Platt Perspective on Business and Technology

China and its transition imperatives 27: rethinking China’s economy and the Party and government policy that shapes it 3

Posted in macroeconomics by Timothy Platt on January 5, 2016

I have been writing about China in this blog for almost as long as I have about anything. And I continue that pattern here with this new installment to what has at least seemingly become an open ended series (see Macroeconomics and Business, postings 154 and loosely following, and that directory’s Page 2 continuation, posting 201 and loosely following for other regular and supplemental installments to this series.)

I ended Part 26 of this ongoing effort, stating that I offered that posting “as a though piece on the consequences of remediative decisions made and actions taken” and I added that I would follow it:

• “With a next installment where I will look at wider-ranging areas of impact and both from China’s downturn, and from how their government seeks to address that. Increased challenges to their environment comprise only one part of that story.”

Xi Jinping seeks to achieve a level and type of overall authority in China of a type not seen since the days of Mao Zedong’s rule. I have been arguing a case for this assessment since very early on in this series, and ongoing experience has only served to reaffirm its basic validity. He seeks to become the one true owner of Party doctrine and authority, and of government power. And he has largely succeeded, at least on the surface. But he has also been significantly stymied in this effort too, from having to accommodate at least a few very significant competing centers of power (e.g. the leadership of the People’s Liberation Army (PLA) that he has in effect been forced to compromise with.) But he has and I add will continue to face his greatest challenge from the vast and largely amorphous power of the Party and government bureaucracy, rendered amorphous and correspondingly less easy to manage because so much of that power is held essentially “off the books” as personal power bases held by specific individuals and groups and at all levels from local on up.

Xi has held show trials and has made public examples of a great many who would in any way challenge him or his ambitions, and that has had to have instilled at least some measure of caution throughout the bureaucratic ranks. But I find myself thinking as I write this of an earlier power seeker: a Roman emperor who also sought what amounts to absolute power in his particular domain named Gaius Julius Caesar Augustus Germanicus (nicknamed and best known as Caligula). And I particularly find myself thinking of one perhaps historically insignificant event in which he ordered soldiers of his Praetorian Guard to shout out loudly and throw their spears into the surf because a rising tide was challenging his beach party and he wanted to teach the god Neptune a lesson.

Ambition and desire for authority can only go so far, when this means actually having to lead real people and their organizations, each with their own power bases and their own ambitions. And that beginning note frames my discussion for this posting and certainly its starting point: pollution and environmental degradation as China has come to experience them.

Pollution and resulting environmental degradation comprise what in the long run might be the single overall greatest challenge that China’s one Party system and its government faces. These leaders and Party and government, and their many people and their country are currently facing what could prudently be considered an economic crisis, as of the time of this writing. And that will take years to fully resolve – whether their current political and governmental systems can manage that as they are organized and run now or not. But the impact of China’s industrial and supportive economic policies, and of their having black and gray market economies that contribute to this problem as well as a more open highly polluting white economy, means that their environmental challenges from today will linger in impact for generations to come. These problems might very well outlive Communism in China, itself. And that timeframe consideration would hold true even if by some miraculous means, China was able to stop adding to their pollution problems today and they only had to deal with what is already deeply set in place from them.

• The air might clear relatively quickly and certainly for particulate pollution, but soil and ground water contamination would last seemingly forever, and certainly in terms of any Party or government planning cycles.

Xi clearly realizes that ongoing high level pollution and its environmental impact constitute a massive threat to his country’s economy and to his dream of making China a major global power in his image. It is pretty well established, and even for Xi and for his leadership team that coal fired power plants contribute to this problem and very significantly so. But even as they acknowledge this, China’s government and their largely state-owned industrial base are currently planning on adding 155 new coal fired electrical power plants to their national electrical grid (see for example, Glut of Coal-Fired Plants Casts Doubts on China’s Energy Priorities. Yes, they are also pursuing nuclear power generation and have a small number of new power plants of that type in the planning with two more actively in the pre-build planning stage. And they are actively pursuing clean energy sourcing such as wind and hydroelectric power. But 155 new coal fired power plants would more than just offset any gain from them, and particularly when these new power plants would in such large part be fueled with lower quality, high sulfur content coal that would be particularly polluting, and both for its production and for its use.

Xi and his government would like to limit and control pollution production and they would like to in some way clean up their country’s environment. But actually doing so brings China’s leadership into a head-on collision with the reality of their overall government and Party, and their overall industrial base and the growing power demands of their citizenry, all of which they have to accommodate. Xi Jinping might as well try to repeal gravity as try to turn off the momentum and drive for new coal fired power plants, and both for the electrical power they would provide and for how they fit into the systems in place, that Party and government and state owned business executives and bureaucrats at all levels control and gain from – personally as well as organizationally. Or, to refer back to my roughly two millennium earlier example of hubris, he might as well order his security team to shout and throw their guns into the South China Sea.

I write here of the limits to power. And I do so thinking of Xi’s predecessors in supreme power in China who have held that authority, or at least that title since Mao, and leading up to his assent to the top. It is probably not as much that they did not want to challenge Mao’s memory, let alone supplant him, as it is that they could not do so with any real possibility of success. They could not try to do so without facing what to them would be unacceptable risk. Ultimately, can Xi crawl out from under the dead but still crushingly limiting hand of Mao and his still so very active legacy? Can China succeed at this as a nation? Others, as I have discussed in postings and in series of them in this blog, have more cosmetically chipped at the edges of Maoism and his legacy, but have never been able to effect anything in the way of fundamental change to it, as Xi seems intent on doing.

I have focused essentially entirely on the environment here, and on how China’s environmental challenges serve as a window into Xi Jinping’s world and the real limitations that he faces in reshaping it. I will turn back in my next installment to more directly address economic factors again such as industrial production and trade balance issues. And I might finally reach a point there, where I would at least begin discussing a complex of issues that I have been thinking about a lot recently: how China’s leadership has and has not sought to employ quantitative easing approaches to help rebalance their economy.

Meanwhile, you can find this entire series and all of its postings at Macroeconomics and Business as postings 154 and loosely following for Parts 1-12 and for a supplemental posting: Part 12.5. And see Page 2 to that directory for subsequent main sequence and supplemental installments to this. You can also find other, China-related postings and series at those directory pages, and at Ubiquitous Computing and Communications – everywhere all the time too. (Note: I wrote this posting for uploading to the server on November 25, 2015.)

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