Chinese Congress: knifes out

Posted: September 2, 2017 in Uncategorized

The 19th Chinese Communist Party will be held on October 18th and it is all important for China and Australia.

In my newsletter we explained in depth how Australia is joint at the hip to China – so what happened in China is very important for Australia – specially as in 2017 Australia avoided  a recession due to China.

This is a special Congress as it is a re election Congress and the first of President Xi reign.

The first 5 years of President Xi have been dominated by  an authoritarian style not too dissimilar to Chairman Mao and the rising of a nationalistic and imperialist China – challenging the current superpower, US.

It has seen a meteoric rise, but also some serious challenges as China continued to use a credit – fuelled model to growth that cannot be sustained for long. Debt to GDP in China is over 300%  and any new investment as seriously decreased return. It is not as grave as other nation as most of the debt is internal – but still not a model that can survive forever.

Another important signature drive of President Xi is his anti-corruption drive. While it has been in some field ruthless and successful, some outspoken persons dare to think differently.

Namely Chinese tycoon Guo accused the anti-corruption czar Wang (and second in command) of running a mega corruption ring and practically just substituting old corruption with new corruption  (yes, Guo had to flee the country).

Every time the second in command fell in China, repercussions have been felt everywhere (1966 Mao purged Liu Shaqoi  and then we had the Cultural Revolution – 1989 Deng Xiaoping turned on Ziyang – Tiennamed happened).

So what happens to Wang it will be important to see (no one knows the real relationship Xi- Wang) is very important.

Interestingly something big is happening as even the most tame forms of liberalism have been crushed (reducing number of migrants country to city,  shutting down international cultural exchanges and even mildly liberal bookshops). Something is happening for sure.

If President Xi wins, as it seems likely, next year he will have seriously to crack down on the Chinese credit bubble. And a Chinese serious crackdown on Chinese credit will influence Australian Dollar, Australian iron ore, Australian real estate. So Australia could have to walk with its own legs, but can she?

 

 

 

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