In shipping, we have become obsessed with China. This is nothing new, in fact ever since 2003 we have been casting our eyes eastwards to see what is going on over there. And no wonder, since it is China that provided the stimulus for the biggest boom for shipping in my working life, and has subsequently provided the backdrop for everything else. This obsession takes various forms of course, but in the tramp shipping market where rumours and opinions drive sentiment, any narrative that rings true will have an effect.
The problem with a convincing narrative is that it is convincing to the listener, who then acts on it, rather than considering a more difficult or complex one which may be nearer to the truth. And the problem with a China narrative is that most of us have no real experience of living and working there, let alone being part of the policy-making apparatus, so we will accept a narrative that rings true to our experience and understanding rather than one that makes little sense to us. This becomes more problematic as the nature of policy-making itself changes in a more centralised machine, with Xi Jinping thought being closely scrutinised to guide legislators.
I must admit, if you pardon the Aristotelian pun, to being a bit of a political animal. One of my frustrations with my struggles with the Greek language is that I cannot properly understand what is being said and written here by politicians or the media, let alone the all-important nuances that help proper analysis of what is going on. When I was still living in the UK I kind of prided myself on knowing what was going on, but these days, having lived in Greece for more or less twelve years now, and after Brexit, I just don’t have a feel for UK politics any more.
But I do know that when a politician in a democracy writes a speech, there are boxes that have to be ticked, and a certain type of language that has to be used. The fact that these speeches are written by speechwriters, or worse, a committee of them, probably tells you why they are mostly very boring. This also probably explains one of the many attractions of the UK’s prime minister Boris Johnson who takes almost perverse delight in saying outrageous things. Donald Trump had a nice line in this too. It shows to the voters that they are real people, and say what they think, and mean what they say, no filter. It doesn’t make those thoughts or words any better than anyone else’s, but at least it means that they are not puppets of the elite state machine. Ex UK prime minister Harold Wilson always used to write the first draft of any important speech he gave, if only to make sure that it was based on his thoughts, ideas, and language.
So it is no wonder that speeches and pronouncements are pored over, discussed, analysed, with passages tweeted and sound-bited ad infinitum, and I must say, ad nauseam. There is a nice story about two UK cabinet ministers who were fierce rivals in a previous Labour government. They were both ambitious and paranoid, and would do anything in their power to advance their own interests and diminish the others, by fair means or foul. It so happened that one of these ministers died suddenly of a heart attack. On hearing the news, the other was thoughtful for a while, and then commented:
“I wonder what he meant by doing that?”
We take the same approach in looking at China policy making, and as such we listen and read analysts’ and commentators’ views on what is going on rather than actually reading what they are saying themselves. It is not as much fun as creating theories to fit our own positions, but I have started doing this a lot more recently, because it is informative.
For those wondering what is going on with Evergrande, gaming platforms, private education and so on, I can do no more than recommend that you read Xi Jinping’s words, in the form of an article published in the CCP’s flagship journal, Qiushi, based on a speech he gave at the 10th meeting of the Central Financial and Economic Affairs Commission on August 17th earlier this year. To Firmly Drive Common Prosperity, the overarching programme to promote socioeconomic equality whilst reinforcing party legitimacy and control, is indeed interesting.
What I found by reading it was that there is a concept to build society into a shape of an olive, a pleasing image, where the middle class is expanded to dominate society, leaving the ends, very rich and very poor, minimal. In Mr Xi’s own words:
expand the size of the middle-income groups as a proportion of the population; increase the income of low-income groups; reasonably adjust high incomes; and prohibit and suppress illegal incomes. These measures aim at creating an olive-shaped [income] distribution structure with a large middle and [two] small ends. These measures would promote social equality and justice, the all-round development of humans, and enable the entire people to march firmly forward towards the goal of common prosperity.
In his speech he urged his listeners to study a “common prosperity zone in Zhejiang” (the coastal province just south of Shanghai, known to many of us as home to shipbuilding and ship repair yards. I was intrigued by this so searched around and found an article on the Chinese State Council’s official website. Here are a few relevant snippets:
According to the plan, the annual per capita disposable income of all residents in Zhejiang will reach 75,000 yuan ($11,570) by 2025. Payment for labor will account for more than 50 percent of GDP by 2025, and the ratio of residents’ per capita disposable income to per capita GDP will continue to increase during the period, the plan said…..
The size of the middle-income group in the province is expected to expand with improvements in the quality of life. The proportion of residents with annual household disposable income of 100,000 yuan to 500,000 yuan is expected to reach 80 percent….
By 2025, the urbanization rate of the population in Zhejiang will reach 75 percent, with the income gap between urban and rural residents kept at a reasonable level…
For urban residents in Zhejiang, “public service circles” will be established with community members able to walk to facilities offering preschool education, health and seniors care, and physical exercise, within 15 minutes. Life expectancy is forecast to surpass 80.
The increasing urbanisation rate seems a lot, but in 2019 the degree of Zhejiang’s urbanisation was already 70% so it’s not really ground breaking stuff. But apart from good intentions, how will this affect the economy in China as a whole?
Urbanisation in general is obviously seen as a good thing, and once the property developers reorganise themselves to do the right thing, housing development (and all that goes with it) will carry on. Also, from my own experience, I can say that there will have to be a great deal of redevelopment of existing housing stock to improve the quality of life for those already living in the cities. And all those preschool, health and senior care centres, not to mention gyms, will have to be built within 15 minutes walking distance of all the urban population.
The second thing is the increase in disposable income. This in itself should keep the economy moving, and as 50% of the increase of GDP will be funded by payment for labour, the state-owned enterprises will have to be busy producing something.
This is a pilot project, and will be studied and adapted for rollout to the rest of China. This means development, and redevelopment on a massive scale. This needs raw materials, energy, imports and exports of goods and semi-finished goods and components. This will also have to meet the environmental targets that China has set for itself. Imagine all the things that have to be made, and done, to effect these changes.
Do not think this is not going to happen, or are just empty words from a politician wanting votes at the next election. These are the words of a leader who realises that the power of the party fades when the people no longer think that their lives are not improving. When this leader says that “we must improve common prosperity in the spiritual and moral lives of the people” he means what he says. When he says “A happy life is earned through struggle, and common prosperity requires industriousness and wisdom,” you should pay attention.
The end of China’s first industrial revolution is nigh, and the days of unchecked growth and endless cheap labour are over. You may be sceptical of the final result, and fearful of all the other things that come with a rising super power, but don’t dismiss the intent. Just read what they say.