China Macro Reporter
1. ‘U.S.-China Positions Have Hardened’

<tr><td class="embed-responsive embed-responsive-16by9"><iframe class="embed-responsive-item" src=""></iframe></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">‘We need a president who basically stands up and says, “China's not perfect. We know China's not perfect, but it's important that we adopt policies that are nuanced, that enable the reformers in China to be able to enact reform within China.”’</p><p><strong>Steve Orlins</strong><strong></strong>is president of the National Committee on U.S.-China Relations.</p><ul><li><strong>Prior to that,</strong> he was the managing director of Carlyle Asia, among other earlier investment roles.</li><li><strong>As an attorney, </strong>before entering private practice, he was a State Department lawyer and a member of the legal team that helped establish diplomatic relations with the PRC.</li><li><strong>With many decades </strong>of Asia experience, especially with Taiwan and China, at the highest levels, Steve is an influential voice in U.S. policy.</li></ul><p>Steve recently gave his views on several issues in a <a href="" target="_blank">video interview on Bloomberg.</a></p><h5>‘U.S.-China Positions Have Hardened’</h5><p><span class="h5p" style="color:#c80000">Q:</span><strong> ‘You've been meeting</strong> with many political leaders here in Beijing. Have positions hardened or are you more optimistic?’</p><p><strong>Steve Orlins: ‘Positions</strong> since the break off of negotiations - despite what happened in Osaka where there was an agreement between President Trump and President Xi to continue the negotiations - on both sides have hardened.’</p><ul><li><strong>‘Each side blames</strong> the other for the breakdown in negotiations.’</li><li><strong>‘Opposed to the ZTE decision</strong> when the United States government banned business with ZTE, a lot of people in China understood that - that ZTE was a bad actor - and they kind of accepted that decision.’</li><li><strong>‘The Huawei ban is</strong> a different kettle of fish - people feel that that is a statement that the United States is trying to decouple from China, is trying to impede Huawei from being a global company.’</li><li><strong>‘It’s not a State-Owned Enterprise.</strong> People here believe it's a private enterprise, and the United States actions are unfounded.’</li></ul><p><strong>‘So since then</strong> there has been a real hardening in the Chinese position.’</p><ul><li><strong>‘My meetings with officials</strong> - both higher and lower level officials - suggest that this hardening is not something that's going to ease in the next few weeks.’</li></ul><h5>‘There is a discrepancy between the data on economic growth and what I'm hearing.’ </h5><p><span class="h5p" style="color:#c80000">Q:</span><strong> ‘You've also been traveling</strong> to some half a dozen areas in China speaking with businesses, American and Chinese businesses. Are you concerned about the economic environment?’</p><p><strong>Orlins: ‘I am concerned that</strong> there is a discrepancy between the data on economic growth and what I'm hearing from these businesses.’</p><ul><li><strong>‘We see in the data</strong> a slight slowing, but what we see when I talk to these businesses is a slowing in some cases and in other cases an actual contraction.’</li></ul><p><strong>‘You don't ask</strong> is growth slower than last year? The question is: are sales actually lower than last year?’</p><ul><li><strong>‘In a lot of cases</strong> in Guangzhou, Shenzhen, Jiangsu Province, I'm seeing businesses that actually have declining sales in specific sectors.’</li><li><strong>‘In automotive,</strong> light industry, companies who depend on exports - they are not seeing slowing growth but contraction.’</li><li><strong>‘One of the things </strong> I noticed was after Spring Festival this year, some workers didn't come back to their factories because they knew there wasn't going to be enough work for them - the owners basically said, “Well, don't all come back because we're not going to be running at capacity. So don't bother.”’</li></ul><h5>The ‘China is not an enemy’ letter</h5><p><span class="h5p" style="color:#c80000">Q:</span><strong>  ‘You are one of a hundred</strong> experts - business leaders, scholars, diplomats - who signed this letter to Trump saying that treating China as an enemy is the wrong approach, and it's hurting America [<a href="" target="_blank">‘China is not an Enemy’</a>]. What's the response you've been hearing from leaders in the U.S.?’</p><p><strong>Orlins: ‘There's</strong> been a mixed response.’</p><ul><li><strong> ‘There are </strong>those who fundamentally believe we're wrong, and that we should have this policy of treating China as a potential enemy.’</li><li>‘<strong>They have written</strong> to us and appeared on media stating that we are fundamentally wrong.’</li></ul><p><strong>‘The good part</strong> of this is we're having a debate. It’s important that the United States, the people of the United States, debate what this policy should be.’</p><ul><li><strong>‘If you go back</strong> to December of 2017 the national security strategy of the United States said, “We view China as a revisionist power and a strategic competitor,” but there was no discussion of whether that was the right policy or not.’</li><li><strong>‘Now,</strong> almost two years later, a year and a half later, we're finally having that debate.’</li></ul><p><strong>‘And it's important</strong> because ultimately the American people are going to make the right decision.’</p><ul><li><strong>‘The views</strong> conveyed in that letter - don't treat China's as an enemy, work with the reformers in China to enable them to enact reforms in China - the right policy.’</li><li><strong>‘And the people</strong> of the United States are going to make the right decision.’</li></ul><h5>Impact of the 2020 Elections</h5><p><span class="h5p" style="color:#c80000">Q:</span><strong>  ‘How do you see</strong> the 2020 elections impacting the relationship, and does it substantially change if a Democrat is elected?’</p><p><strong>Orlins: ‘I think</strong> it changes somewhat, but not substantially.’</p><ul><li><strong>‘There seems</strong> to be a consensus on both sides of the aisle that we need to be tougher on China.’</li><li><strong>‘What our letter</strong> intended was to send a signal to both sides of the aisle that this policy of demonizing China is not in the interest of the American people or the American public - that it's actually damaging to Americans.’</li></ul><p><strong>‘So hopefully</strong> when we have a new administration that has folks who are not as committed to protectionism, we'll see better policies towards China.’</p><ul><li><strong>‘We'll also</strong> see an end of the demonization of China.’</li><li><strong>‘We need a president</strong> who basically stands up and says, “China's not perfect. We know China's not perfect. But it's important that we adopt policies that are nuanced, that enable the reformers in China to be able to enact reform within China.”’</li></ul></td></tr>

2. Impact of tariffs on business decisions: Richmond Fed President

<tr><td class="embed-responsive embed-responsive-16by9"><iframe class="embed-responsive-item" src=""></iframe></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">‘CEOs would like to have the rules of the game made clear.</p><p><a href="" target="_blank"><strong>Tom Barkin</strong></a> – friend, classmate, former McKinsey partner, and now president of the Richmond Fed – gave wide-ranging <a href="" target="_blank">video interview on Bloomberg</a>.</p><ul><li><strong>Here </strong>is what he had to say about the impact of tariffs on business decisions.</li></ul><p><span class="h5p" style="color:#c80000">Q:</span><strong> ‘What</strong> are CEO's telling you?’</p><p><strong>Tom Barkin:</strong><strong>‘I definitely</strong> think the CEOs would like to have the rules of the game made clear.’</p><ul><li><strong>‘If the rules include</strong> a tariff regime or a free trade regime, that's fine. If they don't, that's fine.’</li><li><strong>‘When the rules are clear,</strong> they'll adjust their supply chains accordingly.’</li><li><strong>‘They're challenged</strong> by the uncertainty.’</li><li><strong>‘They don't know</strong> how to adjust their supply chains.’</li><li><strong> ‘That’s why they're really</strong> quite interested in is just knowing what's going to happen.’</li></ul><p><span class="h5p" style="color:#c80000">Q:</span><strong> ‘I know that the Fed</strong> doesn't target the dollar, but what about companies: do they want to see, as the president suggests, a weaker dollar to become more competitive?’</p><p><strong>Barkin: ‘It totally depends</strong> on where you: folks with more international exposure have one perspective; folks with less international exposure have a different one.’</p><p><span class="h5p" style="color:#c80000">Q:</span><strong> ‘What are they telling you</strong> about how they're coping with tariffs these days?’</p><p><strong>Barkin: ‘Well, in the press</strong> there's a lot of talk about tariffs.’</p><ul><li><strong>‘In truth,</strong> there aren't that many tariffs actually in the economy as a percentage of the size of the economy.’</li></ul><p><strong>‘The folks</strong> who are in tariffed industries first of all have to decide whether it's temporary or permanent? Whether it's industry wide or just hitting them?’</p><ul><li><strong>‘If they think </strong>it is temporary, they're more likely to wait and see.’</li><li><strong>‘If they think </strong>it's going to be there for a while - as many people now think it is going to be in places like China - then there they're forcing the question of what to do with their supply chain.’</li><li><strong>‘If a tariff</strong> is industry wide, if everyone manufactures in a given country, then you often go to your customers and see if you can't raise price.’</li><li><strong>‘But if your supply chain</strong> is in China and somebody else's is a Vietnam, you know you've got to move.’</li></ul><p><span class="h5p" style="color:#c80000">Q:</span><strong> ‘Your district represents</strong> a lot of the manufacturing that moved out of the south, moved to China, went to other places. How are trade wars playing there?’</p><p><strong>Barkin: ‘You've got folks</strong> who are directly affected and folks who aren't.’</p><ul><li><strong>‘If you're not directly affected,</strong> people understand the idea of delivering fair trade packages and are willing to take a little bit of uncertainty for that end.’</li><li><strong>‘The folks who are directly affected</strong> - they react very much based on what's happening in their particular business.’</li><li><strong>‘So if it hits</strong> you directly, you're not happy, and if it helps you directly, you are happy.’</li><li><strong>‘But they all</strong> would like the uncertainty to be over.’</li></ul></td></tr><tr>

3. ‘China tariffs: We can do better’

<tr><td class="embed-responsive embed-responsive-16by9"><iframe class="embed-responsive-item" src=""></iframe></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">‘Tariffs are a mistake. They hurt American consumers. They hit Chinese companies that have done nothing wrong - along with the predatory companies.’ </p><p><a href="" target="_blank"><strong>‘AEI in 60 Seconds’</strong></a> is a great series from the American Enterprise Institute that provides bite-sized – and usually provocative – video analyses from AEI experts on a great range of topics. Highly recommended.</p><ul><li><strong>Here is AEI’s Derek Scissors</strong> on <a href="" target="_blank"><strong>‘China tariffs: We can do better | IN 60 SECONDS.’</strong></a></li><li><strong>His premise</strong> – and it’s an excellent one – if we want Chinese companies to stop stealing or coercing IP, then target those companies. Simple, elegant, and imminently sensible.</li></ul><p><strong>‘In March,</strong> I said U.S. China trade was all talk, no action.’</p><ul><li><strong>‘Now </strong>it's all yelling, no action.’</li><li><strong>‘The yelling stems</strong> from American tariffs on up to $450 billion in Chinese imports.’</li></ul><p><strong>‘Tariffs </strong>are a mistake.’</p><ul><li><strong>‘They hurt</strong> American consumers.’</li><li><strong>‘They hit</strong> Chinese companies that have done nothing wrong - <strong><em>along with the predatory companies.’ </em></strong></li></ul><p><strong>‘China does</strong> heavily subsidize its firms, while enjoying open competition practiced by others.’</p><ul><li><strong>‘It steals and forces</strong> the transfer of American intellectual property.’</li><li><strong>‘It promises to improve,</strong> but it never does.’</li></ul><p><strong>‘We should respond</strong> to that. Just not with tariffs.’</p><ul><li><strong>‘The U.S. should target</strong> large enterprises owned by the Chinese government.’</li><li><strong>‘The Communist Party</strong> wants these enterprises to dominate the Chinese and global economies.’</li><li><strong>‘Because </strong>they are owned by the government, they can be held responsible for policy.’</li></ul><p><strong>‘The U.S. should start</strong> with a small group of bad offenders with regard to IP.’</p><ul><li><strong>‘They should not be allowed</strong> to do business with American consumers or companies.’</li><li><strong>‘They should be hit</strong> with global financial sanctions.’</li></ul><p><strong>‘This maximizes</strong> the pressure on bad Chinese actors without taxing Americans.’</p><ul><li><strong>‘It's more focused</strong> and more justified than tariffs.’</li></ul></td></tr>

4. “Who Knew Trump Would Offer A Truce With Xi?”: The Mystery Of The Wall Street Trump Trades

<tr><td class="bg-holder"><img width="100%" src="" alt="CHINADebate"></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">‘Traders are talking about big options bets in advance of the president and others making news. Could they be related? “Maybe someone got lucky—or listened in to those private meetings.”’</p><p><strong>‘Is</strong><strong>Donald Trump</strong>’s erratic behavior fueling a business model? Some Wall Street options traders are beginning to suspect so,’ writes <strong>William D. Cohan</strong> in ‘“<a href="" target="_blank"><strong>Who Knew Trump Would Offer A Truce With Xi?”: The Mystery Of The Wall Street Trump Trades</a>.’</strong></p><ul><li><strong>‘They’ve taken note,</strong> with increasing alarm, of people making strange bets tied to Trump’s actions and then cashing in bigly when the odd bets pay off.’</li><li><strong>‘“If you had the ability</strong> to make hundreds of millions of dollars, or billions, and you knew how to hide it and it was impossible to find, wouldn’t you do it?” a longtime Wall Street options trader asks me sarcastically.’</li></ul><p><strong>‘There is an old saw</strong> on Wall Street about how if you could somehow get tomorrow’s <em>Wall Street Journal</em> today, you could make a fortune.’</p><ul><li><strong>‘Advance knowledge</strong> of presidential actions might provide a similar advantage, and some unusual trading patterns are fueling gossip and suspicion on the Street.’</li></ul><p><strong>‘Take, for example,</strong> what happened in the last 30 minutes of trading on Friday, June 28 at the Chicago Mercantile Exchange.’</p><ul><li><strong>‘By that time Trump</strong> was already in Osaka, Japan—which is 14 hours ahead of Chicago—where he would <a href="" target="_blank">meet</a> for more than an hour with China’s President Xi Jinping.’ </li><li><strong>‘According to the trader,</strong> who has decades of experience trading options, while they were meeting on Saturday morning, someone, or a group of people, bought 420,000 so-called “e-minis”—electronically traded futures contracts tied to a wide range of stock indexes—in the last 30 minutes of trading in Chicago on Friday afternoon.’</li><li><strong>‘The big bet</strong> could appear to be that Trump might announce a deal of some sort with Xi about the tariff negotiations, and that on Monday morning, or soon thereafter, the S&P 500 stock index would trade up.’</li></ul><p><strong>‘The <a href="" target="_blank">total volume</a> Friday</strong> of the September e-minis was a little more than one million contracts, so a purchase of 420,000 contracts, or about 40% of the day’s volume, in the last few minutes would likely be noticed by astute market watchers.’</p><ul><li><strong>‘Charts of the e-mini trading</strong> that day clearly show a spike up in volume in the last 30 minutes of the day.’</li><li><strong>‘“What was going on in the world?”</strong> the trader asked rhetorically. “At that time? The G20.”’</li><li><strong>‘“What if Putin or Xi or MBS</strong> knew something positive would be announced on Sunday?”’</li><li><strong>‘“Heck, just 10% or 40,000 [e-minis]</strong> bought would be $120 million today. Maybe someone got lucky—or listened in to those private meetings.”’</li></ul><p><strong>‘On Saturday in Osaka</strong>—after the market had closed in Chicago—Trump emerged from his meeting with Xi and announced that the contentious on-again, off-again trade talks with China were back on.’</p><ul><li><strong>‘“We discussed a lot of things,</strong> and we’re right back on track,” Trump said at the news conference following his private meeting with Xi.’</li><li><strong>‘“Who knew Trump</strong> would offer a truce with Xi?” the options trader wondered. “Some lucky trader? Are there any hedge fund traders that might have been tipped off? A simple ‘don’t go short this weekend’ might send a signal to load up on the long side.”’</li></ul><p><strong>‘On Monday morning,</strong> the market <a href="" target="_blank">reacted positively</a> to the news that the U.S. and China would resume trade talks, and has kept moving up since, as Trump is always happy to note.’</p><ul><li><strong>‘On Thursday, June 27</strong>—before the G20 meeting began—the S&P 500 index closed at about 2,915.’</li><li><strong>‘Over a week later,</strong> the S&P index is at just below 3,000, an increase of around 84 points, $4,200 per e-mini futures contract. (Each half-point increase in the index is worth $50 per option.)’</li><li><strong>‘Whoever bought</strong> the 420,000 e-mini options contracts was sitting on about a $1.8 billion profit.’</li><li><strong>‘“Someone got very, very lucky,”</strong> the trader told me.’</li></ul></td></tr>

5. ‘Trump’s tariff claims are demonstrably false. Here’s why.’

<tr><td class="bg-holder"><img width="100%" src="" alt="CHINADebate"></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">‘The president’s trade wars are, in fact, proving difficult and costly.’</p><p><strong>‘“Trade wars are good, and easy to win”</strong> — or so <a href=""target="_blank">tweeted</a> President Trump in March 2018,’ write <strong>Benn Steil</strong> and <strong>Benjamin Della Rocca</strong> of the Council on Foreign Relations in <a href="" target="_blank">‘<strong>Trump’s tariff claims are demonstrably false. Here’s why.’</strong></a></p><ul><li><strong>‘But the president’s trade wars </strong>are, in fact, proving difficult and costly.’</li><li><strong>‘China, India,</strong> Canada, Mexico, Turkey and the European Union have all chosen retaliation over capitulation.’</li><li><strong>‘So whereas</strong> the president has agreed to restart trade talks with <a href="" target="_blank">Beijing</a>, he is no longer pledging easy victories.’</li><li><strong>‘Instead,</strong> he is doubling down on the idea that trade wars are good in and of themselves.’</li></ul><p><strong>‘“Tariffs will bring in FAR MORE wealth</strong> to our Country than even a phenomenal deal of the traditional kind,” he <a href="" target="_blank">tweeted</a> in May.’</p><p>China, he <a href="" target="_blank">said</a>, was paying “hundreds of billions of dollars in tariffs.”’</p><ul><li><strong>‘He even </strong><a href="" target="_blank"><strong>claims </strong></a>that tariffs somehow boosted first-quarter U.S. output growth.’</li><li><strong>‘So in trade wars,</strong> it’s “heads we win, tails they lose.”’</li><li><strong>‘Foreigners </strong>give us phenomenal deals (of the Trumpian kind), or America feasts on ever-soaring tariffs.’</li><li><strong>‘The problem with this logic is</strong> that all of the president’s claims are, even if we grant him maximum artistic license, demonstrably false. Here is why.’</li></ul><p><strong>‘First,</strong> foreign countries don’t pay a dime of his tariffs.’</p><ul><li><strong>‘Tariffs </strong>are taxes on imports — paid by the importers, not by the exporters.’</li><li><strong>‘The president’s advisers</strong> know this, and therefore try to explain away his “China pays the tariffs” claim the way he explains away his “Mexico pays for the wall” claim.’</li><li><strong>‘Mexico does not</strong> “<a href="" target="_blank">write a check</a>” for the wall, he admitted, but (somehow) pays through changes in trade flows that will (someday) emerge from his NAFTA revisions.’</li><li><strong>‘Likewise,</strong> China does not actually pay the president’s tariffs, trade adviser Peter Navarro <a href="" target="_blank">explained</a>, but “bears most of the burden of the tariffs” by lowering its export prices to offset them.’</li><li><strong>‘Fortunately,</strong> we can test this claim.’</li></ul><p><strong>‘Each month,</strong> the Bureau of Labor Statistics publishes an aggregate index of the pre-tariff prices of imported Chinese goods.’</p><ul><li><strong>‘Any Chinese</strong> price cuts would cause this index to fall.’</li><li><strong>‘Given that tariffs</strong> last year raised the import costs of Chinese goods roughly 6 percent on average, if Chinese firms had cut prices to offset Trump’s tariffs the index would have fallen 6 percent since last June — when the trade war started.’</li><li><strong>‘Yet the </strong><a href="" target="_blank"><strong>index has fallen </strong></a><strong>barely 1 percent,</strong> and at least some of that tiny decline can be explained by Chinese currency depreciation — which makes Chinese goods cheaper for U.S. importers.’</li><li><strong>‘There is,</strong> therefore, no evidence supporting Navarro’s claim. Americans are, in fact, bearing the burden of Trump’s China tariffs.’</li></ul><p><strong>‘Trump’s second </strong><a href="" target="_blank">claim</a> is that tariffs are “filling U.S. coffers.” China tariffs, recall, were allegedly bringing in “hundreds of billions of dollars.”’</p><ul><li><strong>‘Yet this,</strong> too, is false.’</li><li><strong>‘Government data</strong> show that they <a href="" target="_blank">netted</a>just over $8 billion in 2018. Extrapolating forward through the end of May, total revenue from Trump’s China tariffs has therefore been about $20 billion — a small fraction of what the president asserts.’</li></ul><p><strong>‘More important,</strong> as of May, Trump has <a href="" target="_blank">authorized</a> nearly $26 billion in compensation to U.S. farmers for the losses they have suffered to date from Chinese retaliatory actions.’</p><ul><li><strong>‘This compensation</strong> is $6 billion more than the total estimated China tariff revenue<strong>.’</strong></li><li><strong>‘Far from</strong> “filling U.S. coffers,” then, Trump’s tariffs have been <em>draining</em>them at an accelerating pace.’</li></ul><p><strong>‘Nothing in our analysis</strong> has even touched on the harm to U.S. businesses and consumers from the higher prices the president has imposed on intermediate and final goods, nor to American non-farm sectors that have been slammed by foreign retaliatory tariffs.’</p><ul><li><strong>‘It is noteworthy</strong> that even the industries Trump promised to revive are reeling.’</li><li><strong>‘Since the announcement </strong>of <a href="" target="_blank">steel tariffs</a>in March 2018, for example, U.S. Steel has lost 70 percent of its market value.’</li></ul><p><strong>‘In short, then</strong>, Trump’s trade wars have thus far been an unmitigated economic and diplomatic own-goal [def: <em>a goal that a player accidentally scores against his or her own team</em>] for the United States.’</p></td></tr>

6. 'Is the China model a threat?'

<tr><td class="bg-holder"><img width="100%" src="" alt="CHINADebate"></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">The China Model: Neither a Worry nor Unique</p><h5>The China Model: Neither a Worry nor Unique</h5><ul><li><strong>Western countries</strong> ‘worry about the current Chinese model being spread everywhere.’</li><li><strong>‘Chinese thinkers</strong> see their country’s model of authoritarian reform and opening-up as unique.’</li><li><strong>‘They are both wrong,’</strong> writes <strong>Bill Overholt</strong> of the Harvard Kennedy School and author of the terrific <a href="" target="_blank"><em>China’s Crisis of Success</em></a>, the latest of his many books in <a href="" target="_blank"><strong>‘Is the China model a threat.’</strong></a></li></ul><h5>The China Model is Not Unique</h5><p><strong>‘China is the latecomer</strong> in a group of ‘Asian miracle’ economies — Japan, South Korea, Taiwan and Singapore — that exhibit common characteristics.’</p><ul><li><strong>‘They are all</strong> socially egalitarian and in their era of spectacular growth were run by single party or dominant party systems.’</li><li><strong>‘They all achieved</strong> rapid growth through gradual marketisation, gradual opening to foreign trade and investment, and vigorous import of industrial and regulatory best practice from successful Western economies.’</li><li><strong>‘They also share</strong> a vital common experience of terrible trauma and an overwhelming fear of societal collapse: Japan after losing World War II, South Korea after the Korean War, Taiwan after the Chinese Civil War and Singapore after its shocking separation from Malaya.’</li></ul><p><strong>‘Fear of collapse</strong> inspires leaders to undertake high-risk disruptive policies and suppresses normal public reaction against severely stressful social change.’</p><ul><li><strong>‘In China,</strong> leaders’ acceptance of risky change began with the dismantling of the communes, which were the Communist Party’s principal lever of power, giving them total control over people’s jobs, incomes, location and family circumstances.’</li><li><strong>‘When peasants</strong> in Anhui province began taking back their family farms, this threatened the core of Communist power, but it also generated rapid economic growth.’</li><li><strong>‘Led by Deng Xiaoping,</strong> top leaders decided to make a bet — seemingly very risky at the time — that such growth would continue and would consolidate government income and increase popular support for the Communist Party.’</li></ul><p><strong>‘Leaders </strong>in normal national situations don’t take such risks.’</p><ul><li><strong>‘Likewise,</strong> in normal national situations the population doesn’t accept the kind of social stress that occurred when Zhu Rongji eliminated 45 million industrial jobs in a decade.’</li><li><strong>'Indeed,</strong> by the end of that decade popular fear of collapse had dissipated and popular anger at Zhu’s market reforms was intense.’</li><li><strong>‘Intense reformism</strong> gave way to Hu Jintao’s reassuring promise of a “harmonious society” that would eschew such disruption.’</li></ul><p><strong>‘Even more dramatically,</strong> today’s national economic plans call for further intense market reforms, under the 2013 Third Plenum’s rubric of market allocation of resources, but political resistance is intense and Xi Jinping has instead chosen to emphasise political control over market reforms.’</p><ul><li><strong>‘The counterpart today</strong> of the trade-off Deng and Zhu made, abandoning some forms of direct political control in favour of socially beneficial marketisation, would be for the Party to step back from direct control of state-owned enterprises and the legal system.’</li><li><strong>‘Instead Xi</strong> has chosen to strengthen political control of all enterprises and of the judicial system.’</li></ul><p><strong>‘The China model</strong> of today no longer works, even in China.</p><ul><li><strong>‘The long-term</strong> negative effect on the economy will likely be severe.’</li><li><strong>‘Politically,</strong> the long-term consequences may be equally or more severe.’</li><li><strong>‘Under Deng Xiaoping</strong> and Jiang Zemin, the Chinese Communist Party was a social vanguard, sacrificing its own levers of power to improve the lives of the people.’</li><li><strong>‘Now it is an interest group,</strong> grasping to acquire and retain every available political lever even at great cost to national economic plans.’</li><li><strong>‘Eventually people</strong> will regard it as an interest group rather than a vanguard.’</li></ul><h5>The China Model is Not a Threat</h5><p><strong>‘This model</strong> cannot be emulated, in any comprehensive sense, by normal developing countries.’</p><ul><li><strong>‘The model</strong> is not unique to China, but it is unique to a group of countries that suffered terrible traumas in the 1940s and 1950s and had to risk political control and impose extreme social stress to address those traumas decisively.’</li><li><strong>‘Chinese thought leaders</strong> have largely recognised that the model is not widely replicable.’</li></ul><p><strong>‘Western leaders’ fears</strong> of a universalising Chinese model are misplaced.’</p><ul><li><strong>‘If Xi Jinping</strong> mistakenly tries to export the model, Cold War style, he would not succeed.’</li></ul><h5>Democracy Doesn’t Work Everywhere Either</h5><p><strong>‘Having said that,</strong> the limitations of the Asian miracle model do not validate Western claims that Washington- or Westminster-style democracy will prove optimal everywhere.’</p><ul><li><strong>‘The contrast</strong> between the Asian miracle economies’ successes in improving the lives of the most deprived sectors of the population, and the failure of the Western democratic model to do so in countries like India and the Philippines, can indeed inspire developing countries to seek alternative paths to growth.’</li><li><strong>‘Xi Jinping’s</strong> careful insistence that all countries should be allowed to choose their own path attracts an enthusiastic audience.’</li></ul></td></tr>