Welcome to China--where 11% growth is bad news!?

In terms of sheer numbers of new articles it was a banner day for China today. And the news highlighted the completely different animal that China is. It’s like nothing the world has ever seen before. Even growth is bad and old words mean new things in China.In case the news that the CCP is talking about expanding democratic rights gets you overly giddy. Remember, democracy in the West is not the same as democracy in China. Specifically, structures that appear similar are actually used quite differently. “Democracy” in China is meant as a way for the CCP to benevolently understand the needs of the people and then implement what they see as the best solution--not government by/for/of the people.While definitions may be different, politics are the same—the maintenance of personal power is every politician’s goal (OK, I’m a bit jaded here, but you understand). The rise of the economy and businesses in terms of both domestic political influence and international media attention means that even if they don’t want to the CCP has to give more attention to the Chinese with money to maintain control.In 1994 I was told by a foreign professor working with CCP leaders on political projects that the silent opinion of most Chinese leaders was that socialism was indeed dead and that keeping the CCP in power during the long arduous shift to a new system was the real goal. The problem is how do you “control” democracy? The attempts in ’89 were obviously a failure. So now what?There are few real answers and now the general Chinese population has caught wind of the big secret. For many years in China the buy-off-the-populace-with-economic-growth-so-they-won't-worry-about-democracy has worked. For a billion people going from absolutely nothing to middle class was a huge step and it has totally changed the world’s economic landscape. But many people with money and subsequently more global experience and education in China are now looking for something more.Small steps toward more participatory government will continue to buy time, as long as no missteps are made. Adding businessmen, professionals and intellectuals to the CCP was huge. Small, local elections are too. Broader participation in the relatively new stock markets and actual property ownership by the end of this year will certainly pacify many for the next few years. But if the economy overheats or if there is a political crisis of any type the trappings and slogans will do little to pacify an increasingly media savvy Chinese population.And indeed a crisis may be where things are headed. I’m not a doom sayer and I think that the CCP is itself pretty clever. But the unexpected rise of the 1Q economic figures (Govt. predicted 8%, released numbers were over 11% and you know that the govt. held back on even those numbers) is going to be putting a lot more international pressure on China to revalue it currency—something the govt has been unwilling do more quickly out of fears of both negative social and financial reactions.Add into these numbers the fact that loan growth in China is doubling despite the fact that Beijing has raised interest rates 3 times in the past year. In an already horribly insolvent system even the new spat of foreign banking JV’s and their FDI isn’t going to solve the problems of increasing numbers of NPL’s. Because of the Chinese governments artificial security blanket around the economy China didn’t really feel the effects of the Asian banking collapse in 1998. But it could have a crisis of its own in the making.This financial “bad” news was accompanied by reactive falls in oil, gold and stocks across the globe and coincided with a condemnation by Canada over the jailing of a Canadian Uighur in China and the lawsuit against Yahoo in the US by a Chinese couple.In these interesting circumstances the government is limiting every type of political dissent and both domestic and international media outlets in hopes that a strong hand before the ‘08 Beijing Olympics will mean relative peace, or at least quite, for another 18 months. Things are so tenuous that Premier Wen in his visit to Japan not only didn’t mention Abe’s visits to Japan’s controversial WWII shrine he even went so far as to praise Japan for it’s historical apologies to China for WWII and their subsequent FDI and aid!Politics indeed make strange bed fellows.