Jiang Zemin never spent too much time worrying about Western financial markets or domestic criticism, either before or after he became China’s president between 1993-2003. Instead, he focused on 3 core areas, which became known as the Three Represents:
“The Party must always represent the requirements of the development of China’s advanced productive forces, the orientation of the development of China’s advanced culture, and the fundamental interests of the overwhelming majority of the people in China.”
Today, it is unlikely his protégés on China’s new politburo will deviate from this direction.
“Over the past half-century, many countries have entered middle-income status, but very few have made the additional leap to become high-income economies. Rather, several faced sudden, sharp decelerations in growth and have been unsuccessful in addressing the root structural cause of the slowdown.”
PVC markets provide a good example of the key issues. As the chart shows (based on industry and Global Trade Information Services data), the previous Hu/Wen regime panicked in 2008-9 as China’s export-led growth came to an end. Instead, they stimulated construction and housing markets, whilst also continuing to increase China’s own PVC production capacity:
• Total PVC demand jumped 24% between 2008-10 whilst local production rose 31%
• Demand has however stagnated since then, rising only 5%
• Production has continued to rise, however and is up 14%
• Net imports have taken the strain, falling 38%
As with polyethylene, NAFTA’s major cost advantage has only mitigated its position, with net imports up just 6% between 2010-12. By comparison, Europe’s net position declined from 125KT in 2009 to 15KT, whilst NEA dropped from 890KT to 589KT and SEA from 244KT to zero.
Equally, as the doctrine of the Three Represents suggests, its new focus will surely be on raising living standards for the majority of the people, who earn <$10/day, and not on Hu/Wen’s failed dream of building a western-style middle class during their decade in power.