China Warns Economists to Brighten Outlooks

BEIJING—Chinese authorities are training their sights on a new set of targets: economists, analysts and business reporters with gloomy views on the country’s economy.

Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter.

The stepped-up censorship, many inside and outside the ruling Communist Party say, represents an effort by China’s leadership to quell growing concerns about the country’s economic prospects as it experiences a prolonged slowdown in growth. As more citizens try to take money out of the country, officials say, regulators and censors are trying to foster an environment of what party officials have dubbed “zhengnengliang,” or “positive energy.”

But Beijing has moved to reassert control of the country’s economic story line after policy stumbles that contributed to selloffs in China’s stock markets and its currency last year fed doubts among investors about the government’s ability to navigate the slowdown.

Lin Caiyi, chief economist at Guotai Junan Securities Co. who has been outspoken about rising corporate debt, a glut of housing and the weakening Chinese currency, received a warning in recent weeks, officials and commentators said. It was her second.

The first came from the securities regulator, and the later one, these people said, from her state-owned firm’s compliance department, which instructed her to avoid making overly bearish remarks about the economy, particularly the currency.

Pressured by financial regulators bent on stabilizing the market, stock analysts at brokerage firms are becoming wary of issuing critical reports on listed companies. At least one Chinese think tank, meanwhile, was told by propaganda officials not to cast doubt on a planned government program to help state companies reduce debt, economists familiar with the matter say.

While evidence of the clampdown is anecdotal, it appears widespread. Government departments didn’t respond to requests for comment or declined to comment.

During the past two months, the Communist Party leadership has been talking up the economy to try to reassure global markets.

This message control risks further constraining information about the world’s second-largest economy, thereby deepening the anxieties of investors who already doubt the reliability of official statistics and statements.

“Vigorous debate among economists and public confidence in this conversation is critical if China is to successfully navigate the choppy economic waters,” said Scott Kennedy, a deputy director at the Center for Strategic and International Studies, a Washington think tank. “If the party and government only want to hear good news, then they’d be better off hearing nothing because the value of the words would be less than zero.”

A broad-ranging tightening of controls on society has been under way in recent years as President Xi Jinping tries to gird the party and build public support for a rocky economic transition after decades of growth. Targets thus far have included activist lawyers, social media personalities, foreign nonprofit groups and party members who criticize policies.

While restrictions on foreign media have always been tight, they are becoming tighter; a growing list of foreign publications have had their websites blocked from view within China, including The Wall Street Journal.

Some lower-level government officials describe a siege mentality that took hold among Chinese leaders and senior officials as international financiers like George Soros expressed gloom about the economic outlook early this year.

At high-level meetings the past few months in the walled Zhongnanhai compound where the leaders work, some senior officials called for quashing any criticism that might encourage foreigners to “short China”—or bet against the prospects for growth—officials with knowledge of the discussions say.

“You can see they’re not happy when you tried to tell them foreign speculators are not your biggest problem,” said one of the officials who attended the meetings.

Early this year, Mr. Xi visited the country’s three big state news organizations—Xinhua, the People’s Daily and China Central Television—to lecture them on the need to toe the party line, “tell China’s stories well” and enhance the nation’s influence in the world.

That, Chinese journalists said, has resulted in pressure not only to stay away from critical topics but to produce positive stories about the economy. Reporters covering the country’s stock markets, for example, have been told to focus their reports largely on the official statements issued by the China Securities Regulatory Commission, the stock market regulator, according to Chinese journalists.

“As a Chinese reporter, you can do anything but journalism these days,” said a senior editor at a state-owned media outlet. One colleague, the editor said, was forced by the outlet to take a leave of absence over what senior editors considered the reporter’s aggressive investigation into the causes of last summer’s stock market crash.

The clampdown on criticism is reaching beyond publicly available news and comments at investor forums to include policy research and market analysis. That potentially could skew the information that leaders, officials and investors rely on to make decisions.

In February, the central bank abruptly stopped releasing data on foreign-exchange purchases by commercial banks—long viewed by market analysts as a key snapshot of China’s capital flows—a move some analysts attributed to growing worries over more money leaving its shores. In a statement days later, the central bank said it took the step because the data were “no longer a true reflection of China’s capital flows.”

Ms. Lin, the economist at Guotai Junan, said she started getting guidance last fall to tone down her public remarks about the Chinese currency, the yuan or renminbi—something she acknowledged at an economic forum held at Shanghai’sFudan University in October.

“I was told by regulators not to recommend shorting the renminbi,” Ms. Lin told the gathering, “so I’m just going to recommend buying the dollar.”

Neither Ms. Lin nor her firm responded to inquiries for comment, nor did the regulator.

In the financial hub of Shanghai, the city’s propaganda department recently instructed a local think tank to stop researching a planned debt-for-equity swap program aimed at helping big state companies reduce debt, according to economists familiar with the matter. The reason, these economists said, is that officials don’t want the research to turn up unfavorable evidence after Premier Li Keqiang and others have endorsed the swaps.

The information office of the Shanghai government didn’t respond to requests for comment.

Many analysts have said the plan, which would allow banks to exchange bad loans for equity in companies they lend to, could risk keeping companies afloat when they should sink while leaving banks more strapped for capital.

Given the climate, some are changing their tone. In mid-April, a well-known Chinese economist gave investors in Hong Kong a grim assessment of the economy.

Despite recent signs of a rebound, Gao Shanwen, chief economist at brokerage Essence Securities Co., told investors that “a lot of the official data aren’t reliable” and the economy still faces “big problems,” according to people who attended the closed-door event.

Word of those remarks crackled across social media. Two days later, Mr. Gao issued a clarification on his public account in the popular Chinese messaging app, WeChat, saying those remarks were “made up.” He then released a report on the economy shorn of critical commentary. Mr. Gao and representatives at his firm didn’t return requests to comment.

 

Source: NASDAQ

 

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