China: "please don't talk about our screwed-up banking system"

Nobody panic. That's an order.

China really, really doesn't want people talking about its economic woes. The FT:

In a directive written last week and transmitted over the past few days to newspapers and television stations, local propaganda departments of the Communist party instructed reporters to stop “hyping the so-called cash crunch” and to spread the message that the country’s markets are well stocked with money.

Clearly there's no better way to get reporters talking about something than telling them not to, so here's a quick primer on the country's cash crunch.

Two weeks ago, money market rates in China rose rapidly to double digits, causing interbank lending to freeze up; the scene was alarmingly reminiscent of the Western credit crunch, and many feared that the country was about to have its own Lehman moment.

Fears were stoked by the central bank's refusal to intervene, apparently influenced by a political desire to "correct" the bank's behaviour. A scheduled auction the day after the rate spike would have provided the perfect opportunity to inject extra cash into the economy, but nothing happened.

Eventually, Beijing capitulated, and, on 25 June, committed to bailing out any and all failing banks, ensuring, at least for now, that the market interest rates will decline rapidly. That's not a long-term solution – that would involve boosting the liquidity of Chinese banks such that they aren't at risk of collapsing in the first place – but it preserves the banking system for the time being.

Still, the stock market did not respond happily to the turmoil. Falling ten per cent over a week, it dropped a further six per cent on the day the central bank promised action, although the announcement reversed the trend and it clawed back most of that day's losses. That seems to be the motivation for the media blackout, one of the first in the country to be targeted at the financial press. The FT reports some of the contents of the directive:

First, we must avoid malicious hype. Media should report and explain that our markets are guaranteed to have sufficient liquidity, and that our monetary policy is steady, not tight.

Second, media must strengthen their positive reporting. They should fully report the positive aspect of our current economic situation, bolstering the market’s confidence.

Third, media must positively guide public opinion. They should promptly and accurately explain in a positive manner the measures taken by and information from the central bank.

Translation: if anyone does a Robert Peston, heads will roll.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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What Donald Trump could learn from Ronald Reagan

Reagan’s candidacy was built on more than his celebrity. Trump not only lacks experience as an elected official, he isn’t part of any organised political movement.

“No one remembers who came in second.” That wisdom, frequently dispensed by the US presidential candidate Donald Trump, came back to haunt him this week. Trump’s loss in the Iowa Republican caucuses to the Texas senator Ted Cruz, barely beating Senator Marco Rubio of Florida for second place, was the first crack in a campaign that has defied all expectations.

It has been a campaign built on Trump’s celebrity. Over the past eight months, his broad name recognition, larger-than-life personality and media savvy have produced a theatrical candidacy that has transfixed even those he repels. The question now is whether that celebrity will be enough – whether a man so obsessed with being “Number One” can bounce back from defeat.

Iowa isn’t everything, after all. It didn’t back the eventual Republican nominee in 2008 or 2012. Nor, for that matter, in 1980, when another “celebrity” candidate was in the mix. That was the year Iowa picked George H W Bush over Ronald Reagan – the former actor whom seasoned journalists dismissed as much for his right-wing views as for his “B-movie” repertoire. But Reagan regrouped, romped to victory in the New Hampshire primary and rode a wave of popular support all the way to the White House.

Trump might hope to replicate that success and has made a point of pushing the Reagan analogy more generally. Yet it is a comparison that exposes Trump’s weaknesses and his strengths.

Both men were once Democrats who came later in life to the Republican Party, projecting toughness, certainty and unabashed patriotism. Trump has even adopted Reagan’s 1980 campaign promise to “make America great again”. Like Reagan, he has shown he can appeal to evangelicals despite question marks over his religious conviction and divorces. In his ability to deflect criticism, too, Trump has shown himself as adept as Reagan – if by defiance rather than by charm – and redefined what it means to be “Teflon” in the age of Twitter.

That defiance, however, points to a huge difference in tone between Reagan’s candidacy and Trump’s. Reagan’s vision was a positive, optimistic one, even as he castigated “big government” and the perceived decline of US power. Reagan’s America was meant to be “a city upon a hill” offering a shining example of liberty to the world – in rhetoric at least. Trump’s vision is of an America closed off from the world. His rhetoric invokes fear as often as it does freedom.

On a personal level, Reagan avoided the vituperative attacks that have been the hallmark of Trump’s campaign, even as he took on the then“establishment” of the Republican Party – a moderate, urban, east coast elite. In his first run for the nomination, in 1976, Reagan even challenged an incumbent Republican president, Gerald Ford, and came close to defeating him. But he mounted the challenge on policy grounds, advocating the so-called “Eleventh Commandment”: “Thou shalt not speak ill of any fellow Republican.” Trump, as the TV debates between the Republican presidential candidates made clear, does not subscribe to the same precept.

More importantly, Reagan in 1976 and 1980 was the leader of a resurgent conservative movement, with deep wells of political experience. He had been president of the Screen Actors Guild in the late 1940s, waging a campaign to root out communist infiltrators. He had gone on to work for General Electric in the 1950s as a TV pitchman and after-dinner speaker, honing a business message that resonated beyond the “rubber chicken circuit”.

In 1964 he grabbed headlines with a televised speech on behalf of the Republican presidential candidate, Barry Goldwater – a bright spot in Goldwater’s otherwise ignominious campaign. Two years later he was elected governor of California – serving for eight years as chief executive of the nation’s most populous state. He built a conservative record on welfare reform, law and order, and business regulation that he pushed on to the federal agenda when he ran for president.

All this is to say that Reagan’s candidacy was built on more than his celebrity. By contrast, Trump not only lacks experience as an elected official, he isn’t part of any organised political movement – which enhanced his “outsider” status, perhaps, but not his ground game. So far, he has run on opportunism, tapping in to popular frustration, channelled through a media megaphone.

In Iowa, this wasn’t enough. To win the nomination he will have to do much more to build his organisation. He will be hoping that in the primaries to come, voters do remember who came in second. 

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war