This Week’s Cover Story in The Economist: China’s Economy

choi

China’s economy | The Yuan and the Markets; Strains on the currency suggest that something is very wrong with China’s politics. Economist, Jan 16, 2016.
http://www.economist.com/news/le ... s-politics-yuan-and

Quote:

"Although share prices in China matter little to the real economy, seesawing stocks feed fears among investors that the Communist Party does not have the wisdom to manage the move from Mao to market. * * * Nowhere are those worries more apparent—or more consequential—than in the handling of its currency, the yuan.

"Next week the government will announce last year’s rate of economic growth. It is likely to be close to 7%. That figure may be an overestimate, but it is not entirely divorced from reality.

"Yet China is not [a] normal [nation; put another way: China's economy is not a normal economy]. It is caught in a dangerous no-man’s-land between the market and state control. And the yuan is the prime example of what a perilous place this is. * * * A weakening economy, a quasi-fixed exchange rate and more porous capital controls are a volatile combination. Looser monetary policy would boost demand. But it would also weaken the currency

"In the last six months of 2015 capital left China at an annualised rate of about $1 trillion.


Note
(a) " 'WHAT if we could just be China for a day?' mused Thomas Friedman, an American columnist, in 2010. '…We could actually, you know, authorise the right solutions.' "

Yong Zhao, Who's Afraid of the Big Bad Dragon; Why China has the best (and worst) education system in the world. Bissey-Bass (a Wiley brand), 2014, pages 5-6
https://books.google.com/books?i ... 0day%22&f=false
("[sectional heading] 'China for a Day'[:] Thomas Friedman, the influential columnist who has written several best sellers on global issues, just might be China's biggest fan. More than once, he has expressed a 'fantasy' of America being China for a day. The notion first appeared as the title of a chapter in his 2007 book Hot, Flat, and Crowded; Why we need a green revolution -- and how it can renew America. He then repeated his China-for-a-day dream on NBC's Meet the Press in May 2010, telling host David Gregory, 'I have fantasized -- don't get me wrong --but that what if we could just be China for a day?7")
(i) In the 2007 book (publisher "New York City: Farrar, Straus and Giroux, 2008" -- not published in 2007): Chapter 16 "China for a Day (but Not for Two)"
Dick Rehberg, A Chapter Summary for UUCB Green Discussion Group. Unitarian Universalist Church of Berkeley (UUCB), undated.
http://www.etmsolar.com/gsuu/gs/friedman/synopsis.pdf
(ii) Footnote 7 is: "Meet the Press, transcript for May 23, 2010.
http://www.nbcnews.com/id/372795 ... ge/4/#.UZBBjStgZnA/

(b) In quotation 3: looser monetary policy means pumping money into the economy. Consumers are flush with cash, and they spend, thus increasing demand. But they may also move the money abroad, by using renminbi to buy dollar-- therefore weakening yuan (物以稀為貴).
(c) Quotation 3: “In the last six months of 2015”

This is more likely than the previous posting of mine, where the Financial Time editorial did not add the caveat.
(d) "And, despite a record trade surplus of $595 billion in 2015 [for China], there are good reasons for it to do so, at least against the dollar, which is still being propelled upwards by tighter monetary policy in America."

Recently Federal Reserve raised interest rate (to prevent the US economy from getting a bit too hot, which will bring about inflation), mopping (some) money out of the (US) market/economy.
(e) "On the one hand, the state understands that the lack of financial options for Chinese savers is unpopular, wasteful and bad for the economy. On the other, it is threatened by the ructions that liberalisation creates."

ruction (n; perhaps by shortening & alteration from insurrection)
http://www.merriam-webster.com/dictionary/ruction
(f) "A sharp devaluation would wrong-foot speculators. But it would also cause mayhem in China and export its deflationary pressures."

wrong-foot (vt; First Known Use 1928):
"to cause (as an opponent in soccer or tennis) to lean into or step with the wrong foot; broadly :  to disrupt the equilibrium of <a speed and flexibility that repeatedly wrong–footed his enemies — Anthony Lloyd>"
http://www.merriam-webster.com/dictionary/wrong-foot
(g) "Better would be for China to strengthen capital controls temporarily and at the same time to stop stage-managing the yuan’s value. That would be a loss of face for China, because the IMF only recently marked the yuan’s progress towards convertibility by including it in the basket of currencies that make up its Special Drawing Rights. But it would let the country prepare its financial institutions for currency volatility, not least by starting to scrub their balance-sheets, before flinging their doors open to destabilising flows. Mr Xi could embrace more complete convertibility later, when they were less vulnerable."

stage–manage (vt)
www.merriam-webster.com/dictionary/stage-manage

choi

BRIEFING (which in Economist is a sectional heading):

Chinese politics | A Crisis of Faith; In their response to wobbly markets, China’s leaders reveal their fears. Economist, Jan 16, 2016/
http://www.economist.com/news/br ... -fears-crisis-faith

Quote:

"Jitters emanating from China’s equity and currency markets have exposed widespread fears that the way ahead will be rocky indeed—and that Mr Xi and his colleagues are ill-equipped to navigate it. Evidence from their handling of a broad range of political and economic policy suggests that the worriers may prove right.

"At the same time [that stock market twice suspended twice since the start of 2016], China’s once-placid currency has turned stormy. The central bank believed it could nudge the yuan down, offering a little help to weary exporters without grave repercussions. Instead, it has triggered an exodus of capital and alarmed investors around the world, who braced themselves for bigger falls. As fears of a meltdown in China rippled across global markets, the government scrapped the ill-conceived circuit-breaker, and scrambled to shore up the yuan and the [stock] markets

"Panic about China’s ability to maintain steady growth is unwarranted. * * * That [Beijing's goal of annual GDP growth rate of 6.5% for the rest of the decade] may be difficult, and it could entail a lot more wasteful investment. But it should be achievable.  The problem is thus not an economic one, per se. It is that a government once widely thought of as all-powerful—even over markets—may be losing its grip.

"Mr Xi and his colleagues appear frightened of losing their grip on the economic levers that they have used to help keep the party in power.

"A full-blown economic crisis cannot be ruled out.

"Under Mr Xi’s predecessor, Hu Jintao, the middle class grew phenomenally [as % total population] (see chart 3). * * * Groups independent of party control—albeit small and scattered—sprang up everywhere.

"Mr Xi has tried to present himself as a reformer in the mould of Deng Xiaoping. He has acquired more power than any leader since Deng, putting himself in charge of all the most important portfolios and abandoning the system of 'collective leadership Deng brought in. Indeed in many ways Mr Xi’s grip on the country’s mechanisms of control appears stronger than Deng’s was, and second only to that of Mao Zedong.  Thus empowered Mr Xi talks of reform that goes yet further than Deng’s did

"Mr Xi’s style of rule, though, has proved an impediment to his ambitions.

"Can Mr Xi’s model—with all the flaws in its implementation—continue to keep the end of the party’s history at bay? David Shambaugh of George Washington University, a career-long observer of China [has] a forthcoming book [saying in China] a new era of 'hard authoritarianism' has begun. And he points out that there has been no example of an authoritarian country making the transition to high-income status that Mr Xi seeks without at least a partial democratisation.

Note: "Mr Xi was quick to grasp the dangers facing China when he took over in 2012. Some foreign commentators were still, even then, mesmerised by what they regarded as a winning combination of a technocratic government with a good sense of the country’s needs and how to fulfil them, and a disdain for the endless debates that can bog down good policy in democracies. But Mr Xi and his colleagues realised that the foundations of the model that the late Deng Xiaoping began to develop in the late 1970s, and that in the 1990s came into its own, was in need of an overhaul."
(i) fulfill (v; Late Old English fullfyllan 'fill up, make full' (see full, fill)): "(British fulfil)"
http://www.oxforddictionaries.co ... can_english/fulfill
(ii) come into its (or one's) own; "become fully effective, used, or recognized  <Mexico will come into its own as a vacation spot>"
www.oxforddictionaries.com/us/de ... ome-into-its-or-one