China Presses Economists to Brighten Their Outlooks
Looking at Xi Jinping’s steady tightening of control over the media and long-running crackdown on dissent and public protest, some commentators see partial motivation in a desire to maintain control now that double-digit GDP growth can no longer be brandished to legitimize the Party’s authority. As China continues to experience slowed economic growth and a wavering stock market, many are warning of a looming debt crisis, pointing to countries where similar economic signs indicated the final hour before major financial disruption, or asking if the “Chinese miracle” has entered its final days. Amid the chorus of gloomy economic reports, Lingling Wei reports that economists, business reporters, and analysts in China are being pressured by authorities to adopt a more positive outlook:
Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter.
The stepped-up censorship, many inside and outside the ruling Communist Party say, represents an effort by China’s leadership to quell growing concerns about the country’s economic prospects as it experiences a prolonged slowdown in growth. As more citizens try to take money out of the country, officials say, regulators and censors are trying to foster an environment of what party officials have dubbed “zhengnengliang,” or “positive energy.” [See CDT coverage of the “positive energy” in official propaganda efforts.]
[…] Pressured by financial regulators bent on stabilizing the market, stock analysts at brokerage firms are becoming wary of issuing critical reports on listed companies. At least one Chinese think tank, meanwhile, was told by propaganda officials not to cast doubt on a planned government program to help state companies reduce debt, economists familiar with the matter say.
While evidence of the clampdown is anecdotal, it appears widespread. Government departments didn’t respond to requests for comment or declined to comment.
During the past two months, the Communist Party leadership has been talking up the economy to try to reassure global markets. […] [Source]
See, for example, an April report from Xinhua heralding the IMF’s raised forecast on China trade as a “signal [of] global confidence in China’s economic outlook.” The report came as the lowest official GDP growth numbers in seven years were released, and chose to ignore the IMF’s concern that better than expected trade data may have come from short-term stimulus measures likely to worsen China’s overall debt load.
Propaganda officials regularly seek to eradicate news indicating economic distress, promoting instead a more optimistic narrative. Several leaked censorship directives, translated and published by CDT, show a sample of media management efforts over the past year:
- Minitrue: Rules on Stock Market Reporting, June 23, 2015
- Minitrue: Delete Articles on Stock Market Slide, August 25, 2015
- Minitrue: Li Ka-shing Leaving Mainland, September 19, 2015
- Minitrue: Keep Reporting on Bright Economic Future, September 7, 2015
- Minitrue: Levin Zhu’s Economic Warning, October 19, 2015
- Minitrue: Securities Regulator Xiao Gang’s Removal, February 18 2016
- Minitrue: 21 Rules on Coverage of the Two Sessions, March 6, 2016
- Minitrue: Panama Papers and Foreign Media Attacks, April 4, 2016
While state censors and propaganda officials tightly manage the economic narrative, the central government is also taking steps to manage rising protest from disgruntled investors who are blaming authorities for financial losses. Bloomberg reports on the forced closure and suspended registration of investment firms in an effort to ward off further unrest:
China’s authorities, seeking to forestall potential social unrest due to growing failures of investment firms and online lenders, are ordering many to break leases and close their storefronts on busy streets — lest they become magnets for protesters.
And that’s not all. Registration of all new companies with finance-related names was suspended nationwide in April, according to people familiar with the matter who asked not to be identified because they’re not authorized to speak publicly. In Shenzhen, office building management now must submit contact information for employees of all finance industry-related tenants to the local security bureau. Local governments from Shanghai to central Henan province have put up new signs outside residential compounds to warn the public against illicit fundraising activities.
The government, which had been encouraging the flourishing of investment firms and online lenders in the past two years to give small businesses that can’t get bank loans alternative funding — and to expand investing options for millions of Chinese — had largely failed to put regulations in place that would have prevented failures. The burgeoning ranks of peer-to-peer online lenders, or P2Ps, began opening storefronts on busy streets or in luxury office buildings to garner investment from the general public, hiring thousands of staff to sell products promising extraordinary returns. Other bricks-and-mortar firms sprang up offering wealth-management products with big payoffs, and many of those moved online, too, giving visibility to what was previously the nebulous and hidden world of shadow banking. […] [Source]
In an interview with The New York Times, Chinese economy expert Arthur R. Kroeber notes that as the central government manages the economic narrative, it also takes efforts to control the business of powerhouse homegrown companies like Alibaba. Kroeber warns that these tactics are backfiring, hindering innovation and ultimately stunting overall economic growth:
The key thing for China now is for the government to relax and let these kinds of companies spread their wings, both at home and abroad. If these kinds of dynamic private companies get space, then China can enjoy a phase of strong growth coming both from catch-up and from innovation. The problem is we seem to be moving in the other direction, and not only because of government censorship or controls on higher education. The government is also proposing that Internet companies like Alibaba, Tencent and Baidu sell a 1 percent golden share to the government, apparently with the idea that these companies will be better — or at least more politically controllable — if they have government involvement.
Unfortunately, all the evidence is that these companies are successful because they are not government controlled. [Source]
See also a recent report from The Economist on how Beijing’s tight control of the financial sector and national economy does much to create risk.