(China-171) October 27, 2018 – Why some think President Xi is in trouble now in China!


SPECIAL NOTE: I, as an American, think a little differently from this report…which is saying President Xi is not as effective as Deng Xiaoping in his 1992 tour of southern China, to boost his reforms and opening up of China to the world and more business opportunities for many in China. For one thing, President Xi has done a lot for the country since taking over in 2012…and the question is how to sustain what he has done so far for mainland China, his Belt and Road Initiative and the rest of the world? Peace, Steve, USA Oct 27, 2018   wechat  1962816801   stephenehling@hotmail.com     blog: https://getting2knowyou-china.com


China at a crossroads: can Xi Jinping’s trip south get the economy moving?
• Visit comes a quarter of a century after Deng Xiaoping’s 1992 Southern Tour to press for opening up and reform
• President and his top economic aides prepare the way with soothing words for private businesses
PUBLISHED : Monday, 22 October, 2018 Nectar Gan and Zhou Xin, SCMP


After months of anticipation and speculation, Chinese President Xi Jinping has finally embarked on his long-awaited trip to Guangdong, with the country at a major crossroads after an almost four-decade economic boom.
Many have hoped the trip will build on late paramount leader Deng Xiaoping’s Southern Tour in the spring of 1992, which revived China’s commitment to reform amid isolation from the West over its bloody crackdown on pro-democracy protesters in 1989.
Despite the high hopes, however, most observers are sceptical that Xi’s visit – his second to Guangdong since coming to power in late 2012 – will have the same impact as Deng’s and get stalled reforms moving.
There are similarities between now and then: an hostile external world, an ailing private sector at home and a whole lot of confusion about the country’s future path.
Today, US President Donald Trump is threatening to escalate a trade war against China unless Beijing changes its “unfair trade practices” – from government subsidies to state firms to alleged theft of technology. The risks of disintegration are on the rise as hostilities between Beijing and Washington spread to other, non-economic fronts.
At home, growth has slowed to 6.5 per cent – its lowest rate since 2009 – amid a mountain of debt, a yawning wealth gap and a rapidly greying population. China’s private economy, which contributes about 60 per cent of the country’s GDP, is losing ground to the state sector and slipping under increasingly tight grip of the ruling Communist Party.
Many private entrepreneurs are racing to shift their factories and wealth abroad, out of fear of a deteriorating business climate and inadequate protection of private property.
Xi’s trip, coming before the 40th anniversary of China’s reform and opening up, is seen by some academics and entrepreneurs as a long-awaited confirmation that Beijing is still open for business and China’s economic liberalisation will continue, especially now that it is locked in a bitter trade war with the world’s biggest economy.
“In face of the worsening Chinese economy, the expanding trade war and the unprecedentedly hostile international environment, it is necessary for the central leadership to re-declare its determination to deepen reform and opening up,” Beijing-based economist Hu Xingdou said.
Guo Wanda, executive vice-president of a Shenzhen-based think tank China Development Institute, said there were “wishes” for Xi to announce support for exports and manufacturing amid the trade war.
He Jianping, executive chairman of Guangdong Provincial Enterprise Confederation, an organisation representing local business interests, agreed. “At least [Xi] can make speeches about supporting manufacturing and other businesses,” He said. “His visit in itself is a blessing.”
China’s financial crisis team goes into overdrive with 10th meeting in two months
In the first leg of his trip, Xi toured a hi-tech industrial estate in Zhuhai, visiting Gree Electric Appliances, a leading home appliances maker, where he urged China to become more “self-reliant”. On Tuesday morning, he oversaw the opening of the world’s longest sea-crossing bridge, which connects Hong Kong and Macau with Zhuhai on mainland China.
He is also expected to head to Shenzhen, ground zero of Deng’s reform and opening up policy. The city was a small fishing village neighbouring Hong Kong when Beijing decided to test state capitalism there in a “special economic zone”. It is now China’s most dynamic city and home to a long list of technology giants from Huawei to Tencent.
In the days leading up to the trip, Xi and his top economic officials repeatedly sought to boost the morale of Chinese entrepreneurs and confidence in the country’s economic development. In an open letter to China’s private business owners on Sunday, Xi said Beijing would continue to value and protect the private sector to ensure a “better tomorrow”.

“Any words or acts to negate or weaken the private economy are wrong,” he wrote.
Chinese Vice-Premier Liu He has also issued specific instructions that banks must boost lending to small and private businesses.
But veteran observers of the Chinese economy remained unconvinced that Xi’s high-profile trip would yield any major rewards.
“Xi can never repeat the Deng Xiaoping success,” said Fraser Howie, co-author of Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. “China is a very different country now at a much higher economic base”.
When Deng embarked on his Southern Tour in 1992, the country’s per capita GDP was just US$366, and its exports amounted to less than US$85 billion. In 2017, its per capita GDP had grown more than 20-fold and its exports expanded by 26 times.
China’s private sector, which virtually did not exist before the start of market reforms in 1978, has grown from less than 14 per cent of total GDP in 1992 to 60 per cent, accounting for 80 per cent of urban employment and 90 per cent of new jobs and new firms.
But the lines between the state and the private sector had been blurred in the years since Xi came to power, Howie said. At least 10 private conglomerates have been nationalised since this year, according to the Financial Times.
“I don’t see why that is changing any time soon. A vibrant private sector is not in opposition to the state or the party, but it has to be independent of it,” he said.
Also starkly different is the domestic political climate. At the time of Deng’s tour, the paramount leader had already retired from his official party and military positions. After the 1989 Tiananmen Square crackdown, Deng’s power was significantly weakened in the party, where a conservative faction was growing to oppose his reforms. The Southern Tour, therefore, was out of necessity to reassert his reform agenda.
Today, Xi enjoys unparalleled authority as the country’s most powerful leader in decades, and has hand-picked a team of trusted economic officials to carry out his agenda. Officially, the party has time and again pledged to deepen reform and opening up, with Xi announcing a series of reforms in areas ranging from state-owned enterprises, the financial system, agriculture to the growth model.
But implementation has been lax, as a result of both the resistance of vested interests and Xi’s relentless crusade on corruption, which has spooked many officials into inaction.
Moreover, some “reforms” advocated in official rhetoric are different from the market liberalisation as expected by most people at home and abroad, and contradictory.
George Magnus, an associate at the University of Oxford China Centre and author of Red Flags: Why Xi’s China is in Jeopardy, said China’s “supply side structural reform”, for instance, was in reality “code for a mixture of both good and bad things but overall for little in the way of reform and opening up”.
“What we don’t see here is any attempt to open China’s economy to more competition, to break down market access restrictions in service industries, to treat foreign and local companies alike, to allow private capital more dominant position on SOEs or to run them as Temasek-type operations,” Magnus said.
“[We also don’t see any attempt] to transfer wealth from state and local governments to the private sector, to resolve the government’s conflicts of interest as owner/regulator and participant in the economy, to expand social security safety nets, to allow failures and bankruptcies, or to really shift the balance in the economy to private sector-led growth or to services.
“And that’s why in my view Xi’s visit to Guangdong is not on a par with Deng’s southern tour. Deng used it to relaunch reform and opening up. Xi doesn’t really want to go there at all.”
Other observers also questioned whether the top priority of Xi’s trip was to reassert commitment to economic reforms.
“Guangdong’s status as the symbol and bellwether of reform and opening up has faded now,” said Wang Zhengxu, a Chinese academic in Shanghai.
“The bigger message should be stressing the role of Hong Kong and Macau in the overall development strategy of the whole country.”
Additional reporting by Choi Chi-yuk and He Huifeng


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