Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Political analyst Victor Shih breaks down the relations between China, the US, and the rest of the world in a discussion from the Chevron Auditorium in the I-House on “China-US Futures: Pathways to Peaceful Coexistence”. Key takeaways: many problems perceived by American politicians with China are not as bad as they try to let us believe.
Financial expert Victor Shih dives into the 2024 figures at the annual NPC and concludes China cannot roll over debts anymore and finance its budget like it did before. He tells Bloomberg that central state policies have increasingly replaced a market-driven economy.
China will continue to focus on supporting its manufacturing power, instead of changing to household subsidies, says economist Victor Shih, out of line with many other economists who expect support for consumption, as reported by Al Jazeera. Shih added: “There are 1.4 billion people in China, so comprehensive social assistance would be extremely expensive, especially in a deflationary context.”
Al Jazeera:
Analysts expect the National People’s Congress, China’s rubber-stamp parliament, to again set an annual growth target of about 5 percent when it meets in March.
While many economists have exhorted Beijing to stimulate growth through household transfers, Victor Shih, an expert on the Chinese economy at the University of California, San Diego, expects investment-driven growth to continue to hold sway.
“Marxist ideology, which valorises industrial production, remains the fundamental basis for policymaking in Beijing,” Shih told Al Jazeera.
“In all likelihood, the government will continue to subsidise manufacturing. Consumption, by contrast, is viewed as indulgent.”
Shih added: “There are 1.4 billion people in China, so comprehensive social assistance would be extremely expensive, especially in a deflationary context.”
Shih said Beijing could raise household consumption by urging companies to pay higher wages but that “China’s manufacturing edge is partly based on subdued worker income”.
As such, “higher wages would undermine Chinese exports, which is an important source of output”, he said.
“I don’t think the government will shift budgetary priorities in favour of the Chinese people… which will likely result in a period of economic weakness.”
Financial expert Victor Shih looks at the dilemma China faces as local debts run out of hand, while revenue is dropping, and consumer confidence is low, at a panel discussion at the Ray School of Management at the UC San Diego.
China expert Victor Shih, Director of the 21st Century China Center at the University of California San Diego School of Global Policy and Strategy, discusses the current state of US-China relations with Bill Gertz of the Washington Post, covering questions like, “Is China an existential threat or a competitor?” and “Is China trying to replace the US as hegemon?” at PNYX.
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Xi Jinping has been building up a new government structure and the just-installed Central Financial Commission will be key in making financial decisions for the central government, says political analyst Victor Shih in the Financial Times. The “de facto watchdog, planner, and decision maker for China’s US$61tn financial sector, weakening the power of state institutions such as the People’s Bank of China and China Securities Regulatory Commission.”
The Financial Times:
Wang Jiang, a veteran state banker, has been appointed executive deputy director of the office of the commission, reporting to He Lifeng, a vice-premier and Xi’s new economic tsar, the people familiar with the new body said.
Victor Shih, professor of Chinese political economy at the University of California, San Diego, said businesses should expect to be affected by the commission, which will have the final say on important deals including major mergers and joint ventures.
Shih said the commission would also control mid-level state financial sector personnel appointments and the regulations applied by government agencies. State institutions such as the central bank have already suffered a decline.
Since August, the chairs of some state banks have in effect outranked the PBoC governor in the Communist party hierarchy.
Florida governor Ron DeSantis, a Republican candidate for the US presidential elections, became the latest to go after China as a target to galvanize support against four private schools in Florida, funded by investment firm Primavera for “direct ties to the Chinese Communist party”. China expert Victor Shihexplains in the Guardian why China is the wrong target.
The Guardian:
It was a desperately needed moment of grandeur for Ron DeSantis: the Florida governor’s strongman act over China briefly lifting his stuttering presidential campaign during last week’s Republican primary debate in California.
But what DeSantis left unsaid as he railed against China’s growing global influence, while promising a “hard power” approach to Beijing should he win the White House, was how his posturing was hurting students and families back in his home state.
While their governor was speaking thousands of miles away, hundreds of distressed and bewildered parents in Florida were trying to figure out their next move after DeSantis stripped four private schools of state scholarship money, alleging without evidence they had “direct ties to the Chinese Communist party”.
Without state funding, many families face having to withdraw their children and find alternative educational arrangements barely a month into the school year…
Victor Shih, associate director of the 21st Century China Center at the University of California at San Diego’s school of global strategy and policy, said: “For the Republican side, also to some extent on the Democratic side, China has become this sort of boogeyman, a catch-all opponent of the US in a way that does not take into account a lot of economic and social realities.
“Primavera is not the Chinese communist party. They do manage money for China’s sovereign wealth fund, that’s well-documented, but so does BlackRock and Goldman Sachs, and I don’t see Ron DeSantis going after others who have managed money for China. You cannot say that anyone who does business with the investment arm of the Chinese government is acting on its behalf.
US restrictions on purchasing chips from China are hurting US semiconductor firms, says political analyst Victor Shih in an interview with the state news agency Xinhua. Not every chip sold by U.S. companies is cutting edge or has national security relevance. In those cases, the U.S. government should show some flexibility,” said Shih
Xinhua:
The Biden administration’s curbs on chip sales to China likely have impeded revenue growth of U.S. chips companies to some extent, a U.S. expert has said.
“The U.S. chips companies, like any companies, are very interested in expanding market share, and selling to the China market is very important since China is now the biggest consumer of chips in the world,” Victor Shih, associate professor of political science who also heads the 21st Century China Center at the School of Global Policy and Strategy with the University of California San Diego, told Xinhua in a recent interview…
On July 25, the Semiconductor Industry Association and Oxford Economics released a joint report stating that approximately 67,000 positions in the U.S. semiconductor industry, including roles for technicians, computer scientists and engineers, are projected to remain vacant by 2030.
Besides the shortfall of skilled workforce, the high cost is another hurdle for the industry. “The higher cost basis in the U.S. will not change in the short run. In the medium term, it remains unclear whether the U.S. can set up an apprenticeship program to train sufficient numbers of technicians for semiconductor fabs,” said Shih.
The Semiconductor Industry Association revealed that the 10-year total cost of ownership of a new lab in the United States is 30-50 percent higher than in East Asian economies…
If the restrictions continue, “the segmentation of the global semi market potentially will create very capable Chinese chips competitors to U.S. companies since Chinese buyers now have no choice but to buy from domestic chips makers, giving them a large captive market,” Shih said.
“A balance between national security concerns and commercial concerns is possible. Not every chip sold by U.S. companies is cutting edge or has national security relevance. In those cases, the U.S. government should show some flexibility,” said Shih.
China’s new government promised foreign companies a more open economy, but the recent raids on China offices of Bain and Capvision consultancies leave foreign investors confused, says political analyst Victor Shih at Hong Kong FP. “It’s very puzzling considering Beijing says that it will boost foreign investment and entrepreneurial spirit. It seems like the right hand doesn’t know what the left hand is doing.”
Hong Kong FP:
Victor Shih, associate professor at UC San Diego and an expert on Chinese politics, said that the US and China are involved in tit-for-tat moves. Washington slapped sanctions on Chinese companies in the internet, bio-technology and pharmaceutical industries, while Beijing barred US arms manufacturers from investing in China. However, taking action against global advisory firms “took things to the next level,” he added.
Shih said the due diligence and advisory services industries are essential for both foreign and domestic investment in the Chinese market: “You can’t give away your money when you don’t have enough information. And we all know you will come across scams like the case of Sino-Forest Corporation or Luckin Coffee,” he said in reference to recent corporate scandals. “It’s important to invest carefully.”
“Why are there all these consulting companies in China trying to do research on China’s economy and Chinese companies? It’s not like a plot, it is just because China is important.” Shih added. “It’s very puzzling considering Beijing says that it will boost foreign investment and entrepreneurial spirit. It seems like the right hand doesn’t know what the left hand is doing.”
Political analyst Victor Shih looks at the seachange that has taken place in China since Xi Jin Ping took charge. Especially 2015 was the transition year, where Xi and the party even sidelined the previously more powerful state council, he tells at the China Inside Out meeting at the Asia Society in New York, together with his colleagues from the University of California San Diego’s 21st Century China Center (21CCC).
China’s annual session of parliament ended today. President Xi Jinping secured a third term and stacked the government with allies, including a new premier. But as NPR’s John Ruwitch reports, it’s unclear if Li Qiang’s loyalty is an asset or a liability.
JOHN RUWITCH, BYLINE: The story of Li Qiang’s rise goes back two decades. He was working in his home province of Zhejiang next to Shanghai. Xi Jinping was the provincial Communist Party secretary, the boss. And Li became his chief of staff, a role in which…
VICTOR SHIH: He is the enforcer or go-between the party secretary of the province and all the subordinate units.
RUWITCH: A critical job, says Victor Shih, a specialist in elite Chinese politics at the University of California San Diego. Xi Jinping was on his way up but fighting factional struggles in Zhejiang. Li stood by his side.
SHIH: At that time, there were sort of two camps in the province, and so Xi Jinping’s trust of Li Qiang might have started in this period of relatively intense conflict.
RUWITCH: That apparent trust grew. Li got promotions and was soon governor of the province. Along the way, he developed a reputation as a champion of private business… But Victor Shih of UC San Diego says there’s still a big lingering question. Which of the 63-year-old Li’s instincts will we see more of?
SHIH: You know, whether it will be his – you know, his own belief in the market, in private entrepreneurship or whether it’s going to be his reflex to always carry out instructions from his patron.
China limited its GDP growth for 2023 to a modest 5 percent at the opening of the National People’s Congress this weekend. Political analyst Victor Shih explains the background of this lower-than-expected ambition in the Guardian.
The Guardian:
[Premier] Li [Keqiang] began the speech saying Covid-19 and other domestic and international factors had affected the country’s economy “beyond our expectations”.
He announced the government would aim to create about 12m urban jobs, but left room to move with unemployment rates – keeping the urban target at 5.5%, which it was most recently reported as being in December.
Prof Victor Shih at the University of California, San Diego, told the Guardian the targets were “not overly ambitious”, and allowed the government and its incoming new premier a potential “easy victory”.
“They don’t call for any massive stimulus, and that partly stems from a recognition that exports – a main engine of growth for China’s economy in the last three years – will likely not be so strong this coming year,” he said.
The speech also pledged to resolve housing issues for young people, improve welfare provisions to elderly people and “improve the birth support system”. In recent weeks, the CCP has unveiled a number of policies that aim to reverse the declining birthrate by encouraging people to have more children.
Shih said welfare increases and stimulating consumption – another focus of Li’s speech – would require sizeable government funding.
“So a lot of this wording sounds to me like an empty promise in a sense, because it’s unclear where the money would come from unless growth miraculously comes in way beyond expectations.”
Strategic analyst Victor Shih, author of Coalitions of the Weak, (2022), looks at China’s sudden exit from its contested zero-Covid policy. Was it because of the protests, was it planned before, and what does it mean for the country’s domestic policies and economics? A discussion at the New Yorker on how decisions at the top-level take place.
The New Yorker:
Were these policy changes announced because of the protests, or for economic reasons?
We don’t have a lot of detail. But, as far as some of us can piece together, there has been a debate among top-level leaders. And we definitely can see the debate among experts who advise the Chinese government on the degree of opening. For a long time, there has been a side which strongly advocated for the continuation of a “zero covid” policy. But in recent months, even before the protests began, there were experts in the Chinese government who increasingly spoke out in favor of a more relaxed approach, emphasizing vaccination instead of draconian levels of quarantine. And I think the protests perhaps tipped things a little bit more in favor of the opening camp, or at least some degree of opening. It is unclear at this point how much opening there will be.
It really speaks to the challenge of authoritarian government, especially a kind of dictatorship that controls all forms of media, and has explicitly ordered the media to obey everything the government wants to convey. Sometimes even the Politburo itself does not get a lot of information about the level of satisfaction or dissatisfaction in the population. It took something like a multi-city protest to really make Xi Jinping realize that perhaps there is a groundswell of demand for a more relaxed approach.
Your answer implies a certain amount of debate on this, that it’s not just Xi making these decisions on his own. Is that how you see it?
At the highest level, among Politburo Standing Committee members, we don’t know whether there has been a debate. I suspect that there has been—not an open debate, but someone must have pushed some of this expert opinion to the Politburo level for the opening that we’re seeing to happen so quickly. Briefing material about why opening is potentially justifiable, and potentially not so disastrous for China, must have been there already or it wouldn’t have happened so fast after these protests.
I think that someone like Sun Chunlan, who is in charge of health policies in China, must have read a lot of this briefing material. Whether she was in favor of more opening to begin with is unclear. In fact, I think that may not be the case. It might have been someone else who has been advocating for more opening. The rumor is that Wang Huning, who’s a Politburo [Standing] Committee member, and has been an adviser to Xi Jinping since he took office, was or has been the person pushing for a more relaxed approach to covid. But these are just rumors…
Were you surprised by how quickly, at least publicly, China backed away from its covid policies? People I’ve talked to who know more than me seemed a little bit surprised.
I was surprised. There was this rumor that Wang Huning was advocating it for quite some time, but I never really believed in that rumor. I don’t really know if that’s the case. But it would take an advocate at that level to make it happen. There are two surprising aspects of this. One is that, in some places at least, we are seeing lockdown policies being liberalized very rapidly. And even in Beijing. My previous assessment had been “Oh, there could be relaxation in other parts of China, but certainly not Beijing, where the leadership lives.”
China is taking a short breath from the anti-Covid protests and comes to terms with the effect of the sudden relaxation of the zero-Covid measures. Political analyst Victor Shihtakes a step back at KQED and looks at the fallout of the protests in the short term.
KQED:
What do we know about the protests? What’s exceptional about them?
Shih: The scale in terms of the number of people participating is not especially large, but in terms of the geographical spread and also the demands that were voiced by the protesters, really it is something that we have not seen since 1989. These are protests taking place over a dozen cities, and while they mostly call for less COVID restrictions, there are quite a few instances of protesters asking for fundamental political reform. Even at an elite institution like Shanghai University, which has produced half the top leaders of China — including Xi Jinping himself — there were calls for rule of law and freedom. That’s really striking and is something that we have not seen for several decades…
It seems like this zero-COVID approach is causing the Chinese Communist Party and Xi Jinping a lot of trouble. So why not do something else?
Shih: You have to remember that China spent pretty much the past three years trumpeting the successful approach in controlling COVID up until recent months. After the initial wave of very tragic infections and deaths in Wuhan, the Chinese government was able to control the spread of COVID at a time when, in most countries in the world, COVID spread pretty much uncontrollably, leading to millions of deaths.
Up until the end of 2021, we there has been a very low spread of COVID and a very low number of deaths in China. And so the Chinese government made a lot of that fact. For them to suddenly change course and to open up and to allow the sort of rampant spread of COVID, I think that will create another wave of crisis maybe among a different population, among older people, among people who work for the Chinese government and who were at the forefront of trying to enforce the COVID lockdown policies. So I think either way that they go, they will create some kind of problem with some segment of the population.
Xi Jinping’s grip on power in the party is pretty absolute at this point, because he has inserted very trusted followers in the People’s Liberation Army and also in the internal security services. Once you control those two parts of the Chinese government, you pretty much have all the levers of power. So I don’t think that will change. But we have seen some softening of COVID policies because of the protests. And of course, that could be tactical. But the economic costs of COVID lockdown is quite substantial. I think a lot of people around Xi probably are beginning to suggest to him that that COVID policies need to change or the Chinese economy is really not going to be in a good place…
Shih: I think the protests both in China and also overseas are having a very enormous medium-term impact. In the literature on protests, one of the deepest insights, I think, is from Professor Timur Kuran, who’s at Duke University. His insight is that with protests, especially in authoritarian regimes, people who previously have been very isolated from each other, who didn’t know that other people felt the same way, when they showed up on the streets, they all realized that actually there are quite a number of people who feel the same as them.
This is especially true in China, but also true outside of China, where, of course, a lot of people who have been unhappy with the Chinese government have left China and have come especially to the United States. But they didn’t know that there were so many others like them.
So with these protests, they suddenly realized that there’s actually quite a large community of people who are just like them. This “information revelation,” which is what we call it in the literature, will encourage them to participate in further protests.
And, of course, this mechanism will be especially strong overseas where there is not the threat of arrest when you participate in anti-Chinese government protests. So I think this will have a long-lasting impact.
China’s leaders face unprecedented protest against its rigid anti-covid policy after earlier this week ten deaths in Urumqi were to blame for that. Political analyst Victor Shih sees China’s Communist Party walking on a tight rope, he says in the Hindustan Times.
The Hindustan Times:
An expert on China said Beijing has missed maintaining a balance between Covid control and economic growth, leading to citizens’ anger.
“Basically, what the (Chinese) leadership wants, a fine balance between growth and Covid control, is beyond the capacity of grassroots level enforcers. Instead, they are using draconian measures which invite popular anger,” Victor Shih, Associate Professor, School of Global Policy and Strategy, UC San Diego, expert on Chinese elite politics, said.
There is apprehension that the ruling Communist Party of China could respond with hard measures against the protesters.
“In the short term, the government walks a tight rope between too little repression, which may lead to more protests, and too much, which triggers backlash protests. Unfortunately, with the pervasive surveillance in China, the government will be able to arrest and punish the ring leaders after things have cooled,” Shih added.
“However, with Covid policies still unclear, popular anger may persist for a long period of time, something the regime has not had to deal with for decades,” Shih said.
