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We usually refrain ourselves from making comments about Chinese politics. No one knows what exactly is going on in many cases, including many of those self-proclaimed experts who are forever whining about how misunderstood China is.
We have noted that Chinese people do not like the regime. Every local Chinese we had a chance to talk to seems to be rather critical of the regime. Part of the reasons why the last stimulus in 2008/09 is regarded as a big mistake by the general public is that the stimulus seemed to have benefited property owners, real estate developers, corrupt government officials and the likes most, while an average worker suffer from high inflation and property bubble, thus most people simply does not believe in the regime.
The scandal of Bo Xilai brought some attention on whether the leadership transition is going to be smooth. But things seemed to have gone quite smoothly, on the surface at least. Until now that Xi Jinping seems to have disappeared. Some rumours even said that some (perhaps some supporters of Bo Xilai) has attempted to assassinated him in a mysterious car crash.
There is no credible source to confirm this, but we would not be surprised if the infighting among the top leadership is very serious. Let’s face it, infighting in the Communist Party is not even news. Cheng Li of the Brookings Institution, that Chinese leadership is in crisis, according to Daily Telegraph. Cheng Li said that “This legitimacy crisis is worse than in 1989, and may be the worst in the history of the Communist Party. People are afraid that it could lead to revolution if it is not handled well.”.
We are not going to make any prognostication here about what will happen in Chinese political sphere. We would just say this: that China has never been as stable as it looks, yet it is not easy either to have a truly catastrophic political crisis either. Of course, we cannot rule out anything despite its low probability. And needless to say, if something as serious as a catastrophic political crisis happens, whatever that means, the story in the economic side will be straight forward: in the worst case scenario, there is no pointing touching anything related to China at all.
Of course, that is absolutely not our base case. Just beware of some black swans swimming around.
This article originally appeared here: China’s political risk and the economy
Also sprach Analyst – World & China Economy, Global Finance, Real Estate
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