China zaps Trump, while promising blue skies!

Published by MAC on 2018-01-26
Source: Quartz, Economist, Thomson Reuters

China’s new Davos pledge—blue skies, literally, in three years

Heather Timmons

Quartz

24 January, 2018

Liu He, Chinese president Xi Jinping’s right-hand man and the mastermind behind the country’s economic policy, made a concrete pledge to the country’s 1.4 billion citizens today: In three years, your skies will be blue again.

Air pollution in China is so bad that it darkens skies in the daytime, gives citizens cancer, and hinders its ability to produce solar power, thanks to the country’s coal consumption. China’s Communist Party promised to fight pollution in its latest five-year plan and even bring back blue skies, but Liu is the first to put a timeframe on the pledge.

He made the promise during the World Economic Forum in Davos, Switzerland, while positioning China as a defender of global peace and prudent climate policy, a pivot of Beijing’s since the last US presidential election.

“Green and low-carbon development is what the Chinese people and people across the world want the most,” Liu said. In the next three years, he said China will “scale up pollution control, lower intensity of resource consumption, make our development more eco-friendly and our skies blue again.”

In contrast, the Donald Trump administration has filled its ranks with coal executives, and is trimming regulations on coal-fired plants while rolling back incentives for solar power. Trump pulled the US out of the Paris Climate Accord last summer, a decision Liu seemed to criticize in Davos, without mentioning the US president by name.

Not only will China “honor the Paris agreement,” he said, it will “stay committed to improving the environment with the rest of the international community.”

While Liu outlined some economic changes—including opening up the market to more imports and better defense of intellectual-property rights (these are pledges Beijing has made before, but failed to implement)—he gave few specifics.

He did, however, talk about the need for “rational choices,” another dig that seemed aimed at Trump. It is “crucial to make prudent and rational choices, choices that will serve mankind well” on issues like terrorism and climate change, Liu said.

“We need to seek cooperation in a sensitive manner,” Liu added. “China is a force for world peace, development, and the international order.”

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 As China gets tough on pollution, will its economy suffer?

The received wisdom was that greener growth would be slower. So far, that hasn’t happened

The Economist

5 January 2018

LEO YAO thought he had nothing to fear from the environment ministry. Before, when its inspectors visited his cutlery factory, he says, they generated “loud thunder, little rain”. After warning him to clean up, they would, at worst, impose a negligible fine. Not so this time. In August dozens of inspectors swarmed over his workshop in Tianjin, just east of Beijing, and ordered production to be halted. His doors remain shut today. If he wants to go on making knives and forks, he has been told that he must move to more modern facilities in a less populated area.

Mr Yao’s company, which at its peak employed 80 people, is just one minor casualty in China’s sweeping campaign to reduce pollution. For years the government has vowed to go green, yet made little progress. It has flinched at reining in dirty industries, wary of the mass job losses that seemed likely to ensue. But in the past few months it has taken a harder line and pressed on with pollution controls, hitting coalminers, cement-makers, paper mills, chemical factories, textile firms and more.

Tens of thousands of companies—mostly smaller ones, like Mr Yao’s—have been forced to close, according to Chen Xingdong, an economist with BNP Paribas. In the region around Beijing this winter, the government has ordered steel mills to run at half-capacity and aluminium-makers to cut output by nearly a third. Implementation, half-hearted in the past, has if anything been heavy-handed. In Hebei, a northern province, a ban on coal heating left thousands of residents shivering because the replacement, a switch to natural gas, was not yet ready.

For the wider economy, the question is how steep the cost will be. A sharp tightening of environmental rules in the world’s biggest polluter has the potential to be a shock, both to China and the global economy. Two worries are commonly heard: that it will drag down growth; and, at the same time, cause inflation as production cuts boost prices. Jiang Chao, an economist with Haitong Securities, a broker, says it could end up making for “classic stagflation”. So far, though, these worries are unfounded: growth has been solid and inflation subdued. A possible explanation is that the economic impact is lagging behind the pollution controls. Another is that, contrary to received wisdom, China may be able to raise its environmental standards without paying a high price.

One thing is clear: China’s shift on pollution is real. True, some extreme measures are temporary, especially those aimed at keeping Beijing’s sky blue this winter. But many others will be lasting. As part of a “war on pollution” declared in 2014, China has detailed targets for cleaning up its air, water and soil. On January 1st it introduced an environmental-protection tax, replacing a patchwork of pollution fees. Last month it launched a market for trading carbon emissions, which, though scaled back from early plans, will be the world’s largest. Most crucially, the environment ministry, previously a political weakling, has clout at last—as Mr Yao’s cutlery business found to its chagrin. Besides fining companies, inspectors have disciplined some 18,000 officials for laxity over pollution.

The tougher tactics have already made a big dent in specific industries. Just 60% of steel blast-furnaces are now in use, down sharply since October and near a five-year low. Thermal-power output is now actually declining year by year, evidence of weakening demand. Companies are also feeling the pinch. Schaeffler Group, a German car-parts maker, warned in September that pollution controls would knock out its supplier of needle bearings. Taiwanese chipmakers in the city of Kunshan, an electronics hub not far from Shanghai, say the abrupt tightening of water-quality rules may lead them to move.

Upward pressure on production costs has been intense. A surge in coal and steel prices has attracted most attention, as China has pushed companies to cut capacity (see chart). But similar trends affect a range of smaller industries. In July China banned imports of 24 kinds of waste such as paper and plastic; the ban came fully into effect on January 1st, but demand (and prices) for raw pulp quickly jumped. Restrictions on the chemicals industry have fuelled a 50% increase in the price of glyphosate, a popular weedkiller, over the past few months. Prices of rare-earth metals, notably two used in electric magnets, have also soared.

Yet the biggest economic surprise of China’s environmental campaign so far is not that it has had an impact; it is how muted that impact has been. Yes, industrial production has recently been weaker than forecast, but it is still expanding at more than 6% year on year. And yes, some commodity prices have shot up, but this has had very little effect on general inflation.

Three factors suggest that this benign trend may endure. First, despite the common assumption that industries such as steel or coal are vast, they in fact account for a small, shrinking share of the Chinese economy. Minsheng Securities, a broker, calculates that the full complement of industries affected by the pollution measures adds up to just 7% of total national investment. China has reached a stage of development where manufacturing is fading in importance. Nearly 4m people may lose jobs as a result of cuts in industrial capacity, but strong demand for labour in the services sector, from restaurants to health care, is cushioning that blow.

Second, price increases have been concentrated and show little sign of spreading widely. Prices of coal and steel, the first to heat up, are already levelling off, making the increases seem big one-off changes rather than the start of inflationary spirals. For the economy as a whole, it amounts to a redistribution of resources. Companies that use commodities as inputs face higher costs. But producers benefit. And since metals and mining companies are heavily indebted, the rebound in revenues is helping to fortify their balance-sheets and, in the process, easing Chinese financial risks.

Lastly, green restrictions can themselves generate growth and jobs. China’s drive for cleaner energy sources has gained momentum. Estimates suggest it installed nearly 55 gigawatts of solar-power capacity in 2017, more than the existing capacity of any other country at the start of the year. China accounts for about two-fifths of global production of electric cars. And in more established industries, companies feel pressure to upgrade. To stay in business, Mr Yao says he will move his cutlery factory to a new industrial park, where waste-disposal standards are higher.

If the economic downside from China’s clean-up remains relatively mild, it prompts an obvious question: why did it take the government so long to get tough on pollution? One big reason is surely the uneven distribution of pain. Smokestack industries are based in a small number of provinces such as Shandong in the east and Shanxi in the north. So long as enforcement was in local hands, officials had little incentive to act. None wanted to throttle companies in their own backyard. But from a national perspective, the economic trade-offs of greener growth ought to be easier to stomach. China will both pay a price and reap dividends.

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China's 19th Part Congress

Countercurrents

5 January 1918

The 19th Congress of the Chinese Communist Party began on October 18 last year and lasted for a week. At congresses in the Chinese Communist Party, the more than 2000 delegates first choose a central committee consisting of about 200 full members and approximately 200 alternative members. Then the 25 members of Politburo of the Central Committee are elected, and these members elect the Politburo Standing Committee, which is the undisputed center of power in China .

The 19th Congress was particularly important because only 2 of the 7 members of the ruling Standing Committee, according to the current standards for when Chinese top politicians leave political life, could stay for another period. According to the norms, which are not written rules, a Chinese politician can not be elected if he/she reaches 70 years of age in the following five-years elevation term. The two members who could stay as members for the next five-year period, Xi Jinping and Li Keqiang, were the two most powerful members of the standing committee. Xi Jinping was Secretary General of the CCP and President of the state, while Li Keqiang was prime minister. Neither Xi Jinping nor Li Keqiang will be eligible for re-election at the next congress, to be held in 2022. Accordingly, one could expect that the new standing committee would include one or more persons who could sit for three five-year periods before falling for the age limit, thus replacing Xi Jinping and Li Keqiang. That was what happened when Xi Jinping and Li Keqiang were elected to the standing committee, but the tradition was not followed at this congress. Of the newly elected five members, not a single one will be able to hold their seats for that long. It is therefore expected that Xi Jinping in 2022 defies this norm, which was introduced at the request of Deng Xiaoping to prevent Chinese leaders from staying in their position for life. However, Xi Jinping can not stay on the post as president because the Chinese constitution states that the president can only sit for two election periods.

The newly elected members of the standing committee were: Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji, Han Zheng. Of these, only one, namely Wang Yang, is linked to the once-so-powerful faction around the Youth Federation of the Communist Party, so from this fraction now only Li Keqiang and Wang Yang are members of the Standing Committee. The other 4 new members all have a common past with Xi Jinping and several of them have worked with him or as his subordinates when he was a party secretary of Zhejiang Province.

The position of Xi Jinping has thus been strengthened by the congress. During his first term, he has already in many ways consolidated his position in the party. He has implemented a campaign against corruption which has led to criminal proceedings against 1.4 million officials. The campaign had two purposes. First, to strengthen the CCP’s reputation in the population by cleansing the party, secondly, to eradicate Xi Jinping’s political opponents. He has also launched an ideological campaign with the aim of strengthening “Marxism” within educational institutions. The aim of this campaign was not, as one might expect, to encourage students and teachers to implement Marxist analyzes of the new China, but primarily to emphasize the leading role of the Communist Party in society. Xi Jinping has formulated the idea of “The Chinese Dream”, a dream of re-establishing China’s historical position as a great power and prosperous society. In consequence, he has conducted a more self-assertive foreign policy than his predecessors. Already one year before Congress, he was featured in Chinese media as “the core of the Communist Party,” a position that only the most powerful of his predecessors has taken.

Xi Jinping, therefore, now appears as China’s undisputed leader, and he may be able to stay in this position for a number of years. In addition to being called the “core of the communist party,” his thoughts have been included in the statutes of the communist party, while he is still in power. This has the consequence that criticism of him or his policy could be stamped as criticism of the Communist Party as such.

It has not always been written in the stars that Xi Jinping should achieve such a powerful position. He is the son of former deputy prime minister, Xi Zhongcun, and thus one of the so called “crown princes.” However, in 1997 when Xi Jinping first attempted to be elected to the Central Committee, he was only succeeded in becoming an alternate member, and actually got the lowest number of votes of all. Nevertheless, in 2007, after becoming a full member of the Central Committee in 2002, he joined Li Keqiang in the Standing Committee of the Politburo, designated to be placed in one of the two main positions of power in the CCP at the following Party Congress. At the 18th party congress in 2012 he was finally elected general secretary of the party and president of the state. How he succeeded in making such a leap in the hierarchy of the communist party is still a bit surprising.

In his first period as secretary general, he managed to push Prime Minister Li Keqiang out of line, even in relation to economic policy, which is usually the responsibility of the prime minister. During the same period, he has pushed through a definite strengthening of the power of the communist party in relation to the government and state apparatus, and the 19th congress passed a resolution stating that the communist party should be a leader in all aspects of societal development, including the economy. This decision constitutes a decisive break away from the policy promoted by Deng Xiaoping in the the 1990s, namely to create a separation between party and state, according to which the communist party should not interfere in state and economic affairs. With the new congressional decision, the leadership of the Communist Party in all societal relationships has been established, and plans to separate the party and state have been effectively scrapped.

The election of Wang Huning to the standing committee of the politburo came as a surprise, but his new position may shed some light on the ideological direction the new Chinese leadership is going to follow. Wang Huning is a professor of political science, educated at Fudan University in Shanghai, where he also served as a dean. In the 1980s he was actively advocating the ideology labelled as “neoautoritarianism”. Neoauthoritarianism was based on Samuel P. Huntington’s book, “Political Order in Changing Societies” from 1968, where Huntington states that modernization of a society leads to conflicts between newly emerging interest groups. The stability of a society under change can therefore only be preserved if society is ruled by an authoritarian leadership. In accordance with this view, the neoauthoritarian saw a threat by the post-1979 economic reforms to the stability of society, and therefore advocated to maintain a strong authority in society, which in China could only be the communist party.

Following the tragic massacre in Beijing in 1989, neoauthoritarianism disappeared from the ideological discourse in China, but shortly after the Soviet collapse it was replaced by so–called “neoconservatism”, which Wang Huning also advocated. Neoconservatism is closely linked to the so-called “crown prince party”, children of senior party officials, who strive for political influence in China. In 1992, a group of crown princes at a secret meeting formulated a manifesto that was meant to serve as a kind of political program for the elections at the party congress that year. Influenced by the experience of the collapse of the Soviet Union and inspired by Huntington’s ideas of modernizing society, the crown princes emphasized the need to strengthen the leading role of the communist party in Chinese society, rediscover Chinese traditions and strengthen China’s position in the world through a foreign policy that emphasized China’s national interests. Most remarkable, perhaps, were the crown prince’s ideas that the communist party should take control of the state-owned companies.

The crown princes did not get the success they had hoped for at the 1992 party congress, but neoconservatism continued to be an essential element in the ideological debates in China, and in that connection, Wang Huning played an important role.

Ever since he was elected to the Central Committee of the Communist Party in 2002, Wang Huning has led the Central Committee’s Political Research Office and at the 19th congress he was promoted to the secretariat of the central committee. Without doubt, the neoconservative Wang Huning will continue in the role of ideological watchdog, but now with expanded powers.

The political leadership in China of the last decades may be described as an alliance between neoconservative politicians and neoliberal intellectuals. The election of Wang Huning to the standing committee of the politburo and his entry into the secretariat of the central committee can be interpreted as a manifestation of the denunciation of this alliance. Xi Jinping has also in internal party documents repeatedly criticized neoliberalism, which he regards as harmful on line with “Western democracy”.

Like in the rest of the the world, neoliberalism in China has been the driving ideology behind the privatization of state-owned enterprises. In China, this privatization has reached its limit, and the neoliberal ideology has therefore become redundant. The state-owned companies which have not been privatized are mostly large corporations, many of which deal with construction of infrastructure and the like. The Chinese leadership has no intention of privatizing these companies. On the contrary, many of them are being merged to form real state monopolies, big enough to cope with competition on the global market. The communist party controls these companies through the corporate party committees, where all members of the administrative management have a seat, the CEO typically as chairman.

The unwillingness to privatize major state corporations is considered by many outside China as a sign that China, as Xi Jinping and the Chinese leadership also claim, is still a socialist society. For the Chinese leadership, however, the leading role of the communist party is the most important evidence that China is still socialist and is now on the verge of “a new era of socialism with Chinese characteristics.”

The 19th party congress thus further strengthened Xi Jinping’s position and gave him the opportunity to remain in office as secretary general after the next and perhaps more following party congresses. In addition, the leading position of the communist party has been cemented, especially in relation to state institutions, central as well as local, and neoconservatism is about to become the dominant ideology of the Chinese leadership, although Marxism will continue to be part of official ritual liturgy.

Peer Møller Christensen is a retired Danish university teacher with a PhD in Chinese .