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Evergrande: What Happens Now?

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For all their clever CCP-directed, “with-Chinese-characteristics” tweaks to classic western capitalism, somehow they couldn’t avoid, errrr, a property bubble.  How demeaning for a communist country!  How ironic.

And how we’d all laugh, were it not for the plethora of predictions that the demise of Evergrande will send out shockwaves across the globe, at a time when we’re all a bit fragile.

Really?  Well, perhaps.  I’m no authority on this kind of thing: and in my own sphere I already told you in February that gas prices in the far east were the start of serious energy-price inflation.  But my gut feeling is that if the west could ride the banking crisis of 2007-09, the CCP can engineer a soft landing for Evergrande.  The underlying issue, to my mind, is the impact it has on Chinese politics, both inward- and outward-looking.

On internal politics, I presume a serious property bubble – with the attendant political shame this represents for communists, as alluded to above – strengthens the hands of the socio-economic puritans of the CCP, led by this chap, Wang Huning, (whom I only became aware of recently).  2021 has already seen a striking social-media purge of individualistic content (and social media stars!) that follows hard on the humbling of tall poppies Jack Ma & co.  All this goes by the benign-sounding slogan of “Common Prosperity”, but extends to a “clamp-down” on private tutoring (FFS), which must have a major impact down the road.  Does the middle-class man in the street care about Jack Ma?  Not really, I guess.  But his kid’s education & perceived life-chances ..?

Then there’s the long-awaited Chinese digital currency.  I have absolutely no idea how Evergrande impacts that project – does anyone here? – but it probably does.  Given that it’s designed to strip the USD of its strategic role in world finance, it’s kinda important for the long run.

It’s the “physical” externals, though, that should surely trouble us most directly.  Last year we debated the possibility of “Peak China” having already passed.  The decades of extraordinary Chinese softly-softly patience and (rather successful) attempts to build a kind of soft power to rival that of the USA seem to have come to an end with Xi’s assaults, physical and otherwise, on HK, India, the South China Sea etc etc etc.  These suggest that either (a) he doesn’t care anymore about staying with the soft stuff; or (b) things weren’t moving as fast as he wants.

And what’s that?  Taiwan, of course – and in his time in the top slot.  By hook or by full-scale attack.

Old Man in a Hurry can be a comical phenomenon; but it can also be dangerous.  Very dangerous.  We have our own in the shape of Biden.  There’s an awful lot that can wrong here.  I’ve long suggested that Soviet caution in not invading western Europe when it was at its peak state of military advantage, speaks well for Politburo political maturity at that time.  But equally, they weren’t in any kind of hurry – hey, they were real Marxist-Leninists; they thought it was going to fall in their laps eventually anyhow. 

But Xi, like Mao before him, is (mainly) a nationalist.  Evergrande?  Pff – a sideshow.  IMHO.




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