Opinion

Hugo Dixon

The China files, Part 3: Crony capitalism

Hugo Dixon
May 11, 2011 13:29 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

China’s economy is riddled with vested interests, while free speech is suppressed. This potentially explosive mixture sounds similar to Hosni Mubarak’s Egypt, though Beijing has been much more successful at promoting economic growth than Cairo in recent decades. No wonder the regime is cracking down on dissent — including arresting Ai Weiwei, the internationally renowned artist. But it won’t be easy to maintain the current political model — or to reform it. And failure to do either could knock the economy off its extraordinary trajectory.

The country is officially run by the Chinese Communist Party. But, apart from the suppression of individual rights, it is hard to see much about it that is communist. Inequality is high and rising. The Gini Coefficient, a standard measure of income inequality in a society, is over 0.4 and, by some measures, is close to 0.5 — high figures normally associated with sub-Saharan African countries.

If this inequality were merely a reflection of the market — the fact that some Chinese are more talented and hard-working than others — it could be motivational. But a lot is also a result of economic goodies being grabbed by insiders, sometimes via corruption and in other cases by excluding outsiders from opportunities. One lesson from the Arab Spring is that populations can grow restless when they think rulers and their cronies are enriching themselves unfairly.

In China, the “class” system operates on several levels. At the top of the socio-economic scale are the “princelings,” children of important party officials, who have become multimillionaires by trading on their contacts. Then there are bureaucrats, who enjoy attractive lifestyles funded by the people’s taxes and sometimes bribes. Transparency International puts China joint 78th out of 178 countries in its 2010 ranking of perceived corruption. State-owned enterprises, meanwhile, benefit from monopolies or oligopolies and pay minimal dividends. The fruits of their economic activity are therefore largely enjoyed by those who run them.

The China files, Part 2: Brave new economic model

Hugo Dixon
May 10, 2011 13:16 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

The Chinese government knows it’s time for a change. The old economic model based on cheap exports and eye-popping investment can’t be sustained.

Fortunately, politicians aren’t sitting on their hands. The latest five-year plan, covering 2011-2015, aims to boost internal consumer demand as the main engine of growth. It envisages a bigger share in the economy for services, which are currently only 43 percent of GDP — barely half America’s level. The plan calls for more high-tech industry and for greener, less carbon-intensive growth. There’s also to be a big push into social housing, so the poor can afford somewhere to live.

The China files, Part 1: How fast can China grow?

Hugo Dixon
May 9, 2011 13:30 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

How fast can China grow over the next decade? Nowhere near the breakneck speed it has enjoyed over the past three decades. Multiple economic, environmental and political challenges will slow it down.

The capitalist revolution launched by Deng Xiaoping after Mao Zedong’s death still has a long way to go. But it is now in its early middle ages rather than its infancy. The government recognizes that the old model driven by exports and investment is running out of steam; indeed, its recently unveiled 12th five-year plan tries to grapple with that challenge.

Portugal’s bank rescue plan has one hole

Hugo Dixon
May 4, 2011 20:57 UTC

By Hugo Dixon and Neil Unmack
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

LONDON — Portugal’s bank rescue scheme has one big hole. The European Union and International Monetary Fund have come up with a punchy blueprint to restore confidence in the financial system, as part of the country’s 78 billion euro bailout. The plan includes recapitalisations, stress tests and privatisations. But there’s one weakness: funding. Allowing banks to issue state-guaranteed bonds, as envisaged by the plan, is only a partial solution so long as the government’s credit is still weak.

First, look at the good part of the blueprint. Banks will have to boost their core Tier 1 capital ratio to 9 percent by the end of 2011 and 10 percent by end-2012. That’s above the 7 percent agreed under the new global banking rules. If the banks can’t raise this capital on their own, the state will provide up to 12 billion euros.

Exclusive: Geronzi payoff, expenses in focus at Generali

Hugo Dixon
Apr 27, 2011 06:55 UTC

LONDON/MILAN (Reuters) – Cesare Geronzi’s apparently hefty payoff and his seemingly lavish expenses during 11 months as non-executive chairman of Generali (GASI.MI: Quote, Profile, Research, Stock Buzz) are set to come under the spotlight at the insurer’s shareholder meeting on Saturday, several directors and other sources said.

Geronzi, a powerful Italian corporate insider who has been close to Prime Minister Silvio Berlusconi, resigned in the face of a boardroom coup on April 6. He was awarded a payoff of 16.6 million euros ($24.3 million) upon leaving Europe’s No.3 insurer, several Generali directors and other high-ranking Generali sources told Reuters on condition of anonymity.

Geronzi also ran up bills to cover extensive use of private jets, five secretaries, multiple cars and drivers in four cities, the rent for a flat in Milan, a public relations team separate from the company’s main communications office, and sponsorship of events and media outside the company’s normal advertising program, according to the sources.

Geronzi payoff, expenses in focus at Generali

Hugo Dixon
Apr 27, 2011 06:54 UTC

LONDON/MILAN, April 27 (Reuters) – Cesare Geronzi’s
apparently hefty payoff and his seemingly lavish expenses during
11 months as non-executive chairman of Generali (GASI.MI: Quote, Profile, Research) are
set to come under the spotlight at the insurer’s shareholder
meeting on Saturday, several directors and other sources said.

Geronzi, a powerful Italian corporate insider who has been
close to Prime Minister Silvio Berlusconi, resigned in the face
of a boardroom coup on April 6. He was awarded a payoff of 16.6
million euros ($24.3 million) upon leaving Europe’s No.3
insurer, several Generali directors and other high-ranking
Generali sources told Reuters on condition of anonymity.

Geronzi also ran up bills to cover extensive use of private
jets, five secretaries, multiple cars and drivers in four
cities, the rent for a flat in Milan, a public relations team
separate from the company’s main communications office, and
sponsorship of events and media outside the company’s normal
advertising programme, according to the sources.

Exclusive – Geronzi payoff, expenses in focus at Generali AGM

Hugo Dixon
Apr 27, 2011 06:43 UTC

LONDON/MILAN (Reuters) – Cesare Geronzi’s apparently hefty payoff and his seemingly lavish expenses during 11 months as non-executive chairman of Generali (GASI.MI: Quote, Profile, Research) are set to come under the spotlight at the insurer’s shareholder meeting on Saturday, several directors and other sources said.

Geronzi, a powerful Italian corporate insider who has been close to Prime Minister Silvio Berlusconi, resigned in the face of a boardroom coup on April 6. He was awarded a payoff of 16.6 million euros (14 million pounds) upon leaving Europe’s No.3 insurer, several Generali directors and other high-ranking Generali sources told Reuters on condition of anonymity.

Geronzi also ran up bills to cover extensive use of private jets, five secretaries, multiple cars and drivers in four cities, the rent for a flat in Milan, a public relations team separate from the company’s main communications office, and sponsorship of events and media outside the company’s normal advertising programme, according to the sources.

Special Report: Inside the Egyptian revolution

Hugo Dixon
Apr 13, 2011 08:32 UTC

CAIRO (Reuters) – In early 2005, Cairo-based computer engineer Saad Bahaar was trawling the internet when he came across a trio of Egyptian expatriates who advocated the use of non-violent techniques to overthrow strongman Hosni Mubarak. Bahaar, then 32 and interested in politics and how Egypt might change, was intrigued by the idea. He contacted the group, lighting one of the fuses that would end in freedom in Tahrir Square six years later.

The three men he approached — Hisham Morsy, a physician, Wael Adel, a civil engineer by training, and Adel’s cousin Ahmed, a chemist — had all left Egypt for jobs in London.

Inspired by the way Serbian group Otpor had brought down Slobodan Milosevic through non-violent protests in 2000, the trio studied previous struggles. One of their favorite thinkers was Gene Sharp, a Boston-based academic who was heavily influenced by Mahatma Gandhi. The group had set up a webpage in 2004 to propagate civil disobedience ideas in Arabic.

Non-violent protest and “political jujitsu”

Hugo Dixon
Apr 13, 2011 08:32 UTC

LONDON (Reuters) – Gene Sharp’s writings on how to use non-violent techniques to bring down autocratic regimes are often cited as a major influence on the activists who led the campaign against Egypt’s Hosni Mubarak.

The 83-year-old American academic had never met or spoken to those behind the successful uprising. But he has strong views on what happened in Egypt and what is happening elsewhere in the Middle East. First and foremost, he stresses the importance of preparation and discipline. The Egyptian protesters were prepared while the Libyans were not, Sharp said in an hour-long telephone interview from Boston, where he runs the Albert Einstein Institution, a non-profit organization that advances the study and use of nonviolent action in conflicts around the world.

Discipline means remaining non-violent despite brutality and provocation. “Sometimes the people using non-violent techniques don’t fully understand the methods,” says Sharp, who has written numerous books on the history of non-violent struggles, including two books on India’s Mahatma Gandhi. “They think that if they refrain from violence, their opponents will too.”

Inside the Egyptian revolution

Hugo Dixon
Apr 13, 2011 07:36 UTC

CAIRO (Reuters) – In early 2005, Cairo-based computer engineer Saad Bahaar was trawling the internet when he came across a trio of Egyptian expatriates who advocated the use of non-violent techniques to overthrow strongman Hosni Mubarak. Bahaar, then 32 and interested in politics and how Egypt might change, was intrigued by the idea. He contacted the group, lighting one of the fuses that would end in freedom in Tahrir Square six years later.

The three men he approached — Hisham Morsy, a physician, Wael Adel, a civil engineer by training, and Adel’s cousin Ahmed, a chemist — had all left Egypt for jobs in London.

Inspired by the way Serbian group Otpor had brought down Slobodan Milosevic through non-violent protests in 2000, the trio studied previous struggles. One of their favourite thinkers was Gene Sharp, a Boston-based academic who was heavily influenced by Mahatma Gandhi. The group had set up a webpage in 2004 to propagate civil disobedience ideas in Arabic.