It is with that knowledge that I have approached the Chinese economy, especially the stock markets. As the government continues to loosen its grip on previously state-owned shares, investors in Shanghai, Shenzhen, and all around Asia and the world have reacted as if the home team were about to seal a victory and gleeful chaos would ensue.
But this is tournament time for college basketball here in the States, and predicting a win too early can lead to smashed hopes and basements full of t-shirts commemorating championships that never were.
In Greenspan-ese, this is "irrational exuberance." In China, it’s another pang in the birth of a market that may yet be stillborn despite plenty of midwivery from international institutional investors and salivating stock advisors waiting for the right time to sling shares in the Middle Kingdom.
So whose advice is everyone acting on? The Chinese government’s? I wouldn’t trust Hu Jintao’s guiding finger any more than I would trust the kid down the street who may or may not know what restaurant I’m talking about.
Nevertheless, the majority of the "actionable intelligence" (thanks to Condoleezza Rice for that one) that otherwise savvy business-folk depend on for their Chinese scoop comes from the tiger’s mouth – that of the government.
And the governments of China and other historically communist countries tend towards bombastic pronouncements of policy, known as Five Year Plans. Here is the new one, to be absorbed with a grain of salt (and maybe MSG).
The Five Year Plan for 2006-2011 reflects both Hu and Premier Wen Jiabao, and their agrarian backgrounds that find favor among China’s 745 million rural denizens making between 1 and 2 dollars a day.
In publications like People’s Daily, the common but noble nature of Wen is extolled. The main point of the public’s admiration is his 10-year-old coat. During this January’s Lunar New Year festival, a website in rural Shandong Province popped up with a discussion thread titled,
"Premier came to the Shandong countryside again after 10 years, in the same winter coat!"
This elicited responses like, "What lies behind Premier Wen’s close relationship with his people is his love for the people. It is a kind of individual emotion and affinity," and, "a salute to Premier Wen. He is just like my next door neighbor: a good and frugal neighbor."
Ecstatic praise of Chinese leaders is nothing new, but these comments would not be possible under the leadership of Jiang Zemin or Deng Xiaoping, who came from urban areas and elevated industrial production in the cities to the point that we see urbanization today.
Where’s the Wealth?
In contrast to the overcrowding and general prosperity in Beijing and even provincial capitals farther afield, rural workers’ rights are almost nonexistent, in limbo between true ownership and collectivized subsistence.
The Five Year Plan’s new economic project promises more policy moves to address the disparity between rural peasants and urban bourgeoisie. For the power of the peasantry is what made China communist in Mao’s era, and their rage could undo the project just as easily.
The Plan introduces new taxes on heavily-consuming vehicles while lowering taxes on small, efficient transportation. This is an effort to boost public action to lower national reliance on imported oil products, even as national oil company officials traverse the globe and wheel and deal with neighbors who are well-endowed with black gold and natural gas.
There is also a new tax on chopsticks, a massive amount of which are used each year at the cost of 70 million cubic feet of forest. Other wooden products like floor panels and furniture will also be levied against.
On the highest end of the tax scale will be the luxury items of the new China – the things people flock to cities to afford – like Rolexes and yachts. Golf clubs and balls will be taxed by 10 percent to discourage the growth of the sport and its voracious land appetite. Nevertheless, I am sure part-Chinese Tiger Woods will still pop up on CCTV quite often.
In my opinion, the most important part of the Plan is not what it discourages but what it encourages: efficient – not conspicuous – consumption, wise use of land and provision of more access to the socialist system’s basic health care opportunities for rural workers, and the opening of more and more high-tech plants to ensure China’s steady rise as the world’s leading exporter of IT products (this stands in stark contrast to China’s "world’s workbench" title that led to blackened skies and abominable factory conditions).
The recipe for China’s wealth stir fry is not yet finalized. The wok has actually not been agitated for quite some time, and the rising heat threatens the end product in a way that is not lost on the Beijing and local Party chiefs. To rearrange some resources at this point may well be exactly what is needed for China to keep cooking.
– Sam Hopkins
