Friday, August 28, 2015

The story so far: Weak yuan, bellicose China

My article The story so far: Weak yuan, bellicose China appeared yesterday in the Edit Page of The Pioneer.

Here is the link...

Communist leadership in China believes that China is ‘big and strong', but the Shanghai and Chinese stock exchanges have shown that China is shaky too. A weaker China may, however, become more aggressive

On Monday, the Shanghai Composite index dropped down by 8.52 per cent. Can you imagine, markets in China lost a paltry one trillion dollar as the sell-off deepened not only in Shanghai, but also in Shenzhen and Hong Kong. The world’s markets followed suit and started crumbling.
The South China Morning Post said, “Chinese stocks closed at their lowest level in six months as a wave or risk-off selling pummeled the market with only about 100 stocks listed in Shanghai still trading late as the other 993 stocks listed on the benchmark index.”
A first ‘explosion’ had occurred on August 11, when the yuan was devaluated for three consecutive days; at that time, many predicted long-term consequences for the Middle Kingdom.
Different explanations, often contradictory, have been given about the risky move: Some ‘experts’ explained that since a few years, Beijing kept the rate of the yuan more or less fixed at 6.20 per dollar, hoping to become a member of the exclusive club of reserve currencies of the International Monetary Fund. However, the IMF recently announced that China’s immediate inclusion was not on the cards as the fund would like Beijing to undertake more in-depth reforms, for example, by letting the exchange rate fluctuate. It is, however, doubtful if the devaluation was a first step in this direction.
Others have argued that the move would help China’s exports, but it will also push the dollar higher, making imports more expensive for China, the world’s largest user of energy, metals and grains. The question is: Has the leadership lost control over what is happening? Perhaps not, but the trust of the investors is fast vanishing.
Strangely, it is ‘holiday times’ in Beijing and all the big bosses have moved to a more clement sky in the sea resort of Beidaihe in Hebei province. On August 5, Xinhua published a news item titled, ‘Do Not Wait Anymore; No Meetings in Beidaihe.’
The news agency explains that every year since the Mao Zedong era, current and retired Chinese Communist Party leaders meet at Beidaihe in July or August.Xinhua however adds: “Not long ago, the CCP Central Politburo met twice, on July 20 and on July 30, which was unusual. …Is it meaningful, necessary, or possible to talk about these issues again in Beidaihe several days or 10 days later?”
So, no talk, though the communist leadership is on a warpath for something else. On August 10, the People’s Daily published an article mysteriously titled: ‘Dialectically View the Phenomenon of Tea Turns Cold When People Are Away.’
The article explains, “People come and go; the present day replaces old times. Over the years, many of our party cadres have correctly treated their status changes after having stepped down from their leadership positions. They consciously have not intervened in the work of the new leadership team …they have thus won everyone’s respect.” This targets former President Jiang Zemin and his clique.
Since then, websites in China have reported that Mr Jiang was under house arrest. It is difficult to check the veracity of the information, though a full-fledged war seems on the cards between Chinese President Xi Jinping and the ancient regime. Who will win is open to bets.
Simultaneously, Beijing is becoming more aggressive; not only in the South China Sea where it reclaimed number of large reefs, but also in the Pacific and elsewhere. Take the preparation of the military parade to be held on September 3, to commemorate the 70th anniversary of victory over Japan in World War II.
Xinhua announced that the People’s Liberation Army will unveil hundreds of new domestically developed pieces of armament. The grand show will feature 12,000 soldiers and 500 pieces of China’s latest military gadgets.
According to Xinhua, the Second Artillery Forces, the PLA’s strategic missile force, will display seven types of missiles, “The scale and number of the missiles will surpass any previous outing.”
During the National Day parade in 2009, China showcased five types of missiles, including the DF31A, a long-range intercontinental ballistic missile capable of reaching the shores of the US.
Will the DF41, the latest inter-continental ballistic missile with a range upto 15,000 km be displayed? A Pentagon report recently asserted, “China is developing a new road-mobile ICBM, the DF-41, possibly capable of carrying multiple independently targetable re-entry vehicle.”
The parade is “partly aimed at sending a message of warning to the us,” said Huang Dong, president of the Macau International Military Institute in an interview with Ming Pao, a Hong Kong newspaper. Mr Huang asserts that the purpose of the parade is “warning Washington to not ‘interfere’ in its regional activities, in particular its territorial disputes in the East China Sea and the South China sea.” The aggressiveness does not stop here.
On August 18, the PLA daily published an editorial, ‘Be Ready to Fight at All Times’. It re-emphasised the importance of building a strong Army which should be ready to fight ‘at all times’.
The article, later re-published (in Chinese) by all the major media, states: “Through these phenomena, we can easily see that Japanese militarism’s desire to eliminate China has never died, that is has refused to recognise the defeat in that war, and that it has secretly been gathering strength in an attempt to stage a comeback.”
It concludes, “China is at the critical juncture of becoming big and strong. Some Western countries are unwilling to see the rise of China, doing everything possible to contain and suppress China, repeatedly squeezing China’s strategy for development …thus the likelihood of disturbances and war taking place on our doorstep has increased.”
Closer to the Indian border, on August 24, the People’s Daily Online reported that three more unattended radars were soon to be installed in Tibet. The mouthpiece of the Chinese Communist Party reminds us that China’s “first unattended radar station has stood eight years on the top of Ganbala mountain, with a height of 5,374 meters above the sea level on Qinghai-Tibet plateau.”
The website affirms that the unattended radars would form a radar network with the previous one. Kampala (Ganbala in Chinese) is located in Nagartse county of Shannan Prefecture, not far from Lhasa.
Incidentally, on August 11, China Military Online published photos with this comment: “Air force J-11 regiment boosts night combat power, the PLA Air Force conducted night combat training in Tibet on August 9.” The pictures show a high plateau military airfield (Lhasa Gongkar) surrounded by snow-clad mountains and a group of J-11 heavily-Armed fighters taking off amid twilight.
The communist leadership believes that China is today ‘big and strong’, but the Shanghai and other Chinese stock exchanges have shown that China is very shaky too.

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