Xi Jinping Has the Power to Reform

Back in 2014: Michael Pettis Said China Has 2 Years to Adjust; Xi Must Consolidate Power.

What is most important for China in the near future?
What really matters is whether President Xi can consolidate power quickly enough. If he can consolidate power, he can force the adjustments in spite of the opposition of the elites. That is the most important question. The Soviet Union had similar problems and they had to make their adjustments in the Seventies. But the Soviet Union’s power was much more dispersed and the adjustments failed. This is something China absolutely does not want. Their interpretation, which I think is correct, is that they have to consolidate power much more so they can force through the adjustments.

Xi needed 3 years, until the 2017 National Congress.

Reuters: China’s president consolidates power with ‘Xi Jinping Thought’

Xi’s Thoughts are expected to further consolidate his power and putting him on a par with the founder of the Communist party, Mao Zedong.

Brookings: The rise and rise of Xi Jinping: At 19th Party Congress, he consolidates power to a degree unseen since Mao and Deng.Zhou Xiaochuan’s warning of a “Minsky moment” and Xi Jinping’s consolidation of political power is a interesting combination. China avoided deleveraging before the National Congress because it would have harmed Xi’s efforts if it was a failure. Now he has the power to force through reforms and he’s more insulated if it turns into an economic crisis.

The last 18 months was relatively low volatility as China headed into its National Congress. We are at or have passed the low in volatility.

Author: 罗臻 http://www.investinginchinesestocks.blogspot.com

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