Communication Breakdown

by Refayat Mosaowir Haque

The CCP (Chinese Communist Party) and the PBoC (People’s Bank of China), the country’s central bank, recently admitted the existence of a serious gap in their communications strategy. Sadly, the fundamental opacity of the CCP makes this an insurmountable challenge. Exacerbating this issue further is the fact the PBoC is de facto an advisory board accountable to Premier Li Keqiang’s State Council. This results in the PBoC, akin to the Federal Reserve or the ECB (European Central Bank), to remain near to powerless and submissive to the whims of the State Council. Adding to woes is the fact that what the world needs from China, now more than ever, China does not possess. China needs a central bank governor similar in poise and authority to Ben Bernanke (now Janet Yellen) or Mario Draghi; one who could arise sanguine in these times of turmoil to reassure markets and alleviate concerns. It is safe to assume we are more or less being kept in the dark with regards to key Chinese economic and financial data, and policies mandated by Beijing. Ironically, sometimes we are bestowed with revelations that actually cause more confusion and paranoia than optimism.

Let’s take the example of the currency adjustment last August. Beijing decided to depeg the renminbi to the US dollar to make it more flexible. The move was promising, as it aimed to offer greater exchange rate flexibility with 2% devaluation relative to the US dollar, and to make the currency more market driven in order to satisfy one of the IMF’s (International Monetary Fund) requirements for official reserve currency status. The hope was that the renmimbi would, in essence, become internationalized. Conversely, internationalizing a currency entails it’s strengthening and that it becomes more market driven, given China’s economic reality achieving both is a near impossibility. No intervention will provide the renmimbi with both the reputation of being strong and market driven; an inherent and indomitable contradiction prevails. For this reason world markets were left utterly perplexed in August. What Beijing sought as a positive policy step was misinterpreted as the government’s first shot in a new currency war. Such instances compel us to sit and pull our hair out trying to make sense of it all.

Beijing’s motive was not clearly communicated, and this culminated in negative speculation and eventually, widespread apprehension. Markets saw the devaluation as Beijing’s desperate response to rescue a sinking economy. It was widely perceived that the move to a more flexible currency reflected the abysmal state of the economy, something official figures concealed. Poor communications surrounding the move not only sent world markets into a state of hysteria, but also cost the country US$320bn of its foreign exchange reserves from August till now as Beijing frantically attempted to limit a free fall of the currency. A year and a half ago Chinese reserves stood at around US$4tn and last month it fell to US$3.23tn; a loss of US$770bn, nearly half of which was exhausted in the last six months.

Lapses in the CCP’s communications strategy have also impacted global perceptions of the credibility surrounding official figures, especially concerning growth. Many Western economists do not give much credence to official GDP growth rates, some expressing their distrust by going as far as referring to them as “purely figments of official imagination.” This isn’t surprising given that reported GDP growth rates are dubiously close to growth targets set by the CCP. The approximately 7% rate set by the government is considered questionable to many. In fact, recent figures on electricity consumption, bank lending, and freight volumes allude to increasingly weaker growth than what the official quarter-to-quarter composite data suggests. Power output as a metric is also a reliable indicator of growth, and the drastically low increase of just 0.1% last year implies that growth is much slower than official estimates. Effects of supplying exaggerated and misrepresented data for the benefit of the CCP is continuously being felt globally in the form of a looming global crisis, with some predicting it to induce a more dreadful form of protracted attrition and to have more punitive repercussions than the subprime mortgage crisis of 2008.

Given the conspicuous nature of the Chinese economy’s decline the official growth rate of around 7% is untenable. It is crucial to ascertain how the official rate stands at roughly 7%. Let’s analyze one way the official statistics bureau calculated real GDP growth, this method is based on nominal GDP growth figures to account for inflation. In Q3 of last year nominal GDP growth stood at 6.2%, and with the inclusion of 0.7% deflation official calculations declared the real GDP growth to be 6.9%. However, during that quarter the consumer price inflation increased to 1.4%. Heightening concerns, the 0.7% deflation taken into account in their calculations stem from falling producer prices, which reflects the decline in the global prices of imported commodities, and not domestic deflation. Then, it is easy to see why the inclusion of “deflation” in their calculation cannot be accepted. Analysts have attempted to discover alternative deflators, but this task has been nothing short of arduous and grueling due to the lack of trustworthy and accountable data on sectoral weights and price levels. Notwithstanding this impediment, analysts have predicted the country’s growth closer to 5 to 6%, nothing close to the 7% declared officially. This so-called “doctoring” of figures is old news, however, it’s imperative that it stops for the sake of the country’s long-term growth and peaceful coexistence with the global economy.

The communications crisis is not only confined to inadequate communications of policy decisions and misrepresentative data reporting, but it also includes misguided policies that are a) kept under wraps for fear of scrutiny, and b) completely beyond economists and analysts subscribed to the free market canon. Misguided, and harmful, policy choices can be attributed to last summer’s collapse of the local equity market, during which we witnessed a fall of 40% peak to trough. In 2014, the CCP devised a scantly thought-out strategy talking-up equity prices to allow SOEs (State Owned Enterprises) to float shares for raising funds needed in paying off their excessive debts. No amount of intervention could avert the collapse that resulted from the ensuing bubble.

Complicating matters for the CCP even more is the onslaught of issues they are having to face as consequences of their misguided and poorly communicated policies, and manipulated economic and financial statistics. This is further widening the communications gap as more salient long-term matters such as addressing distortions in the real economy are being sidelined. Official Markit/Caixin factory PMI (Purchasing Managers’ Index) figures released February 1st revealed the record sixth straight month of decline in manufacturing. The PMI at the beginning of the month stood at 48.4, anything below 50 signals contraction. Interestingly enough, this report focuses more on small and medium sized companies and not the larger SOEs. SOEs are notoriously inefficient and indebted organizations often managed by kleptocrats under the protection of the CCP, so it makes sense that they were omitted from the report [author’s sarcasm]. The inclusion of SOE data in the report would have resulted in figures significantly lower than 48.4.

What is absolutely essential for the CCP to do at this present moment is to sustain a transparent communications strategy that effectively elucidates the government’s short-term and long-term plans for the currency and equity markets. This in addition to, reaffirming its commitment to supply-side reforms it has been promising for years with a detailed, and accountable, timeline for policy implementation. Thankfully, Zhou Xiaochuan, PBoC governor, emerged out of oblivion February 16th vindicating his institution’s communications strategy by saying, “The central bank is neither God nor a magician who can turn uncertainties into certainties”. Mr. Zhou’s statement was needlessly demoralizing and his analogy fatuous at best; one wouldn’t expect an individual locally deemed to be a “leading reformer” in the CCP to emerge from the shadows only to say something distasteful.

A nation as entrenched in the global financial system as China can only stand to lose by discouraging independent and transparent communications between its central bank, currency institutions and equity market entities, and the rest of the world. The CCP must restrain itself from being complacent and negligent about distributing information. Whatever the policy intentions are the CCP must be assiduous about disclosing them lucidly, and in a thoroughly detailed manner, as this is necessary to reduce the scope for misinterpretation. Manipulating domestic economic data won’t help its case either.

As is being seen in multiple cases the CCP’s, often times unorthodox and arcane, policies are ineffectively communicated to the outside world. This leaves speculators and analysts completely bewildered and incapable of making educated predictions, and steers world markets towards chaos. But maybe that’s their strategy, to deliberately restrict the flow of information to the outside world. To quote Mao Zedong, “Disequilibrium is normal and absolute whereas equilibrium is temporary and relative”, “disequilibrium” in this context results from the absence of parity in terms of information. Perhaps it is to the CCP’s advantage to contain certain information within its inner circles, and to inhibit dissemination to external entities both local and foreign.

The bottom-line is if China is to maintain its growth trajectory of “7%”, it ought to respect the norms and conventions of global financial communities and play by their rules. They could start by not being reticent about their indispensable economic information. Reworking the communications strategy could be the first step in ameliorating the bedridden financial status quo plaguing the second largest economy in the world. However, it won’t be all uphill once this issue is addressed, debilitating effects of the global slowdown and other macro pressures exerting themselves on the nation will be haphazard and difficult to subdue. China’s hardships will only increase, as the country carries on its transition from secondary to tertiary sector in the wake of a global recession affecting everything from commodity prices to currencies.


Reactions to the Terror Attacks in Paris

Paris 13/11

In light of the horrific attacks in Paris yesterday, I wanted the chance to share my thoughts on these events and what lies ahead for us as a country. I apologize in advance if this is an unstructured stream of consciousness, but I hope you will understand that the nature of these events is such that I’m having a tough time organizing my thoughts in an effective way.

My heart aches

Although my family is safe, my heart still aches. Aches first and foremost for all the dead and wounded. Nothing will ever fill the void that they have left, but it is our responsibility to ensure that their lives are remembered for all the beauty and love that they had. Their families too must be in our thoughts. I can’t even imagine the immeasurable grief they must feel. Such a brutal and violent end to 100+ innocent lives is a tragedy for which there is no remedy. In light of this loss of life, we can tell ourselves that everything will be okay, but the truth is that it won’t. Anytime a life is brutally and senselessly ended, whether that life is in Paris, Beirut, Syria, Egypt, or anywhere else, a little piece of humanity disappears with it.

My heart aches too for my country, my dear France. This year has been a particularly devastating one for my country and my city. It is not just our people that are under attack, but our values, ideals, and our very ways of life. We have paid a terrible price. Although my heart aches, I have never been so proud in my life of my country and my fellow countrymen.

Love is more powerful than hate

In times like these, I am tempted to be filled with anger and hatred toward these unjustifiable acts. Nothing, ever, can rationalize or even begin to explain the slaughter of innocent civilians. And while I am tempted to lash out, tempted to seek vengeance in any form, tempted to respond not only in kind, but with incredible amounts of force, I have been tempered by the enormous outpouring of love from around the world.

On a personal level, I have been so moved by the dozens, if not hundreds of people who have reached out to me personally. Their care, their love, their compassion is the basis from which we all can begin to move forward. As a Frenchman, the enormous outpouring of international support has profoundly touched me. Yesterday, everyone was French – and nothing could make me more proud.

Even during these times, where the very good of humanity is thrown into question, the fact that people would go out of there way to show love and compassion is a true testament to the kind of world we live in. There is violence in this world. There is hatred in this world. There exist despicable human beings who relish death and destruction. But there is also so much good in this world. Violence only breeds violence. But when a ray of love, of solidarity, of fraternity shines through, that is the true embodiment of the human spirit. I wish it were under different conditions, but the truth is that the universal solidarity, steadfastness under the most trying conditions, must be the cornerstone of our collective recovery from this tragedy.

While destruction can be measured in euros or in body count, love is less tangible. But I would invite all my fellow countrymen, and indeed our friends throughout the world, to put away our hatred and despair, and instead embrace and disseminate love, compassion, and empathy. If we as a society unify around hatred and anger, the terrorists will have won. If instead we unify around our most basic common links, I am convinced we will rebound stronger and more unified from this tragedy.

Let’s celebrate life

Too often after tragedies like this one, we are filled with the compulsive need to understand why such an event happened and what could compel individuals to break free from the bonds of rational actions and commit such heinous crimes. While this is understandable, I would urge everyone, starting with the press, to forget about the perpetrators. While their stories may appear to be excellent human-interest pieces, the only thing we need to know is that their fanatical ideas pushed them to commit unjustifiable acts.

Who they are, where they grew up, how they were pushed into the arms of radicalization is frankly irrelevant. By reporting their names, their stories, their backgrounds, we are not reporting facts, we are disseminating propaganda. Instead, let us focus on the victims. Let’s report about the lives they led, the people they touched, the impact, however big or small, they had in this world. This tragedy is a human story, but not one of violence and death, it is one of compassion and life.

Let us therefore take this opportunity to celebrate the lives of those who left us. Let us mourn their passing but also recognized that we are collectively better because they lived. As for the terrorists, let’s forget them. While they may have succeeded in executing their plan, we can make sure that their ultimate goal of dividing and breaking us fails. That is on us, and it starts by ignoring death and embracing life.

Let’s avoid shortcuts and simplifications

Although the facts remain unclear, initial signs lay the responsibility of the Islamic State (Daesh). With this tragedy, as with so many others like it, the knee-jerk reaction to blame Islam is profoundly flawed. If anything, blaming all Muslims for the actions of a minority, who hide behind the banner of an honorable religion, is granting these terrorists the victory they crave. Islam is not our enemy. Arabs are not our enemy. Syrians are not our enemy. Daesh is our enemy.

The worst thing we could do in a situation such as this one is to create more divisions. This is not a clash of civilizations. Islam is not inherently incompatible with western ideals and values. The people who perpetrated these acts do not speak or even represent Islam. They bastardize the Muslim faith in the same way the KKK bastardizes Christianity. Surely we would never blame acts of hate committed by Christian extremists on the entire religion. Then so to must we accept these people for what they are: fanatics seeking only to destroy and divide.

In light of this, let’s not fall into the trap of division. Let’s not tear at the seams of our society by blaming people of a religion, ethnic background, culture, or origin. They are as much the victims of this crime as any. Let’s instead extend that uniquely French value of fraternité to everyone, and in particular our Muslim brothers and sisters who are shocked, hurt, and horrified by these acts.

Let us extend this logic to the thousands of migrants seeking refuge in Europe. They are not the problem. By and large, these people are not fleeing their homeland to bring death and destruction to ours. If anything, by stigmatizing them, we will force many good men and women, out of anger and despair, into the very arms of the people they are fleeing today. Syrian immigrants are not the cause of this attack, even if it becomes evident that these perpetrators came from Syria. Immigration into Europe is a problem, but eliminating it will not make us safer.

Radicalization is the child of desperation. The men and women fleeing Syria are the incarnation of desperation. Instead of pushing them to the depths of despair which breeds fanaticism, let’s understand their struggle and make a concerted effort to welcome them until such time as they can return to their homes. By doing so, we will be spreading goodwill and love rather than continuing to perpetuate anger and hate.

Our enemy’s enemy is our friend

In the earliest days of the Syrian civil war, I strongly advocated for intervention to remove the Assad regime. Western powers decided otherwise. The dichotomy between their human rights focused rhetoric and their failure to act has contributed to the abysmal situation present their today.

While I still firmly believe that Bashar Al-Assad is a criminal, the truth is quite simple: he represents the best chance for stability and to eliminate Daesh. Arming moderate rebels has proved pointless, and frankly, I question if enough “moderates” still exist in the ranks of fighters. We must sit down at the table with Al-Assad and his allies in Moscow to develop a clear plan to eliminate Daesh. The time for lofty R2P goals has long since passed. We can either choose to hold on to these nebulous ideals or ensure our protection by eliminating the true enemy: Daesh. Doing so simply must go through a deeper collaboration with the Assad regime.

While this is certainly not ideal, it can be the only solution to both stemming the migrant crisis and preventing further metastasis from the Daesh cancer. That said, Western powers should not turn a blind eye to the atrocities committed by the Syrian regime. Indeed, the very values that were attacked cannot be cast aside at the cost of security. Instead, any fight against Daesh must be predicated on a renewed push to ensure more freedom for Syrians and organize a more just and fair society – even if it one with Bashar Al-Assad at its helm. Ultimately, the enemy we know is much less frightening than that we do not. Daesh must be defeated purely and simply. If doing so means working with Assad, that is a price we must pay to avoid further bloodshed.

We cannot compromise our values

Liberté, Egalité, Fraternité – today these principles must be more than simply a motto, they must be a compass that guides our collective recovery from these heinous acts. Make no mistake about it, this attack wasn’t targeted at an individual, it was targeted at a community brought together by central values. In our response, we cannot afford to comprise our most basic tenants in the name of security.

In particular, many will call for greater scrutiny of Muslim citizens. This would be a tragedy that would worsen the impact of these attacks. Others are already calling for expanded security at the expense of civil liberties. This too would be a grave error. I make this argument not out of some idealistic adherence to values in the face of pragmatic alternatives, but rather because sacrificing these values is precisely the goal of these actions. In abandoning the glue that holds together our society, we are opening the door to greater radicalization – particularly among the most fragile communities in our society, those most susceptible to radicalization. People are not born radical, rather by the circumstances of their lives they are led down the dark and terrible path of hatred and destruction. We can avoid this, but the only way to do so is by reaffirming our values, and recognizing that only together, as one, can we move past this tragedy.

Liberty, we learned, has a high price, yet it is a price we must continue to pay as a society. Security, if it comes at the cost of freedom, is not security – it is merely isolation. In times where our very foundations are shaken, our values must bring us together, not tear us apart. That is why I urge my fellow countrymen and all our friends around the world to hold our values high. Be proud of them, and recognize that they are our most precious national asset. Nothing, no bomb, no bullet, no act of savagery can erase these fundamental tenants.

How we move forward will define us as a country

In the final analysis, there is no way to look at this event positively. Things are not going to be okay, certainly not for the families who mourn a loved one. Nothing can replace them; nothing should try to replace them. Rather than sit around telling ourselves that everything will be okay, let’s accept that we are not okay. We need to grieve, but with grief comes time for healing, and my deepest hope is that together with a renewed resolve and firmly grounded in our values, we can show the world that what unites us is so much stronger than what divides us. We can be the living proof that love is a stronger force than hate, that we will always be better together than apart.

This event has changed France forever, but the ultimate test of a people has always been how they respond to crisis. Let us mourn our brothers and sisters who have left us and pray for the hundreds of injured. But let us also honor their lives by coming back stronger, more unified, and fully embracing the values of Liberté, Egalité, and Fraternité that bind us together. France is more than a country, France is an idea. In light of this terrible tragedy, let us unite behind that idea and show that we are one. There is no finer tribute to those we lost.

Vive la République,

Vive Paris,

Vive la France.


Article of the Day: The Gun Smuggler’s Lament

The Gun Smuggler’s Lament

Sorry I haven’t posted in a week or so – I’ve been incredibly swamped with work. I will try and be more diligent in the coming weeks but wanted to make sure to share this article. It’s a really great piece of journalism and I think it helps frame the current situation in Libya. It’s astonishing to see how far the country has come from its years of oppressive rule. It is arguable, however, if that movement has been forward or backward. The story of this arms smuggler is fascinating and says a lot about the current state of affairs in the country – a captivating read!


Article of the Day: Pope Francis and his Little Fiat

Pope Francis and his Little Fiat

Pope Francis’ visit to the United States has been the focal point of all news outlets in the United States for the past few days – and with much cause! The Pontiff’s trip has already made waves with his speech at the White House focusing on Global Warming and his much anticipated remarks before Congress tomorrow (an event I am sadly missing due to a business trip) and a speech before the General Assembly of the United Nations.

What is so remarkable, and frankly admirable, about Pope Francis is not only his lofty goals and ideals expressed in his remarks, but more importantly his willingness to demonstrate them through his actions. As I watched footage of his arrival in Washington yesterday, I was immediately struck by the car he was entering. In Washington in particular, a black SUV is almost a status symbol. For the Pope to enter a small and accessible Fiat send a very strong message – one I wish more leaders were willing to follow.

Ultimately, I think this is an excellent symbol not only for the Pope’s message, but also of the humility and genuine of the Pontiff himself!


Article of the Day: Pope Francis faces diplomatic test on Cuba trip

Pope Francis Faces Diplomatic Test on Cuba Trip

Pope Francis’ North America tour is receiving more billing than any rockstar, actor, or politician in recent memory. In DC alone, anticipation of his trip is at a fever pitch. According to some estimates, the crowds expected to attend a rally with the pontiff will match or exceed those of a Presidential inauguration – a strikingly high amount.

In the context of this visit it is fascinating to consider the foreign policy implications and influence of the Vatican. In particular, Francis’ trip to Cuba is very striking as he has an excellent opportunity to engage in dialogue, not only with the Cuban regime but also foster dialogue between the people of Cuba and that of the United States. The common link of religion in this instance of foreign policy is fascinating, and ostensibly positive. A rare find in a geopolitical world where religion so frequently acts as a wedge between people!


Article of the Day: Hit Charade

Hit Charade

No geopolitical implications in this article, so I’ll keep it brief. I think it’s pretty appalling how unidimensional pop music is, even artists who I enjoy (David Guetta) feature prominently on this list. I guess music is a business so it makes sense but its pretty disheartening to see “artistry” be so devalued. With that said, there has perhaps never been a better time for people’s talent to emerge through platforms like soundcloud and youtube. Regardless, interesting article worthy of consideration!


Article of the Day: What to make of Pope Francis now?

What to make of Pope Francis now?

The Pope’s much anticipated visit to Washington next week is stirring up a lot of emotion inside the beltway. For some, the visit of the Pontiff marks a historic occasion to validate the doctrinal changes Francis has appeared to undertake. For others, the traffic nuisance is a cause for much fear.

Jokes aside, I think this visit is an important one – particularly at a time when America seems torn between a rigid and fervent religious base and a movement countermovement that praises scientific advancement over all else. With that in mind, it is very interesting to take a look at how others judge Francis’ Papacy so far. I think it has been generally favorable, at least from a PR perspective, yet I think this article does a good job of laying out some of the deeper fundamental issues at play within the church!


Article of the Day: Labour’s Disastrous Choice

Labour’s Disastrous Choice

The Labour leadership election this past weekend was many things, but surprising was not one of them. Jeremy Corbyn’s election is, as I have said many times, a potential nail in the coffin for the Labour Party. While his policies and convictions, which no one can deny are profound, may drive a new wave of support, I firmly believe that they will make him unelectable to the general public. It will be curious to see not only how the Labour MPs respond to the Corbyn leadership but also what sort of a vacuum this creates in the center. I predict that the Lib Dems will probably see their share of support grow for the duration of Corbyn’s leadership. Ultimately, the electorate that voted for New Labour will likely not settle for a Corbyn government. In this situation, the likely scenario for future elections involves the Tories maintaining support and a surge in the Lib Dem vote – at least, one can hope!


Article of the Day: Jeremy Corbyn for UK Labour party leader? Blame the bankers

Jeremy Corbyn for UK Labour party leader? Blame the bankers

The title of this article is very misleading and doesn’t accurately capture its true value. Jeremy Corbyn’s rise is an interesting one and indicative of a larger trend in Europe of extremisms coming to the fore. What’s very interesting about this development is how different countries interpret the populist rise. In some places, it comes from the nationalist far right, in others, from the anti-capitalist far left. I think this author does a good job at delineating some of the differences and similarities between the two movements. It would be very interesting to find out where these came from and why some countries tend to see a rise of the far left vs a rise of the far right…