Dismal results in Liaoning led new provincial boss to pledge harder work

In perhaps no country is the economy more closely linked to the government than in China. From time to time, the editorial line of the official newspaper, the People's Daily, will be watched as an early indicator of any possible change in the wind in the marketplace. Don't say this was the case only in the 1980s, when reform and opening-up had just begun. The same is true today.

It follows Chinese logic. Whenever a change is to come, especially an important one that is to overcome many bureaucratic barriers, its coming cannot be a natural phenomenon. And it takes political will to clear the way.

Reading the recent political news from Beijing, investors can feel that something major is in the making. The first was the changing of the guard on May 5 in Liaoning province, one of the largest industrial bases of the country during the planned economy era and now trailing behind other parts of China in business.

In the first quarter of 2015, Liaoning's GDP growth was a miserable 1.9 percent, making it low man on the totem pole in the GDP growth ranking of all provinces, municipalities and autonomous regions.

Last year, Liaoning's GDP growth was 5.8 percent, already lower than the national average and at its lowest point in 15 years.

Since the beginning of the year, all three drivers of growth - industry, investment in fixed assets and consumption - have been "on a rapid decline" in Liaoning, the Chinese-language business press reported with alarm.

Most disturbingly, investment suffered a net fall of 18.5 percent from the same period last year.

The long-term danger in Liaoning, as the People's Daily reported two days after the province's top official was replaced, is an unprecedented drain of talent and skilled labor. A shortage of talent would become more serious in five years, a local researcher said.

Even low-skilled workers don't want to stay in Liaoning. Many factories' assembly lines are understaffed.

Although China is in the middle of a slowdown in economic growth, the central government won't tolerate such a major setback. Small wonder that the newly appointed Liaoning boss, 59-year-old Li Xi, let it be known immediately after his appointment that he wouldn't look to be just another nice guy in his new job, implying that he will find a way to make the system work.

Liaoning is perhaps only the first example. On May 6, the People's Daily ran an editorial complaining that there are many local bureaucracies simply reluctant to do any work: Documents that the central government issued in November have yet to be circulated, let alone implemented. The central bank's monetary policy is ignored by local financial institutions.

It is as if, the official newspaper said, when GDP worship is being criticized, some people (meaning some officials) think they can leave the local economy in free fall. Or that some people (again meaning some officials) think the best way to avoid corruption charges is to stay idle.

"Officials not doing their work," the People's Daily said, "are the largest stumbling block to the implementation of macro-economic policies." This can be seen as a serious reprimand that Beijing is giving local officials.

The message cannot be clearer: It is Beijing's call for "reform promoters", the term used by the Central Leading Group on reform in its meeting on May 5. China needs not only officials who don't feed business deals to their family members or mistresses. It needs capable reform promoters.

So in the next few months, too much of a slowdown, like the one seen in Liaoning, would be seen as a political problem that won't be politically allowed. Officials unwilling or unable to act as reform promoters will be removed from their positions and replaced by those willing to work harder.

This is a coming trend, as any politically savvy investor can tell. And in all likelihood, when officials' careers are at stake, they will try to help the country keep up its growth momentum.

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn

(China Daily European Weekly 05/08/2015 page13)