If you want an alternative take on why the shipping market is so poor in China and the Pacific in general, then I might have one. It has little to do with blue sky time during the forthcoming Winter Olympics, or Evergrande and the housing market, or even trade relations between China and the rest of the world. These are factors certainly but nothing was going to happen to improve the plight of bulk carrier owners in the East this week because the powers that be in China, in fact the Power That Is, were busy discussing matters of great import in a top security military hotel in Bejing, gathering for the sixth plenary session of the 19th Central Committee of the Communist Party of China. This is from the English Translation of the subsequent Comminque:

A total of 197 members and 151 alternate members of the Central Committee attended the session. Members of the Standing Committee of the Central Commission for Discipline Inspection and leading officials of other relevant departments were present at the meeting in a non-voting capacity.

That’s a lot of political power and decision-making capacity in one place. What were they doing? Setting the stage for next year’s National Party Congress, and confirming history:

The Political Bureau has held high the great banner of socialism with Chinese characteristics; followed the guidance of Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Theory of Three Represents, the Scientific Outlook on Development, and Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era;

With this crucial stuff to discuss, and more importantly to sign off, there hasn’t been much time to look at anything else. As I have mentioned before, if we want to look to the future of China’s economy  we need to read what they say, not interpret numbers and trends in a ‘Western’ way. The Party owns the whole game, and whilst it may make mistakes, these mistakes will be corrected far before they are admitted.

For those of you with longer memories, you will know that the swift and brutal suppression of the Tiananmen Square protests was on the orders of Deng Xiaoping, now seen fondly by history as the man that opened China after Mao. And his theory is still officially historical. But with those of you (probably fewer) with any knowledge of Marxism-Leninism will know that history is not something that you record and learn from, history is something that empowers you and is on your side. This is why this week was important.

But once the powers that be get back to their desks after tending to the needs of history, they will have a full in-tray. For those of us in shipping, there are a few things that need to be resolved, mostly around energy and coal, at least in the short term:

–         Will the increased production of domestic coal in China continue at the current pace (reaching record highs on November 10th)?

–         Will Chinese imports of coal continue to be hammered (October’s imports fell 20% month-on-month)?

–         Will Chinese manufacturing productivity continue to be affected by power shortages?

–         Will price capping of electricity, coal and petrol improve or distort the demand for commodities?

–         Now that the fall in steel prices has stopped (for the moment) will there be a final push for iron ore imports before blue skies are needed in January and February?

–         Is the banking system ok? Or will the strains caused by recent policy decisions on gaming, housing, education, technology, and business need to be addressed?

–         Will all of the above slow Chinese growth to a point where a stimulus will be required?

–         If so, what will that stimulus entail?

These are all affected by Chinese policy taken at the highest level. Market forces have only a secondary role. If you are in any doubt about this, read the following from the same communique:

Every Party member should bear in mind what the Party is and what its mission is—these are issues of fundamental importance that we must never lose sight of. We must have a precise grasp of historical trends, stand firm in our ideals and convictions, and stay true to our Party’s founding mission. We must remain modest and prudent, guard against arrogance and rashness, and work hard. We must not be intimidated by any risks or led astray by any distractions, and we must be absolutely certain that we make no catastrophic mistakes on fundamental issues.

Any distractions or mistakes will not be looked on kindly, but likewise doing nothing or worse, letting things work themselves out, is anathema to the Party and its’ members.

And if you want any further proof of my theory, you will note that there will be a virtual summit between US president Joe Biden and President Xi Jinping on Monday, announced today. I know it has been in the works for a while, but it could not be confirmed until the Plenum had finished and published its’ communique. This summit will have little or any affect on the day to day movements of the shipping markets, it is all the other stuff I have mentioned above that will, and these need decisions.

Don’t ask me now what will be decided as far as energy in particular, but also manufacturing and exports and business in general, but I expect some more definite news (and probably a few more cargoes) in the following weeks, as day to day work government work resumes. After all, President Xi told the 28th Asia Pacific Economic Co-operation Economic Leaders’ Meeting in Beijing:

Openness is the lifeline of Asia-Pacific cooperation.

As CGTN (China Global Television Network – controlled by the CCP) helpfully points out:

Home to around 3 billion people, APEC’s member economies make up about half of the global trade and 60 percent of the world’s total GDP.

If they can abide by Xi’s words:

“We need to practice true multilateralism, stick to dialogue rather than confrontation, inclusiveness rather than exclusion, and integration rather than decoupling”

then the shipping markets may not be so badly off after all. Watch this space: the Party’s only just starting.

Simon Ward