It has been a week, dear readers, increasingly visibly dominated by two different approaches, two clearly incompatible strategies for the future of the country. (And then there is also the U.S. and the circus of the Republican Convention Cleveland. But we will get to that later.)
We are referring to the ever-clearer indications of two approaches to the Chinese economy, and indeed the overall situation – what you might call the Status Quo Side (SQS) vs the Transition & Reform Team (TRT – remember, you saw these acronyms here first). In the red corner, we would appear to have Mr. Xi leading the SQS, intent on shoring up the system, further strengthening the position of the State-owned enterprises, and taking an ever-sterner approach to naughtiness in any direction. The TRT, on the other hand, would seem to have Li Keqiang as its patron, pushing for greater efficiency in the SOEs, a reform and reduction of the SOE role in the economy, and various other changes that have been discussed and declared now for years, but not implemented.
How this drama plays out is difficult to say, as there is little sign of it on the streets of China, and little more than whispers in conversations. There’s a weird feeling out there, dear readers. Hopefully the question won’t be made irrelevant by some major development of an unfortunate and military character.
But watching Cleveland, to change the subject, the sense of the world today is that anything is possible. The Trump Show, as predicted, has paid little attention to China-related issues. The absence from the convention of the serious Republican leaders – the Bushes, Romney, McCain – and the prominent roles of the four Trump children – is just weird. We await the Hillary Show, but there should be enough material from this convention for the Dems to create a clear distinction. Our money would still be on her to win the presidency, on Brexit to not actually happen, and for the Shanghai stock index to fall again below 3,000.