From the 1990s, in real estate, in local government management, in business borrowing everyone was just doing what they were told or expected to do. Excessive borrowing is bad, but everybody else was doing it and how do you survive if you drive slower than everybody else? Circa 2008
I remember some of my Hangzhou and Zhejiang government s…
From the 1990s, in real estate, in local government management, in business borrowing everyone was just doing what they were told or expected to do. Excessive borrowing is bad, but everybody else was doing it and how do you survive if you drive slower than everybody else? Circa 2008
I remember some of my Hangzhou and Zhejiang government students telling me “…the more risk, the more profit.” I had done a fair amount of real estate development around Chicago,
and I told them no sane developer thinks that way. But I was not operating in the Chinese
environment. Risk was … well, a foreign concept.
I am reminded of the movie Absence of Malice With Sally Field and Paul Newman. Through a series of planted innuendos and false newspaper leads, Newman’s business and reputation are ruined, a friend commits suicide, and an otherwise decent district attorney is forced to resign. In the hearing to discover what happened, Newman comments that there is no one to blame – “everybody was just doing their job.”
We saw that in the US many times, most recently prior to 2008. And there was always the melding of overambition, lack of experience, fraud, ignoring regulations, ignoring enforcement
of regulations, and overweening pride – what we used to call hubris. Perhaps it is a bit too much to call this all the banality of evil, but there it was. No individual act was itself going to bring the
system down, but collectively … a different story.
Systems in the US could be just as dysfunctional as any in China. That in fact is one of the lessons Xi et.al. learned from the American financial crisis. I wonder if the hubris really began about that time. Even for some of my government students, the US was thought to be a shining city on a hill. Then, less so. Mixing metaphors like crazy, once it was discovered the emperor had no clothes, the ancient Chinese superiority was given room to grow. The Chinese learned to pay no attention to that man behind the curtain.
Power corrupts, and Xi’s power seems to be pretty absolute. China went into the Xi era with some big problems but also the confidence to solve problems foreign and domestic. CCP went from victory to victory from … well, if not 1978 then 1989 on. The 1998 Asian crisis? Not a problem. The 1990s Chinese bank and fiscal relations crises - managed. The 2008 financial crisis- not in China. Stimulus worked. Farmer rebellions over land theft? Sufficiently managed. The 2015 stock market crisis – sufficiently massaged. Corruption? Sort of managed. Hong Kong? Some troubles, but finally pacified. Sanctions and tariffs? Trade uber alles.
Tianxia was moving in the Chinese direction. Maybe Mr. Xi began to believe his own press releases, or there was just no stopping the momentum – until he made the series of own goals that made the demographic and debt and environmental problems all the worse. There were – there are – more thoughtful ways to handle the debt and real estate and fiscal relations and employment problems, but these all involve changing the system, per Pettis. Mr. Xi et.al. are dancing as fast as they can, and perhaps they will pull off another slim victory. CCP is nothing if not flexible and resilient. I think one will want to see this next ten years as personal failings that compounded systemic problems. Xi was the right man in the right place at the right time ... until he wasn't.
From the 1990s, in real estate, in local government management, in business borrowing everyone was just doing what they were told or expected to do. Excessive borrowing is bad, but everybody else was doing it and how do you survive if you drive slower than everybody else? Circa 2008
I remember some of my Hangzhou and Zhejiang government students telling me “…the more risk, the more profit.” I had done a fair amount of real estate development around Chicago,
and I told them no sane developer thinks that way. But I was not operating in the Chinese
environment. Risk was … well, a foreign concept.
I am reminded of the movie Absence of Malice With Sally Field and Paul Newman. Through a series of planted innuendos and false newspaper leads, Newman’s business and reputation are ruined, a friend commits suicide, and an otherwise decent district attorney is forced to resign. In the hearing to discover what happened, Newman comments that there is no one to blame – “everybody was just doing their job.”
We saw that in the US many times, most recently prior to 2008. And there was always the melding of overambition, lack of experience, fraud, ignoring regulations, ignoring enforcement
of regulations, and overweening pride – what we used to call hubris. Perhaps it is a bit too much to call this all the banality of evil, but there it was. No individual act was itself going to bring the
system down, but collectively … a different story.
Systems in the US could be just as dysfunctional as any in China. That in fact is one of the lessons Xi et.al. learned from the American financial crisis. I wonder if the hubris really began about that time. Even for some of my government students, the US was thought to be a shining city on a hill. Then, less so. Mixing metaphors like crazy, once it was discovered the emperor had no clothes, the ancient Chinese superiority was given room to grow. The Chinese learned to pay no attention to that man behind the curtain.
Power corrupts, and Xi’s power seems to be pretty absolute. China went into the Xi era with some big problems but also the confidence to solve problems foreign and domestic. CCP went from victory to victory from … well, if not 1978 then 1989 on. The 1998 Asian crisis? Not a problem. The 1990s Chinese bank and fiscal relations crises - managed. The 2008 financial crisis- not in China. Stimulus worked. Farmer rebellions over land theft? Sufficiently managed. The 2015 stock market crisis – sufficiently massaged. Corruption? Sort of managed. Hong Kong? Some troubles, but finally pacified. Sanctions and tariffs? Trade uber alles.
Tianxia was moving in the Chinese direction. Maybe Mr. Xi began to believe his own press releases, or there was just no stopping the momentum – until he made the series of own goals that made the demographic and debt and environmental problems all the worse. There were – there are – more thoughtful ways to handle the debt and real estate and fiscal relations and employment problems, but these all involve changing the system, per Pettis. Mr. Xi et.al. are dancing as fast as they can, and perhaps they will pull off another slim victory. CCP is nothing if not flexible and resilient. I think one will want to see this next ten years as personal failings that compounded systemic problems. Xi was the right man in the right place at the right time ... until he wasn't.