China’s president-for-life Xi Jinping has turned to “born-again Marxism” in an effort to revise history and to re-shape national consciousness around a more malleable model that suits his purposes.
… Xi and his supporters [are] now trying to use [Marx] to present a different narrative of China’s rise. “They are saying China’s success didn’t come from a change to capitalism,” he said. “It came from a one party-controlled process of developing its economy, lifting people out of poverty, fighting corruption and creating a fairer society — which were among the original Marxist ideals in the 19th century.”
“They are trying to present an alternative development model, not only economically but also with a theoretical and ideological underpinning,” he added.
The Chinese government’s Marxism push comes at a time when they are trying to simultaneously portray themselves as the defenders of capitalism, including in several high-profile speeches by Xi at international economic forums.
Meanwhile In the Real China
On the level of state propaganda for Chinese consumption, an extreme Marxist makeover of recent history may make a lot of sense. It certainly sells well to party officials who understand which entity butters their bread and allows them to keep their own organs to themselves.
But today’s China is built upon the promise of economic prosperity for all. If Xi is unable to manage China’s increasingly unwieldy economy, unrest is likely to spread from local levels upward — regardless of all of Xi’s precautions.
Piling Credit on top of Credit
Just days after Chinese media reported that an unprecedented number of corporations have defaulted on bonds they owed, the Chinese regime has announced that local governments can issue bonds to repay debts that will mature in 2018—highlighting the enormity of China’s debt problem.
… many of China’s big firms—some of which are publicly listed—have already defaulted on bonds this year, including the state-owned Sichuan Coal Industry Group and Dalian Machine Tool Group; Dandong Port Group, which manages the eponymous port located on the border to North Korea; China City Construction Holding Group, a construction engineering firm; and China Security and Fire Co., a firm specializing in security systems, according to a report by the state-owned newspaper China Securities Journal.
Since the beginning of this year to May 7, 19 firms have defaulted on corporate bonds, according to data from the Chinese finance database Wind.
… The Shanghai edition of the Journal, Shanghai Securities News, reported on May 10 that short-term loans were also in trouble. According to data from Wind, 116 short-term bonds—repayable within a year—have been cancelled or postponed since the beginning of the year… Surprisingly, most of those debtors possessed AA or AA+ ratings. __ Issuing New Dept to Pay Off Old Debt
“The old model of credit-fueled growth can no longer hold.”
The pace of new debt issuance is one component of that, but so are “the complexity, and the fact that the corporate sectors have taken on so much debt, and a lot of this debt is by the state-owned enterprises, and nearly half of the debt is somehow connected to real estate.” ___ CFA Institute
China is Not Alone in the act of Drowning in Bad Debt
The question is whether India can overcome its economic challenges. “There are several,” Wang warned. One of them is the country’s high percentage of non-performing loans. Early in 2018, Reuters reported that India’s bad loans have nearly doubled in the past four years, but the Reserve Bank of India has announced new rules for dealing with defaults that may bring discipline to the banking sector. __ https://blogs.cfainstitute.org/investor/2018/05/18/asia-rising-china-and-india-in-the-next-decade/
Consider that China and India are supposedly the economic global hopes for the 21st century. Both are insufferably corrupt, sinking in rotten debt, and now both nations are flirting with the long-discredited and perpetually failing economic and social system of Marxism.
It’s fine to hope for the future, but your hopes should be built upon rational ideas if possible, not on fantasies that always fail.
Fact check for those who look past the party line:
“The China growth story is not likely a miracle of communist government central planning; it’s a massive credit bubble, almost certainly the largest ever. China’s impressive growth has come overwhelmingly and almost exclusively from unsustainable credit expansion combined with extensive, largely unprofitable domestic infrastructure expansion. In the last two decades, China has seen the largest construction boom in any country ever.
… Fixed capital investment is spending on physical assets such as infrastructure, buildings, property, machinery, or technology. While a certain amount of fixed capital investment is unquestionably good for any economy, fixed capital investment in China has reached completely unsustainable levels. It is largely responsible for the surging corporate indebtedness problem in China that we discussed in the previous post. It is also this excessive fixed capital spending, which is creating the illusion of rapid economic growth and high employment in China. __ 90% of Chinas GDP is Fixed Investment
Potemkin facades ultimately fail — as we saw when the USSR collapsed shortly after the fall of the Warsaw Pact.
They have to fake it. The future of CCP control over China depends upon maintaining multiple levels of simultaneous deceit.