The stockmarket’s collapse kicks up political fallout for Xi Jinping

Both of the president’s signature policies are in trouble

THE stockmarket rout, together with the devaluation of the currency and a mishandled disaster in Tianjin, comes at a time when the government of Xi Jinping was already under pressure for other reasons. China’s economic woes will increase the political strains upon the president.

On August 19th the website of CCTV, the state-run television system, carried an article signed by “Guoping” which claims that “the scale of the difficulties [in implementing reform], the extent of opposition, the stubbornness, ferocity, complexity and even weirdness of those who haven’t adapted to reform or even oppose it go far beyond what most people imagine.” This unusual language enjoyed the government’s stamp of approval. Guoping is a pseudonym that has been used for articles that are widely thought to reflect the president’s political views. According to the government’s website, it is the nom de plume of a group of the state-run media’s top commentators and propagandists.

The so-called opposition, as described in the article, may be exaggerated for effect. But the difficulties and dissent are real. Senior government and party officials have said nothing about the turmoil in public, which has fuelled speculation of divisions at the top. The prime minister, Li Keqiang, has come under special scrutiny (he was partly responsible for the failed attempt to prop up the stockmarket and had ruled out any devaluation of the yuan).

Mr Xi himself can hardly escape scrutiny. Unlike most of his predecessors, who left economics to their prime ministers, the president has immersed himself in economic decisions. He set up new policymaking bodies on reform and finance, for instance, and serves as their chairman. This makes it harder for him to escape blame when things go wrong.

Chaos in the markets angers investors of course, but for the most part that is not a problem for Mr Xi. On August 22nd the head of a rare-metals exchange was grabbed by unpaid investors at a luxury hotel in Shanghai and frog-marched down to the local police station (he was subsequently released). But less than 15% of household assets are invested in the stockmarket: the share-price fall is not a threat to the political system, nor even the financial one.

Rather, the turmoil matters because it raises the perennial problem in China: reform-minded leaders want to encourage markets, which require prices to change, but the leadership as a whole prizes stability, and dislikes sudden price movements. The result is a shuffling back and forth over crucial matters of reform, which continues despite the upheavals. The government has promised a big reform of state-owned enterprises, as well further financial liberalisation. A series of recent editorials in the People’s Daily, the Communist Party’s mouthpiece, dismissed the idea that the tanking markets indicate a rejection of reform and said the next stage must “improve public satisfaction”.

The real trouble is that turmoil in the market brings out opposition from within the ranks of the party—and is doing so at a time when the meltdown also dents the government’s reputation for economic competence. Opposition from within the ranks is spurred not only by the sputtering economy but, even more, by Mr Xi’s other signature policy, an anti-corruption purge. Another editorial suggested this is driving a wedge between Mr Xi and various retired leaders who are trying to protect their protégés.

That editorial—published on August 10th, again in the People’s Daily—held up as models of good behaviour former bigwigs who, when they retired, left the stage for good (as the article put it, they were like tea that went cold after the guest had left). Hu Jintao, Mr Xi’s predecessor as president, was one such cup of tea gone cold. Though he was not mentioned, Jiang Zemin (Mr Hu’s predecessor), is widely seen as being the article’s target. He left the presidency in 2002 yet has remained influential behind the scenes.

Over the past few years, Mr Xi’s anti-corruption policy has taken down several of Mr Jiang’s closest colleagues, notably a former chief of national security, Zhou Yongkang, and two top military commanders, Xu Caihou and Guo Boxiong. In late July, the purge touched one of Mr Zhou’s associates, Zhou Benshun, the party chief in Hebei province, who thus became the first serving provincial leader to be placed under investigation.

The broadside against Mr Jiang and the investigation of Zhou Benshun suggest the president’s anti-corruption campaign is still fully under way. Indeed they put a sharp point on the fact that the campaign has been much more extensive than most people had expected—just as the economic slowdown has been fiercer than most economists had forecast. Mr Xi has staked his prestige on his economic competence and his willingness to clean the stables. Both tasks are getting harder.