Xi’s governance model
Lynette Ong in this commentary points out some interesting facts about the way the Chinese Communist Party (CCP) and Xi have governed China so far:
- Since the student demonstrations in 1989, the CCP has invested tremendously in designing a stability maintenance system (weiwen tizhi) in order to preempt social discontent on a nationwide scale. The annual expenditures on stability maintenance, which range from hiring temporary “security guards” to more high-tech control measures, far exceed national defense spending.
- Since the beginning of COVID tasks of temperature tracking, monitoring people’s movements, and ordering and delivering food supplies have fallen on the shoulders of state-mobilized volunteers.
- The prolonged lockdown tested the community’s patience to extreme limits and implementers of party policy and state-mobilized volunteers had to increasingly deploy unreasonable and extreme measures to extract compliance from citizens.
Xi’s intransigent belief in zero-COVID has not only irked the citizenry; it has also eroded trust in the system that the CCP has so painstakingly built. It defies common sense, but dictators often do things that make no sense—in part because nobody is willing to tell them what they’re doing wrong. As Xi’s third term proceeds, we should expect more policy measures that defy common sense and at the increasing expense of social stability—the very objective that Xi’s regime has prioritized.
China’s Massive Protests Are the End of a Once-Trusted Governance Model
By: Lynette H. Ong – University of Toronto
What happens in China, doesn’t stay in China
In this paper Barcelona et al. examine whether China constitutes an important driver of the global financial cycle. Towards this goal they:
- Employ a dynamic factor model (DFM) to estimate an alternative real GDP growth series for China. They use a large panel of indicators that are informative about the Chinese business cycle: these include key economic indicators, such as industrial production and retail sales, and also data on auto sales, property market sales, and series reflecting high-tech goods demand including semiconductor production and mobile phone production.
- They construct a measure of China’s credit impulse using different types of credit influenced by the Chinese authorities including bank loans, shadow credit, and local government bonds. The authors then use exogenous shocks to this impulse in an empirical model that accounts for the influence of global economic and financial developments on China, to evaluate the effects of Chinese policy-induced credit shocks on its economy and the transmission to the rest of the world. They find:
China does not have a big presence in global financial markets. Yet, our results suggest that spillovers from China reverberate through the global financial system predominantly through sentiment effects. Expansionary credit policies in China lead to an increase in Chinese consumption, which raises global growth. Higher global growth prospects lead to an increase in global risk sentiment and an expansion in global asset prices and global credit.
What Happens in China Does Not Stay in China
Authors: William L. Barcelona, Danilo Cascaldi-Garcia, Jasper J. Hoek, Eva Van Leemput
From: Federal Reserve Board
