Thread by @muralipiyer

Time for a bit on China.

You all know how i love to bash China and Xi Jinping.
Now, a little bit without the excessive dramatisations.

2. #XiJinping is a rare leader that China has received. Providence has a way to feed the right medicine to someone that it wants to keep alive longer.
Jinping is just that.

3. The mess in China can be easily related. What we have is a large babudom state. The party politbureau is the only controlling authority, but it’s a collection of different ambitions, that just want to show good results on paper. The whole system relies on having good press.

4. The present chinese mess has its roots in the Mao era. The man who started the current dynasty had beautifully crafted a power structure where the Chairman is effectively the emperor.
Instead of “Divine Right”, the subtle difference is in bringing “Will of the People”.

5. So, the narrative of Chairman is of a benevolent ruler who can do no wrong, because essentially the gods have willed him to be the ruler of the “Middle Kingdom” and Chairman is so “exalted” that he denied himself the traditional title of Khan of Khans.

6. Unfortunately, the ‘khakhan’ did make a series of “blunders” as part of cultural revolution.
Of course, the initiater of any dynasty has two objectives.
A) tightening the grip. (Cultural revolution)
B) expansion of territory (tibet annexation)

Mao did both.

7. Mao was a materialist. He understood that a vast majority of chinese are underdeveloped. Establishment of utopia is an easy hope to sell.
Cultural revolution was an easy means to purge old power structures, and make it party oriented.
It also resulted in a lot of dams, etc.

8. Nehru’s sense of betrayal comes from this. Both Mao and Nehru had the same ideas for governance. Both had same ego.
Only Mao had the desire to expand. And, the indo china war happened.

9. Mao had the best of the best of the Qing Empire era babus working for him.
And, they were all well experienced in the art of building paper castles.

Mao messed up with population, food security, water management, etc.

Then there was the brief time of Huo Goufeng.

10. Huo was the first person who recognised the excesses of Mao. And he attempted to correct a few.
One of the interesting things is the one child policy to counter the excessive population growth during the Mao era.
His only good contribution is the fixed term Chairmanship.

11. And then came the era of Deng Xiaoping.
Deng was smart enough to realise that economy has to be fixed if China has to regain any kind of power in global arena. The rise of neighboring Japan helped to be a good guide.
Deng decided to start the economic transformation of Hans.

12. Deng focused on making the Eastern china the factory of the world. He started with coastal provinces and paved the way for much of the development in modern china.
One thing he continued from Mao era though was the obsession with infrastructure.

13. Though Huo era saw the start of one child Policy, Deng had significant hand behind the policy.

Many provincial leaders thought that the best way to appease Deng when they can’t show huge economic recovery is by showing progress in one child policy.

14. Deng managed to do something that even Mao couldn’t do.
He brought up the chinese middleclass, and also made them subservient to party rule. This attack was through the attack on family structure. He initiated the phenomenon of ghost children.

15. Deng era also saw people actually earning a bit of money.

This was the real kickstarter for China’s development. Chinese people started seeing real improvement in quality of life.

This led to the uprising of the princelings, aka Tianmen Square Massacre.

16. The compromise formula for the June Fourth Incident was basically the Qing tactic. Give the young leaders power. Give them posts.

But, this meant one more thing: Scope for remaining elite, aka bribery. Everyone needs return of investment after all.

Now comes Jiang Zemin.

17. Personally I consider him the third monarch, though he is actually the fourth one.
Jiang Zemin is still alive. So, his story is not exactly over.

Jiang Zemin would have absolutely loved to continue as Chairman even now.

18.
Emperor Jiang Zemin had only one problem. He was part of the group that enforced the 10 year limit on Chairman.(He actually extracted 14 years by that soft coup on Deng. That’s a different story. And,Deng Xiaoping had already his successor Hu Jintao decided for him.)

19. Under the direct rule of Jiang Zemin, “capitalism with Chinese characteristics” strengthened its roots.
Bribery and personal favours returned to be the foremost method of getting promoted. Yes, that’s how babudom had always worked in china, even during the ming era.

20. The vicious cycle of corruption meant that Shanghai, the economic capital, also became the most coveted province.
Of course, Jiang Zemin also kept track of the trail so that no one revolted against him even when he had to step down from thrown in 2002.

21. Population was not a concern for Zemin.
It was just one other point in the pile of things. Of course, he had to show he was doing a good job. In 1999, China achieved its stated goal of controlling TFR(total fertility rate).

22. Mind you, TFR was already down to 1.8 when Jiang Zemin assented the thrown. By 1999, TFR already fell to 1.6. That was the time the one child policy had to be scrapped.
By that time, already 20 years of the policy was over. That’s 20 years of babudom who showed it as a medal.

23. Also, one generation (of at least the urban population) had grown up with no siblings.
Sex ratio had already started getting skewed. That means that showing real estate to get married had started gaining popularity.

24.
To put it very crudely,
Jiang Zemin is the reason why we are having the massive Chinese Housing bubble.

25. And a lot had to do with the desire to project the propaganda of rising China.

Construction is the easiest way to improve GDP growth. By the early 90s, most of the infrastructure was already done. But stopping construction meant reduction of scope for corruption.

26. By making people use real estate as a means to invest money, the Jiang Zemin era created two things.
First, of course, is the Evergrandes. Basically a bunch of real estate companies for the people showing allegiance to the emperor to make money.
Second is as funding source.

27.
Chinese provinces have a very interesting thing. (I like this idea, so i am a bit biased).
All the big apartments are not exactly owned by the people buying it. What’s actually sold is a fixed term lease.
Land lease is non-tax revenue for the state. (I absolutely love this)

28. The real estate companies take lease. They then build apartments. Chinese people love to buy these apartments. (I will soon add the Hukuo angle)
The home buyer is actually buying a lease for say 40-60 years. By that time, they probably would have died or moved on.

29. The land is still owned by the state.
The real estate companies could ideally lease the same land in the future.
It’s like a renewable resource for state revenue.
In essence, bonds of the provinces or State Owned Enterprises(SOE) backed by the provinces are high quality.

30. Now, a small word about hukou.
China has one more class structure based on where you are born.
All Govt facilities is available only to people within that province. This means that people from rural areas or western provinces have no way to migrate to eastern china.

31. If someone wants to migrate to the east to get a job, he/she has to leave family and children in their homes. There are two workarounds.
One is getting married to a city dweller.
Second is to own house in the area.

32.
The existence of Hukou ensures that real estate is a never ending money machine for the provinces.

No one in China will scrap it. This hukou system had been in china for more than 10,000 years. It’s pretty old.
It has become part of what’s inherently chinese characteristics.

33. Why is housing important:
Because it’s the real source of income accounting almost a third of state income.
It’s steady.
It’s increasing with the housing bubble, perpetuated by the state.

It’s the best collateral for sovereign debt.

34.
It’s also a reason why provinces and SOEs can keep on taking loans. Or at least they could.

35. Emperor Hu Jintao was effectively reduced to a puppet of Jiang Zemin. It’s not like Hu Jintao was not a good leader.
After all, 2008 Olympics happened under him.
China was the only growing economy during the Lehman crisis. (Technically not correct, but that’s the propaganda)

36. With so much already brought in by the Jiang Zemin led faction and the mere fact that Jiang Zemin and still alive(and has power to pull return favours from the people he promoted), Hu couldn’t really correct much.

37.
The population continued to get hit by the one child policy.
Debt fed chinese industries continued to grow.
By bringing the great Chinese firewall, tech entrepreneurs could build the alibabas and tencents.
With Hong Kong route still active, money was pouring in.

38. People often forget the quantum of development that took place under Hu Jintao.
At least some chinese could actually start living first world lives now.

39.
Of course, the side effect was that Chinese companies started losing the cost arbitrage. Chinese labor was no longer as cheap as the past.
But, china had already built ecosystems. There was already sufficient inertia. Some companies chose china over a Thailand despite cost.

40.
Remember that all this while, population was plummeting.
All the extra ghost population was not growing enough to keep population growth up. The improved life expectancy delayed degrowth. But eventually population started shrinking, though it was not under Hu.

41.
The chinese debt kept on climbing.
With princelings being investors in many of the companies, it became compulsory for every company to pay dividends whether they made profit or not. Too many faces need to be saved. Taking loans to pay dividends became the norm.

42.
Population.
Food.(china had grown to be one of the biggest food importers by then)
Debts.
Housing.

Everything was already getting worse.

43.
Then came the turn of Emperor Xi Jinping.

Because of his past, Xi Jinping had a very clear idea about the chinese system.
The first thing he had to do was to protect himself. Unlike Hu(or mostly because of the experience of Hu), Xi Jinping started with the best defence.

44. Xi Jinping is perhaps far more aware of the problems of China than any other leader.
He had to undo the damage caused by all his preceding emperors.

45. Xi Jinping is a very tough leader.

Xi Jinping showed Jiang Zemin who’s the Chairman. His initial purge, termed anti-corruption drive, was surgical. The target was chosen, a series of articles on party mouthpiece explaining the crimes with evidence came, and death verdict.

46. No one had any doubts on what is happening. And no one cared, except those who thought they might be the next target.

The initial attacks meant that Xi Jinping had sufficient room to do what he wanted to do.

47. Xi Jinping is the first person to actually look at the wreck caused by one child policy. He had the benefit of hindsight, of course. I bet he knows that the numbers by statistics commission is pure fiction.
He first watered it down to 2-child policy and later 3 child policy.

48. The important thing to note here is that Xi started with soft approach. Deng Xiaoping, after all, is still the revered “paramount leader”.
Getting called equal to the paramount leader is the first step to establish the “divine right” of Chairman.

49.
Xi Jinping probably knows that even the three-child policy is too little too late.
The mishandling of population has already meant that China has a perpetual food crisis. There are too few farmers. Despite productivity improvements, china has become permanent importer of food

50.
The inequality due to the three previous emperors means that china is already having poor Gini numbers. China Gini is 0.48. That’s about as bad as Europe.
The real TFR is definitely lower than the official numbers. It’s definitely less than 1.3.

51. The share of working age population has been plummeting as well.

China is already in a population time bomb.

The other side effect comes from skewed sex ratio.

52. China has two problems when it comes to marriage.
There had been rampant sex selection due to the one child policy.
Traditionally, it’s practically impossible for a 30yo woman to get married.
Men are not finding enough women, and they are choosing other alternatives.

53. The result is what’s commonly called as “conscripts who are pampered crybabies and sissies addicted to masturbation” joining army.

From agriculture to army, china is having serious shortage in manpower.
As i said, too little too late.

54. The next thing Xi Jinping did was to take away the protection of SOEs.
It was made abundantly clear that companies that don’t make profit will be allowed to fail. It doesn’t matter whether it’s default by a local government entity or a SOE.
In 2014 itself, Xi made it clear.

55. The plug was removed for several coal, iron, steel, aluminium companies because Xi Jinping finally had the courage to say enough is enough.

By the way, i have no sympathy for “investors” who put money in china and lost money. Greed earns no gains.

56. When people talk that Xitler is bringing down the evergrandes, these are really either people with vested interests or people using event to bash the convenient target.

57. What’s happening right now in China is the third real reform.
Xi Jinping is fixing the state addiction for debt.
This starts with deflating the housing bubble. The reality of the bubble is becoming too obvious. So, Emperor Xi started with the softest beginning.

58. The three red lines essentially is all about saying that real estate companies should cut down their debt and become more responsible.
All the companies who are defaulting now were essentially Ponzi schemes. They were in effect covering expenses by borrowing.

59. Everything ends with the way local governments were doing corruption with the help of land revenues. That’s the crux of local corruption. That’s the reason behind tofu towers and ghost towns.
Emperor Xi emperor is finally making the local governments pay.

60. Then there is the jack ma thing.
To talk about it, we have to talk about the term of Xi Jinping.

If Emperor Xi Jinping ruled for one day more than Emperor Jiang Zemin, the latter loses all power. The only opportunity for Zemin to do it is by preventing Xi to get re-elected.

61. A lot of things happening now is actually about preventing Xi from getting re-elected. And Xitler getting back to his ruthless ways to counter it. There have already been multiple assassination attempts on Emperor Xi, most of it as part of a coup.

62. It’s convenient to portray that Jiang Zemin is the only faction interested in coup. The reality though is that in 2022 everyone can have a shot. Also, anyone who gains power in 2022 will remain Chairman till death.

There is simply too much power struggle.

63. So, when we talk about china and xi and all, there is more to it than is said.

As i said, i love china bashing. That’s exactly like the way i love LeLi bashing or Congi bashing.
It’s like complaining about weather.
It’s not about ignorance of certain things.
/end