Will Problems in China's Financial Sector Be the Trigger for Total Collapse? "Revolution is impos... more Will Problems in China's Financial Sector Be the Trigger for Total Collapse? "Revolution is impossible until it is inevitable." At the very beginning of his book, Gordon Chang quotes this phrase from Leon Trotsky in order to catch the flavor of surprise yet inevitability of the collapse that he predicts for the Chinese communist regime. Indeed, since the fall of the Berlin Wall in 1989, many apparently strong regimes have collapsed. From East Germany in 1989, to Indonesia in 1998, and then to present-day Argentina, these transformations came about so suddenly and unexpectedly that the top political leaders did not know how to respond. The sudden confusion and inaction of the top rulers, in turn, sent out a signal to the citizenry that the rulers were no longer able to rule. Therefore, hundreds of thousands of people took to the street to pull down the regime. As demonstrated in the cases of Indonesia and Argentina, a systemic bank or currency run is a perfect candidate for triggering such a crisis. The relevant question here is thus: Are China's financial problems so serious that the country may experience a systemic bank or currency run? Gordon Chang dedicates one chapter in his book (chapter 6) to addressing this question. He begins by arguing that Chinese banks are "the most vulnerable link in China's economy today.... It is here, in the banking system, that the end of the modern Chinese state might well begin" (p. 122). However, at the end of that chapter, he concludes that "Beijing will do everything in its power to keep the state banks alive.... [Of] all segments of the economy, banking will be the last to fall" (p. 143). Chang's answer to the question seems to once again confirm the perception, generally shared among observers of China's banking system, that although seriously insolvent, Chi-Book Reviews
The decentralized economic reforms in post-Mao China have aroused a debate in the studies of cent... more The decentralized economic reforms in post-Mao China have aroused a debate in the studies of central-provincial relations over whether the center has lost control to the increasingly powerful provinces. This article uses the turnover of provincial leaders as an indicator to reassess the evolution of central-provincial relations. By subjecting contending theories of the debate to a statistical test that covers a time period including both the Deng and Jiang regimes, this study finds that the center was neither gradually losing control over the provinces, nor keeping constantly effective supervision of the provincial leaders with coherent policy criteria. Central-provincial relations in fact varied over time, and their fluctuation was affected by changes in the broader political context, such as succession politics during regime change.
This study provides an institutional explanation for the rapid growth of foreign investment in Ch... more This study provides an institutional explanation for the rapid growth of foreign investment in China since the mid-1990s. The argument is that this increase is caused by domestic institutional changes in China, including intensifying competitive liberalization among local governments, reorientation of the central elite toward stabilization and structural reforms in macroeconomic policies, and widening regional disparities during this period. The first factor encourages local governments to offer various concessions to foreign investors. The second factor maintains the macroeconomic stability conducive to the expansion of export-oriented foreign firms. Finally, the third factor, an unintended consequence of the previous two, supplies labor-intensive firms with abundant migrant workers from the impoverished hinterland. The combination of these three institutional features has helped to forge coastal China into a world production power-house since the mid-1990s.
When Xi Jinping had just come to power in 2012, the world expected that he would continue the dev... more When Xi Jinping had just come to power in 2012, the world expected that he would continue the development trajectory of economic liberalization and political institutionalization set in motion by Deng Xiaoping. However, when the National People’s Congress abolished the presidential term limit in the Chinese Constitution in March of 2018, it suddenly became clear that Xi had chosen to “roll back” from Deng’s policy line in nearly every aspect of the Chinese Party-state system. How does one explain Xi’s sudden departure from Deng’s policy line? In comparison with the resurgence of other authoritarian regimes of the 1960s and 1970s in Latin America and East Asia, this paper argues that the cause of Xi’s political rollback lies in the exhaustion of the previous development model. More specifically, the exhaustion of export-led growth in the mid-2000s had made the existing distributive coalition unsustainable. The power struggle within the political coalition therefore intensified and fi...
Will Problems in China's Financial Sector Be the Trigger for Total Collapse? "Revolution is impos... more Will Problems in China's Financial Sector Be the Trigger for Total Collapse? "Revolution is impossible until it is inevitable." At the very beginning of his book, Gordon Chang quotes this phrase from Leon Trotsky in order to catch the flavor of surprise yet inevitability of the collapse that he predicts for the Chinese communist regime. Indeed, since the fall of the Berlin Wall in 1989, many apparently strong regimes have collapsed. From East Germany in 1989, to Indonesia in 1998, and then to present-day Argentina, these transformations came about so suddenly and unexpectedly that the top political leaders did not know how to respond. The sudden confusion and inaction of the top rulers, in turn, sent out a signal to the citizenry that the rulers were no longer able to rule. Therefore, hundreds of thousands of people took to the street to pull down the regime. As demonstrated in the cases of Indonesia and Argentina, a systemic bank or currency run is a perfect candidate for triggering such a crisis. The relevant question here is thus: Are China's financial problems so serious that the country may experience a systemic bank or currency run? Gordon Chang dedicates one chapter in his book (chapter 6) to addressing this question. He begins by arguing that Chinese banks are "the most vulnerable link in China's economy today.... It is here, in the banking system, that the end of the modern Chinese state might well begin" (p. 122). However, at the end of that chapter, he concludes that "Beijing will do everything in its power to keep the state banks alive.... [Of] all segments of the economy, banking will be the last to fall" (p. 143). Chang's answer to the question seems to once again confirm the perception, generally shared among observers of China's banking system, that although seriously insolvent, Chi-Book Reviews
The decentralized economic reforms in post-Mao China have aroused a debate in the studies of cent... more The decentralized economic reforms in post-Mao China have aroused a debate in the studies of central-provincial relations over whether the center has lost control to the increasingly powerful provinces. This article uses the turnover of provincial leaders as an indicator to reassess the evolution of central-provincial relations. By subjecting contending theories of the debate to a statistical test that covers a time period including both the Deng and Jiang regimes, this study finds that the center was neither gradually losing control over the provinces, nor keeping constantly effective supervision of the provincial leaders with coherent policy criteria. Central-provincial relations in fact varied over time, and their fluctuation was affected by changes in the broader political context, such as succession politics during regime change.
This study provides an institutional explanation for the rapid growth of foreign investment in Ch... more This study provides an institutional explanation for the rapid growth of foreign investment in China since the mid-1990s. The argument is that this increase is caused by domestic institutional changes in China, including intensifying competitive liberalization among local governments, reorientation of the central elite toward stabilization and structural reforms in macroeconomic policies, and widening regional disparities during this period. The first factor encourages local governments to offer various concessions to foreign investors. The second factor maintains the macroeconomic stability conducive to the expansion of export-oriented foreign firms. Finally, the third factor, an unintended consequence of the previous two, supplies labor-intensive firms with abundant migrant workers from the impoverished hinterland. The combination of these three institutional features has helped to forge coastal China into a world production power-house since the mid-1990s.
When Xi Jinping had just come to power in 2012, the world expected that he would continue the dev... more When Xi Jinping had just come to power in 2012, the world expected that he would continue the development trajectory of economic liberalization and political institutionalization set in motion by Deng Xiaoping. However, when the National People’s Congress abolished the presidential term limit in the Chinese Constitution in March of 2018, it suddenly became clear that Xi had chosen to “roll back” from Deng’s policy line in nearly every aspect of the Chinese Party-state system. How does one explain Xi’s sudden departure from Deng’s policy line? In comparison with the resurgence of other authoritarian regimes of the 1960s and 1970s in Latin America and East Asia, this paper argues that the cause of Xi’s political rollback lies in the exhaustion of the previous development model. More specifically, the exhaustion of export-led growth in the mid-2000s had made the existing distributive coalition unsustainable. The power struggle within the political coalition therefore intensified and fi...
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