China's elite rattled by fading economy & graft crackdown

1. China's Elite Rattled by
Fading Economy &
Graft Crackdown

2. Contd..
It was hardly an unusual start to the day for a senior Chinese leader in a
country grappling with an economic slowdown. On the morning of July
24, Zhou Benshun attended a meeting to promote one of President Xi
Jinping's signature projects, a plan to boost growth by building a
“supercity“ that would integrate Beijing with the region around it. But
by 6:10 pm that day, Zhou's career was over, and he faced years in
prison.
The Communist Party's anti-corruption agency announced it was
investigating him on “suspicion of serious violations of party discipline
and the law,“ signaling his ouster as the party chief of Hebeiprovince,
one of the nation's most populous.

3. Contd..
Zhou's sudden downfall he is the first sitting provincial party chief to be
purged by Xi underscores the uncertainty that permeates the Communist
elite as they contend with two unnerving developments beyond their
control: an economic slowdown that appears to be worse than officials had
anticipated and that could mark the end of China's era of fast growth, and a
campaign against official corruption that has continued longer and reached
higher than most had expected.
Driving decisions on both issues is Xi, who took the party's helm nearly three
years ago and has pursued an ambitious agenda fraught with political risk.
Now, weeks before a summit meeting in Washington with President Barack
Obama, those risks appear to be growing, and there are signs that Xi and his
strongwilled leadership style face increasingly bold resistance inside the
party that could limit his ability to pursue his goals.

4. Contd..
Xi has positioned himself as the chief architect of economic policy usually the prime
minister's job and has vowed to reshape the economy, exposing himself to blame if
growth continues to sputter. At the same time, Xi is making enemies with an anti-
corruption drive that has taken down some of the most powerful men in the
country and sidelined more than 100,000 lower-ranking officials. Senior party
officials are said to be alarmed by the state of the economy, which grew at the
slowest pace in a quarter-century during the first half of the year, and now seems
to be decelerating further. In a sign of its anxiety, the leadership this month
implemented the biggest devaluation of the Chinese currency in more than two
decades, sending global markets into plunges.
Xi's reputation was also dented this summer by panicked official efforts to prop up
the Chinese stock market after a sharp dive in share prices. His government had
promoted the market as a good investment to the public for months.

5. Contd..
Even before these episodes, early this year a number of party elders
had quietly urged Xi to focus more on reinvigorating the economy,
according to an adviser to senior party and government leaders and an
editor at a party media outlet, both of whom requested anonymity to
describe internal discussions.
The advice was viewed not only as a sign of their dissatisfaction with
Xi's management of the economy but also as implicit criticism of his
pursuit of high profile corruption cases that had tarnished their legacies
and targeted their protégés, the adviser and the editor said. “Right
now, the economic situation is not good, so the core of the party's
work should be shifted more toward the economy,“ the adviser said,
paraphrasing the message communicated to Xi.

6. Contd..
Xi has pledged sweeping market-oriented reforms to overhaul the Chinese
economy for long-term growth, including plans to weaken monopolies
enjoyed by state enterprises, to wean the economy from its dependence on
inefficient state-directed investment, and to liber alize the nation's financial
markets, with the aim of making the country's currency, the renminbi, a
strong com petitor to the dollar on world markets.
But there has been little progress to PHOTO: GETTY IMAGES ward these
goals, and as growth has be gun to stall, the government has adopted
measures that run counter to Xi's call to allow market forces to play the
“decisive role“ in the economy, including aggressive intervention to prop up
the stock market last month and policies encouraging state banks to lend
money.

7. Contd..
Behind the scramble is a deep-rooted anxiety within the leadership about pos sible
social instability if the age of supercharged growth in China ends. Chi na's gross
domestic product grew more than 26-fold in the 37 years since the country began
to open up its economy, bolstering the party's authoritarian rule and lifting more
than 600 million people out of poverty.
“Everyone understands that the economy is the biggest pillar of the Chinese
government's legitimacy to govern and win over popular sentiment,“ said Chen
Jieren, a well-known Beijing-based commentator on politics. “If the economy
falters, the political power of the Chinese Communist Party will be confronted with
more real challenges, social stability in China will be endangered tremendously ,
and Xi Jinping's administration will suffer even more criticism.“
Some have asked whether the party leadership and its technocrat advisers are up
to the task of managing a slowing economy after decades of experience with one
that has only soared, fueled in large part by mass migration from the countryside to
the cities. Even neutral observers warn that Xi may be promising too much.

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