professional game in the not so distant past, does not match up to that expectation. Despite its unexpected success in reaching the quarter-finals of the recent Asian Championships, it currently still ranks joint 83rd in the FIFA World rankings (though the women’s national team ranks 16th).

President Xi Jinxing is a fan of the sport, which China claims to have invented (see picture above). Xi also understands the statements about national soft power that sporting success can make. So there is a state plan.

The State Council has issued a 50-point development plan. One of the central points is to switch responsibility for developing the sport to the China Football Association from the General Administration of Sport. That may restore some of the authority the association lost after the corruption scandals.

Another is to boost the game in schools. One immediate impact of this is the creation of a school football leading group. It comprises the education ministry and five other government departments, including the National Development and Reform Commission, which suggests it will have some clout.

The education ministry says it is increasing the number of primary and secondary schools designated as football academies to 20,000 by 2017 from 5,000 now. This will mean they get new facilities including pitches, which across China have been swallowed up for property development in recent years. Thirty counties will trial promoting the development of young players and raising the popularity of the game among schoolchildren.

Last November, education minister Yuan Guiren said that football would become a compulsory part of physical education classes in all schools and that 6,000 school coaches would be trained this year. Seven volumes of instructional text books are in preparation, according to the People’s Daily. The goal is for there to be 50,000 schools specialising in football by 2025. In 2016, football will become an option in the national university entrance examinations in an attempt to overcome parental reluctance to let their children swap studying time for chasing a ball around a pitch.

With Qatar cementing its hold on the 2022 World Cup, the next likely opportunity for China to host the tournament for the first time is 2034. Would China have a team suitably good enough by then? Never discount the power of Party discipline, but as the U.S. has shown, two decades is the bare minimum for raising a generation of footballers good enough to compete with the world’s best.

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An Architect For A Rich China

RATHER LIKE FINANCIALLY threadbare English nobility marrying American new money in the 19th century China’s Communist Party is embracing the country’s new self-made wealth. Five of the country’s ten richest people will attend the National People’s Congress — China’s parliament — which convenes for its annual showpiece plenary on Thursday. Thirty-six of the country’s 100 richest people will be involved in either the NPC or the meeting of the top political advisory committee that precedes it.

The incongruity is not as pronounced as it might first seem. The trend of the Party co-opting new wealth — and the nascent political interest it represents — is not new, even if it has not been given the same degree of public attention before. Nor are the newly rich necessarily popularly reviled. Many citizens see them as aspiration-worthy models of self-made success, and stark contrasts to the beneficiaries of the corruption and cronyism that has long flourished in the creases where state-owned businesses, government officials and Party elites converge.

Many of these new multibillionaires have made their fortunes in areas such as the internet, e-commerce and telecoms where there were not state vested interests in the first place. As well as having them on the inside of the tent rather than outside it, the new leadership may well find them useful role models in support of President Xi Jinping’s ‘four comprehensives,’ a collection of objectives being bundled up as an ideological foundation for Xi’s vision of the ‘Chinese dream’ — and his contribution to the Party’s theoretical canon.

The quartet of building a moderately prosperous society, deepening (economic) reform, rule by law, and strict party discipline provide plenty of echoes — as does the presence of glorious wealth at the NPC — of Deng Xiaoping’s economic liberalisation of China. That is no accident. Xi continues to establish himself as the country’s paramount leader and take on the Deng-like mantle of being the architect of the country’s future prosperity.

Deng helped a handful of Chinese get rich first, and they they helped a second, if still privileged wave to do so on the back of three decades of helter-skelter growth founded on infrastructure investment and cheap export manufacturing. Xi has to scale that to the mass of Chinese citizens in a more equitable way if the Party is to maintain the legitimacy of its political monopoly. That in turn means making economic growth sustainable by rebalancing the economy on the fulcrum of domestic demand while avoiding the pitfalls of its debt legacy from the old model.

More of his blueprint, in the form of the new five-year plan, will be revealed in more detail over the coming weeks, starting with Prime Minister Li Keqiang’s ‘work report’ to the NPC, which will likely enshrine a new GDP growth target of ‘around 7%’, to replace the existing ’around 7.5%’.

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China Takes Small Steps In Limited Local Judicial Reform

CHINA HAS INAUGURATED its first two circuit courts, one in Shenyang and the other in Shenzen, to spread the workload of the Supreme Court. This echo of Imperial China is one of the early pilot schemes as judicial reform kicks off in one-third of the country’s 33 provinces.

The most intriguing aspect of the proposed reforms is President Xi Jinping’s gamble on increasing the independence and professionalism of the judiciary, which has hitherto been an extension of the Party’s legal arm. But trusted courts are one of the essential requirements if the Party is not to corrode from the inside.

As this Bystander has noted before this first step in judicial reform will only effectively apply at local and municipal levels. The Party will retain its sway over national and provincial courts through the Central Politics and Law Commission, the Party body that oversees the legal system in its broadest sense — from police to prosecutors, judges, internal security, surveillance and prison administration.

Nor should anyone be under any illusion that judicial independence even at local level heralds the introduction of the rule of law. Xi is pursuing rule by law, altogether a different thing. No legal proceedings on which the Party has a national interest will be left to the vicissitudes of independent judges. Judges will be expected to declare their loyalty to the Party, and to take preemptive action in cases of threats to state security.

Where judicial reform will make an impact is that local judges will no longer be appointed and funded by local officials but by provincial or national authorities. That should break the commonly cosy relationship between local officials and local courts. It would then be more difficult for corrupt local officials to remain immune from accountability, a widespread popular grievance.

Not only would that give Xi’s anti-corruption drive some mass support but it will also provide some ‘flies’ whose squashing would warn a new set of ‘tigers’ now Xi is pushing his anti-corruption drive against police and security officials including Zhou Yongkang, the former and much feared head of the country’s security apparatus and the most senior official to date brought down by Xi’s anti-corruption drive.

More independent local courts would also provide a safety valve for the social unrest that has been escalating to the Party’s concern, without the reforms going nearly far enough to satisfy legal activists. It could also create courts that are more robust in their handling of commercial disputes, which would be to the benefit of foreign businesses operating in China and which have long felt local courts to be stacked against them.

As with all reform, it will proceed slowly; what is starting now is the first pilot schemes. The target date for broad based implementation of judicial reform is 2020. The goal is to reinforce the Party’s legitimacy to maintain its monopoly on political power by showing it can govern cleanly and fairly.

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Zhou To Face Trial Shows Xi’s Firming Grip

ZHOU YONGKANG, THE former and much feared head of China’s security apparatus who has not been seen in public since October last year, is under arrest while he is investigated by state prosecutors on charges of corruption, adultery and leaking the country and Party’s secrets, state media has said. He has also been expelled from the Party.

Zhou, a member of the Politburo before he retired two years ago and an ally of the disgraced former Chongqing party chief Bo Xilai, is the most senior official brought down by President Xi Jinping’s anti-corruption drive, and the biggest loser in the power struggle around Xi’s ascent as China’s paramount leader. Zhou’s fate has been a matter of speculation for some time as he has been under Party investigation for more than a year, but the timing of the announcement of criminal proceedings suggests authorities believe they now have sufficient evidence for a trial, and that Xi feels confident enough with his grip on power to proceed with such a sensitive case in public.

However, the inclusion of leaking state secrets among the charges may provide the excuse to keep any trial itself closed. Bo’s open trial did not go as well as a propaganda exercise as authorities would have liked: Bo’s public image, though diminished, survived.

As well as his control over the vast domestic security sector, Zhou held sway over the oil industry and Sichuan province. Many of his loyalists and recipients of his patronage are also under investigation as his clique is dismantled. The question now for its head is the likely sentence he faces. This Bystander believes Zhou’s would be more severe than Bo’s life imprisonment, so likely a suspended death sentence. Senior officials may no longer be untouchable but they remain unexecutable.

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Beijing Drains The Energy Out Of Hong Kong’s Protests

BEIJING HAS GOT its Occupy Central protesters to where it wants them. The energy is draining out of the broad body of protest against Beijing’s insistence that it will select the slate of candidates from which Hongkongers can elect their new chief executive in 2017. The remaining rump, however radicalized it becomes, can be marginalized.

Beijing knows how to crack down on such dissenters. Widespread popular discontent with government is an altogether trickier and more threatening proposition for the Party.

Fears that Beijing might send in the tanks to break up the protest camps in a deadly echo of 1989 in another place have proved unfounded. But the iron grip of the authorities, exercised through a mix of police force and private court injunctions, has been steadily and unsparingly tightened.

The streets of Admiralty, Causeway Bay and Mong Kok have largely been cleared to allow daily commerce to flourish unhindered once more now popular sympathy for the demonstrators has ebbed. Beijing has also skillfully separated the student and civil activist wings of the protests.

The surviving student leaders threatening a hunger strike can be bought off with face-saving ceremonial concessions without authorities needing to cede anything of substance, not that any political concessions were ever likely. In the equally unlikely event that face-saving is rejected and the hunger strike produces a martyr, it shifts the focus of the protest, and the blame from Beijing’s handling of the situation to Hong Kong’s, and offers Beijing the opportunity of some housecleaning of Hong Kong officials should it so choose or need.

Enabling legislation still has to go through the Legislative Council so there will be more possible points of conflict before 2017 that could require some sacrificial official lambs, and especially. If international business confidence in Hong Kong is at risk.

However, the longest shadow of the Hong Kong protests falls over Taiwan. Last weekend’s local elections on the island underlined the extent of popular concern that Taiwan was rushing too quickly towards potential reunification.

Events in Hong Kong will have done little to encourage many in Taiwan that there is any need to hurry or that the political umbrella Beijing wants to put over the growing cross-Strait economic ties is even desirable.

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Party Plenum Indicates Limits To Xi Jinping’s Power

THIS BYSTANDER DRAWS two points of note from the recently concluded Fourth Party Plenum, the four-day annual meeting of China’s 350 most powerful officials. The first is that President Xi Jinping has not centralized power as comprehensively as has been supposed. The second is that there is a distinction between the rule of law and rule by law.

Both points are significant in their separate ways. Xi needs to centralize power if he is to remove the obstacles that the most entrenched vested interests pose to his economic reforms outlined at the previous Party plenum. Xi wants to switch the economy from investment- and export-led growth to domestic consumption. It is a change to a no longer sustainable credit fueled model of growth that powered the past three decades of China’s rise as transformative as the policies of Deng Xiaoping that initiated it.

Xi sees his legacy as being on the same historic scale. Yet there are many powerful Party, state and military elites who have benefited in privilege and pocket book from the old economic model, and will not readily give it up. While Xi has extended his power to coerce them to do so faster than many had expected before he became China’s pre-eminent leader, this plenum has shown that his drive to centralize power is not yet complete.

The PLA is a case in point. It holds a special place in the country’s politics for the obvious historical reasons and has considerable policy autonomy. With China taking on a greater global role, such autonomy gives it more opportunity to calibrate China’s “assertiveness” than may always be comfortable for Beijing. It also has extensive industrial and commercial interests from which senior members of its old guard profit

The plenum had been expected to approve a reshuffling of the Central Military Commission to promote allies of the president. On the basis of the communique issued after the meeting, that did not happen.

Nor was any light shed on the fate that is to befall Zhou Yongkang, the former Politburo Standing Committee member who is the biggest tiger to fall prey to Xi’s anti-corruption drive and the highest ranking Party member be investigated for corruption in many a year.

On both scores, that suggests divisions of view at the top. At the very least, there are still obstructions that Xi feels he cannot yet move.

The communique’s main point of commission as opposed to omission was changes to the judicial system, the plenum’s headline issue. The Party remains firmly in control of the legal process; a democratic separation of powers was never on the agenda, even though many believe that China will not be able to make the economic transition Xi desires without commensurate institutional political, social and legal changes.

For any foreseeable future, the judiciary remains subordinate to the leadership of the party and national security. Top leadership will still be able to control cases at the provincial or national level in which it has a pressing political interest. Rule by law; not rule of law.

That has tempted some commentators to suggest that nothing is changing. There are significant changes at the lower levels, however. Local judges will no longer be appointed and funded by local officials but by provincial or national authorities. That should break the commonly cosy relationship between local officials and local courts. It would then be more difficult for corrupt local officials to remain immune from accountability, a widespread popular grievance.

That in itself won’t shift for Xi any of the big obstacles blocking his economic reforms. It will, however, help to break up the endemic institutionalized corruption at the level that has the most impact on most people’s daily life. If he is still not able to move all the big rocks at the top that he would like, he can still remove a mass of little obstacles at the bottom.

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Facing A Slower Chinese Economy, Xi Needs A Winning Party Plenum

THE INTERNATIONAL MONETARY FUND held its forecasts for China’s GDP growth this year and next unchanged in its latest quarterly economic outlook even as it trimmed those for the world economy. It is still expecting 7.4% GDP growth this year, slowing to 7.1% in 2015, down from 7.7% in both 2012 and 2013. “China is sustaining high growth, but slightly lower growth in the future is seen to be a healthy development,” the Fund says.

For this year, the IMF is projecting that the economy will come up just short of the official growth target of 7.5%. After a slower than expected first-quarter, Beijing launched a number of stimulative measures to get the economy back on track for hitting that target. These included tax relief for small and medium businesses, accelerated fiscal and infrastructure spending, and selective cuts in banks’ required reserve ratios.

But with the  property market still weighing on the broader economy, GDP in the third quarter, due to be announced on October 21st, is likely to confirm that growth continues gently gliding downwards, somewhere in the 7-7.5% range is this Bystander’s best guess. We expect some more if modest stimulus in the fourth quarter to make sure the full-year number comes out as close to the higher end of that range as possible. Prime Minister Li Keqiang is only the latest official to blur what counts as 7.5%; about 7.5% will be close enough.

It is likely that next year’s official target will be lowered to a more realistic 7% as the economy makes the transition to more sustainable long-term growth through rebalancing demand away from investment toward consumption, and the property market, especially residential investment, remains sluggish. However, infrastructure investment and credit will remain the main drivers of growth next year.

Excess industrial capacity and the dark shadow of provincial and municipal debt remain the main risks to the growth forecast along with the deflation of the property market getting out of hand. While the government has great capacity to absorb such a hard landing, that capacity isn’t infinite, and the policy challenge is exacerbated by the two-tier property market that has emerged in China. Bubble prices persist in large cities while small cities are experiencing a property recession thanks to overbuilding spurred by local governments desperate to spur growth.

A too-fast slowdown in property prices would work through to the banking and shadow banking system in short order. The IMF rightly notes in its report the importance of reforms to buttress financial sector stability:

It is crucial to implement key elements of the authorities’ structural reform that aim to strengthen the regulation and supervision of the financial sector, reduce implicit guarantees, liberalize the deposit rate, and use interest rates instead of quantitative targets for the implementation of monetary policy, thus encouraging market-based pricing of risks. Further expansion of the social safety net, by reducing the current high rate of social security contribution, and better health care benefits would help reduce household saving rates and raise domestic consumption.

More broadly, China needs to structural reforms to its education, labor and product markets to raise firms’ competitiveness and productivity while lowering credit growth and local government borrowing. All that touches just about every vested interest. That is meat for the forthcoming Fourth Party Plenum.

Last year’s Third Party plenum announced the need for reforms to strengthen social safety nets and the social security system as part of a 60-point blueprint sketched out for President Xi Jinping’s plan to rebalance the economy. This year’s plenum, due to start on October 20th, has as its first objective the consolidation of Xi’s rule of law cum anti-corruption drive — which will be a proxy for the jockeying for power and influence between Xi and his predecessors Jiang Zemin and Hu Jintao.

While Xi has moved faster to consolidate his power base than might have been expected, his ability to advance his economic-reforms agenda will require the backing of Jiang and Hu and their respective Shanghai and Communist Youth League factions. The appearances at National Day celebrations of some senior figures in the Party and army thought to be the subject of anti-graft investigations and who have not been seen in public recently suggests Xi may be rallying unity in the ranks to that end.

Xi may well feel his best next tactical move for economic reform will be to revamp the 100-or so central-government controlled state-owned enterprises to improve their business performance and governance. These are the big dogs in the economy, and entrenched obstacles to reform in their various sectors. Making them over would have the added bonus for him of weakening some of the power bases of those not aligned with him.

The trick for Xi remains aligning the political realities he faces with the underlying structural slowing of economic growth, but without getting too close to the feared hard landing of the economy that would undermine his political position. As we have noted before, every mini-stimulus ratchets up a notch the difficulty of introducing the policies needed for rebalancing because they don’t address the underlying causes of unsustainable booms and the vested interests that benefit from them. And that needs a political solution before it can get an economic one.

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