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China’s President Xi and his reform agenda – really

By ValueWalk
Capital Markets

 

Thanks to misguided stories about President Xi’s reforms, America risks losing the opportunity to participate appropriately in China’s massive economic rebalancing and reform drive.

In their Animal Spirits, George A Akerlof and Robert J. Shiller, two Nobel Prize winners, show how human psychology drives the economy and why it matters for global capitalism. In particular, they show how stories move markets and are themselves a real part of how the economy functions.

The same goes for other economies, including China. What “we” in America know about China is filtered through aggregate stories by Washington’s political pundits, policy wonks, economic analysts, and news oracles. Some stories reflect realities; others don’t. Still others are misguided and flawed, while the rest have self-serving agendas.

As President Xi Jinping is in his first official state visit in the U.S., he remains an enigma to most Americans – not in spite of these stories, but because of them.

Stories about Xi’s secret agenda

After his first year in power, leading media, such as Bloomberg, reported that “Xi amassing most power since Deng raises reform risk.” After two years, the Chinese president was portrayed in the West as “Xi who must be obeyed” as The Economist put it in its cover story, calling him the most powerful Chinese ruler certainly since Deng, and possibly since Mao.

What united these stories, which quickly spread across the world via lesser-tier media channels, was their common denominator: Xi had acquired too much power.

More recently, Washington’s stories would like us to believe that the problem with President Xi is not that he has too much power, but that he is increasingly powerless.

The new conventional wisdom came about after Chinese equity market volatility, which the Financial Times thought showed that “Xi’s imperial presidency has its weaknesses.” That wisdom was quickly seconded by the Wall Street Journal, which reported that crises put dents in Xi’s armor as “Chinese president is looking more vulnerable than at any time since taking office in 2012, insiders say.”

Despite the demise of the Cold War, the West’s old imperial inclination to see the world through the glasses of good (“we”) and evil (“they”) permeates the Xi biographies. From Foreign Affairs and Foreign Policy to the Atlantic and the New Yorker, the story starts with an “insider” anecdote, a political recollection or recent event that presumably serves as an intro to the Xi narrative. In reality, it is a Potemkin bridge because of its basic point: If you serve in a Communist Party, you are “Born Red,” as Evan Osnos entitled his Xi story in the New Yorker – not one of “us” but “them,” and thus neither credible nor trustworthy.

Xi’s policy stance d

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