Sat, Aug 29, 2015 - Page 8 News List

EDITORIAL: Beijing governing by remote control

Breaking with their usual practice when it comes to train wrecks and other disasters of human origin, there has been little evidence of China’s leaders this week in the wake of the latest “Black Monday,” the worst day for Chinese shares since 2007. Actually, there has been little sign of them since the People’s Bank of China (PBOC) suddenly devalued the yuan on Aug. 11, triggering the currency’s biggest one-day loss in two decades.

However, some standard operating procedures appear to have been followed this week: one, restrict mention of the problem in the local media; two, announce a probe into suspected illegal actions by low-level players; three, blame outsiders, especially Western governments, for creating the problem in the first place or hyping it up; four, cry victim; five, praise the leadership for its acumen and bravery and, six, above all else, never let facts interfere with announced policies.

As usual, any problem, big or small, cannot be seen to be the fault of the Chinese Communist Party, because that might lead to criticism of the party, its leadership and the nation’s political structure. The party’s Teflon coating, while flaking fast, means that scapegoats must be found elsewhere.

Chinese shares have been in trouble since early June, and the Shanghai bourse’s main index has fallen more than 40 percent since then. The move to accuse some local securities firms of manipulating prices — as occurred on Wednesday — was followed by a one-two punch on Thursday of Chinese media commentaries lambasting their foreign counterparts for being doomsayers and fanning fears of a crisis and a top PBOC official telling Reuters that this week’s roiling of Chinese and global stock markets was not down to China’s exchange rate reform, but fears about the US Federal Reserve raising interest rates.

“We were wronged,” PBOC Research Institute of Finance and Banking Director-General Yao Yudong (姚余棟) said.

However, there is plenty of evidence available that the government, the PBOC and other officials were more than happy to act as cheerleaders when the Chinese stock market turned bullish earlier this year, and they sought to encourage Chinese to invest and to consume more to boost the national economy. So obviously someone erred, somewhere.

However, the lack of independent and transparent regulatory authorities and an independent financial press in China has long been a burden on the economy in terms of investment by both locals and foreigners and has also handicapped Chinese corporations seeking to become global players.

In addition, Chinese President Xi Jinping’s (習近平) vaunted anti-corruption crackdown, in addition to its political score-settling side, has actually made it more difficult to learn about Chinese corporations, as will the national security law passed by the National People’s Congress early last month and the cybersecurity law that is still in the draft stage.

Many analysts believe the Chinese government will attempt to prop up the markets in the coming days, to prevent the economic turmoil from overshadowing next week’s commemorative efforts marking the end of World War II, especially the massive military parade scheduled for Thursday in Beijing.

What happens after that is anyone’s guess.

However, this week, if not the entire month, has been a reminder that Chinese politics and economics operate on a very different playing field from the rest of the world and we should forget that at our peril.

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