Friday 08 Oct 2021 | 02:32 | SYDNEY
Friday 08 Oct 2021 | 02:32 | SYDNEY

Stability is key to understanding China

22 March 2010 16:41

Clinton Dines is an Australian businessman who has lived and worked in China for 31 years, until recently for 21 years as BHP Billiton’s senior in-country executive.

It is probably not unreasonable to suggest that the Chinese Government, for all that it may not quite measure up to the high standards, deeply-held values and intellectual acuity of their many critics in the Western world, has in fact moved things along quite dramatically in the last three decades.

There are 400 million fewer people below the poverty line and there are roughly 200 million now 'comparatively affluent' Chinese who are buying houses, cars, consumer goods and enjoying a quality of life that few imagined would be available even a few years ago. China is now the world's second largest economy and appears, by most measures, to be in ruddy economic health. It would be a brave or foolish man who would argue that some other approach to national development and economic policy management would have produced better outcomes for the Chinese people.

One of the keys to China's achievement has been that, for the first time in a very long stretch of history, China has experienced a sustained multi-decade period of relative stability.

The only real moment of substantive instability in the last 30 years was the period around the Tiananmen Square demonstrations and their aftermath. For a polity and population with living memory of Mao's volatile policy predisposition, the Cultural Revolution, the Great Leap Forward, the Civil War, the invasion by the Japanese, the Warlord era and all of the dislocations, tragedy, upheaval and trauma associated with all of those, the relief of comparative stability is palpable.

This is why we should take Chinese officials fairly seriously when they talk about 'stability' the way they do, almost as a mantra. They are, after all, in charge of 1.3 billion people and a US$5 trillion dollar economy.

They took the consequences of their concept of stability on the chin during the Asian Financial Crisis when they held the RMB firm while every other Asian economy happily depreciated their currencies. The recognition China received for that contribution to regional stability was muted, but its agenda then, as it is now, was almost entirely focused on domestic development. A rapid depreciation in 1998 would have contributed to domestic instability at a time when China was going through some major reforms of the SOEs and housing.

Something similar applies now with the pressures on China to allow the RMB to appreciate. China, like the rest of us, had a bit of a fright when the GFC hit but responded with agility (and stimulus), and has recovered well.

RMB appreciation was put on hold as the crisis unfolded and is now, justifiably, back on the agenda. And it will happen – gradually, on a Chinese timetable and to meet Chinese domestic developmental needs. Not because anyone tells them to do so. It is as untenable for a Chinese leader in Beijing to be seen to be doing the bidding of foreign powers as it is for a US President to be seen to be subservient to any foreign pressures, perhaps more so.