Xi Jinping versus Deng Xiaoping
Special points to highlight in this issue:
Although I personally do not expect anything new to come out of the Fourth Plenum, currently in session, that suggests that there will be any change in Xi’s approach to leadership, I can assure my reader that I would have no way of knowing whether or not this was indeed the case. Beijing has been filled with rumors – as always happens during these meetings – but the true outcome of the session is likely to be known only by a few dozen people in China, while the rest of us must read the tea leaves and try to come up with interpretations that are consistent with the evolution of behavior.
Most analysts agree, as do I, that Xi’s radical recentralization of power upon himself and a small group around him is likely to undermine long-term Chinese growth, in part because China is simply too big to be run by a small group, in part because the candidates for leadership positions below him are being selected more on the basis of personal loyalty than of merit, and in part by undermining the quality of information that is passed upwards by frightened subordinates (and all three criticisms have emerged strongly in the past 2-3 years). I disagree with consensus, however, in that I see this process of centralization as necessary for China in the short term to manage the adjustment through which it must go without a political crisis.
Third quarter GDP growth came in at 6.0 percent, slightly below market expectations. I find this number hard to believe, not because it is low but rather because it is too high, and I suspect that GDP growth as measured by Beijing was in fact much lower.
Meanwhile more provinces are reporting that they are under severe debt pressures. As I explain below, there are only a limited number of ways in which a debt problem can be resolved.
Now read on...
Register to sample a report