Taps Coogan – October 29th, 2022

Enjoy The Sounding Line? Click here to subscribe for free.

Leland Miller, the man who runs the largest private in-country data-collection network in China – China Beige Book International, recently spoke with Bloomberg about China’s recent Party Congress, their third quarter GDP numbers, and the very overt removal of Hu Jintao from the proceedings. Keith Krach of Perdue Krach Institute for Tech Diplomacy also shared his views on US companies efforts to disengage from China.

 

Some excerpts from Leland Miller:

“It’s not all together clear whether markets believe China’s economic data this time around but what’s pretty clear that nobody was very happy with the way Xi packed the new leadership with loyalists. I think there was always a desire to see somebody who symbolized more market opening, disagreements among top leadership, more fulsome pushback against Covid-zero… When you look at who he put up next to him, it looks like it is going to be the Xi-Show with very little pushback… I think that worries people who have watched the crackdowns of the last two years.”

“We’ve been taught as China-watchers to see the party as prioritizing growth above all and that has been true for the last five, ten, 15 years. It is not true anymore. The China we are looking at right now, led by Xi Jinping, is one focused more on security. It’s focused more on restructuring the economy so there are fewer vulnerabilities for the party in terms of reckless credit expansion of the property sector, shadow finance out of control. They want to take control of the economy and reroute the economic growth model and to do that they have to materially slow down the economy… Things are changing dramatically… The Chinese economic growth model as we know it is over and they are taking a more realistic stance.”

“We know that it was a pretty big humiliation for Hu (to be removed from the party congress) but are we absolutely sure that this is part of a public purge of the Communist youth league faction which barely exists anymore? That’s not clear at all. Hu’s son was in the room, he’s in the politburo, so if we track his career over the coming months we’ll be able to get indications of whether this is something that was specific against Hu or it was some other dynamic…” 

Some excerpts from Keith Krach:

“Xi is not only the most powerful dictator since Mao he is probably the most powerful dictator in the world since Hitler… He’s probably even more dangerous…. We know what’s happening. There is no limit to his ambition…  The question in terms of business board rooms is… what are the moral responsibilities, what are the fiduciary duties that (board members) have to mitigate that risk for their shareholders…? If there is a conflict in Taiwan it’s not only disastrous for the business community, it is catastrophic for the tech-business because of Taiwan’s lock on the semiconductors. 

There is more to the interview so enjoy it above.