Coup Rumors in China Have Deeper Meaning

April 6, 2012

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"There are decades when nothing happens and there are weeks when decades happen." ~ Vladimir Lenin

Truthiness is preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true. Rumors are an expression of truthiness. The successful spread of a rumor implies either hidden wants or a belief in a rumor’s capacity to be true.

IARPA wants to identify metaphors for a similar reason: “metaphors have been shown to be pervasive in everyday language and to reveal how people in a culture define and understand the world around them.”

Dú shū xū yòng yì, yī zì zhí qiān jīn: “Read critically, and you will find each word worth a thousand ounces of gold.”

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The rumors imply that the people do not believe in the stability of their own government.

Dāng-jú-zhě-mí: “A spectator sees more than a player in the heat of a game.”

The first headline shows the leadership is concerned about their grip over the military. If you’re Bo Xilai, the recently ousted Maoist that sparked these rumors, and have a groundswell of support in rural China and among the military, would this spate of headlines and implicit support embolden you?

Over a year ago, I called China’s political situation a “powder keg,” questing whether China’s ‘iron fist control is coming unhinged.’ I pointed to rising nationalistic sentiment and growing support among the poor for the Maoist doctrine.

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There are in essence, two Chinas. One is made up of the rural poor and includes the family of the military personnel. Nationalistic anti-west jingoism is often found amidst this group. They are dismayed by the materialism, prefer faux promises of security over freedom, and want  a firm hand at home, and to the outside.

The western trained technocrats, their politically connected cabal, and city dwellers make up the other faction. They see a need for reform, to reduce control over state owned assets and the banking system.

Over the past several decades, the former has seen their land taken and given to property developers, food prices surge, and the environment wrecked. Meanwhile, the latter has benefited by the country’s growth.

“Distant water won’t help to put out a fire close at hand.” – Chinese proverb

While a tough economic decade is inevitable, a political crisis may not, but the leadership needs to embark on reform, rapidly. Residents of the rural area are treated as second-class citizens in China’s Houkou system, where City dwellers receive higher wages and better healthcare.

“It is later than you think” ~ Chinese Proverb.

A quick response from the reformists could quell some of the sentiment and garner support. Reduced financial repression through lower import taxes and destroying the Houkou system would be starting points, but they must happen quickly.

Leadership must be careful. A new stimulus program risks setting off inflation: each 10% rise in food prices doubles the level of global social unrest, according to the IMF. (Aside, is the omnipotent Mr. Bernanke dictating foreign policy too?). There is no easy way out.

Mōzhe shítou guòhé: “Cross a river by feeling the stones”

Deng Xiaoping, the father of modern day Chinese political philosophy, suggests moving ahead with economic reforms slowly and pragmatically.  Unfortunately, slow is no longer acceptable. Market forces move faster than politicians can act. This metaphor suggests it will take panic for movement. Are we there yet?

“In life, it often takes a crisis to spark change.” ~ HS

All of this is happening when GDP growth is north of 8%. What happens when GDP craters? The Occupy Wall Street movement did not become a movement until long after the crash.

These are not good signs for a country ranked the eleventh most likely to experience an increase in violence against the government by the Mincord model, nor does this bode well for the long term stability of the world.

More pressing for investors, if you were a businessman that has capitalized on “guanxi,”or a foreigner who sees these threats, would you leave your money in China?

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