 |
 |
 |
 |
 |
 |
|---|
Crisis Management
China’s record of 30 years of 10% annual GDP growth creates an illusion of continuity. In fact, its political and economic systems have endured a series of dramatic crises that threatened to undermine or reinvent the China model, but instead, reinforced the boom. “Reform and opening” itself was born out of the CCP’s legitimacy crisis following the death of Mao Zedong, and early reforms were justified by the need to rapidly catch up with East Asia's newly industrialized countries. The Tiananmen crisis of 1989 initially triggered state repression, but ultimately led to a renewed burst of marketization and privatization. The East Asian financial crisis of 1997-8 reinforced Bejing’s caution about fully opening its financial system, but also spurred even greater foreign trade, and foreign exchange reserve accumulation, in the 2000s. The global downturn of 2008-9 exposed China’s structural imbalance, but massive stimulus spending and a cheap currency allowed China to export its way through the downturn, once again giving policy-makers confidence that each crisis was an opportunity to advance the China boom. |
||
China's Opacity Protected it from CrisisPeriod: Rebirth
|
Click to expand In this particular instance, China’s opacity, lack of transparency, and lack of openness, worked to its advantage. These are banks that are, to this day, heavily controlled by the government. They might have foreign partners, some of them might have spun off shares, but they are basically still, and they certainly were back in '96-'97, dominated by national government policy. So, it was really not a betting against them, there was really not a breaking of the banks or of the currency. Now, the government did something else that turned out to be quite memorable for the rest of Asia, which was that in the face of these torrents working their way through the financial system, there was a temptation to devalue your currency as a way of continuing to be competitive in global markets through your exports. And China, for a lot of different reasons, did not do so. I think it was seen as a position of strength, or a move by China to try to forestall further devaluations that might have happened by other countries to remain competitive with China were it to have devalued. I think to a certain part, this was really just realpolitik. To alter the value of your currency is a traumatic event, particularly in economies with profoundly rickety financial systems. And, even today, China has a rickety financial system. And back in '96-'97, the shocks and aftershocks that it might have caused, and the dislocations in the banking system, or in the export market, if it were to have taken a sort of radical step with its currency, might have been highly counterproductive, so it chose not to. But that was seen as a bulwark in Asia and something that China got some good PR points for.
|
Cite this Source >>
|
||||||||||||||||||||||||
Add New Comment
comments powered by Disqus