China needs to learn how to spin

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China needs to learn how to spin

Much can happen in 48 hours, as Hollywood constantly reminds us. China’s leaders learned that the hard way last week, at the conclusion of the ponderously named Third Plenum of the 18th Communist Party Congress.

Put off by an almost comically vague initial communique, the Beijing confab was quickly derided as a giant “nothingburger.” Just two days later, however, after Chinese officials released a more detailed list of reforms, opinions swung wildly. Suddenly the plenum was hailed for producing some of the most significant proposals in decades - everything from relaxing the one-child policy and abolishing labor camps, to giving farmers more control over their land, migrants more rights and services, and the market more of a role in disciplining state enterprises.

This whiplash lurch in opinion holds two lessons for China. First, major statements such as the plenum communique carry a global significance perhaps rivaled only by the U.S. State of the Union address.

Not so long ago, turgid party announcements rarely moved markets. Now, Chinese leaders are finding out that they must anticipate and respond to an instant global reaction. Such pressures most likely encouraged officials to release the more substantial reform document earlier than planned.

Second, the vagueness with which Chinese communiques are written produces confusion. This might seem useful on occasion: Deng Xiaoping pioneered the strategy of “signaling left and turning right” to throw off potential opponents. But more often, opacity simply allows anyone and everyone to see what they want to see - not what the leadership hopes to signal.

For many years, Chinese leaders could ignore such concerns. The initial communique issued after the 1993 Third Plenum was shorter and even more obscure than last week’s yet arguably about as important. With just a single line - “alter the operations of state-owned enterprises and build modern corporate governance” - officials introduced some of the most drastic state-sector changes in China’s modern history.

Deng’s even more momentous post-1978 reforms at the 11th Third Plenum were signaled in just four characters: gaige kaifang (“reform and opening up”). An investor would have had a hard time trading on that gnomic phrase, let alone imagining that three decades later, China would have grown into the world’s second-largest economy, a $9 trillion behemoth.

Bureaucratic culture within the Chinese leadership hasn’t caught up with that spectacular growth. To party apparatchiks and those deeply embedded in plenum planning and document drafting, everything basically operates as it always has. They are accustomed to communicating in nebulous phrases that only savvy insiders can understand.

Today the global cognoscenti demand greater specificity. Time and again in recent years, China has paid a price for refusing to meet those expectations. Volatile markets have swung based on speculation and misinterpreted statements. The global press has obsessed over every retired general huffing and puffing about teaching Japan a lesson - while sometimes missing the broader sweep of China’s evolving reality.

Until now, officials have blamed the outside world for misinterpreting Chinese statements. My Chinese interlocutors would repeatedly complain, when the Western news media leaped at the latest offhand comment about dumping U.S. Treasuries, “You Westerners are overly reactive (tai guofeng le)!”

Surely, though, the Chinese government realizes it is losing control of its messaging - both with its people and with those trying to make sense of the country from the outside. A more skeptical, educated citizenry is no longer willing to tolerate overt obfuscation. More and more Chinese are relying on other sources of information. Events such as the plenum and the political transition last year are now live-tweeted.

If the reforms announced last week are indeed to lead to a more market-based economy, China will have to accept greater market discipline in its messaging as well. The Chinese central bank learned this the hard way over the summer, when it failed to clearly explain a rise and fluctuation in interbank rates and the ensuing liquidity crunch. The central bank was supposedly trying to rein in banks and institutions that had engaged in high-risk lending behaviors. The market saw only that liquidity had dried up, and panicked.

Rather than lamenting the new reality, it’s in Beijing’s interest to develop a sustained and sophisticated strategy to telegraph clarity and credibility. This isn’t something that can be done through Xinhua or People’s Daily editorials. In fact, China can learn much from the U.S. and other Western governments about controlling its intended message. Call it “propaganda with Western characteristics.” That might sell in Beijing.

*The author is a fellow at the Paulson Institute and co-author with William Adams of “In Line Behind a Billion People: How Scarcity Will Define China’s Ascent in the Next Decade.”

By Damien Ma
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