CHINAMacroReporter

'Does Xi Jinping Face a Coup Threat?'

In today’s issue: 1. Rest easy. Xi is Safe / 2. China a Career Killer? /3. Rethinking 2020: What’s Overlooked and What’s Overhyped / 4. China’s Financial Opening Accelerates
by

|

CHINADebate

January 23, 2021
'Does Xi Jinping Face a Coup Threat?'

In today’s issue:

1. Rest easy. Xi is Safe.

  • 'Does Xi Jinping Face a Coup Threat?'

2. China a Career Killer?

  • 'Why Chinese Companies are Having a Tough Time Recruiting in the U.S.'

3. Rethinking 2020: What’s Overlooked and What’s Overhyped

4. China’s Financial Opening Accelerates

  • ‘China’s Easing of Regulations Restricting Foreign Ownership of Financial Firms’
  • ‘Reasons for Increases In Cross-Border Capital Flows into China’

'Does Xi Jinping Face a Coup Threat?'

  • This is clickbait for China wonks.

And it led me to listen to the full and fascinating Pekingology podcast with CSIS’s Jude Blanchette interviewing Yale’s Dan Mattingly.

  • Here are some highlights:

‘In the popular imagination, what an autocrat has to fear unrest. He has to fear protestors in the street, storming the gates and taking him down.’

  • ‘Generally though, what has led to the unconstitutional exit of authoritarian leaders from office isn't mass protest, isn't mass uprising - instead it's coups; it's other elites taking down the leader. And that's really what autocrats have to worry about.’
  • ‘A study shows that almost 70% of leaders in the post-war period of autocratic leaders when they've exited office has been because of coups.’
  • ‘So it's this fear of other elites that's really important.

‘And who launches coups and what are coups successful nine and 10 times a successful coup is by the military.’

  • ‘So if you're an autocrat, you really have to be nervous about what's the military doing and is the military coming after me?’

‘If you take a kind of broad view of different types of authoritarian regimes, one-party regimes like China under the CCP are generally more stable, more resilient, less likely to experience a coup.’

  • ‘Military dictatorships - and China is by no means a military dictatorship - are more vulnerable to coups than one-party systems like China.’

Dr. Mattingly goes on to argue that Xi Jinping has sufficiently secured the support of the leadership of the People’s Liberation Army to keep himself safe from a military coup.

  • We can all rest easier.

My interview with Julian Ha, a partner in the global executive search firm, Heidrick & Struggles, highlighted issues about the U.S. executives who work or refuse to work for Chinese companies doing business in the U.S. that I had never considered. He told me:

  • ‘Just a few years ago, some of the very large Chinese conglomerates - the Anbangs, the HNAs, and the Wandas, and the Huaweis - were all expanding globally but in the U.S. in particular.’
  • ‘And they were all hiring folks at senior levels to help them run the factories, to run the corporate functions, marketing, and so on.’

But ‘because of the uncertainty created by the retraction from the U.S. market and the rise of anti-China sentiment, the Chinese companies that are still in the game in the U.S. are having a much harder time recruiting talent.’

  • ‘When a Chinese company is being threatened with or actually being put on the Entities List, senior talent think twice about joining.’
  • ‘Potential recruits ask themselves, “Is this something that would be a career-limiting move?” ’

‘And they may be right.’

  • ‘I have seen senior executives who took on very public roles within some of these Chinese companies finding that their life after those companies has been more limited.’
  • ‘I would even go so far as to say it has a bit of a taint. A bit like working for big tobacco.’

‘Rethinking 2020: What’s Overlooked and What’s Overhyped’ from MacroPolo provides a corrective to conventional wisdom.

What’s overlooked?

1. ‘Closing the Curtain on the GDP Obsession Era’

  • ‘Although some observers have noted this shift on GDP, its significance may be underappreciated.’
  • ‘It is tantamount to simultaneously reshaping political incentives, changing the investment-driven model, and redirecting focus toward de-risking and reforming the economy.’
  • ‘In short, the Xi administration has been unexpectedly tolerant of austerity—a precondition for ramming through very difficult structural reforms that are essentially growth negative in the near term.’

2. 'Decoupling Is Everywhere Except in Reality’

  • ‘If a single word were chosen to define US-China in 2020, “decoupling” would be a good candidate.’
  • ‘Bandied about with abandon, the term has created the perception that these highly complex supplier networks were being severed in real time.’
  • ‘What has been overlooked is just how little meaningful decoupling actually happened.’
  • ‘What has actually happened on the decoupling front appears disproportionately modest relative to the attention heaped on it.’

What’s overhyped?

1. ‘China Slams Door on The World'

  • ‘Yet when it comes to capital markets, China has gone in precisely the opposite direction, further linking itself to global capital.’
  • ‘Although market openings began around 2018 and capital inflows rose steadily since, it wasn’t until 2020 that foreign capital inflows saw a notable spike.’

2. ‘BRI Is Down but Not Out’

  • ‘China’s overseas lending plummeted in 2019, leading some to prognosticate the death knell of the “Belt and Road Initiative” (BRI).’
  • ‘Yet China’s overseas lending has risen in 2020, though it has not returned to the heights seen in 2017 and 2018.’

‘China’s Financial Opening Accelerates’ by Nick Lardy and Tianlei Huang of the Peterson Institute for International Economics goes in-depth on some of the points made by MacroPolo:

  • ‘Despite predictions by some observers that the United States and China are headed for a “decoupling,” China’s integration into global financial markets is accelerating.’

'The best example of China’s deepening integration into global financial markets is the substantial increase in the role of US and other foreign financial institutions in China.'

  • 'This was made possible when Chinese market regulators, starting in 2017, gradually eased long-standing restrictions on foreign ownership, most of which were incorporated into the US–China Phase One agreement signed in January 2020.'

'The attraction of the Chinese financial market for foreign firms is substantial and will only grow.'

  • 'The total assets of China’s financial sector at the end of the second quarter of 2020 stood at RMB340 trillion ($48 trillion).'
  • 'Because of previous restrictions, foreign firms have only a tiny slice of most segments of this market; they control less than 2 percent of banking assets, for example, and less than 6 percent of the insurance market.'

The analysis explains 'several factors have contributed to the rapid increase in foreign holdings of onshore renminbi-denominated Chinese securities.' They are:

  1. 'Chinese stock and bond markets have grown rapidly since 2014 and have become too big for global investors to ignore.'
  2. 'The number of channels that facilitate foreign portfolio investment has also grown.'  
  3. 'The inclusion of Chinese securities in global stock and bond indices, like the Bloomberg Barclays index, drew institutional investing.'  
  4. ‘Interest rates on Chinese government bonds are higher than the US interest rate, and a rate cut is unlikely.'
  5. 'The renminbi appreciated about 6 percent vis-à-vis the dollar between January and early December 2020; from its low point in late May, it appreciated 8 percent. Foreign investors can now both earn higher returns on Chinese bonds and convert their RMB earnings back into dollars at a more favorable rate.'
  6. ‘China's rapid economic recovery from the COVID-19 pandemic reflects the profitability of Chinese industry, which is driving its strong equity market performance.’

Here’s a trend that is likely to continue regardless of the state of U.S.-China relations.

  • That’s because China sees a benefit in bringing foreign expertise and capital.
  • And doesn’t fear competition because it closed those markets long enough for its own firms to attain overwhelming dominance.

One more thing.

In the last issue I referenced former National Security Advisor, Gen. H.R. McMaster’s 'Biden would do the world a favor by keeping Trump’s China policy.' About this I wrote:

  • ‘Gen. McMaster gets one big thing wrong when he writes: "U.S. policy between the end of the Cold War and 2017 was based on a flawed assumption: that China, having been welcomed into the international order, would play by the rules, and, as it prospered, would liberalize its economy and, ultimately, its form of governance." '

‘In fact,' I wrote, 'this was never the avowed aim of the administrations during the period he cites.’

  • ‘This would be a quibble except that it may well be that, based on his writings, the incoming Indo-Pacific Coordinator, Kurt Campbell, may hold the same incorrect view, and that is an issue for crafting policy – keep an eye out of this.’

From the reader response I received I realize I didn’t explain my objection well. The problem is this:

  • Past administrations pursued a policy of engagement with China but not with the primary aim of changing China to a democracy from an autocracy.
  • The aim was to encourage, among other things, trade and business and China’s joining the community of nation’s as what Robert Zoellick called a ‘responsible stakeholder.’

If viewed as a tool only to change China’s political order, ‘engagement’ failed.

  • And that is just what critics who favor all-confrontation/all-the-time contend.
  • By misreading history and discrediting engagement with China they aim to advance their policy prescription of confrontation.

A better solution is both confrontation and engagement.

  • This is, in part, how President Reagan ended the Cold War.

And that is why this misreading of history can lead to bad U.S policy toward China.

CHINADebate, the publisher of the China Macro Reporter, aims to present different views on a given issue. Including an article here does not imply agreement with or endorsement of its contents.

More

CHINAMacroReporter

August 24, 2023
Xi Jinping: 'The East is Rising' | Yes. Rising against China
All our careful analyses of PLA capabilities, the parsing of Mr. Xi’s and Mr. Biden’s statements, the predictions as to the year of the invasion, everything – all out the window. This is one you won’t see coming – but one you have to have prepared for.
keep reading
July 23, 2023
‘The U.S. Has Tactics, But No China Strategy’ | Bill Zarit
‘The U.S. needs national review of outward investment to China, but it has to be narrow and targeted and done in conjunction with our allies and partners.’
keep reading
July 10, 2023
‘Is Xi Coup-proof?’ (after the march on Moscow, I have to ask)
What about the guys without guns? So if Mr. Xi doesn’t face a rogue army or a military coup… How about a coup by Party elites?
keep reading
March 11, 2021
China, Ai, & the Coming U.S. Industrial Policy
‘The government will have to orchestrate policies to promote innovation; protect industries and sectors critical to national security; recruit and train talent; incentivize domestic research, development, and production across a range of technologies deemed essential for national security and economic prosperity; and marshal coalitions of allies and partners to support democratic norms.'
keep reading
March 11, 2021
'Why Biden Should Ditch Trump’s China Tariffs'
‘President Joe Biden has to decide whether to rescind his predecessor’s China tariffs.’
keep reading
March 11, 2021
Then There are Semiconductors
‘While American companies pioneered semiconductors and still dominate chip design, many have outsourced the actual fabrication of chips, mostly to Asia.’
keep reading
March 11, 2021
'Hard lesson for HK opposition: Extreme political confrontation is not in the designs of China'
'The radical forces in Hong Kong thought they were strong!’
keep reading
March 11, 2021
'China Turns to Elon Musk as Technology Dreams Sour'
‘China is having its techlash moment. The country’s internet giants, once celebrated as engines of economic vitality, are now scorned for exploiting user data, abusing workers and squelching innovation. Jack Ma, co-founder of the e-commerce titan Alibaba, is a fallen idol, with his companies under government scrutiny for the ways they have secured their grip over the world’s second-largest economy.’
keep reading
March 11, 2021
For Industrial Policy: National Security Advisor, Jake Sullivan
‘While American companies pioneered semiconductors and still dominate chip design, many have outsourced the actual fabrication of chips, mostly to Asia.’
keep reading
March 10, 2021
'Beijing replicates its South China Sea tactics in the Himalayas'
‘Emboldened by its cost-free expansion in the South China Sea, Chinese President Xi Jinping’s regime has stepped up efforts to replicate that model in the Himalayas.'
keep reading
March 10, 2021
'China Crackdown on Hong Kong'
‘The scale of the protests really shook Beijing. All the previous protest movements had lasted a few months, at most. This time, there was huge support, and it wasn’t dying down on its own.’
keep reading
March 9, 2021
'Neither China nor the US fits neatly into any one box’ Yuen Yuen Ang
‘Binary narratives lie behind the common misconception that China’s economic success has vindicated autocracy. (The simplistic logic is that if China is not a democracy, it must be an autocracy, and when it prospers, that prosperity must be because of its autocracy). For liberal democracies, this raises the fear that the “China model” poses an ideological challenge to democracy.’
keep reading
March 7, 2021
Part 2 | 'How Biden Can Learn From History in Real Time' Copy
‘ “International relations scholars,” the political scientist Daniel Drezner has written, “are certain about two facts:'
keep reading
March 7, 2021
How the WTO Changed China
'WTO membership, the new consensus goes, has allowed China access to the American and other global economies without forcing it to truly change its behavior, with disastrous consequences for workers and wages around the world.’
keep reading
March 7, 2021
With growth on track, China starts to unwind stimulus
‘China was the first country to open its lending and spending taps in the face of the coronavirus downturn. Now, it is the first to start to close them, giving others a partial preview at the National People’s Congressof what the end of stimulus will look like. The most notable aspect is its gradualism.’
keep reading
March 6, 2021
'Taper test - With growth on track, China starts to unwind stimulus'
‘China was the first country to open its lending and spending taps in the face of the coronavirus downturn. Now, it is the first to start to close them, giving others a partial preview at the National People’s Congressof what the end of stimulus will look like. The most notable aspect is its gradualism.’
keep reading
March 5, 2021
Nursing China’s Debt Hangover
‘China official target of 6% annual economic growth, announced Friday, is so modest it’s clear something else is going on. A plausible theory is that this is part of a strategy to rein in debt.’
keep reading
March 4, 2021
China & the U.S.: Getting Each Other Wrong
China and the U.S. seem to be in the process of reassessing their views of each other’s strengths and weaknesses. Xi Jinping appears to be seeking some balance in his assessment of the U.S. And analysts in the U.S. have reversed a trend of opinion that ‘China is inexorably rising and on the verge of overtaking a faltering United States.' They argue instead ‘the United States has good reason to be confident about its ability to compete with China.’
keep reading
March 4, 2021
'NATO's Shifting Focus to China'
‘Consider, for example, a war escalating over the defense of Taiwan. “We should not forget that the main member state in NATO, the United States, is not only a transatlantic nation, but also a Pacific nation. And the question is, if at a certain stage, the U.S. were to be threatened by China, would that invoke Article 5 in the treaty?"'
keep reading
March 3, 2021
Missing: Has anyone seen Europe’s China plan?
‘Caught between Washington and Beijing, European capitals find themselves in lack of a strategic China policy.’
keep reading
February 28, 2021
Why Beijing was right to rein in Jack Ma's rogue Ant Group IPO
‘In July 2020, just before their IPO application, Ant Financial not only abandoned the word "financial" and renamed themselves Ant Group, they attempted to list not on the Shanghai or Shenzhen exchanges, where financial institutions list, but rather on the Shanghai STAR Market, which was created as an exchange for high-tech innovators.’
keep reading
February 27, 2021
The rivalry between America and China will hinge on South-East Asia
‘In the rivalry between China and America, there will be a main zone of contention: South-East Asia. Of the two competitors, China looks the more likely prize-winner.'
keep reading
February 26, 2021
'Inside Xinjiang’s Prison State'
‘After years of first denying the facilities’ existence, then claiming that they had closed, Chinese officials now say the camps are “vocational education and training centers,” necessary to rooting out “extreme thoughts” and no different from correctional facilities in the United States or deradicalization centers in France.’
keep reading
February 24, 2021
Japan Is the New Leader of Asia’s Liberal Order
‘In an era of Chinese bellicosity, North Korean provocations, and a raging pandemic, Japan’s inconspicuous ascent to regional leadership has gone mostly unnoticed.’
keep reading
February 23, 2021
‘Patriots’ Only: Beijing Plans Overhaul of Hong Kong’s Elections
‘China plans to impose restrictions on Hong Kong’s electoral system to root out candidates the Communist Party deems disloyal, a move that could block democracy advocates in the city from running for any elected office.’
keep reading
February 23, 2021
HSBC offers lesson in corporate realpolitik
‘HSBC’s Asia pivot is a lesson in corporate realpolitik. It is just as much a recognition of the new political reality facing every western company that is dependent on doing business with China. Businesses will have to choose between western markets and access to China, and between liberal and authoritarian value systems.’
keep reading
February 23, 2021
Germany Is a Flashpoint in the U.S.-China Cold War
'As goes Germany, so goes Europe — and that’s a real challenge for the U.S. Berlin leads a European bloc that could cast a geopolitical swing vote in the U.S.-China rivalry.’
keep reading
February 22, 2021
Remaking “Made in China”: Beijing’s Industrial Internet Ambitions
‘The Chinese government is placing large bureaucratic and financial bets on upgrading and digitizing its already dominant manufacturing base. Such efforts have coalesced around one key term: the “industrial internet” (工业互联网). The successful application of it across Chinese industry would prolong and elevate the “Made in China” era.’
keep reading
February 22, 2021
How American Free Trade Can Outdo China
‘When it comes to trade, a critical dimension of the U.S. and China competition, America is ceding the field. At the same time, China has expanded its trade footprint. When it comes to trade and investment agreements, China isn’t isolated. The U.S. increasingly is. Now we have to make up for lost ground. America can out-compete China, but first it needs to get back in the game.’
keep reading
February 21, 2021
China’s ‘two sessions’: why this year’s event is so important for Xi Jinping’s vision for the future
‘The ‘Two Sessions,’ the annual meeting of the National People’s Congress, the country’s legislature, and the top political advisory body, the Chinese People’s Political Consultative Conference, begins on March 5 and runs for about two weeks.’
keep reading
February 20, 2021
‘The Future of China’s Past: Rising China’s Next Act'
‘By the Party’s own acknowledgment, Deng’s initial arrangement has run its course. It is therefore time to develop a new understanding that will do for the Party in the next 30 years what Deng’s program did in the previous era.'
keep reading
February 20, 2021
‘UNDERSTANDING DECOUPLING: Macro Trends and Industry Impacts’
‘Comprehensive decoupling is no longer viewed as impossible: if the current trajectory of U.S. decoupling policies continues, a complete rupture would in fact be the most likely outcome. This prospect remains entirely plausible under the Biden administration.’
keep reading
February 20, 2021
‘Europe can’t stay neutral in US-China standoff’
‘China aims to create a world that is not safe for Europe — strategically, economically or ideologically. Xi is actively striving to undermine the stature of democracies in the global order. The more power China amasses, the less tolerant it will become with any government that won’t toe its line. China also represents a long-term economic threat to Europe — not merely because it is an advancing competitor in a global market economy, but because Beijing’s policies are designed to use and abuse that open world economy to eventually dominate it.
keep reading
February 20, 2021
‘Beat China: Targeted Decoupling and the Economic Long War'
‘The economy is the primary theater of our conflict with China. It is now clear that the U.S. and Chinese economies are too entangled, particularly in critical sectors such as medicine, defense, and technology.'
keep reading
February 19, 2021
‘No, China is not the EU’s top trading partner'
‘This week the media seized on a report by Eurostat, the European Union’s statistical agency, to declare that China surpassed the United States in 2020 to become the EU’s main trade partner. This is simply not true.’
keep reading
February 18, 2021
‘China faces fateful choices, especially involving Taiwan’
'Should Mr Xi order the People’s Liberation Army to take Taiwan, his decision will be shaped by one judgment above all: whether America can stop him. If China ever believes it can complete the task at a bearable cost, it will act.’ ‘
keep reading
February 18, 2021
'An Unsentimental China Policy'
'Jake Sullivan, wrote in Foreign Affairs in 2019, “The era of engagement with China has come to an unceremonious close.”Yet it is worth remembering what engaging China was all about.’ For most of the past half century, efforts to improve ties with the country were not about transforming it. Judged by its own standards, U.S. engagement with China succeeded. It was only after the Cold War that a desire to change China became a prominent objective of U.S. policy.’
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.