Fat Years - Chan Koonchung [101]
While the world economy was floundering, what was the situation in China?
China was also in danger as exports came to a standstill, the number of unemployed suddenly rose steeply, and stock markets fell until trading was halted to forestall further losses. This time China’s economic growth would probably not avoid slipping from positive to negative figures.
The economic stimulus of 2009—relying on the National Treasury to allocate funds for direct investment to stimulate the economy—helped maintain the national GDP, but didn’t genuinely encourage domestic consumer demand. Much of the stimulus money was invested in dubious mega-projects and fixed-capital assets, and the chief beneficiaries were the bureaucrats, state-run enterprises, and the interest groups tied to their apron strings. In other words, the stimulus helped increase the monopoly of state-run enterprises over the market, and further decreased the scope of private businesses.
The most troublesome thing was still the huge decline in the value of the dollar. Before 2004, China’s annual trade surplus had not been very large. After 2004, however, China had less and less need to import foreign manufactured goods, and its exports grew at an ever more ferocious pace. China’s foreign-exchange reserves abruptly rose to over two trillion dollars. Then, all of a sudden, those dollars lost more than a third of their value.
Although China had originally made a lot of noise about the dollar, it had not actually been selling off dollars the way Japan, Russia, and Taiwan had; China held on to its dollars and kept buying American-dollar assets right up to the end. It wasn’t that China didn’t want progressively to distance itself from the dollar, but it lacked an alternative place to invest its money. The government was already trying to reach mutual currency-exchange arrangements with Japan, South Korea, the ASEAN, and the Shanghai Cooperation Organization nations, and was already actively urging the United States to issue some bonds payable in renminbi—what the foreign press had dubbed “Panda Bonds.” So it wasn’t that the government wasn’t making crisis preparations, it was that time was against them; they could only pray that the dollar would not decline further—they certainly could not imagine that it would go under so quickly.
Politics is a cruel business. Just the “crime” of allowing our sovereign wealth to shrink so much was bad enough. Add to that the negative growth in the national economy that was certain to follow, and the ruling group at that time would have completely lost its prestige within the Party. The following year, that governing group would not have had the strength to resist the opposition, and would certainly have fallen from power; it would have been a time for their friends to weep and their enemies to laugh. And this is the most important reason why they resolutely decided to put the “Action Plan for Achieving Prosperity amid Crisis” into operation.
So. Since they were going to die anyway, they thought they might as well make one last stand, and take drastic measures to alter the course of the heavens, an attempt to turn a bad situation into a victory. If they won, it would be a complete victory. And if they lost … well … if they lost, the great deluge that came after them would be a problem for the next Party leadership to resolve.
The day that the dollar fell so precipitously in 2011 was the eighth day of the first lunar month. The New Year vacation period had