Daniel W. Drezner

China’s Leadership Embraces Austerity In All Its Forms

Reuters reports that China’s new leadership has added another new policy plank:  China on Tuesday ordered a five-year suspension of the construction of new official buildings, state media reported, in the latest move by President Xi Jinping to crack down on extravagance and pervasive corruption. The decision was “made in accordance with the country’s frugality ...

Reuters reports that China’s new leadership has added another new policy plank

China on Tuesday ordered a five-year suspension of the construction of new official buildings, state media reported, in the latest move by President Xi Jinping to crack down on extravagance and pervasive corruption.

The decision was “made in accordance with the country’s frugality campaign”, official news agency Xinhua said.

Some structures built in violation of regulations had tainted the image of the Communist Party and stirred vehement public disapproval, the agency said.

“The directive called on all party and government bodies to be frugal and ensure that government spending goes toward developing the economy and boosting people’s wellbeing,” it added.

The ban also covered “glitzy structures” built as training centres, hotels or government motels, it said.

I assumed the whole "frugality" thing was just a cover to engage in more efforts to cool down China’s economy, but the Financial Times’ Simon Rabinovitch interprets the edict the same way

China’s austerity campaign – unlike those in the west which have been triggered by budgetary shortfalls – is driven largely by the new leadership’s determination to address what it sees as the slipping moral standards of the Communist party elite.

Xi Jinping’s first move as party chief late last year was to bar lavish banquets, red-carpet receptions, wasteful travel and other trappings of corruption that have stained the public’s perception of the government.

Those measures have had a clear impact on the economy, leading to slower consumption growth in the first half of the year and dealing a blow to luxury goods companies around the world.

Whether the latest ban has a similarly negative impact on the property market will depend on how it is interpreted by state-owned companies. Chinese corporate executives have felt pressure to comply with Mr Xi’s earlier austerity policies even though government officials, not companies, were his targets.

Beijing has previously tried to stop local governments from building massive new offices, but only with limited success.

Let’s call this the full-spectrum austerity program.  Not only is China’s new leadership trying to cool down a geyser of new credit creation — which it needed to do sooner rather than later — it appears to want austerity to be the new watchword for Chinese society, Chinese culture, Chinese politics, etc.  

This gives rise to a very interesting question:  just how far can/will Xi and Li go with this?  Over at The Diplomat, Zachary Keck notes that even before this latest edict, China’s new leadership was running into political roadblocks

Amid slowing growth, there are a number of signs of dissent among China’s leadership over a number of economic and political issues….

Premier Li Keqiang encountered stiff resistance from inside the government when pushing through his Shanghai Free Trade Zone this year.

Premier Li pushed hard for the FTZ following a March trip to Shanghai, his first domestic trip since taking his current position as the head of the government. As such, one government source told SCMP that “the Shanghai free-trade zone is like Li’s baby,” while another noted that the premier would now lose face if the experiment fails.

But, according to three sources with “first-hand knowledge of high-level government meetings,” both the China Banking Regulatory Commission (CBRC) and China Securities Regulatory Commission (CSRC) openly opposed certain initiatives proposed by Li’s office. The CSRC, for instance, opposed Li’s suggestion that foreign commodities exchanges be allowed to set up future deliveries warehouses in China, while the CBRC objected to a proposal to allow certain banks within the FTZ to engage in offshore banking services.

This dissent, presented in feedback memos to Li’s initial proposal, prompted the premier to slam his fists against a table in frustration, and tell a meeting that this opinion feedback was not acceptable. Li’s office also responded to both objections in memos, according to SCMP.

Meanwhile, others have been objecting to Xi Jinping’s “mass line” campaign, a revival of a Maoist crusade that urges Communist Party officials to communicate regularly with the masses. Xi has also used the campaign to target corruption and railed against the CCP to rid itself of “formalism, bureaucratism and hedonism and extravagance."

But the campaign, announced in April but only officially unveiled last month, is already coming under fire. Most notably, last week Study Times, a newspaper run by the Central Party School, published an article criticizing the concept.

In the world of foreign policy punditry, there are a lot of rules of thumb that people parrot without having any idea if they are actually true — it’s just something they hear often enough to think that it must be true.   One of these rules of thumb has been that the Chinese Communist Party can’t tolerate economic growth below 8% or there’s a trouble a brewin’.  We’re about to see that hypothesis put to the test. 

One would assume that Li and Xi would not go down this path so soon after taking office unless they were damn sure that they had their political bases covered.  Then again, they would not be the first authoritarian rulers to misread their political support. 

Developing….

Daniel W. Drezner is a professor of international politics at Tufts University’s Fletcher School. He blogged regularly for Foreign Policy from 2009 to 2014. Twitter: @dandrezner

Trending Now Sponsored Links by Taboola

By Taboola

More from Foreign Policy

By Taboola