CCTV headquarters, Beijing. Photo by Mark Lehmkuhler.
Why is the Chinese economy experiencing a wrenching adjustment to slower growth?
It’s not because China is still an export-driven society, whose main customers are aging and cutting back on their consumption.
It’s not because, during and after the financial crisis of a few years ago, China flooded its economy with abundant cash - which did act as a short-term stimulant but has left enterprises and local governments across the country loaded with debt.
It’s not because of the surprise decision to devalue the yuan (which, as I have written, is actually a constructive move).
And of course it’s not because of any policy decision at all by the Communist Party and its officials, who have governed the country continuously and completely since 1949.
No, August’s crash in the Chinese stock market is all the fault of a guy named Wang Xiaolu.
Wang is a business reporter for Caijing, a respected Chinese business periodical. In late July, he published a story claiming that the China Securities and Regulatory Commission was considering an end to interventions aimed at stabilizing the stock market - as, in fact, the regulatory body did, about a month later. For the outrageous act of digging up facts and adding perfectly reasonable analytical context, Wang was detained for spreading “false information.”
On Monday, Wang “confessed” on the state broadcaster China Central Television (CCTV). “I shouldn’t have published the report at such a sensitive time, especially when it could have great adverse impact on the market,” he said. “I shouldn’t have caused our country and shareholders such great losses just for the sake of sensationalism and eye-catchiness.”
In other words, Wang had the audacity to write something true and, in doing so, single-handedly crashed the Chinese stock market.
Or maybe not quite single-handedly; Wang is suspected of colluding with others. China’s official press agency, Xinhua, has reported that a total of 197 people have been punished for spreading rumors and causing panic about the state of the stock market, among other topics. Detainees, including Wang, have reportedly been placed under “criminal compulsory measures.” In his televised confession, Wang asked for leniency from the judicial authorities, since he was willing to confess his “crime.”
As David Bandurski, from the University of Hong Kong’s China Media Project, said: “This isn’t about the factual nature of [Wang’s] reporting, it’s about the political impact. This looks like a vendetta.”
While the story of the emperor’s new clothes may be originally Danish, in post-imperial China, it is still very much against the law to observe that the emperor has no clothes unless the emperor first approves the observation. Wang and his fellow detainees can attest to this, if they still have the nerve to talk about things the authorities would rather not discuss.
Yet Americans should not rush to appear holier-than-thou, especially those elements of the American press who clamored for scapegoats for our own financial meltdown not so long ago. While American publications certainly are not wrong to criticize China’s crackdown, they ought to find the act of hunting down someone to blame for financial turmoil uncomfortably familiar.
Government officials duly obliged the popular uproar by looking for people to prosecute and, for the most part, finding them. The problem was that the evidence didn’t actually support the effort. Whether it was Goldman Sachs, JPMorgan Chase, Bank of America or individual bank employees, the government was more than willing to hoover up a great deal of settlement money, even if convictions were few and far between.
While Americans shake their heads over the unfair treatment dished out by Chinese government officials, our own hunt for scapegoats has left us with a banking industry that is so risk averse it cannot carry out activities that are fundamental to banking, such as extending unsecured credit to trustworthy borrowers and offering savers a decent return on their savings.
China has its Wangs, and we have ours. In our case, they are people who committed the crime of banking, back when bankers were expected to be something other than dispensers of government-endorsed credit to government-favored parties.