Chinese President Xi Jinping warns against ‘black swans’, ‘grey rhinos’ amid economic downturn


China must be on high alert against “black swan” and “grey rhino” financial events in the face of a slowing economy, President Xi Jinping told senior members of the Communist Party faithful.

Key points:

  • Mr Xi instructed officials to “prevent and defuse major risks”
  • His speech showed “serious concern” over slowing economic growth
  • Economic risks can lead to political and social threats for the CCP

State news outlet Xinhua said Mr Xi instructed officials to “prevent and defuse major risks” across a range of fields — politics, ideology, society, science and technology — to “ensure a healthy economy and social stability”.

A “black swan” is an unpredictable market event with extreme financial consequences, while a “grey rhino” is a large, visible threat that goes ignored.

The speech comes after recently released data showeds China’s economy saw its slowest growth in almost three decades last year.

Reuters said Mr Xi told local governments to strike “a balance between stabilising growth and fending off risks” and that “zombie firms — companies with a lot of debt — would be dissolved properly and resettlement of workers would be taken care of accordingly”.

Pradeep Taneja, a specialist in Chinese politics at the University of Melbourne, said while the Chinese Communist Party (CCP) was always careful to avoid outright alarm, Mr Xi’s speech betrayed deep concern.

“The fact that Xi Jinping was highlighting these risks in this meeting does indicate that there is concern — there is in fact serious concern — about the implications of slowing economic growth rate,” he said.

“Watching Chinese politics is like reading tea leaves — you’re always trying to read between the lines of what is being said.

“The Chinese Communist Party never raises alarm. They never say that things are bad. They always indicate that they are in control.”

Avoiding another Tiananmen

Always at the back of the CCP’s mind was the need to avoid the possibility of another Tiananmen Square, he said, where 1989 pro-democracy protests were violently quashed.

Mr Taneja said there were growing parallels with the events of 1989 and that in China, economic risks come with the threat of political strife.

“If economic stability is under question — if there is a considerably slowing economic growth rate, high unemployment, failing businesses — then there is always the potential for social and political instability,” he said, or, as the CCP would term it, “chaos”.

He said stimulus packages have long been a part of China’s approach since the 2008 global financial crisis, from subsidising whitegoods purchases to keeping the Chinese manufacturing industry afloat and investing in public infrastructure.

China’s central bank has slashed the reserve requirement ratio five times in the past year, Reuters reported, and Mr Taneja said he expected to see concrete steps taken to alleviate pressure on small and medium enterprises.

One example of this was cutting taxes for smaller private companies; however, “if demand is slowing, tax cuts aren’t really going to help a great deal”, he said.

But hand-in-hand with economic control to avoid social upheaval was China’s internal security apparatus, Mr Taneja said.

“China spends as much on its internal security as it does on its military, so you’ve got parts of China, like Xinjiang, Tibet, where there is constant turmoil, and the security establishment of China spends a lot of time trying to manage affairs there,” he said.

A significant economic slowdown risked spilling over and having a broader impact than in areas dominated by ethnic minorities in China, he said.



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