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Portrait de Marcus Svedberg
2012-02-24 (Comments)

The big question ahead of the Russian presidential election next Sunday is not who will win but rather what the margin will be and, more importantly, what will happen after the election.  

Prime Minister Putin may not be as popular as he used to be or as liked as the official polling suggest, but he is nevertheless the most popular politician in Russia and the other candidates are trailing far behind the former president.

The latest Levada survey, which is the most trustworthy polling organization, gives Putin a 66% win, which means that he would win easily in the first round.  None of the other four candidates comes close to those levels with Communist leader Zyuganov and nationalist Zhirinovsky at distant second while the two other candidates, Just Russia leader Mironov and billionaire Prokhorov, trailing even further behind.

Putin’s popularity has fallen during the last couple of years and the street protests after the parliamentary election in December illustrate the growing discontent with the ruling elite, personified by Putin, among the urban middle class.

But it would be a mistake to assume that he has turned deeply unpopular or that some other politician has become more popular. Putin’s approval rating has dropped from an abnormally high 85% four years ago to a more normal 65% today, according to Levada.

The protests have not been unimportant though as they seem to have encouraged Putin to adopt a more reformist stand. He has been talking and writing about the need for reforms in the election run-up, which would be very positive for the economy and the stock market if implemented.

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Portrait de Kristina Sandklef
2012-02-17 (Comments)

Ever heard about Wukan? It is a fishing village with 20 000 inhabitants in China’s southern province of Guangdong. 

Wukan made the international headlines a couple of months ago after its villagers staged a massive protest against a land grab with too small compensation and to get back the body of one of their protest leaders, Xue Jinbo, who had mysteriously died in custody. Meanwhile, a journalist from British The Daily Telegraph was tweeting the events to the world from within Wukan, which made the incident quite unique.
 
After the angry villagers had driven the Communist Party cadres out of the village, the provincial leadership promised to investigate what really had happened to Xue and elections of a new village committee were to be held.

The protests subsided and one of the protest leaders, Lin Zulian, became temporary party secretary of the village until elections with sealed ballots had been held to elect a new village leadership. Since then Wukan has been hailed as having the first free democratic election in China and the phrase ”Learn from Wukan” has since been used in other protests in other parts of China.
 
But how important is really Wukan for China and its future democratic development? I would say that the most important thing with Wukan is that Guangdong’s party secretary Wang Yang, one of the candidates for a seat in the Communist Party Standing Committee of the Politbureau later this year, actually handled the situation very well. Wang Yang is known for being quite liberal and also for promoting ”Happy Guangdong”, where the province’s inhabitants are supposed to get happier, which is to be measured by a happiness index.


One of the main streets in the city of Chongqing in China.

Rather than being
a part of democratizing China – village elections have after all been held in China since the 1980s, some of them more democratic than others – Wukan has been part of the leadership struggles taking place as seven of the nine members of the Standing Committee are leaving this autumn.
 
As Chinese leadership selections are secretive, it is hard to know what is really going on behind the scenes. The fifth generation of leaders coming up is the first generation that has not been picked by one of the revolutionaries and it is also believed that there could be experiments with inner party democracy selecting the new leaders. Seen is this light, Wukan was thus a positive move for Wang Yang.
 
Last week, the party secretary of Chongqing, Bo Xilai, known for busting mobsters in his city and trying to revive communism à la Cultural Revolution creating ”Red Chongqing”, had a serious blow. One of his closest allies, the former vice mayor and police chief Wang Lijun who helped Bo to bust thousands of corrupt mobsters in the city a couple of years ago, turned up at the US consulate in Chengdu apparently trying to seek refuge from Bo, possibly seeking asylum.

Nobody really knows what happened, but it seems that Wang is not ill getting vacation style treatment, as Chongqing authorities claimed on their website, but is now in Beijing taken care of by the Communist Party’s Disciplinary Committee, which is the party’s main watch dog for corruption. Was this an attempt by Beijing to bring down popular Bo Xilai to prevent him from being one of the top leaders in the fifth generation leadership? Or is Bo strong enough to survive anyway?
 
Meanwhile, vice president and most likely the future party leader and president, Xi Jinping made an official visit to the US this week. His visit to the US, where his daughter studies at Harvard under an alias, was important for him to boost his international reputation and showing the Chinese back home that he will be able to handle the important relationship with the US as the new leader of China.

The visit appears to have gone well, with Xi talking agriculture in Iowa, shipping in Los Angeles, meeting Obama and having lunch with Hillary Clinton and Joseph Biden in Washington. Back home in Beijing the secretive power struggle for the seats in the Standing Committee continues and we will for sure see more political struggle this year.

Étiquettes: Chongqing, Wukan | (Comments)
Portrait de Marcus Svedberg
2012-02-14 (Comments)

What are the defining characteristics of politics in Central Asia? It remains in the shadows of Russia and rarely changes. The latest election in Turkmenistan and the recent government reshuffle in Tajikistan do not change these old truths as it happened while the spotlight was on the upcoming Russian election and it will not lead to any real changes anyhow.

That incumbent President Berdymukhamedov won a landslide in the 12 February election in Turkmenistan did not surprise anyone. According to the official election authorities, Berdymukhamedov who has been in power since former president Niyazov died in office in 2007 received 97% of the votes.

The turnout was 96% and one can only wonder what the 3% of the electorate that voted for any of the remaining seven candidates were thinking. The elections were, obviously and as usual in Turkmenistan, neither free nor fair and international election observers like the OSCE did not even bother to monitor the vote.

President Berdymukhamedov refers to his time in office as “"The Era of Turkmenistan's Great Renaissance”, but the country has not changed in any material way from the so called “Golden Age” under his predecessor. And there is, unfortunately, little prospect for a real renaissance in Turkmenistan in the near future.        

President Rahmon has meanwhile ruled Tajikistan, which is slightly less authoritarian but mostly unfree according to Heritage, since independence 20 years ago. That Rahmon reshuffled the government recently will unlikely change anything since he is unlikely to reduce his tight grip on power.

There have been suggestions that the changes in the government, which included the removal of the minister of education as well as a number of security service officials, was a result of growing pressure from the media on the back of corruption allegations.

That may very well be true but the changes will most likely be of a more cosmetic nature rather than a serious attempt to change the status quo in one of the poorest and least developed countries in Eastern Europe.    

One can only conclude that it is rather ironic that these two countries together with neighboring and equally authoritarian Uzbekistan are expected to the fastest growing economies in Eastern Europe in 2012.

Étiquettes: Berdymukhamedov, Central Asia, Rahmon, Tajikistan, Turkmenistan | (Comments)
Portrait de Marcus Svedberg
2012-02-10 (Comments)

What is the common denominator between Hungarian flag carrier Malev and Romanian Prime Minister Emil Boc? The answer is that both went out of business this week as a result of the economic slowdown.

The flag carrier Malev has, just like the Hungarian economy in general, been struggling for quite some time so the closure did not come as a major surprise. It had accumulated almost EUR 300mn of debt and was grounded after failure to service those debts.

It was also running into problems with the EU Commission over allegedly illegal state aid from the Hungarian government, which is the main owner of Malev. It remains unclear what airline(s) will fill the void but two low cost airlines have already tried to seize the opportunity.  

Meanwhile, the Prime Minister Boc in neighboring Romania resigned as a result of public protest that took place throughout the country in January. People are protesting against political incompetence and economic austerity in general.

President Basescu and Prime Minister Boc have been targeted and their ruling Democratic Liberal Party has dropped sharply in the opinion polls. PM Boc defended the austerity measures, which have been applauded by the IMF and foreign analysts, but stepped down in order to “defuse political and social tension.”

President Basescu quickly nominated former foreign minister Mihai Razvan Ungureanu as Prime Minister. He promised to continue with the reforms and will now try to form a government. The winter of discontent is thus not over quite yet. 

Étiquettes: Basescu, Boc, Malev | (Comments)
Portrait de Kristina Sandklef
2012-02-03 (Comments)

On Monday February 6th, the Chinese celebrate the Lantern Festival, which marks the end of the Chinese New Year celebrations. This is the first day in the new year with full moon and traditionally the Chinese would go to temples with lanterns to pray for good luck.

Today, the Lantern Festival is mainly marked by many lanterns hanging in the streets and people sending off fire crackers. Migrant workers who visited their families in the Chinese hinterlands are now returning back to their work places in the urban areas.

So what can we expect from the Year of the Water Dragon? According to Chinese tradition, the dragon is a celestial, benevolent creature that brings you good luck. It originally represented the emperor, but today it represents power. As it is considered to be the best of all the zodiac animals, a baby boom is expected in China this year as many couples would like to have a dragon baby.

Studying Chinese horoscopes shows that the Water Dragon will lead to changes, adjustments, new directions and strategies. It is a good year to improve yourself, make calculated investments and build wealth. Traditionally, water represents money – most likely derived from the peasant culture where water is crucial for cultivating and getting a good harvest, or in other words more wealth. Thus the Water Dragon is supposed to bring us money this year, but many horoscopes also predicts natural disasters involving water, such as flooding, tsunamis and changes in the sea level.


The Lantern Festival marks the end of the Chinese New Year celebrations.

As for the economy
, the Chinese astrologists predict that the Chinese economy will be strong this year, while the Euro zone will continue to struggle during the year, something that you might not have to be an astrologist to predict.

However, looking at more secular forecasts, most economic analysts do expect the Chinese economy to slow down slightly during 2012, but it will still show high economic growth compared with the turbulent global economy. The Asian Development Bank forecasts a growth at 8,8 percent, the IMF 8,2 percent and the World Bank 8,4 percent. The Development Research Center at the Chinese State Council puts its projections at 8,5 percent growth 2012. At East Capital, we expect the Chinese GDP growth somewhere between 8,2 and 8,5 percent this year, depending on how much Chinese exports are hurt by the global economic turmoil.

We also expect inflation to stay relatively stable at around 4-4,5 percent and promoting growth will be in focus for the Chinese government rather than controlling inflation, as I wrote in a previous blog post (link). China’s trade surplus is expected to shrink as Chinese consumption is to take off more following higher wages and restructuring in the economy.

Politically, 2012 will be an interesting year as it is the start of the leadership transition in China. We will closely follow the political development in China and the different persons and factions within the Communist Party making their way to the mighty Standing Committee of the Politbureau. So far we do not expect any groundbreaking changes in political development the next few years as the old leaders exit and the new leaders enter.

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Our bloggers

  • Portrait de Karine Hirn

    Founding partner and Chief Representative, Shanghai office. Karine blogs about East Capital, its investment products and gives direct reports from Shanghai.

  • Portrait de Marcus Svedberg

    As East Capital's Chief Economist Marcus will focus on macro-economic issues, market events, research and political issues affecting the region.

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    As Head of Communications Vesna will focus on East Capital's business as well as the latest media topics.

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    Kristina, Macro Economist Asia, will share her experience and report trends and issues within politics and economics affecting China.

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