China’s attempted poultry CPR & the nature of power
Froth and Substance in Shanghai and Wall Street
Settled in for a longish read? Make yourself a fancy coffee, sit down, and examine the froth carefully.
See Through News doesn’t usually follow the daily stock market volatility, preferring to, ahem, see through the froth and examine the substance below.
But a recent intervention by China’s Securities Journal to reassure Chinese domestic stock traders is more than froth, and exposes a great deal of substance about Power.
Some is specific to China, but much of it exposes broad vistas onto the substantial matter of the nexus where Government, Business and Media meet for a common goal
All this beard-stroking was sparked by a short Reuters article. Here’s an extract:
In a front page commentary on Wednesday, the state-owned Securities Times said that systemic risks “do not exist in the A-share market overall.”
“The macroeconomy is still in a steady rebound stage, and short-term fluctuations do not change the long-term positive outlook for A-shares,” the commentary said.
“The recent market decline to some extent reflects misinterpretation of policies and a venting of emotion. Economic fundamentals have not changed and the market will stabilise at any moment.”
Other major securities dailies echoed the commentary in market reports.
So what’s all this about, and why should you care? Unless you hold shares in Chinese companies priced in renminbi, you have no reason to even be aware of the stock market conniptions that prompted the Securities Journal commentary.
The ‘short-term fluctuations’ it refers to are a recent dip -a plunge, a plummet, even – in China’s REM-denominated domestic stock market.
Even this background might leave you wondering about the reasons for the Securities Journal’s cryptic reassurance.
What do they mean by a venting of emotion at a misinterpretation of policies? Why the odd denial that any systemic risks… exist in the A-share market? What the hell is an A-share market, anyway?
A Different Kind of Contagion
The answer to the last question marks the first step on this article’s journey. We start with ordinary Chinese investors taking a punt on the stock market, and end at the extreme apex of China’s power structure, taking in en route all governments, big business and mainstream media. Strap in.
Without wading too deep into the weeds of China’s different share categories, A-shares are local currency shares listed on domestic stock exchanges. Chinese companies have a variety of other flavours of shares denominated in foreign currencies (US$, HK$, SG$ etc.) on domestic and foreign markets.
So the A-shares are the ones owned principally by Chinese citizens. They’re the major source of money flow from private pockets to Chinese business. What’s spooked China’s millions of investors so much? The A-share market’s recent dive was triggered by similar falls in the value of Chinese companies listed overseas.
And this loss of confidence was brought about by Beijing’s recent stock market interventions to rein in the likes of Alibaba (China’s phenomenally successful Amazon knock-off) and Didi (China’s phenomenally successful Uber knock-off).
In Beijing’s estimation, these companies had grown too big for their boots, had forgotten who’s really in charge, and needed reminding. So they put Alibaba’s boss under house arrest, and sabotaged Didi’s much-anticipated Initial Public Offering in the US..
Xi’s strong-arm crushing of former Wall Street and Silicon Valley darling Jack Ma, Alibaba’s charismatic founder, leaves this once-ebullient character either in self-imposed purdah, or effective house arrest. And his November 2020 US$35 billion IPO of Alibaba’s financial arm Ant Group, in tatters.
There was much speculation about Xi’s reasons for the take-down, and many investors put it down to a one-off personality clash between Ma and Xi.
This optimism was shattered in June, when Didi Global’s highly lucrative $US4.4 Billion New York IPO, was torpedoed within two days, when Beijing announced a sudden, and previously unflagged, suspicion that the company had violated data privacy and national security, of all things. Within hours, 25% had been knocked off the company’s valuation.
This second financial coshing convinced even the optimists that this was a trend, not a blip, and you now know the rest.
Xi’s slap-down, however necessary it may have been for reasons of social stability, national harmony or any other of the Politburo’s euphemisms for Raw Power, didn’t go down so well on Wall Street. This is to be expected, as Beijing’s diktat is obviously weaker there, but Xi is now finding that even in his own domain, investors are not to easy to order about, when they swallow the losses.
From Wall Street’s perspective, this intervention made a mockery of all their prudent due diligence. The mountains of meticulous financial analysis, the sector-based Profit/Earnings comparisons etc. were all vaporised by a bolt from the blue hurled from Zhongnanhai, the seat of Chinese power by the Forbidden City.
There’s little more contagious than Fear, and the cold that Wall Street had caught was now threatening to turn into full-blown flu among China’s domestic investors.
It turns out that the SARS-Cov-2 virus is rather easier to stop at the border than Fear, or as the commentary puts it, ‘venting of emotion’.
So the Securities Journal article was Beijing’s attempt to stuff the cat back in the bag.
The Fortune articles linked to above typify most Western financial market coverage, which oscillates, in time-honoured fashion, between knee-trembling at the overweening power of the Chinese state, and lip-licking about possible bargains. Classic Fear and Greed.
Those without eggs in the Chinese company shares basket have taken full advantage of the chance to bathe in a warm bath of schadenfreude.
Fun though beware-what-you-wish-for finger-wagging may be, it’s the privilege of the outsider. It’s quite a different matter to anyone whose business, investments, livelihood or life savings, are hostage to Beijing’s whims.
Reuters and other doyens of the financial press routinely prefix publications like The Securities Journal with ‘state-owned’. It’s almost redundant – as this story has made clear, everything in China is effectively ‘state-owned’, at least in the internet troll sense of ‘owned’.
Even if Beijing doesn’t technically own all the shares, it can shut you down overnight. Just ask the crypto-miners now packing up their servers to plug in, and resume mining, somewhere more welcoming, now that Xi has decided that if cryptocurrency is going to be permitted in China, it will be state-owned.
A Literary Challenge for The Securities Journal
Now you know the background, imagine you’re one of the Securities Journal editorial staff given the tricky task of rowing back on a Beijing edict. This is a poisoned chalice, a damage-limitation task that carries no obvious upside, but significant career and personal risk if you get it wrong, or events run out of control.
Before composing their commentary, we must assume the Journal summoned their top feline-into-cloth-receptacle-reinsertion specialists, and their oil-on-troubled-water gurus.
Their challenge – to reassure investors that this was a limited and targeted crackdown, but without implicitly criticising the crackdown itself.
This required the agility of a State Circus tightrope walker. While Xi’s crackdown on Alibaba and Didi was prudent, they tiptoed, it wasn’t aimed at ‘good’ investors like all of us, so there’s no need to be spooked. Feel free to carry on investing loads more money in Chinese businesses. Don’t fall for any misinterpretation of policies and whatever you do, avoid any venting of emotion.
Investors will have got the message – ignore the proof that Beijing could shut down any company you invest in overnight, at any point in the future, for reasons you can only guess at. Nothing to see here. Keep consuming and good night.
A tricky writing challenge, then. The Securities Journal eventually went with a quotation from a Mao Zedong poem, 七律·和柳亚子先生 (Reply to Mr. Liu Ya-Tzu).
风物长宜放眼量 – Range far your eye over long vistas
We’ll leave it to the tea-leaf readers of Zhongnanhai (China’s Kremlin) to determine whether this literary flourish should be interpreted as lickspittle toadying to one of the founders of the Chinese Communist Party 100 years ago, or a subtly subversive warning to Xi Jinping on the dangers of imperial overreach. For the writers’ sakes, we hope it’s the former.
But it does recall that other oft-quoted adage wheeled out by financial journalists at times like these:
杀鸡儆猴 – Kill a chicken to scare the monkey
This proverb derives from a folk tale about a street entertainer whose performing monkey has started to become recalcitrant. His solution – slaughter a chicken before its eyes, in order to, well, urge his colleague to reconsider his priorities, and focus on the job.
This phrase was employed as early as three millennia ago, when an advisor to a Zhou dynasty king resolved a problem in similar fashion. An eminent scholar declined his offer of work, so he killed him. This might not reflect modern management practice, but his reasoning was that while his solution may have rendered this particular scholar’s services inaccessible, other scholars might not decline his next invitation quite so airily. Chickens and Monkeys.
Europeans have their own, more recent, version of this concept. In Candide, published in 1759, Voltaire references the British Navy’s decision three years earlier, when after concluding that the unfortunate Admiral Byng had failed to defend Minorca from French assault with sufficient enthusiasm, they court-martialed and executed him.
Dans ce pays-ci, il est bon de tuer de temps en temps un amiral pour encourager les autres – In this country, it is thought wise to kill an admiral from time to time to encourage the others.
Xi Jinping and his Politburo are regular chicken-killers. Whenever they want to keep China’s Internet Service Providers on their toes, for example, they suddenly, and apparently arbitrarily, crack down on one for being too lax in its policing of, say, unflattering images of their leader as Winnie the Pooh, or other coded expressions of dissent.
This is usually highly effective. One chicken dies, but millions of monkeys recalibrate, and distance themselves a bit further than they previously thought necessary from the imaginary, ever-shifting, deliberately fuzzy grey line that separates Getting on with Business, from Going Too Far.
Encouraging pre-emptive self-censorship is way more efficient than passing clearly-worded laws.
The Three-Headed Beast Impeding Carbon Drawdown
But why have a few words of poetry quoted in a Chinese state-run financial newspaper set See Through News off on such a protracted literary ramble? What does any of this have to do with our Goal of Speeding Up Carbon Drawdown By Turning Inactivists Into Activists?
Well, it’s all about the nature of power.
We’ve written elsewhere about the Three Headed Money Beast, the slavering maws of Government, Business and Media joined below the neck by Power, and below the belly to other Beasts. They all wallow in the Money Mire, that keeps their bellies full and their fangs sharp.These Three-Headed Beasts are what stand between us and carbon drawdown, and are the reason why we’re drowning, burning and shrivelling.
Our mission is to bypass, placate, or convert this Cerebrus of Climate Denial, to save human civilisation (no need to Save The Planet, the planet will be just fine). The longer we permit these Beasts to stand between us, and reducing atmospheric carbon, the worse our chances are of averting civilisational collapse.
China is one of the two super-Beasts wallowing in the Money Mire. Its Three Heads are working together just fine, but so are those of the other conjoined Beasts.
Ignore the Media head’s distractions – stop looking up at briefly orbiting billionaires and start looking down at Heat Domes, German floods, melting ice sheets, wobbly jet streams and Australian droughts.
Don’t be fooled by the Business Head’s greenwashing.
And keep focused on the Government Head’s current actions, not its future promises.
Democracies or Autocracies – They’re All the Same Beast.
The Security Journal commentary that launched our journey is a perfect illustration of how similar the Beast is around the world; all nations, big or small, democratic or autocratic, East or West, are ruled by the same three heads of Government, Business and Media.
Their apparent diversity is actually one of the Beasts’ most powerful features. Speeding Up Carbon Drawdown would be way easier if they all coalesced, Terminator II style, into a single Beast. The obstacle would be much clearer for us all to see.
But by subdividing our species into 200-odd national tribes, each with its own Beast, we’ve created a global-scale conjuring trick distraction. Getting us to focus on the differences between our Beasts is a highly effective, hidden-in-plain-sight, distraction, It conceals the fact that these national Beasts are in fact a colony of sub-Beasts, connected by just the kind of International Money circulation that so concerned the Securities Journal.
The Last Refuge of The Beast
This may explain why, in the absence of any ideological differences, all that’s left to distract us is the flags, and medal-kissing of patriotism/nationalism/jingoism.
Our loyalty to our sub-tribe, prioritised ahead of any affiliation to our species, is never more clearly on display than during the Olympics. Few things corrode homo sapiens’ solidarity as effectively as the elevated heart-rate and welling tears induced by podium ceremonies, national anthems, flag-shawls, and medal tables.
In China, the links between the three Heads of the Beast are much more transparent – neatly summed up in that prefix ‘state-owned’. Xi’s predecessor as President President Hu Jintao, described China’s media more intimately than as mere ‘mouthpieces’ – he re-stated their traditional role as ‘the Party’s mouth and tongue’. Under Xi, the mouth has got bigger, and the tongue has wagged louder.
In Western democracies, these connections are less obvious, but no less powerful. Elections, parliaments, coalitions, debates etc.are another feat of act of conjuring prestidigitation, while the actual acts of money-making – and carbon-generation – take place off-camera, behind closed doors, in smoked-filled rooms, under the table.
It’s a more subtle act than China’s. Democracies don’t routinely add the prefix ‘right-wing billionaire-owned’ to our newspaper titles, or label state intervention in stock markets as asserting establishment power, or ‘making clear who’s really in charge’. We use phrases like ‘too big to fail’, or ‘government bailouts’.
Yet in democracies and autocracies alike, nominally at least, the Government Head regulates the Business and Media Heads. So wherever we may be, that’s where Carbon Drawdown Activists should, in theory, concentrate pressure.
But Realpolitik, and what goes on below their necks, means we need to address the whole Beast.
This point, that the basic power dynamic operates in democracies, as well as autocracies, is critical. Just because some Governments don’t have elections, doesn’t make them any less sensitive to Activism. In Britain, the pyramid of government, from Westminster to parish councils, covers everything. Likewise, in China, it’s the CCP, from Zhongnanhai, to local party secretary.
It’s important too to recognise activism for what it is. It’s not just an occasional stiff letter to your MP, or wearing a rosette and stuffing leaflets in letterboxes every couple of years. It can be participating in online community groups to discuss floods, fire and drought where you live, asking the authorities what they’re doing to protect their citizens, and using whatever means or language is appropriate to urge your nominal representatives to do their jobs and represent you.
This may not be obvious, but in some ways autocracies are actually more exquisitely sensitive to the Will of the People than democracies, simply because for those in power, the stakes are way higher, and the risk of failure more drastic.
Take Britain or America. We’re all too familiar with how things work in our system. David Cameron gambles on Brexit, misreads the Will of the People and gets it wrong. He ends up in a bijou shepherd’s hut in the massive garden of one of his country estates, earning a small fortune for his memoirs, and texting his old chums to earn much bigger fortunes via taxpayer bailouts for his new chum Lex Greenshill.
Donald Trump gambles on Covid, misreads the Will of the People, and gets it wrong. He ends up in Mar-el-Largo being wooed by power-brokers and billionaires.
There are worse outcomes.
Trump and Cameron might sometimes envy the unimpeded power wielded by autocracies like Russia and China, but the absence of the pressure valve provided by elections and referendums raises the stakes for Putin and Xi Jinping, and their close circle, considerably.
If Xi Jinping gambles, misreads the Will of the People and gets it wrong, he could end up dangling from a lamppost in Tiananmen Square. The examples of Ceaucescu, Gadaffi and Saddam are what keep autocrats like Xi, Putin and Bolsonaro awake at night.
This sensitivity to public opinion is the less discussed flip-side to China’s notorious state surveillance apparatus. China’s Orwellian apparatus detects and snuffs out dissent before it can even express itself, and imprisons and executes its citizens for Thoughtcrime. We’re all too familiar with that aspect – not that Beijing seems unduly bothered by the post-Trump West’s protestations.
But all China’s online snoops and snitches, human and virtual, paid and voluntary, all those CCTV cameras with face-recognition AI etc.t, also feed information upstream. They may not publish opinion polls in China, but the leaders have their ‘neibu’, top-secret, Poltitburo-eyes-only daily reports.
The audience may be small, but it’s highly attentive. Their surveillance network isn’t just an agent of downward repression, it also serves as a cutting-edge, real-time town hall, a hi-tech finger on the pulse of the nation, feeding critical data upstream.
Whenever this network detects a quickening of the pulse rate, China’s leaders must ask themselves whether this is a Jack Ma scenario, requiring a visit to the chicken coop, or a Henan floods situation, requiring urgent, unconditional support to demonstrate their virtue as protectors of The People.
You’ll never hear any Politburo member admit any fault in their decision to make an example of Alibaba and Didi, any more than you’ll get a mea culpa out of Trump or Cameron.
But who knows what those muscled, discreet security guards protecting the top leadership may witness, behind their dark glasses.
Within the high walls of Zhongnanhai, once home to Emperors, then to Mao Zedong, and now to Xi’s inner circle, they stand silent guard.
Maybe they can see Xi Jinping starting to sweat a bit as he hums the Bee Gees ‘Staying Alive’ under his breath, in his increasingly desperate attempts to pump life back into a slaughtered chicken.