Elite Chinese Politics and Political Economy

Xie Ping writes yet another hard-hitting article, accusing the entire banking-government nexus of colluding with each other in numerous ways. Always refresing, but does it help his career?

中国金融领域与不良资产有关的十大串谋
谢平
2006年03月24日09:55
　　形形色色的串谋行为背后，有“串谋链成本－收益－风险三大定律”

　　串谋与勾结是所有的组织和机构中普遍存在的现象。在中国金融领域，不良资产的产生、处置中的串谋现象表现得尤为突出。总体上，这些行为可以概括为十大方面：

　　首先，国有商业银行总行、省市分行负责人与党政官员的串谋，可称之为“政治性串谋”。例如，在一些不良资产比例高的省，省级分行行长当上了副省长或者在其退休后，被安排到省人大、政协任职；

　　其次，银行各级机构领导成员之间的串谋。如行长与副行长、党委委员之间，甚至发贷、审贷人员之间，互相对他人的违法、违规行为心照不宣、视而不见，甚至合伙作案，如中国银行开平支行大案；

　　第三，银行工作人员与企业的串谋。如审贷不严、虚假票据等，例如中国银行哈尔滨河松街支行的高山一案；

　　第四，银行与监管人员的串谋。例如监管人员擅自降低监管标准、隐瞒不良资产信息等；

　　第五，银行与资产管理公司、地方政府在不良资产剥离中的串谋。例如故意合同要素缺损、虚假申报贷款数量和质量、借破产兼并逃废债等；

　　第六，资产管理公司与不良资产回收机构（相当部分是个人控制的）之间的串谋。例如低估贱卖资产、选择性批发等；

　　第七，资产管理公司与欠贷企业之间的串谋。企业与银行在放贷时串谋一次，在回收环节则与资产管理公司又来一次串谋；

　　第八，银行、资产管理公司与司法部门的串谋。例如，2003年交通银行锦州分行与法院联手造假核销贷款的案例；

　　第九，资产管理公司与拍卖行、评估机构、律师事务所之间的串谋；

　　第十，资产管理公司与外商之间的串谋。

　　形形色色的串谋行为背后有相同的规律，这里不妨称之为“串谋链成本－收益－风险三大定律”。

　　定律一：串谋被发现的风险折扣远小于串谋预期获得的收益，串谋收益又小于对应贷款的本息。

　　定律二：贷款本息，即不良资产之和，要大于串谋总收益。串谋的总收益是各环节的串谋收益之和，这取决于串谋链的长度和范围。

　　定律三：串谋链越长，范围越广，被发现的风险越小，产生的不良资产越多。

　　上述串谋行为有其内在缘由：

　　其一，激励机制扭曲是最重要的原因之一。中国的金融机构经营者面临的是双重激励——货币化激励与行政级别激励。一方面，经营者对此无所适从，最终导致相机抉择问题，即银行家经营好银行的预先承诺是不可置信的，他可以通过自身转移来规避市场风险，易地为官；另一方面，两市场间存在交易可能。比如，银行家为了获得政治认可，而不考虑银行资产的盈利性、安全性、流动性，追逐省长项目、市长项目，导致银行业绩恶化，即“政治性串谋”。

　　其二，不良资产是一种非标准化的高风险资产，其未来市场价值有很大的不确定性。非标准化的原因又在于不良资产处置中信息不完全与不对称。因此，串谋有可能获得超额处置价差。

　　银行现有的“集体领导班子”体制实际不是防范串谋的机制设计，反而容易形成“内部人控制集团”并产生串谋。相对业绩评价（RPV）机制证明，尽管国家有关部门给银行设定了经营目标，但当银行经营者共同选择增加不良资产时，可以通过一个交互保险的契约（不揭发）以降低委托人（国家）所提供的激励强度，从而避免激烈竞争。为补偿串谋带来的激励强度的扭曲，国家不得不进一步提高激励强度，结果给经营者带来更多串谋收益。

　　RPV不可能定理则指出，即使在歧视性的机制中，当委托人给予幸运者较高的激励以诱导他努力工作时，不幸者就有较强的动机增加不良资产。为了减少不幸者增加不良资产动机，委托人不得不减少两者之间的激励强度的差异，搞“大锅饭”。但这样会留给代理人之间以足够的串谋空间。这印证了国有银行旧体制下，产生不良资产的串谋行为具有必然性。

　　此外，内部控制薄弱、外部监管不力、串谋行为处罚太轻以及形成社会串谋链条后被惩罚的风险下降等等，也都是出现串谋现象的缘由。

　　如何有效建立防范这些串谋行为的机制呢？一是尽快改变激励机制。要针对国有金融机构的经营者建立货币化的激励，改变倚重政治化激励和道德说服的激励机制，特别是割断国有银行分行与地方党政的干部任免关系。二是要实行独立的内部稽核体系，垂直管理。这会在组织内部形成独立的监督者与代理人的利益，有利于防范串谋行为。三是强化外部独立审计。四是加重处罚力度，强制轮岗。五是提高金融机构内控水平、完善IT系统和数据集中程度。六是加强对中介机构的监管，特别是涉及不良资产处置的拍卖业的监督管理。（作者为中央汇金投资有限公司总经理）

　　《财经》杂志/总155期

来源：《财经》杂志

Man, how did i miss this. Qiu Xiaohua was promoted to the head of the State Statistical Bureau (SSB). He was of course one of Zhu's ablest lieutenants, and it is paying dividend. Note, he is only 48, so the question is what's next for him? I have no doubt that he will serve as head of SSB for the next five years and possibly until the end of the Wen Administration, but then he would still be in his mid-50s. If the Standing Committee considers statistics to be an important tool of the regime, which seems to be the trend, he might find himself a vice premier in charge of statistics, auditing, and the likes.




邱晓华：名牌“老统计”
2006年03月24日05:45

　　3月16日，48岁的邱晓华升任国家统计局局长。作为新闻发言人、总经济师，邱晓华早已为业内外熟知。除了强劲的业务能力、钻研精神，他还给统计数字注入了鲜活的生命力。在“十五”计划结束、“十一五”规划开局的节点上赴任国家统计局局长，邱晓华势必要面临新一轮的挑战。邱晓华面对日后的工作语重心长地说：我的工作任重道远。

　　邱晓华是一位学者型官员，与以往历任国家统计局局长半路出家不同，邱晓华是一个在统计领域耕耘20多年的“老统计人”。有学者指出，邱晓华既是统计学家、又是政府高层，两者兼备是中国统计界的一件幸事。有媒体这样评说邱晓华，一个掌握中国20年变化数字的人、一个真正对中国经济了如指掌的人。

　　儿时梦想成为作家

　　1958年，邱晓华出生在福建省宁化县城关镇。在这个南方小镇里，他经历了磨难的童年。在他6岁那年，母亲离开人世，年幼的邱晓华和姐姐与外婆生活在一起。那个年代穷苦孩子经历的一切他都尝遍，种菜锄地、砍柴、喂牲口……虽然过着困苦辛劳的日子，但是童年邱晓华心中就有自己的理想，生活磨难只是在他的品质中印下了勤奋耐劳、俭朴坚强的底色，让他在后面的不平路上禁得起颠簸，而不是向命运低头。

　　邱晓华从小就表现出对知识的浓厚兴趣，他嗜书如命，擅长作文。上学后，好学的他不负所望，一直保持着良好的成绩，尤其是语文课，老师经常夸奖他写的作文好。物质生活的匮乏，与学习知识的渴望，让他自小养成了朴素谦虚并且勤奋好学的习惯。

　　童年的邱晓华对于自己长大成人后的畅想，是成为一名作家或者新闻记者。在他今后的人生中，他撰写的大量经济分析著作圆了半个作家的梦想，剩下的半个恐怕连他自己也想象不到，竟是成为中外瞩目的经济专家。

　　结缘统计数字

　　1977年底，全国恢复高考时，当时在宁化县水茜乡插队的邱晓华最终以优异成绩考取了厦门大学经济系念起了统计专业，从此和统计数字结下了不解之缘。

　　邱晓华的同学曾经回忆说，大学时，邱晓华就表现出了对数学特殊的敏感，数学成绩总是特别好。当时计划统计专业招收的是文科生，很多同学一提到数学就头痛，邱晓华经常向这些学习数学有困难的同学伸出援手。同时，他还是个热心的人，他经常提早到教室晚自修，顺便帮同学占座位。一位来自渔民家庭的同学家里发生翻船事故后，家庭经济也不宽裕的邱晓华还向这位同学捐了款。不仅学习好，邱晓华还是系里的体育健将，创造了多项纪录。据说，他参加校运会4×100米接力比赛创造的校纪录直到毕业后很多年还没有被打破。

　　大学四年，邱晓华不仅把专业知识基础打造得扎扎实实，而且在学校里还积极要求进步并于毕业前夕入了党。毕业时他把本属于自己的留校名额让给了同学，怀揣深远的抱负，孑身一人北上，拿着一纸毕业分配证明进入了国家统计局。那是1982 年，邱晓华24岁。从那时至今，他在国家统计局干了近24年。

　　工作起来就疯狂

　　毕业之后能够到本专业的最高研究机构工作，邱晓华很珍惜。当邱晓华进入国家统计局后，他在综合司的同事就发现办公室里多了个“工作狂”。在参加工作的前5年，他几乎放弃了除锻炼身体之外的所有业余交往和娱乐，把精力全花在了学习和工作上。他每次出差返京，放下行李即赶回机关处理公务。为尽快熟悉业务，并且不断补充业务知识，他经常在别的同事下班以后，留在办公室研读这里的理论书籍和资料。那个时候，局里很多人对这个年轻人的印象就是他在综合司灯火长明下如痴如醉读书的背影。初来乍到的前几年，他广泛钻研了中外经济理论、现代统计理论等等书籍，而且参与了当时我国第一本《中国统计年鉴》的编制工作。一次在全局先进经验介绍会上，邱晓华以“笨鸟先飞”为题，介绍了自己的成长道路。

　　令多位地方官员佩服的是，邱晓华对宏观经济的表述能力非常强。中南财经政法大学教授、博士生导师叶青回忆到，邱晓华到湖北鄂州调查，不看文稿，整整两个多小时，为现场统计工作人员讲述“十一五”规划的全过程，思维敏锐、对纷繁的经济数据记忆明晰、信手拈来。

　　学者型官员

　　邱晓华是个学者型官员。作为高级统计师、经济学博士，他先后担任多个大学的兼职教授，并曾于1996年至1997年在美国斯坦福大学亚太研究中心做高级访问学者，著有《中国经济热点追踪》、《改革十年宏观调控分析》、《八十年代的中国经济》、《九十年代的中国经济》、《中国的道路―――我眼中的中国经济》等专集，并先后在全国性刊物上发表有关中国经济改革与发展的研究文章近400篇。

　　邱晓华还先后承担了《中国宏观经济的研究》、《中国农业与国民经济关系研究》、《中国经济速度、结构、效益关系研究》、《中国经济分析与预测系统研究》等十多项国家级课题研究，许多学术成果被评为优秀成果奖。1986年撰写的《从国情国力出发看我国经济发展对策》一文，薄一波看后给予了高度评价，并当即提出“要与作者再好好探讨”。1987年撰写的题为《我国农副产品出口情况、问题和对策》的分析报告中，提出沿海农业必须走以外向型发展道路为主的观点。此论一出，中央领导倍加重视，成为我国制定沿海地区发展战略的重要参考资料。1991年11月由邱晓华主笔的《对三年治理整顿的反思与回顾》的文章在《人民日报》以一个整版的篇幅刊出，文章对治理整顿进行了全面反思和总结，并郑重提出“治理整顿已经可以结束，留存问题应在继续深化改革中解决”。文章一出，震动了中国经济界，也震动了中南海。中央很快采纳了文章的建议，同年底宣布治理整顿结束。

　　邱晓华还多次参与《政府工作报告》、中央经济工作会议、中央全会文件的起草工作，受到中央财经领导小组、国务院研究室的通报表扬。现在他还是央行货币政策委员会的委员。

　　把新闻发布会当考场

　　1993年起，邱晓华开始担任国家统计局新闻发言人，从幕后走向前台。为了做好新闻发言人，他更加刻苦努力，平时注意搜集来自各方面的信息，上千页的统计年鉴都装在他心中；遇到不同观点，他从不轻易否定，而是潜心思考，反复揣摩，吸收有营养的东西。他曾说过：“我是把每一次新闻发布会都当成考试。力图显示我们不仅生产数字，而且也有观点。”

　　正是由于他的努力，中外新闻记者都喜欢参加邱晓华的发布会，专家学者也十分重视他的发布会，因为他能够运用数字解释经济事实，通过数字之间的相互关系揭示深层次的问题，并据此提出有说服力的观点。

　　邱晓华很善于对经济数字进行灵活的、创造性的运用。他不仅具有高超的统计数字运用技术，而且他对统计数字背后的政治意义也具有很强的敏锐性。2002年时，国外一些有影响的媒体，像英国的《金融时报》、《经济学家》，美国的《新闻周刊》、《商业周刊》和《中国经济评论》对中国统计数字的准确性提出了疑问，由此引起了对中国发展前景的错误推断和评价，邱晓华敏锐地意识到对中国统计数字怀疑的背后是有文章的，所以他着重强调，2002年是中国加入WTO的起步之年，必须保持中国良好的国际形象，不能让错误的观点误导国际舆论，要让境外的投资者、机构和有识之士真正了解中国，对中国有信心。

　　上任面临新挑战

　　1999年9月，邱晓华结束了安徽省省长助理的任职，回国家统计局担任副局长，同时，根据工作需要，他兼任了局机关党委书记。从此，他开始渐渐减少公开发言的次数，再次从台前走回幕后，主抓党务工作。由于这次任命，他又再次出现在公众面前。统计系统的人士认为，作为学者型官员，邱晓华的专业性很强，处事稳重，对于宏观政策的把握比较好。他上任统计局局长后，在提高统计系统统计数据质量方面应会有所加强。

　　上任第一年，邱晓华将面临巨大的挑战。按“十一五”规划的要求，国家统计局亟待建立起一个能体现自主创新能力的统计指标体系以及各地区、行业节能降耗的统计发布制度，研究制定不同功能区域的评价指针和划分标准。统计制度改革在2006年将继续深化。为减少各界对统计数据的质疑，完善统计制度，统计局正全面改革调查管理体制，整合省及以下政府统计机构，实施垂直管理。另外，从今年开始，国家统计局将逐步发布各个省份的GDP能耗执行数字。

　　上任第一天，邱晓华说，今后的统计工作要为三方面服务：一是党政领导、二是社会公众、三是企业经济界人士。在统计与经济的关系上，邱晓华认为，统计调查需为社会经济发展提供优质服务，而真实、科学的数据是国家经济发展的基石。

　　面对庞杂的工作与不小的压力，邱晓华说：我的工作任重道远。

　　（本报综合报道）

　　《市场报》 (2006年03月24日 第五版)

Latest news, oil price restrictions have been lifted. A, this means the government is not overly worried about inflation at this point. B. this shows another classic central government trick to push the cost of reform down to the local governments. If the cabbies go on strike, the local government will have to pay for subsidies to them. I wouldn't be surprised that subsidies to sub-national level SOEs will come from local governments as well. Here, the State Development Bank might step in with a few loans.

I wonder if this will increase or decrease Chinese import of oil. On the face of it, the answer of course is that Chinese demand for oil will decline due to higher prices, but the refineries are now more eager to process oil than before, so that might neutralize some of the effect of higher prices. But I doubt that would be greater than the effect of increasing prices for consumers, so China's balance of trade will improve even more, unless they revaluate the currency to increase the buying power of domestic oil consumers.


Xinhua
Govt raises retail prices of processed oil
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China announced Sunday its decision to lift the prices of processed oil as of March 26 while setting up a mechanism to offer some subsidies to disadvantaged communities and public service sectors.

In a circular made public Sunday, the State Development and Reform Commission, which regulates energy prices, said the producer prices of gasoline will be raised by 300 yuan (37.5 U.S. dollars) per ton while that of diesel oil will be up by 200 yuan per ton.

To offset the impact of the price hikes to communities sensitive to higher prices, the commission said China's State Council has decided to launch a mechanism to subsidize some of the communities and public service sectors.

The recipients of the subsidies include grain growers, fishermen and fishing firms operating and farming offshore or in inland areas, using oil-driven fishing boats, state-owned forestry enterprises and nurseries of forestry centers, urban public transportation firms, said the commission.

It said the government will pay the unspecified amount of subsidies directly to grain growers to mitigate the impact of the price hikes of diesel oil and chemical fertilizers and other agricultural production materials.

For operators of rural passenger shipping business, the commission said the government will reduce the impact mainly through such measures as adjusting the charges of transportation, and offer proper amount of subsidies to those in difficulty.

The commission said local governments will offset the increased financial burden on taxi drivers in the urban areas mainly through readjusting the charges of transportation and imposing surcharge on fuel oil.

It said local governments may offer provisional subsidies to taxi drivers in the urban areas if they are unable to readjust the charges in the immediate future.

The Chinese Government has ordered various localities and government departments to implement the measures on subsides while price regulators at various levels should improve inspection and supervision of prices of processed oil to maintain the stability of the oil prices.

Energy sector is one of the very few areas that Chinese Government has yet liberalize price control since China began to build a market economy.

The commission said China's current prices of processed oil are far below that on the international market, which is not helpful to oil refineries in China, to ensuring adequate supplies and to improving energy efficiencies, thus having negative impact on the stable operation of the economy.

Prior to the price hikes, the retail prices of domestically processed oil is about 43 U.S. dollars, while that of crude oil on the international market stands at around 60 U.S. dollars, an official with the commission said in an interview with the press.

The artificially lower prices have resulted in heavy losses of domestic refineries and made it difficult for the oil sector to ensure domestic supplies.

The central government has been slow in raising processed oil prices in the past two years to reduce the impact of higher oil prices on the disadvantaged communities and public service sectors, said the official.

The official said imported oil accounts for over 40 percent of the country's oil consumption, and changing oil prices on the international market are having growing impact on domestic oil market and prices.

A reader emailed me to ask me the following question. It is an intriguing question that I hope one of our readers has an answer:

I am having troubles in finding a way to estimate the plausible total losses of the AMCs. Do you have any idea on how I could hovercome the problem?

Actually, it's hard to tell. The problem is that since 2001, AMCs have absorbed new batches of NPLs, which is worth a lot more than the old batch on a per dollar basis. So, when they claim they have "recovered" money, is it from sales of the old NPLs or the new NPLs? I don't have any evidence that AMCs are separating the old NPLs and new NPLs when they declare their recovery ratios. You can find those so called ratios in the CBRC website. If you have some AMC contacts, I would be interested in finding out whether they are separating the new and the old NPLs when they declare recovery ratios.

Another problem is that AMCs have learned to buy NPLs from each other at a high price. So, even if the MOF has some regulation requiring AMCs to keep track of recovery ratio for the original 1.4 trillion, they can just sell NPLs to each other at a high price, thereby jacking up the recovery ratio. In this way, the cash recovery ratio for the original 1.4 trillion is artificially high, while AMCs have "invested" in some useless NPLs from another AMC, which they will make a loss on. But that's okay, since NPLs they acquire from another AMC does not count as the original NPLs, but "new investment." Anyway, if readers out there know the accounting, please let us all know.

Dear All,

Wen gave a pretty important press conference yesterday at the NPC in which he said "...we must resolutely push forward reform and opening, walk the path of socialism with Chinese characteristics. Although moving forward will be difficult, we must not stop; the way back is a dead-end." So, things are about to get really interesting since this was clearly a very strong message intentionally telling the world that Wen is supportive of further reform. This stands in sharp contrast to, if not in opposition, to Hu's call for reviving Marxism. I don't know what prompted Wen to make this statement, but perhaps out of personal preference or pleads by his advisors (as well as Jiang's people) that Hu's leftism now needs some adjustments. Undoubtedly, this strong signal will give heart to those neo-liberal economists and reformers in the government, who had been feeling a bit defensive lately.

Wen also said that the bank listings will go forward, as expected. BUT, in answering the WSJ reporter's questions that "whether you will support Citibank's bid to acquire majority stakes in the Guangdong Development Bank?" His answer was "in the process of handling commercial banking reform, we must insist on two principles 1. THE STATE MUST HOLD MAJORITY CONTROL, which guarantees the control over a vital economic flow and prevents financial risks 2. strengthen management of the entire process of reform, perfect internal control and monitor and prevent the loss of state assets"

Man, the folks at Citibank must be feeling pretty painful tonight. With Huang Ju's absence, Wen's words are the law, so that's it for that deal. I think this will give the Societe General/Shougang combo a renewed chance of taking a minority stakes. Mm, what should they do? Well, if Citibank had been active in other bank deals (like with city commercials), I would just cut my losses with this deal. GDB is pretty crappy anyway. I would much rather hold high minority stakes in several good city commercials. But I haven't heard any Citibank deals on the horizon with other smaller banks, so this is all they got.......

The AWSJ piece on this topic says "The premier didn't answer a question about his views on Citigroup Inc.'s effort to buy a controlling stake in Guangdong Development Bank. The potential deal would require Beijing to ease its current 25% cap on foreign ownership of domestic banks." No, he answered it, he said "in the process of handling commercial banking reform...." not in the process of handling "state-owned commercial banking reform" which would indicate that the majority control rule only applies to the Big Four banks. His language suggests that the state controlling majority rule still applies to all commercial banks.





温家宝:继续改革国有商业银行 要避免大的损失

央视国际 (2006年03月14日 12:18)
专题:2006年全国两会

　　中新网3月14日电 中国国务院总理温家宝在今天的记者招待会上强调，改革要继续推进，同时注意随时总结经验，避免损失，特别是大的损失。

　　温家宝说，国有商业银行改革的目标是建立现代商业银行制度。我们要探索公有制的多种实现形式，而股份制就是一种有效的实现形式。实行股份制不是目的，目的在于改善公司治理结构，学习和借鉴先进的管理经验，从而提高国有商业银行的管理水平和经营效益。

　　他强调，在把握商业银行改革的过程中要坚持两条原则：第一，国家绝对控股，从而保持对经济命脉的控制权，防范金融风险。第二，加强对改革全过程的管理，完善内控机制和监管体系，防止国有资产流失。他说：“我们的国有商业银行改革正在进行当中，应该说取得了一定的成效。我们要继续推进改革，同时注意随时总结经验，避免损失，特别是大的损失。”

My student sent me this article, which is just excellent. Talk about blow-back effect, Hu's recent push to revive Marxism is signaling leftist scholars to be bold again. To be fair, their voices have been supressed for the past 15 years, and they would now like a day in the sun.

That's fine, but the tragedy in China is that these ideological debates often have policy implications. Zhou Xiaochuan, for example, are now under the attacks of the leftists for selling state bank shares too cheaply. He is especially vulnerable now with the absence of Huang Ju, who would have taken the brunt of the criticism.



New York Times
By JOSEPH KAHN
Published: March 12, 2006
BEIJING, March 11 — For the first time in perhaps a decade, the National People's
Congress, the Communist Party-run legislature now convened in its annual two-week
session, is consumed with an ideological debate over socialism and capitalism that many assumed had been buried by China's long streak of fast economic growth.

The controversy has forced the government to shelve a draft law to protect property
rights that had been expected to win pro forma passage and highlighted the resurgent
influence of a small but vocal group of socialist-leaning scholars and policy advisers.

These old-style leftist thinkers have used China's rising income gap and increasing
social unrest to raise doubts about what they see as the country's headlong pursuit of private wealth and market-driven economic development.

The roots of the current debate can be traced to a biting critique of the property
rights law that circulated on the Internet last summer. The critique's author, Gong
Xiantian, a professor at Beijing University Law School, accused the legal experts who
wrote the draft of "copying capitalist civil law like slaves," and offering equal
protection to "a rich man's car and a beggar man's stick." Most of all, he protested
that the proposed law did not state that "socialist property is inviolable," a once
sacred legal concept in China.

Those who dismissed his attack as a throwback to an earlier era underestimated the
continued appeal of socialist ideas in a country where glaring disparities between rich and poor, rampant corruption, labor abuses and land seizures offer daily reminders of how far China has strayed from its official ideology.

"Our government only moves forward when it feels there is a strong consensus," said Mao Shoulong, a public policy specialist at Tsinghua University in Beijing. "Right now, the consensus is eroding and there is a debate over ideology, which we haven't seen for some time."

The divide does not appear likely to derail China's market-led growth. President Hu
Jintao, in what Chinese political experts and party members said was a clear reference to the debate, told legislative delegates last week that China must "unshakably persist with economic reform."

China has generally stuck by its market-opening commitments to the World Trade
Organization. Wen Jiabao, the prime minister, has allowed billions of dollars in foreign investment to flow into the once tightly protected financial sector.

Legislative officials insist that the proposed law, which has taken eight years to
prepare and is intended to codify a more expansive notion of property rights added to
the Constitution in 2003, will sooner or later be enacted, though possibly with some
significant modifications. But Mr. Hu and Mr. Wen wittingly or unwittingly invited the debate when they made tackling growing inequality a center of their propaganda efforts, political analysts say. The state-run news media are abuzz with calls to make "social equity" the focus of economic policy, replacing the earlier leadership's emphasis on rapid growth and wealth creation.

Since his rise to power in 2002, Mr. Hu has also tried to establish his leftist
credentials, extolling Marxism, praising Mao and bankrolling research to make the
country's official but often ignored socialist ideology more relevant to the current
era.

He told party leaders in 2004 to study how Cuba and North Korea maintained political
order, party officials say. And he has tried to distance himself from his predecessor, Jiang Zemin, who invited private businessmen to join the Communist Party and was viewed as permitting well-connected officials to enrich themselves with public property at the expense of the poor.

"Hu is himself a centrist who is not really pursuing one agenda or the other," observed a party official who said he could be punished for talking about leadership politics if he were quoted by name. "But he did pull us to the left to restore balance, and that gave the old guard an opportunity it has not had in years."

As a result, analysts say, the leadership may find it harder to pursue market-oriented solutions to some pressing problems, like providing health care to rural residents, grappling with rampant corruption in the state sector, expanding access to education and overhauling banks, insurance and securities companies.

Beijing's new plan to address its rural woes, labeled "building a new socialist
countryside," promises an infusion of government cash for peasants and rural areas. But it steers clear of tackling some restrictions on economic activity, like a ban on
private land sales in the countryside, that many pro-market economists say have left
peasants economically disenfranchised.

"My impression is that allowing an expanded role for the market in education and health care is off the table," said Mr. Mao, the Tsinghua policy expert. "Rural land ownership is also too sensitive to consider now."

The tensions reflect rising concern that breakneck growth averaging nearly 10 percent
annually over 20 years has left China richer but also dirtier and, by the standards of the one-party state, politically volatile. Corruption, pollution, land seizures and arbitrary fees and taxes are among the leading causes of a surge in social unrest. Riots have become a fixture of rural life in China — more than 200 "mass incidents of unrest" occurred each day in 2004, police statistics show — undermining the party's insistence on social stability.

Many Western and some Chinese experts have argued that these problems stem from China's authoritarian political system, and that they will not easily go away until people have a greater say in how they are governed. But the Communist Party and many left-leaning scholars reject that view. They say the ills are caused by capitalist excesses and rising inequality, which they say requires that the government reassert itself in economic affairs.

One measurement of inequality, the gap between the average incomes of urban and rural
residents, has risen to about 3.3 to 1, according to the United Nations Development
Program, higher than similar measures in the United States and one of the world's
highest. A study by the party's Central Research Office estimates that the ratio could rise to 4 to 1 by 2020 if current trends continue, a level some Chinese economists say could incite wider social turmoil.

Such political fears seemed to give an opening to critics who felt economic policies had strayed too far toward capitalism. The strength of leftist opposition had faded
throughout the 1990's after Deng Xiaoping, who called economic development "hard truth," and later Mr. Jiang tolerated little ideological discussion of the direction of changes.

Liu Guoguang, a Marxist economist and a former vice director of the Chinese Academy of Social Sciences, stimulated an outpouring of opinions about inequality last summer when he gave a private talk that was transcribed and posted on the Internet. His talk
supported the emphasis on growth and development but called for a much larger role for the government in managing economic affairs.

In a subsequent interview with Business Watch, a state-run magazine, Mr. Liu said, "If you establish a market economy in a place like China, where the rule of law is
imperfect, if you do not emphasize the socialist spirit of fairness and social
responsibility, then the market economy you establish is going to be an elitist market economy."

He has been joined by other scholars, including Mr. Gong, whose incendiary polemic on
the property law prompted a succession of sympathetic essays and study sessions.
Also contributing to the response is the Hong Kong-based economist Lang Xianping, who
has used a television show to pillory what he describes as raids on state assets by
managers and foreign investors.

One top official who has come under scrutiny is Zhou Xiaochuan, the central bank
governor and a promoter of market initiatives. Mr. Zhou attracted foreign investment to the financial sector, partly delinked China's currency from the United States dollar and steered the three biggest state-owned banks toward stock market listings overseas.

Mr. Zhou was attacked directly in a widely circulated Hong Kong newspaper article and
indirectly by commentators in Beijing, who accuse financial officials of selling China's most valuable assets too cheaply.

Ji Baocheng, president of People's University in Beijing, criticized Mr. Zhou's banking changes in a public session of the legislature last week. He cited the big Hong Kong stock market listing of China Construction Bank, which was completed after the government injected billions of dollars to clean up its balance sheet.

Mr. Ji said the government priced shares in the bank too low, given the fresh infusion of capital, and he accused officials of "blindly sacrificing the interests of China and its people."

The government defends the overseas listings as a necessary step to raise capital,
attract foreign experts to the boards and executive offices of the troubled banks and
put the financial system on sounder footing.

Some pro-market economists, who seemed ascendant in the 1990's and early in this decade and now often sound defensive, have denounced the leftist revival as dangerous. Many also criticize the Hu-Wen administration for micromanaging investment and bank loans, tinkering with property and stock markets and declining to extend market-oriented policies to the countryside.

Zhou Ruijing, a retired newspaper editor associated with the pro-market camp, captured the sentiment in a January magazine essay.

"A widening gap between rich and poor is not the fault of market reforms," he wrote.
"It's the natural result of them, which is neither good nor bad, but quite predictable."

Apparently, the Central government is finally phasing in popularity polls as a cadre evaluation method. The Central Organization Department has been experimenting with this for quite some time, and I guess Hu Jintao now finally agrees to implement this nationa-wide. I personally don't think it will have a great impact, but on the margin, it might improve the quality of governance. Below, I answers some questions posed by a reporter, and include the Reuters piece on it.

1. What, in your opinion, is the reason for this announcement?

Hu Jintao is trying to gain legitimacy through this move. Also, I suspect that it is also an attempt to remove or at least undermine the legitimacy of several Jiang crony who are currently provincial party secretaries, such as Guangdong's Zhang Dejiang. He is probably not very popular these days.

2. Do you think this is feasible, and why/why not?

First, the Central Organization Department (COD) has been talking about this for quite some time. In fact, experiments using polls to evaluate cadres have been carried out for several years. The CCP will probably implement it nation-wide. I actually think the impact won't be that great. First, if the surveys are carried out by the local Organization Department, they will be meaningless since the local party secretary can control the outcome. I wonder if the COD will carry out its own survey on an annual basis across all the counties in China. It is actually much easier to do this than it sounds. Many Chinese governemnt and academic organizations (as well as western ones) have been doing mass surveys in China for years. I don't think the polling will be centralized for political reason. There would be too much opposition to it.

Even if they do the surveys, it will only be around 20% of the overall "grade" of the official. Evaluation by co-workers and superiors, as well as age, education, and administrative accomplishments, will still be important.

3. If it is not too speculative, how can this be implemented?

Like I said, it wouldn't be that hard. The COD can set up survey teams in every provincial capital, and they can carry out an annual survey of randomly chosen households in that province every autumn or spring (harvest and spring festivals are the two stress points during the year).

4. In your opinion, will "social stability" lose its importance to the new criteria in cadre performance reviews?

No, social stability will always be the number one priority in evaluating a cadre. There is no sign that this criterion is slipping.



China to use public opinion in party reshuffles

Reuters
Wednesday, March 8, 2006; 1:08 AM

BEIJING (Reuters) - China is planning a massive reshuffle of local politicians, linking promotion to how well they adhere to the central leadership's bid to address social imbalances, an official newspaper said on Wednesday.

The moves may affect over 100,000 officials in township, county, city and provincial posts ahead of a party congress in 2007 that is likely to seal changes in the country's ruling circle under President Hu Jintao.

"The criteria for promotion will not only look to GDP growth and other political achievements, it will also look to the level of popular satisfaction with their administration," the overseas edition of the People's Daily, the Communist Party's mouthpiece, said, citing comments by the party's organization chief, He Guoqiang.

It said the decisions about promotions and demotions would apply the "scientific outlook on development" -- the party's catchphrase for balanced economic and social growth that places fresh emphasis on social equality, especially for China's poor farmers.

"The goal is to properly select appropriate officials to provide an organizational guarantee for China's future development, and it has major significance for the Chinese Communist Party's 17th Congress in 2007," the paper said.

Hu and Premier Wen Jiabao have overseen a new five-year national development program currently before China's parliament.

That program promises improved incomes, health, education and housing for the country's 750 million farmers, but it has ignited internal debate about how to combine economic growth and equity, say observers.

He, the organization chief, said 14 provincial-level governments would be reshuffled later this year, and 17 in the first half of next year. Party congresses are held every five years, usually late in the year.

He did not specify what provinces would be changed first, but the leaders of several have been widely discussed as potential successors to Hu and Wen.

The paper said the selection process would include public opinion polls, on-the-ground investigations, and interviews with officials.

Just read a very interesting note written by a friend in the banking community on the prospect of passing the Schumer-Graham Bill, which, if passed, would impose a 27.5% tariff on all Chinese import because the Chinese monetary authority is supposedly under-valuing the RMB by 27.5%. There is apparently renewed momentum in Washington to pass this bill.

Of course, this bill is ridiculous from an economic and legal perspective (like, it violates the WTO), but does that mean it doesn't have a chance of becoming law? I wish I can say so with confidence, but in politics, you never know. I presume there is some heavy lobbying in the background against any actual protectionist measures. However, there is likely a free-riding problem. That is, all the small firms investing in China are leaning on the big companies to lobby Congress, but the big players are afraid to damaging their name brand, so they pray that the other big companies will do the lobbying. As a result, you have an under-supply of pro-China lobbying. Meanwhile, politicians who just want the next re-election are individually incentivized to hurl as much protectionist rhetoric to the public as possible.

But what's really crucial is whether there is leadership to actually see this bill through. One thing to look at is whether members in the relevant committees (finance committee, I believe) are running for re-election this time and whether their margin of victory is narrow. Only those with a need of re-election would try to benefit from this mess through shepherding the bill through the legislative process, thereby claiming credit. At minimum, this bill will require both Schumer and Graham's continual commitment; they are incentivized to continue sponsoring the bill since they will get the most credit, as the bill is named after them. But will other members follow suit?

One hopes not. Rhetoric is fine, but actual action will be detrimental because it will create general expectation of uncertainty. And of course, consumers will suffer.