President Xi Jinping lays down the law to the Chinese army in first 'precept' speech since Mao Zedong
Comment of the Day

January 06 2016

Commentary by Eoin Treacy

President Xi Jinping lays down the law to the Chinese army in first 'precept' speech since Mao Zedong

This article by Li Jing for the South China Morning Post on Monday may be of interest to subscribers. Here is a section: 

The only other leader to have given a precept speech to the military in the 67-year history of the People’s Republic of China was Mao Zedong, who did so in 1952 and 1953.

Xi, who is also chairman of the Central Military Commission (CMC), used the speech to call for his military reform plans to be fully implemented.

Xi’s ambitious modernisation plan would completely remodel the army, which was established in Mao’s era, and would therefore put him on a par with – or even higher than – Mao in terms of his military authority, said Chen Daoyin, an associate professor at Shanghai University of Political Science and Law.

“No other former CMC chairman – Deng Xiaoping (???), Jiang Zemin (???) or Hu Jintao (???) – has given a military precept before, which means Xi’s power and authority is even higher than them,” said Chen.

Zhang Lifan, a party historian, said the phrase “Xun Ci” suggested a sense of sternness and admonishment towards the lower ranks.

“It also signals Xi’s discontent and anxiety over the status of the army – the rampant corruption and the Soviet-style command structures,” he said.

Xi was showing assertiveness in the overhaul to remove any resistance from within the army, said Zhang.

Eoin Treacy's view

Xi Jinping is head of state, head of the military, minister for foreign affairs and controls the economics portfolio. As if that is not enough he is also attempting to push through an aggressive reform agenda which would modernise the army and clamp down on corruption, trying to rationalise overcapacity in steel, coal, cement and managing a slowdown in the housing market. With so many ambitious targets he is stepping on a lot of toes and needs the military on side if he is quash dissent within the Party. 

A day after Xi made the above speech to his military, basically telling them they are unfit for purpose, North Korea announced it has successfully detonated a nuclear device. Regardless of whether it was a hydrogen bomb or not, the most common interpretation of this event can be summed up in this quote from a related Bloomberg article

“Xi has got to be fuming,” said Clay Chandler, managing director of Barrenrock Group, a Hong Kong-based risk consultancy. “This runs counter to all of China’s foreign policy objectives, and makes mighty China seem weak —- incapable of restraining even a small impoverished neighbor that is almost totally dependent on China for economic survival.”

I’m not one to indulge in conspiracy theories; preferring Ockham’s Razor than convoluted explanations. However is it possible that China’s administration feels under pressure from the enormity of the reform agenda and the existential threat posed if they fail to successfully migrate away from an infrastructure led economic model? If so, the sideshow of a North Korean drama may lend itself to an exercise in nationalist fervour which is all too often used to paper over cracks in the political apparatus at home. 

From many trips to China over the last decade the one takeaway that has been constant throughout is that China needs a weaker currency. Right now the Renminbi is falling against the Dollar and exhibits top formation characteristics against the Euro which is a larger trading partner. 

Against this background, the administration has an incentive to promote stability in the stock market, not least following Monday’s botched introduction of circuit breakers. The Shanghai A=Share Index has steadied over the last two day but has work to do before investor confidence is restored. The most likely scenario is for more volatile ranging than we have seen over the last six months. 

Encouragingly the FTSE/Xinhua A600 Banks Index has found at least near–term support in the region of the lower side of its three-month range. 

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