A communist party

It is September 30, 2009 – the People’s Republic of China exists 59 years and 364 days. Tomorrow is the big day, the day the majority of China’s 1.3 bln people have been waiting for: New China’s 60^th anniversary. Police and over 1 million volunteers (!) are mobilized in a security operation more forceful than the 2008 Olympics. Kite flying is banned (if you have been to Beijing before, you know this is a bitch for Beijingers), flying homing pigeons is not allowed either (my grandfather would have cried), and everyone entering the city of Beijing is checked for papers and other possessions. Parade rehearsals in the weeks before today have shut down major highways and hundreds of office and residential buildings; no one was to see the glorious parade until October 1, 2009. Soldiers of the parade have trained months to be able to walk *perfectly* (note the stress) in line.

Neither police nor volunteers however could help change the weather conditions on the 30^th: terribly smoggy and far from glorious. I’m quite sure the organizers let out a few not to be repeated words when they rubbed the sleep out of their eyes and opened their curtains that morning. Luckily, the government still had a few weather bombs left from the Olympics and decided to use them overnight. Not surprisingly, while rubbing the sleep out of my eyes the next morning, I was greeted by a pastel colored sky and rays of sunlight. After all, a celebration of a 60yr-old dictatorship cannot be without the sun-fueled glitter of shiny military boots, weapons and rockets. The organizers must have been very relieved.

The parade, carefully watched by Mao from his portrait on Tian’anmen Square, was a big success – smiling, happy people waving the flag of China while rows of robot-like soldiers paraded in front of them, and China’s air force blazed over them. Massive amounts of fireworks would later take over airspace from the fighter jets. Starting off with some horses, a few canons and a lot of men a few decades ago, China's military might came a long way – it is obvious October 1^st was all about impressing people.

Click here for a photo-series of the celebrations.

Trying to further soak up the spirit of the Beijingers on October 1, I decided to go to The Founding of a Republic (建国大业) – a box-office hit patriotic movie with all China’s movie stars, describing Mao’s trials and tribulations in gaining a foothold in China’s political arena alongside the Kuomintang. The actual founding of the PRC and the years that followed (widespread famine, and damage to the culture, society and economy of China) were left out and the movie hurries forward to December 1978, when Deng Xiaoping embarks on economic reforms by saying “to be rich is glorious”.

That quote was made by Deng Xiaoping 31 years ago, or more than half the age of modern China. Although this reform period has exceeded Mao’s 27 years of terrible rule, Mao continues to be a historic and hip figure, even when Communism and the Communist Party are not.

Another thing Deng said is that the CCP will “soon” relinquish its dominance over the Chinese economy and society – in reality, this has never happened. Now, one could argue that, judging from the graph below, if being rich is indeed glorious, then China has been doing a pretty glorious job over the past three decades. China alone accounted for more than 75% of poverty reduction in the developing world over the last two decades.

Surprisingly however, the greatest contributor to Chinese growth since the 90s is not net exports but domestically funded fixed investment used to buy machinery or construct buildings and infrastructure. China’s model of investment-led state corporatism hatched after the 1989 Tiananmen-protests to preserve the economic power and relevance of the party. About half of China’s growth in 2008 was spurred by state investments and, due to China’s USD 586 bln stimulus spending earlier this year, almost 75% of this year’s GDP growth is actually on the back of state-led fixed investment. In addition, as much as 80% of this money goes to state-owned enterprises, whereas they only constitute to some 25% of the economy (see below). Tellingly, >95% of China’s stimulus package went to state-controlled enterprises and the state currently owns more than 65% of all fixed assets in the country.

In other words, after more than 30 years of market reforms, the Chinese economic cycle still is not moved by entrepreneurial spark – the wheels still only really spin when the central government unleashes a fiscal flood.

Another quote from Deng Xiaoping: “It doesn't matter if a cat is black or white, so long as it catches mice.” – it seems China is doing exactly this; when China wants something, they will get it, even if it's something as intractable as the weather - growth equals growth, and blue skies equal blue skies. Maybe another 30 years will be enough for China to meet these targets naturally - after all, manipulation also equals manipulation.