US-China Watch

With the world in flux as never before, macroeconomic insight and analysis is always at risk of chasing a moving target. That is especially the case when it comes to the US-China conflict, driven by the oft unpredictable crosscurrents between the world’s two largest economies and their ambitious geostrategic aspirations. Through the combination of blogging and tracking the rapidly shifting news flow, the weekly updates below will attempt to keep you abreast of the latest developments on the US-China watch.

Remembering Jiang Zemin

The passing of China’s third-generation leader, as Jiang Zemin’s presidency (1993 to 2003)  is categorized in modern Chinese history, underscores the important contrast between then and now.  He was Deng Xiaoping’s (China’s second-generation leader) hand-picked successor, and, as such, played an important transitional role for modern China. I would highlight three important developments during Jiang’s leadership that stand in sharp contrast with those in the fifth-generation tenure of Xi Jinping:

Reforms. In the second of his two terms in office (1998-2003) Jiang empowered his premier, Zhu Rongji, to implement a massive wave of state-owned enterprise reforms.  That was powerful impetus to productivity and efficiency which underpinned the hypergrowth of the Chinese economy that averaged 9.8% during his ten-year leadership.  Xi Jinping’s “Third Plenum Reforms” of 2013 were ambitious on paper but the implementation was disappointing, as was the lack of autonomy of his premier, Li Keqiang.   Under Xi’s first ten years as leader, Chinese real GDP growth averaged 6.2%, nearly 40% slower than the pace under Jiang Zemin.

Globalization.   Jiang Zemin cemented China’s commitment to the broader world economy with his push for WTO accession, which after more than a decade of negotiations finally bore fruit in late 2001.  The US quickly became China’s largest trading partner, providing a powerful boost to the export-led growth model of Jiang Zemin and underscoring China’s role as the leading beneficiary of globalization. Under Xi Jinping, this phase of the Jiang Zemin movie has run in reverse. While Xi has spoken forcefully in Davos of China’s leadership role in globalization, his actions say otherwise.  The mounting conflict with the United States over the past five years — trade war, tech war, and early skirmishes of a new cold war — frames Xi’s legacy as a muscular, conflict-prone leader who favors more of a decoupling from the US.

Style. Jiang Zemin was outgoing, multi-lingual, and curious.  He loved music and enjoyed singing in public; his rendition of Elvis Presley’s “Love Me Tender” was especially memorable.  He provided China with a likable face at a time when it was struggling to make a mark on the global stage. Jiang’s approach, consistent with what Deng Xiaoping dubbed “hide and bide,” was aimed to dispel deep concerns over China that had arisen in the West in the years immediately after the tragic events at Tiananmen Square in 1989. Xi Jinping is obviously cut from a very different cloth on all of the above.  Demonstrations are back — although today’s “zero Covid” protests are very different from the political awakening of the democracy movement in 1989. But especially disconcerting by comparison with Jiang, is China’s new unlimited partnership with the Russian Federation, signed with Vladimir Putin just three weeks before he launched a horrific war with Ukraine.  By aligning China with the world’s most dangerous pariah state, Xi’s geostrategic muscularity is the opposite of hide and bide.

I met Jiang Zemin a couple of times in my travels to China.  One exchange stands out from a visit in February 2000. He was always enthralled with financial markets. He asked me about America’s NASDAQ market which was surging toward a record high at the time. He said, “I would love to have a NASDAQ in China.” When the dotcom bubble burst a month later, I wanted to call him back and talk about market risk.  Alas, that never happened.

You can follow me on Twitter @SRoach_econ

Dark Clouds Over Black Friday

Long the biggest shopping day of the year, Black Friday is not what it used to be. In the brave new world of e-commerce, it now seems like every day is Black Friday. There is no formal kick-off to the holiday shopping season. But dark clouds are all too evident on...

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The Bali Disconnect

The world breathed a collective sigh of relief at the front-page  photos of Joe Biden and Xi Jinping smiling while shaking hands in Bali on November 14. The steady drumbeat of US-China conflict escalation over the past five years had taken a decided turn for the worse...

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Biden and Xi in Bali

Finally.  After nearly two years of Covid-induced zoom meetings and phone conversations, the fog is about to lift in Bali, with a face-to-face meeting the coming Monday (November 14) between Presidents Biden and Xi on the sidelines of the upcoming G-20 meeting. While...

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Security Without Growth?

Since the days of Deng Xiaoping, the concept of a “rising China” has been central to the nation’s identity. The 20th Party Congress marked an important inflection point in that narrative: Xi Jinping’s third term now appears to be more about national security than...

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20th Party Congress: Post-Mortem

While the dust has barely started to settle on China’s now competed 20th Party Congress, a few tentative conclusions can be reached: National security was the key take-away. This came through loud and clear in Xi Jinping’s opening oration as well as in the communiqué...

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20th Party Congress: Itching for Conflict

Halfway through China’s 20th Party Congress and the news has been fairly predictable.   Xi Jinping’s opening speech on October 16 was long on self-promotion and ideology, but actually about one hour shorter in terms of delivery time when compared with his grand...

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20th Party Congress: Surprises?

The attention given to China’s upcoming Party Congress far exceeds that preceding any other event in the modern (post-Mao) history of the CCP. The focus has spanned the gamut — from leadership and ideological doctrine to the internal policy debate and China’s...

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20th Party Congress: The Next Chinese Premier

Last week, I provided a general overview of the upcoming 20th Party Congress, always China’s most widely watched political event.  I stressed that in this case, the focus will be less on ideology and policy (unlike the 19th Party Congress in 2017, which saw the...

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20th Party Congress: Overview

Every five years the Chinese Communist Party (CCP) convenes a congress of approximately 2300 senior Party members in the Great Hall of the People on Tiananmen Square in Beijing to lay out China’s political agenda for the years ahead.  This year’s 20th Party Congress...

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Fed Risks and China

It is tempting to give America’s Federal Reserve great credit for its recent about-face in tackling inflation.  Three consecutive rate hikes of 75 bps in the federal funds rate (FFR) represent the sharpest increase in the benchmark policy rate over a four-month time...

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