Archive for ‘Politics’

20/01/2017

Taiwan’s President Tsai Ing-wen aspires to create ‘new era’ of peace with Beijing | South China Morning Post

Taiwan aspires to create a “new era” of peace with mainland China, which should set aside the baggage of history and have positive dialogue, Taiwan’s President Tsai Ing-wen said in a letter to Pope Francis, adding military action could not resolve problems.

The issue of self-ruled and proudly democratic Taiwan has shot to the top of the international agenda since US President-elect Donald Trump broke with decades of precedent in December by taking a congratulatory telephone call from Tsai.

Pope Francis hails ‘good’ relations with China after getting gift from Xi Jinping

That, along with subsequent comments by Trump that the one-China policy was up for negotiation, has infuriated Beijing, which views Taiwan as a wayward province, to be bought under its control by force if necessary.

Mainland China is deeply suspicious of Tsai, whose ruling Democratic Progressive Party espouses the island’s formal independence, a red line for Beijing, and has cut off a formal dialogue mechanism with Taiwan.

In her January 5 letter to the Pope, released by her office on Friday, Tsai said upholding peace across the Taiwan Strait called for goodwill and communication.

Taiwan’s President Tsai Ing-wen continues call for Beijing talks but refuses to accept ‘one China’ principle“

Based on many years of experience in cross-Strait negotiations during my political career, I am convinced that military action cannot resolve problems,” Tsai said.

“Taiwan and mainland China were once embroiled in a zero-sum conflict that caused tension in the region and anxiety among our peoples.In contrast, today people on the two sides of the Taiwan Strait enjoy stable lives and normal exchanges under peaceful separate governance.

”China’s priests wary of Vatican’s Beijing olive branchTaiwan was committed to maintaining its democracy and the status quo of peace, but would not bow to pressure, she added.

“I urge the governing party across the Strait, together with the governing party in Taiwan, to set aside the baggage of history and engage in positive dialogue,” Tsai said.

The Vatican is one of only a handful of countries which still maintains formal diplomatic ties with Taiwan, although the Pope is trying to heal a decades-old rift with mainland China where Catholics are divided between those loyal to him and those who are members of a government-controlled official church.

Tsai said she sought to live up to the Pope’s words on nonviolent action.

“As the first female president in the ethnic Chinese world, I aspire to live up to your words as I devote myself to enhancing the well-being of the Taiwanese people and creating a new era for cross-Strait peace.”

Source: Taiwan’s President Tsai Ing-wen aspires to create ‘new era’ of peace with Beijing | South China Morning Post

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18/01/2017

Why Are Party Symbols Like the Bicycle So Important in Indian Elections? – India Real Time – WSJ

A familiar Indian political saga played out in the country this month, as two factions of a party squabbled over what emblem to identify themselves with for upcoming state elections.In a democracy of over 1.2 billion people, many of whom are still illiterate and identify their choice on the ballot paper by the symbol adopted by the party, the answer has more than symbolic importance.

In the case of Uttar Pradesh, India’s largest state, a bloc of the ruling Samajwadi Party is hoping to pedal to success using the symbol of a bicycle in regional polls that start next month.

The Election Commission of India ruled earlier this week that the right to use the name of the Samajwadi Party, or the Socialist party, and its logo—the bicycle–belonged to Akhilesh Yadav, the incumbent chief minister of Uttar Pradesh, and not his father and party founder Mulayam Singh Yadav.

The Yadav father and son have been dueling over control of the party, each claiming to be its head, since it split earlier this month. At the center of the contention was whose faction gets to use the bicycle, the party’s logo since its inception in 1992.The Election Commission of India said the group led by younger Akhilesh Yadav is the genuine Samajwadi Party and “is entitled to use its name and (the) reserved symbol ‘bicycle’” because it had the support of the majority of the party cadre.

Jostling over political symbols is an established trend in India, especially when parties split.

The emblems are valuable because they could be used to solicit voters’ loyalty that would have taken years to cultivate.

Congress, the current national main opposition party, has had to choose new symbols in the past after party splits. It settled for its current symbol–an open palm, which a party leader said stands for hard work and toil–ahead of the 1980 elections.Prime Minister Narendra Modi’s Bharatiya Janata Party meanwhile has retained its original election symbol– the lotus flower, that epitomizes creativity and prosperity in Hinduism–since its formation in 1980.

The bicycle has significant brand value for the Samajwadi Party, which has its voter base in the mostly rural and agrarian Uttar Pradesh, where the human-powered vehicle is one of the most-favored and affordable means of transportation. To connect to voters, the party’s leaders often cycle during campaigns and distribute bikes to their supporters.

The party says on its website that it “gives immense importance to the development of common man and thus adopted the vehicle of the common man–a bicycle as its symbol.”

Source: Why Are Party Symbols Like the Bicycle So Important in Indian Elections? – India Real Time – WSJ

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16/01/2017

India’s prime minister has a knack for shrugging off embarrassment | The Economist

ADDRESSING a conference in his home state of Gujarat on January 10th, Narendra Modi, India’s prime minister, exuded confidence. India’s economy is the fastest-growing and one of the most open in the world, he declared, reaffirming his government’s commitment to reform.

The 5,000-strong audience, sprinkled with foreign heads of state and corporate bigwigs, applauded warmly. One multinational’s boss drew cheers with a sycophantic call for India to “export” Mr Modi to run his home country, America, too.

The optimism and praise, however, contrasted with sobering economic news. Since November rating agencies have sharply lowered their growth forecasts. Small and medium-sized firms report big lay-offs. Vehicle sales fell in December by 19% compared with the previous December, their steepest drop in 16 years, says a car-industry lobby group. Housing sales in India’s eight biggest cities slid by 44% in the last quarter of 2016 compared with the year before, reckons Knight Frank, a global property firm, in a report. “The Indian government’s demonetisation move on November 8th brought the market to a complete standstill,” it says, alluding to Mr Modi’s surprise order to withdraw 86% of the notes used in daily transactions.

There is little doubt that Mr Modi’s assault on cash has caused ordinary Indians disruption, annoyance and, particularly for the poorest, severe distress—though the pain is easing now as the government prints more money to replace the scrapped notes. Yet just as would-be foreign investors seem happy to continue boosting Mr Modi, many Indians also still trust and admire the prime minister. Like America’s president-elect, Donald Trump, who once claimed he could “shoot somebody” and not lose votes, Mr Modi’s support seems oddly unaffected by his flaws. Anecdotal evidence, online polling and informal surveys all suggest that the prime minister’s misstep has scarcely dented his standing.

Opinion polls in India have a poor record, and none published since the demonetisation drive has specifically measured Mr Modi’s popularity. However, two surveys carried out in December in the state of Uttar Pradesh, India’s most populous, suggest that his Bharatiya Janata Party (BJP) remains poised to perform well in imminent state elections. When the results from several rounds of voting are tallied in March, the BJP could be basking in its biggest triumph since Mr Modi won national elections in 2014. The party has not suffered in municipal votes in several states since November and is well positioned in several other looming state polls.

Prior to the demonetisation drive, Mr Modi had handily weathered other storms. Murderous communal riots tarnished his long term as chief minister of Gujarat, for instance. Yet according to Pew, a research firm, the prime minister’s popularity in mid-2016, at an enviable 81%, had declined only marginally from a stunning 87% the year before. The liking is personal: Mr Modi regularly scores higher in such polls than either his party or his policies.

Some pundits speak of “Modi magic” to explain his immunity from criticism, but there are more straightforward reasons. One is the prime minister’s talent as a politician. Although often dour in countenance, Mr Modi is a pithy speaker in Hindi, with an unerring nose for the class-driven grudges that often guide voter sentiment. In debates over demonetisation, he successfully projected himself as a champion of the common man against currency hoarders and tax evaders. He is also extremely protective of his own image as a man above the fray. Mr Modi’s dress, gestures and public appearances are theatrically staid and uniform, punctuated by meaningful looks and silences. He does not hold press conferences, preferring to retain control of his narrative via carefully rehearsed interviews and his monthly “From the Heart” radio address.

Pygmy-slayer

Mr Modi is also lucky. His well-funded, highly disciplined and pan-Indian party faces an unusually divided and uninspiring opposition. Congress, a party that ran India for decades and still commands a nationwide base, is burdened by squabbling and corrupt local branches and a lack of clarity over ideology and the role of the Gandhi dynasty. India’s many other parties are all parochial, tied to the interests of one state, caste or other group, and so with little hope of playing a national role. Handed the golden opportunity of Mr Modi’s demonetisation fumble, the opposition has failed to mount a united charge.

Other institutions that might check Mr Modi’s ambitions, such as the press and the judiciary, are also not as vigilant as in other democracies. Some parts of the media are owned by Mr Modi’s friends and supporters; others by business groups with interests that are vulnerable to retribution. Journalists, whistle-blowers and activists are keenly aware that critics of the government often pay a price, whether in the form of “trolling” on the internet, harassment by officials or spurious lawsuits. India’s courts, meanwhile, do often clash with the government but are cautious in picking fights: on January 11th India’s supreme court airily dismissed a public-interest lawsuit demanding investigation of documents that appear to implicate dozens of officials in bribe-taking.

Even Mr Modi’s foes believe his administration is less corrupt than previous ones have been. However, as the banknote debacle revealed, it is not necessarily much more competent. The most iron-clad rule of Indian politics is anti-incumbency. Even the investors vying for Mr Modi’s attention may take note that, for all the talk of openness, India still has some of the world’s most tangled rules, highest corporate tax rates and most capricious officials.

Source: India’s prime minister has a knack for shrugging off embarrassment | The Economist

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16/01/2017

Why do Indians vote for ‘criminal’ politicians? – BBC News

Why do India’s political parties field candidates with criminal charges?

Why do the voters favour them despite their tainted past?

Political scientist Milan Vaishnav has been studying links between crime and democracy in India for many years now. His upcoming book When Crime Pays offers some intriguing insights into what is a disturbing feature of India’s electoral democracy.

The good news is that the general election is a thriving, gargantuan exercise: 554 million voters queued up at more than 900,000 stations to cast their ballots in the last edition in 2014. The fortunes of 8,250 candidates representing 464 political parties were at stake.

The bad news is that a third (34%) of 543 MPs who were elected faced criminal charges, up from 30% in 2009 and 24% in 2004.

Fiercely competitive

Some of the charges were of minor nature or politically motivated. But more than 20% of the new MPs faced serious charges such as attempted murder, assaulting public officials, and theft.

Now, India’s general elections are not exactly a cakewalk.The Indian politicians facing criminal charges

Why do many India MPs have criminal records?

Politics and the barrel of the gun

Over time, they have become fiercely competitive: 464 parties were in the fray in 2014, up from 55 in the first election in 1952.

The average margin of victory was 9.7% in 2009, the thinnest since the first election. At 15%, the average margin of victory was fatter in the landslide 2014 polls, but even this was vastly lower than, say, the average margin of victory in the 2012 US Congressional elections (32%) and the 2010 general election in Britain (18%).

India’s elections are fiercely competitiveAlmost all parties in India, led by the ruling BJP and the main opposition Congress, field tainted candidates. Why do they do so?

For one, says Dr Vaishnav, “a key factor motivating parties to select candidates with serious criminal records comes down to cold, hard cash”.

The rising cost of elections and a shadowy election financing system where parties and candidates under-report collections and expenses means that parties prefer “self-financing candidates who do not represent a drain on the finite party coffers but instead contribute ‘rents’ to the party”. Many of these candidates have criminal records.

There are three million political positions in India’s three-tier democracy; each election requires considerable resources.

Many parties are like personal fiefs run by dominant personalities and dynasts, and lacking inner-party democracy – conditions, which help “opportunistic candidates with deep pockets”.

‘Good proxy’

“Wealthy, self financing candidates are not only attractive to parties but they are also likely to be more electorally competitive. Contesting elections is an expensive proposition in most parts of the world, a candidate’s wealth is a good proxy for his or her electoral vitality,” says Dr Vaishnav, who is senior fellow at the Carnegie Endowment for International Peace.Political parties also nominate candidates with criminal backgrounds to stand for election because, simply put, they win.

During his research, Dr Vaishnav studied all candidates who stood in the last three general elections. He separated them into candidates with clean records and candidates with criminal records, and found that the latter had an 18% chance of winning their next election whereas the “clean” candidates had only a 6% chance.

Many Indians vote on lines on identity and religion

He did a similar calculation for candidates contesting state elections between 2003 and 2009, and found a “large winning advantage for candidates who have cases pending against them”.

Politics also offers a lucrative career – a 2013 study showed that the average wealth of sitting legislators increased 222% during just one term in office. The officially declared average wealth of re-contesting candidates – including losers and winners – was $264,000 (£216,110) in 2004 and $618,000 in 2013, an increase of 134%.

‘Biggest criminal’

Now why do Indians vote for criminal candidates? Is it because many of the voters are illiterate, ignorant, or simply, ill-informed?

Dr Vaishnav doesn’t believe so.

Candidates with criminal records don’t mask their reputation. Earlier this month, a candidate belonging to the ruling party in northern Uttar Pradesh state reportedly boasted to a party worker that he was the “biggest criminal”. Increasing information through media and rising awareness hasn’t led to a shrinking of tainted candidates.

Dr Vaishnav believes reasonably well-informed voters support criminal candidates in constituencies where social divisions driven by caste and/or religion are sharp and the government is failing to carry out its functions – delivering services, dispensing justice, or providing security – in an impartial manner.

“There is space here for a criminal candidate to present himself as a Robin Hood-like figure,” says Dr Vaishnav.

Clearly, crime and politics will remain inextricably intertwined as long as India doesn’t make its election financing system transparent, parties become more democratic and the state begins to deliver ample services and justice.

Prime Minister Narendra Modi has suggested state funding of polls to help clean up campaign financing. Earlier this month, he said people had the right to know where the BJP got its funds from. Some 14% of the candidates his BJP party fielded in the last elections had faced serious charges. (More than 10% of the candidates recruited by the Congress faced charges). But no party is walking the talk yet.

Source: Why do Indians vote for ‘criminal’ politicians? – BBC News

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16/01/2017

Davos 2017: Can Xi Jinping be star of the show? – BBC News

China’s President Xi Jinping heads to Davos this week.

It’s the first time a Chinese head of state is attending the global forum and he’ll be star of the show.

But besides the allure of snow-capped alpine peaks and tasty cups of hot chocolate, why is he doing this? And why now?

First off, let’s not kid ourselves. Davos is a venue where little meaningful gets done.

It has struggled to shake its reputation as a very expensive talking shop that sees the rich and powerful of global business, politics, arts and society meet every year to sip cocktails and connect.

Along the way they’re supposed to think big thoughts about how to improve the world economy.

But given that their wealth and lifestyles are precisely what many parts of the developed world is seeing a backlash against right now, it’s not clear how much their solutions will help.

Davos: Are the global elite in retreat?

Globalisation and free trade are being attacked in the US and Europe. And with a new president about to enter the White House, President Xi’s speech will be watched very carefully.

According to Jiang Jianguo, a minister in China’s State Council Information office, President Xi will be “offering Chinese remedies for the world’s economic ailments”.

So what might he say, and why is this important? Here are three things I’ll be watching for:

1) Free trade is good trade

Globalisation has arguably benefited China more than any other country in the world.As the US pulls out of free trade agreements, President Xi is likely to laud its merits, and position China as the world’s newest and friendliest trading partner.

Of course, there’s always the criticism that China only opens up its economy just enough to benefit itself.But President Xi is likely to tackle that too. Chinese leaders tend to make big announcements in speeches abroad, so watch out for any further possible access to China’s economy.

2) China as a force for peace, not war

China’s growing military might in the South China Sea is a potential flashpoint

It’s part of China’s public diplomacy to convince the world that China’s rise is a good thing for everyone.

President Xi will be likely to present an image of China to the world “as a friend to everyone, a big wonderful panda that everyone should hug, and that everyone should just relax,” says Prof Kerry Brown of the Lau China Institute at King’s College London.

But this may be a hard sell, especially given the lingering concerns about China’s growing military might in the South China Sea.

Davos is a good opportunity to challenge these perceptions, says Jia Xiudong, at the China Institute of International Affairs in Beijing.

“Other countries may see China as an aggressive, assertive country. But this is a misunderstanding. That’s why it’s such a good opportunity for the president to communicate his message.

“Oh, and that no-one will be unfurling Free Tibet flags or heckling him (at least not inside the venue) will probably be an added benefit.

3) It’s all about symbolism, silly

President Xi’s speech comes just three days before Donald Trump is inaugurated as the 45th president of the United States.

“America is downgraded slightly in the eyes of the world because of the election,” says Prof Brown. “And China is more prominent – so it’s quite significant.”

Vanity is also a factor. President Xi enjoys massive popularity at home, and, as you might expect, would like to see that level of respect paid to him on the international stage.

What better way to do that than to praise the virtues of China’s economic wisdom to a receptive crowd, at a time when faith in the US’s ability as the de facto superpower is being questioned and dissatisfaction for the free market system – and the inequality it has created – is rising.

But while President Xi may enjoy being thrust into the spotlight on the Davos stage, it won’t erase some of the hard truths he has to deal with back home.

China’s economy is slowing down and its currency, the yuan, is weakening to lows not seen since 2008.

All of this has Beijing extremely concerned. China knows better than most that a growing gap between the haves and the have nots is devastating for social stability.

Source: Davos 2017: Can Xi Jinping be star of the show? – BBC News

13/01/2017

India’s Massive Aadhaar Biometric Identification Program – The Numbers – Briefly – WSJ

The rollout of India’s new biometric identification system is not without problems as outlined in a story in The Wall Street Journal Friday.

One of the biggest reasons there are still issues with the biometric IDs–which are already being used widely to distribute subsidies for food and fuel–is the sheer scale of Aadhaar.

Here are a few of the numbers that point to the size of the program which is leading to the problems.

1.1 BILLION

The number of Aadhaar cards issued. Enrollment started in 2009, and now the system can process 1.5 million applications a day. That still leaves out about 150 million Indians without cards.

86%

The percentage of all Indians who hold Aadhaar cards. For those older than 18 the percentage is 99.5%. Most of those left out are infants, because fingerprint recognition isn’t reliable until a certain age. Still the government has already started to assigning numbers to newborns.

15 MILLION

The number of transactions per day involving Aadhaar. That is a five-fold rise from a year ago when there were 3 million a day.

4 BILLION

The total number of times the Aadhaar system has been used so far for authentication and identification.

377 MILLION

Number of Aadhaar number linked to bank accounts. Going forward, the connection to bank accounts will make transactions smoother and allow bank clients to move funds just by using their fingertips.

Source: India’s Massive Aadhaar Biometric Identification Program – The Numbers – Briefly – WSJ

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12/01/2017

Amazon Yanks Indian-Flag Doormats as New Delhi Threatens Punishment – India Real Time – WSJ

Amazon.com Inc. pulled doormats emblazoned with the Indian flag from its Canadian website after the South Asian nation’s foreign minister threatened to oust the Seattle company’s employees.

This is unacceptable,” Sushma Swaraj, India’s foreign minister, wrote on Twitter Wednesday in response to a posting from a user showing an image of the doormats for sale.

Ms. Swaraj, who has 7 million followers on the platform, called on Amazon to remove the “insulting” products and threatened to rescind visas for Amazon’s foreign staff in India if action wasn’t taken.Her three tweets on the issue garnered more than 19,000 retweets and more than 30,000 likes, with some users calling on “all angry Indians” to email Amazon founder Jeff Bezos directly.

Source: Amazon Yanks Indian-Flag Doormats as New Delhi Threatens Punishment – India Real Time – WSJ

12/01/2017

Service With a Smile in Xi’an – China Real Time Report – WSJ

In China’s ancient capital Xi’an, police are taking charm lessons from high-end innkeepers.

The Public Security Bureau in the city’s Chang’an district sent more than 20 officers to a nearby luxury hotel to study “Smiling Services” on Sunday, a few days after a local TV news program aired footage criticizing police and other local bureaucrats for poor customer service.

It’s a rare case of public agencies turning to private companies for working advice in a country where officialdom has long enjoyed the superior status.

The news report focused on difficulties people have in getting a Hukou, an essential local residence certificate in China, and the service they received from desk officers at the local police station.

The report came on the heels of a pledge by new Xi’an’s municipal party secretary, Wang Yongkang, that he would serve as a “five-star waiter” for local residents, and drew a sharp response from local Communist Party officials.

“We are all the waiters for the people. We should not only serve people well, but also should serve them better than five-star hotels and try to devote wholeheartedly to become people’s ‘Five-star Waiters,’” an article posted on the website of the Xi’an Communist Party’s municipal committee said.Chinese people have long complained about poor service from bureaucrats, with many saying their sole focus is on pleasing their superiors, not the people they are paid to help.

Mr. Wang’s “five-star pledge” has resonated throughout Xi’an and appears to have inspired the undercover news report on police services. The same news program aired a similar report targeting bureaucrats in the city’s business registration offices two days before it took on the police.In the wake of the latest news story, Public Security Bureau officials said they held emergency meetings to watch the program and criticize involved officials before coming up with a plan to seek advice from a local five-star hotel, which wasn’t identified.

The police officers received a PowerPoint presentation on the hotel staff’s serving standards and observed their work on site, according to sanqin.com, a local media site which was allowed to tag along at the sessions. Public Security Bureau officials declined to comment to The Wall Street Journal.

A photo posted on Chang’an Public Security’s social-media account showed police officers smiling behind the hotel desk counters, attending to “guests” played by hotel employees. Another photo showed police officers listening attentively to lectures and carefully taking notes.

The effort didn’t impress everyone, judging by responses in social and traditional media.“The timely response of local authorities toward local media exposure is worthy of praise,” Nanfang Daily commented, but it went on to question the value of the charm lessons. “Smiling shouldn’t be a fake smile. It’s better to come from the heart.”

One commentator on social media said people would simply be happy if bureaucrats did their jobs correctly.

“Citizens don’t ask you to extend warm welcome and farewell or deliver some star-level service,” this person said. “What we ask for is only that you answer questions and solve problems according to the rules.”

Source: Service With a Smile in Xi’an – China Real Time Report – WSJ

06/01/2017

The high economic costs of India’s demonetisation | The Economist

MOST economists might hazard a guess that voiding the bulk of a country’s currency overnight would dent its immediate growth prospects. On November 8th India took this abstruse thought experiment into the real world, scrapping two banknotes which made up 86% of all rupees in circulation. Predictably, the economy appears indeed to have been hobbled by the sudden “demonetisation”. Evidence of the measure’s costs is mounting, while the benefits look ever more uncertain.

At least the new year has brought a semblance of monetary normality. For seven weeks queues had snaked around banks, the main way for Indians to exchange their old notes for new ones or deposit them in their accounts. That is over, largely because the window to exchange money closed on December 30th. The number of fresh notes that can be withdrawn from ATMs or bank counters is still curtailed, but the acute cash shortage is abating, at least in big cities.

As data trickle through, so is evidence of the economic price paid for demonetisation. Consumers, companies and investors all wobbled in late 2016. Fast-moving consumer goods, usually a reliable growth sector, retrenched by 1-1.5% in November, according to Nielsen, a research group. Bigger-ticket items seem to have been hit harder. Year-on-year sales at Hero Motocorp, the biggest purveyor of two-wheelers, slid by more than a third in December.AdvertisementA survey of purchasing managers in manufacturing plunged from relative optimism throughout 2016 to the expectation of mild contraction. Firms’ investment proposals fell from an average of 2.4trn rupees ($35bn) a quarter to just 1.25trn rupees in the one just ended, according to Centre for Monitoring Indian Economy, a data provider. As a result, corporate-credit growth, already anaemic, has reached its lowest rate in at least 30 years (see chart).

All this amounts to “a significant but not catastrophic” impact, says Shilan Shah of Capital Economics, a consultancy. Annual GDP growth forecasts for the fiscal year ending in March have slipped by around half a percentage point, to under 7%, from an actual rate of 7.3% in the last full quarter before demonetisation. Other factors, such as the rise in the oil price and the surge in the value of the dollar after the election of Donald Trump, are also at play.

Whether the costs of the exercise justify the benefits depends, of course, on what those benefits are. In his speech announcing the measure, Narendra Modi, the prime minister, highlighted combating corruption and untaxed wealth. Gangsters and profiteers with suitcases full of money would be left stranded. But reports suggest that nearly 15trn rupees of the 15.4trn rupees taken out of circulation are now accounted for. So either the rich weren’t hoarding as much “black money” as was supposed, or they have proved adept at laundering it. The Indian press is full of tales of household staff paid months in advance in old notes, or of bankers agreeing to exchange vast sums illegally.

Fans of demonetisation point to three beneficial outcomes.

First, banks, laden with fresh deposits, will lend this money out and so boost the economy. Big banks cut lending rates this week (quite possibly nudged by government, the largest shareholder of most of them). But their lending recently has not been constrained by a lack of deposits, so much as by insufficient shareholder capital to absorb potential losses, and by the over-borrowed balance-sheets of many industrial customers.

Second, Indians will move from living cash in hand into the taxed formal economy. Mr Modi has recently promoted the idea of a cashless, or “less-cash”, India (not something mentioned at the outset), as one reason for demonetisation. Progress towards getting Indians to pay for things electronically is indeed being made, but from an abysmally low base.

The third upshot is the most controversial. Now that the demonetised bank notes are worthless, the government is intent on in effect appropriating the proceeds. The procedure requires trampling on the credibility of the Reserve Bank of India (RBI), the central bank, which must first agree to dishonour the promise, on all banknotes, to “pay the bearer” the value. If it does so, “extinguishing” the notes and its liability for them, it can transfer an equivalent amount to the government budget.

With so much cash handed in at banks, the amount remitted to government by the RBI might amount to perhaps 0.2-0.3% of GDP. Proceeds from a tax-amnesty scheme for cash-hoarders may swell the figure. Even so, it will not be enough to justify the costs of demonetisation—or even, perhaps, the damage to the reputation of the RBI, which is already facing questions about its independence. But having imposed the costs, Mr Modi will be keen to trumpet whatever benefits he can find.

Source: The high economic costs of India’s demonetisation | The Economist

06/01/2017

Xi Jinping is busy arranging a huge reshuffle | The Economist

EVERY four years the United States holds an election that can change national policy and unseat many decision-makers. Every five years China holds a selection process that can do the same thing. Communist Party officials tout it as evidence of a well-ordered rhythm in their country’s politics. This year it may turn out as unpredictable as America’s election in 2016.

The people up for re-selection are the 350-odd members of the party’s Central Committee, the political elite, along with its decision-taking subsets: the Politburo, the Politburo’s Standing Committee (a sort of inner cabinet) and the army’s ruling council. The choice of new leaders will be made at a party congress—the 19th since the founding one in 1921—which is expected to be held in Beijing in October or November, and at a meeting of the newly selected Central Committee which will be held directly afterwards.

Party congresses, which are attended by more than 2,000 hand-picked delegates, and the Central Committee meetings that follow them, are little more than rubber-stamp affairs. But they are of huge symbolic importance to Chinese leaders. They matter for three reasons.

First, they endorse a sweeping reshuffle of the leadership that is decided in advance during secretive horsetrading among the elite. The coming congress will be Mr Xi’s first opportunity to pack the Central Committee with his own allies; the outgoing one was picked in 2012, when he took over, not by him but by the people then running the country, including his two predecessors. After previous congresses held five years into a leader’s normally ten-year term—that is, those convened in 2007 and 1997—it became clear who that leader’s successor was likely to be. If the coming meetings are like those earlier ones—a big if—they will give a strong clue to Mr Xi’s choice of successor and start the transition from one generation of leaders to another.

Second, congresses can amend the party’s constitution. China’s leaders like the document to give credit to their favourite ideological themes (and Mr Xi is particularly keen on ideology). When Jiang Zemin stepped down as party chief in 2002 his buzzwords were duly incorporated; so too were those of his successor, Hu Jintao, five years later. Mr Xi’s contribution to party-thought—such as on the need to purge it of corruption while strengthening its grip—is likely to gain similar recognition.

Third, congresses are the setting for a kind of state-of-the-union speech by the party leader, reflecting an elite consensus hammered out during the circulation of numerous drafts. In the coming months, Mr Xi will be devoting most of his political energy to ensuring that his will prevails in all three of these aspects. His authority in the coming years will hugely depend on the degree to which he succeeds. Preparations for the gatherings are under way. They involve a massive operation for the selection of congress delegates. On paper, this is a bottom-up exercise. Party committees down to village level are choosing people who will then choose other representatives who, by mid-summer, will make the final pick. Thousands of party members are also scrutinising the party’s charter, looking for bits that might need changing.It may sound like a vast exercise in democratic consultation, but Mr Xi is leaving little to chance. Provincial party bosses are required to make sure that all goes to (his) plan. Over the past year, Mr Xi has appointed several new provincial leaders, all allies, who will doubtless comply.

Hands up who likes XiT

hose chosen to attend the congress will follow orders, too, especially when it comes to casting their votes for members of the new Central Committee. And the newly selected committee will stick even closer to script. The processes that lead to its selection of the party’s and army’s most senior leaders are obscure—a bit like the picking of cardinals in the Vatican. But an account in the official media of what happened in 2007 suggests that at some point in the summer, Mr Xi will convene a secret meeting of the current Central Committee and other grandees for a straw poll to rank about 200 potential members of the new Politburo (which now has 25 members). This is called “democratic recommendation”, although those taking part will be mindful of who Mr Xi’s favourites are.

Candidates for the Politburo must fulfil certain criteria, such as holding ministerial rank. For the coming reshuffle, Mr Xi has added a new stipulation: faithful implementation of his policies. For all his power, Mr Xi has struggled with widespread passive resistance to his economic reforms. To ram home the importance of obedience, Mr Xi recently held what he called a “democratic life session” at which Politburo members read out Mao-era-style self-criticisms as well as professions of loyalty to Mr Xi as the “core” leader (as the party decided last October to call him).

By August, when Mr Xi and his colleagues hold an annual retreat at a beach resort near Beijing, the initial lists of leaders will be ready. Probably in October, the Central Committee will hold its last meeting before the congress to approve its documents. The “19th Big” will start soon after, and will last for about a week. The first meeting of the new Central Committee will take place the next day, followed immediately by the unveiling before the press of Mr Xi’s new lineup (no questions allowed, if officials stick to precedent).

The process is cumbersome and elaborate, but over the past 20 years it has produced remarkably stable transfers of power for a party previously prone to turbulent ones. This has been helped by the introduction of unwritten rules: a limit of two terms for the post of general secretary, and compulsory retirement for Politburo members if they are 68 or over at the time of a congress. Mr Xi, however, is widely believed to be impatient with these restrictions. He has ignored the party’s hallowed notion of “collective leadership”, by accruing more power to himself than his post-Mao predecessors did.

If precedent is adhered to, five of the seven members of the Politburo’s Standing Committee, six of its other members and four of the 11 members of the party’s Central Military Commission (as the army council is known) will all start drawing their pensions. In addition, roughly half the 200-odd full members of the Central Committee (its other members, known as alternates, do not have voting rights) will retire, or will have been arrested during Mr Xi’s anti-corruption campaign. This would make the political turnover at this year’s gatherings the biggest for decades, akin to changing half the members of the House of Representatives and three-quarters of the cabinet.

Until late in 2016 there was little to suggest any deviation from the informal rules. But in October Deng Maosheng, a director of the party’s Central Policy Research Office, dropped a bombshell by calling the party’s system of retirement ages “folklore”—a custom, not a regulation.

The deliberate raising of doubts about retirement ages has triggered a round of rumour and concern in Beijing that Mr Xi may be considering going further. The main focus is his own role. Mr Xi is in the middle of his assumed-to-be ten-year term. By institutional tradition, any party leader must have served at least five years in the Standing Committee before getting the top job. So if Mr Xi is to abide by the ten-year rule, his successor will be someone who joins the Standing Committee right after the coming congress.

But there is widespread speculation that Mr Xi might seek to stay on in some capacity when his term ends in 2022. He might, for instance, retire as state president (for which post there is a clear two-term limit) but continue as party general-secretary. He faces a trade-off. The more he breaks with precedent, the longer he will retain power—but the more personalised and therefore more unstable the political system itself may become. Trying to square that circle will be Mr Xi’s biggest challenge in the politicking of the year ahead.

Source: Xi Jinping is busy arranging a huge reshuffle | The Economist

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