Yuan as Reserve Currency less important than Economic and Political Reform

Yuan as Reserve Currency less important than Economic and Political Reform

By Chris Harry

In theory, the addition of the RMB as a top-reserve currency would further diversify the world's exchange reserves. It also would draw China further into the world economy, which might also be a positive force for encouraging China to move toward a stable economic model based on greater transparency and not-so-minor adjustments such as the rule of law. On the other hand, Chinese banks would have to sink and park huge sums of money as deposit insurance, which could further weaken its already fragile debt-to-GDP ratio imbalance.

The fact that China is a maverick economic player that relies on artificial growth which is willing to use any and all means to continue the growth bubble for the sake of social stability and the perpetuation of the party-state, also means that China could potentially become a hugely disruptive and destabilising force in the world economy.

Party interests will always remain paramount and unchecked under the current system, so only when China makes a fundamental political and economic shift, can we expect the Yuan to make a positive contribution to global economic stability. China will also need to follow international rules and regulations in order to make a positive contribution to international economic stability. Again, under the current system in place in China, we cannot expect that it is willing to follow international norms, practices and rules. 

The lack of a domestic rule of law clearly indicates China unwillingness to abide by international treaties and conventions. China's approach in the South China Sea shows a total disregard for the sovereignty of its own neighbours and is a breach of the treaties it signed, took part in drafting, and pledged to uphold. 

Xi's administration has been emboldened to further apply the no-rules bully approach toward domestic politics and foreign policy. At the same time, the domestic economy has been tanking ever since Xi took power.

The stock market debacle also shows a total lack of transparency and honesty in dealing with internal domestic issues. In the end, the government relied on a command-driven and heavy-handed approach to force a recovery of the stock market. In the process, billions in individual investors' earnings evaporated, along with one-fourth of its crucial monetary reserves to support China's state retirement funds. 

Beijing took a huge gamble by creating a false bull market in order to orchestrate state-led insider trading, so as to prop up Zombie SOEs that are bleeding out huge losses daily and are kept alive by state-controlled banks that can barely handle the pressure of giving out free money to keep these SOEs afloat.

When China gets its political and economic house in order, then we might expect the RMB to play a positive role in the world economy.

Emperor Xi: I want True Dictatorship

刁皇：我要真独裁 （他的独裁梦）

Emperor Xi: I want True Dictatorship

Pictured here with a fake yellow umbrella, an homage to the Umbrella Revolution where Hong Kong students bravely demonstrated and protested in their demand for true elections. Emperor Xi's make-believe response is depicted above as,  "I want true dictatorship".

The yellow colour of the umbrella also represents a colour that was reserved only for the Emperor in ancient China. In the past, any subject discovered wearing fabric dyed in Imperial yellow could be subject to the death penalty.

This is symbolic of how human rights have been further eroded and weakened just as party Emperor Xi has been concentrating more and more dictatorial powers in his own hands since his rise to power.

希特勒的小粉丝 Hitler’s Fanboy

明确表态支持前苏联，自动就认可帝国主义和专制制度，使自己变成希特勒以及其他毛骨悚然恶棍的小粉丝。 全面控制政治、文化和社会的消极世界观是不得人心和缺德；使得国家和人民的潜力大大地衰减。一个消极、排外、镇压公民和践踏宪法的党中国谈不上未来长久，何况有能力圆其独裁梦。

Xi Jinping makes light of Beijing’s heavy air pollution

     In reference to Beijing’s air pollution, Xi Jinping said, “we mustn’t be impatient in the face of problems” and that we should, “adopt a calm and collected life approach toward these problems.” When describing the coal pollution and severe sandstorms of his youth in Beijing he further added, “Back then we didn’t have PM2.5, but we did have PM250.” According to the report by China’s Phoenix News, all those around him laughed aloud in response.

     Evidently, he seized the opportunity to make a light joke about heavy air pollution in Beijing and he almost appears nostalgic and accepting of the fact that Beijing has faced serious air pollution for half a century.

     Perhaps instead he should have said PM二百五 (er bai wu – another way of saying 250 in Chinese), which is also colloquial Chinese for a “dimwit” or “someone who says or does inappropriate or foolish things”.  

 

     On a more serious note, however, he seems to be attempting to defuse the issue by implying that Beijing’s air pollution was even worse back when he was a young boy, although I imagine very few people would find this convincing. Ironically, one could just as easily interpret his comments as a blunt admission that Beijing has been facing serious pollution for the last 50 years or so, most of the period in which China has been under communist rule. Perhaps it is also a subtle jab at the U.S. embassy's monitoring and publishing of air pollution in Beijing, despite being curtly requested by an unamused Beijing government to refrain from doing so. 

     Either way, it smacks of ill-advised hubris, but it is also consistent with so many of his bold pronouncements of late, inasmuch as it hints at the new ruler's confidence in his ability to control the course of events in China, quite likely stemming from his princeling pedigree as part of the red aristocratic elite which controls most of China's wealth and now has 4 members out of 7 in the inner sanctum of absolute power - the standing committee of China's politburo.

     In my humble view, it shows a serious lack of good judgement, and it will certainly not gain him any points in China or internationally. In a worst case scenario, PM er bai wu could become a damning and sarcastic sound bite that could easily gain traction among Chinese micro-bloggers and Chinese society at large that pokes fun at the leader’s cavalier approach to China’s serious and growing environmental crisis. Surely he would not want to go down in history as the leader who was smug about smog.

习近平把北京的严重污染当笑话看待

提到空气污染时，习近平说“不用着急”要“淡定面对它”。他还说小时候北京“没有PM2.5,但是有PM250”。对严重污染如此淡薄，还把它当作笑话来看待，连小布什很可能都不会犯这么低级的错误。如果把它说成PM二百五会不会取得更大的笑声呢？

Translation and Chinese/English commentary by Chris Harry

News source: Phoenix news report by Du Ping

Update: Bill Bishop seems to have already made a veiled reference to PM二百五(er bai wu) on Sina's Weibo Microblog today (March 7th, 2013).