Crypto News: China’s ignored warnings

"History doesn't repeat itself, but it often rhymes," Mark Twain is believed to have said. In Beijing this week, there was some very notable rhyming.

Premier Li Keqiang, China's titular second-in-command behind President Xi Jinping, made an extraordinary plea to as many as 170,000 local officials about the urgent need to stimulate a now-shrinking economy. His statement came amid a backdrop of draconian, zero-tolerance restrictions meant to stop the spread of the coronavirus. Those "Covid-zero" policies have been championed by none other than Li's boss—and they have sent China's production and consumption tumbling.

A decade ago, it was Li's predecessor who was making a plaintive appeal against what he saw as damaging policy moves. Wen Jiabao, about to step down in a generational leadership succession, said in 2012 that "without successful political reform, it's impossible to carry out economic reform."

His message didn't take.

Xi Jinping, left, and Li Keqiang Photographer: Qilai Shen/Bloomberg

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In his 2012 speech, Wen criticized a political-economic model established in the metropolis of Chongqing that featured conservative Communist values, a crackdown on crime and a focus on state-led control of the economy. By contrast, he lauded leadership elections at the village level, and called for reform of the Communist Party and its leadership mechanism.

In the absence of change, China risked a repeat of the chaos triggered by the Cultural Revolution that began in 1966, Wen warned.

That warning, as it turned out, came just months before Xi took over as Communist leader. Xi coopted that very same Chongqing model, conceived by his long-jailed rival Bo Xilai.

Rather than embrace the private finance Wen pushed for, Xi cracked down on the shadow lending industry that had grown up outside the state-dominated banking system. He resurrected adulation for Communist history and instituted a corruption crackdown.

Xi did change the party's leadership mechanism, but not quite in the way Wen envisioned. Instead, Xi cast away the convention of 10-year limits for the top leader, setting up a path for him to rule indefinitely.

Li Keqiang's speech didn't get top billing on May 26 in a Communist Party media organ. But there were three stories about Xi Jinping. Photographer: Bill Bishop, Sinocism

So Wen's final plea went unheeded. Will Li's missives suffer a similar fate? It's hard to see how they won't.

For one thing, Bill Bishop, a China political expert who writes the Sinocism newsletter, points out that the People's Daily—the Communist Party's mouthpiece—only gave a small mention to Li's speech on its front page May 26, below larger pieces about Xi that featured photos of the paramount leader (three, to be exact).

For another, analysts at research firm Trivium China observed "there was an elephant in the vast but virtual room at Wednesday's emergency meeting on the economy—the stringent Covid containment strategy that's brought China's economy to its knees."

Three weeks before Li's extraordinary address, the Communist Party's top leadership panel doubled down on Covid-zero. The Politburo Standing Committee pledged to "fight against any speech that distorts, questions or rejects our country's Covid-control policy."

Finally, Li's entreaties for provincial, municipal and rural leaders to fast-track infrastructure projects and do whatever else it takes to boost employment and restore growth were missing one key ingredient: money. He effectively told his audience they're on their own, because Beijing won't be opening up its coffers any further to give financial support.

Xi has made clear that his success in containing the virus and avoiding the mass deaths seen in other major countries is the legacy he's riding on heading to the party's leadership conclave later this year.

That leaves little hope for Li's appeals. —Chris Anstey

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