Wednesday, July 6, 2011

Mayor Du Will Soon Have a Visitor


From an MSNBC article on the current anxiety surrounding debt in China:  
The source of China's current problem dates back to the collapse of the global economy in 2008 when, like its Western counterparts, the Chinese government unleashed a flood of cash to stimulate its economy. Much of that money was loans from state-owned banks to local governments, which were supposed to spend all those yuan on new roads, railways, power plants and other projects to help China maintain its torrid pace of economic growth.


Many of those yuan didn't get where they were supposed to go. It's still not clear exactly where they all went. But this week the Chinese government announced the results of a nationwide audit of 31 provinces and hundreds of municipalities which found that those local governments are now carrying some $1.6 trillion worth of loans. And a large portion — as much as 20 percent — may have to be written off as bad debt.


Auditor Zhao cannot help but chuckle at his surname, which suggests the light of the sun. Such light, when able to penetrate the country's thick coat of smog, is blocked by other barriers before it can illuminate the finances of this nation's countless local governments. Up until now, this has not mattered. Now it does. Orders from the top.

His car, an unassuming white ex-taxi, mounts the hill. There's a general store and a noodle shop to the right (actually, they are both one and the same) a gas station to the left. Bracketed between the silhouettes of both is a view of the valley containing the prefecture-level city of Liangchuan. New office buildings. New high-rises. A Mexican-style villa on the hilltops beyond. This framed picture should have a title, Zhao thinks. “Modern Times.” Perhaps, in a hundred years, economists will remark upon such snapshots and lay blame for humanity's failures upon their empty promise. An interesting thought, but no more than idle musings for a small fry. Auditor Zhao is not an economist. He is only meant to know a lot of the information economists require to speak to the world about the economy.

The sun is up. The yellow hills overlooking the other side of the valley catch the light, while waterfowl rise into the air from the gorge. Auditor Zhao wants some noodles.

He walks into the combination noodle joint and general store. To the left, the store is dingy, its wooden shelves covered in the cheapest versions of every item known to humankind. To the right, the counter where noodles are served. That half enjoys a little illumination from a small, yellowing window facing the back lot. More illumination is provided by a rectangular outline of white light formed by the curtained entrance to the kitchen. He places his order with the old man who runs the combination noodle shop and hardware store. The old man turns and pushes aside the curtain to bark Zhao's order to his wife. She's operating a noodle press. Good, Zhao thinks, they'll be fresh.

Bowl of noodles in hand, he exits to make for a table with a Coca-Cola umbrella. As he pries two wooden chopsticks apart, he begins to brood again. Mayor Du will not know he has arrived. That's the point. That's why he came without a chauffeur in an old white 93 Nissan Bluebird, its heyday as the king of Beijing's taxi fleet long since passed. He is one of thousands who have been sent surreptitiously into the countryside to confirm or refute Beijing's fears that China's local governments are dangerously in debt.

Of course, this is modern capitalism. Modern capitalism requires everyone to be in debt, and for it not to matter. But then 2008 rolled around, and those Americans had to burn themselves alive on a pyre of debt, leftover cash for tons of Chinese consumables included. To pick up the slack, Beijing and the central banks injected stimulus money into local governments to encourage even more infrastructure and newer and cleaner industries, with the assumption that the money would be invested wisely. When he thinks of the integrity of this assumption, he is reminded of his cousin from his hometown in Hunan.

One day a few years back, his cousin's brother, Xiao'er, had had the audacity to purchase a new cell-phone. He got the phone and a pre-paid plan with cash upfront, but an hour later the stupid thing broke. Xiao'er returned to the mobile phone store to demand a refund from the manager. The manager tried to console Xiao'er. “Let me call our district supervisor,” said the manager. “He'll sort this out for you.” But the manager didn't call the district supervisor. Instead, he called a gang of ruffians, armed with wax wood poles, to beat the hell out of him. Xiao'er died hours later in a hospital.

When asked by Zhao why he hadn't pressed charges against the manager, the cousin explained that the manager in question was related to the township party cadre, who occasionally utilized the same armed gang to exact extra taxes from farmers. Zhao, despite his position, was powerless to seek justice.

These are the people entrusted with almost two trillion dollars in loans?

Finished with his noodles and subsequent cigarette, he makes his way back to the car, alone in the street whose every surface cannot repel the fine dusting of Shaanxi Province's famous yellow earth.   

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