WSJ Journalist Bounced from China and Why It Matters

The Washington Post reported today China denied the visa renewal for Chun Han Wong, a Wall Street Journal reporter. The action came after Wong helped write a report on allegations the cousin of Chinese president Xi Jinping was involved in gambling and potential money laundering in Australia.

As the Post pointed out in the past the Chinese government has retaliated against foreign journalists through the visa process for stories that discussed the private lives and wealth of the families of the country’s ruling elite.

A 2012 Bloomberg News investigative report disclosing the Xi family’s investments resulted in a visa ban for the news agency that was only lifted after extensive discussions between Bloomberg executives and Chinese officials.

At least half a dozen correspondents for the New York Times faced lengthy delays receiving new visas or were expelled outright after the Times published a similar expose that year about former Chinese Premier Wen Jiabao’s family wealth.

Why is this important?

Basically without independent reporting from China the global public would have little information about what is going on in that country. We would not know the economic and social pressures that are at play in the world’s second largest economy and up and coming military power.

And that is what dictators like the Communist Party leadership in China want. They don’t want information about the cracks and flaws in their society. They are especially afraid of the Chinese people learning about  see the lavish lifestyle they lead.

Traditionally the big fear is an outraged farmer class. In the past the governments of China have tolerated a lot of push back from farmers because of their large numbers.The party’s biggest fear is that these farmers would see how well the leadership is living and compare it to the bone-crushing poverty the rural class faced.

Now, however, there is a growing middle class and these folks want to see continued growth. They are also more educated. So they know corruption impedes economic growth. So it is this danger the party leadership faces. They do not want the rising middle class to know just how much wealth the leaders have. Or how they give unfair advantage to their family members.

So for the party leadership their very survival depends on controlling the press and keeping their dirty laundry hidden. And that is why journalists who do what journalists do — finding and reporting on facts — are such a danger to the Chinese government.

The rest of the world needs to know this information because we have to live in a world where China is a major player. Whether it is economics or military, China has a role. And we need to know if they are playing fair or if they are cheating. (And then take appropriate steps.)

Knowing about a government leader’s family connections to wealth and possible criminal activity is a vital part of knowing how to deal with that leader.

And that is what a free press is all about.

Economic Stability Needs Free Press

Despite all the complaints about how poorly “the media” covered the Wall Street shenanigans that led to the 2008 Great Recession, people still turn to the unfettered and independent media outlets for news about stocks, bonds and the general state of the economy. In fact, the whole system of savings and investment would not work without a free press.

The media — and this includes knowledgable bloggers — provide the public with loads of information about what is going on in the marketplace. They look at government regulations, company news and the overall status of the market.

One of the reasons there is global support for the U.S. stock markets is because there is such a strong tradition of free and unfettered media. (And perhaps, part of the trauma of the 2008 collapse was because how poorly the market was covered at the time.)

In fact, one of the most important part of any successful stock market is a free press that is allowed to dig into company records and government actions. Look at London, Paris, Tokyo and even Hong Kong.

So is it any wonder there are uprisings and complaints about how things are going in the Chinese stock markets?

China Digital Times summarized a series of articles of how people across China are complaining about their losses in Chinese investment instruments.

According to the [Wall Street] Journal, some 1.6 million investors lost a total of at least $24.3 billion to collapsing wealth-management products over the past year. Many say they invested because of the perceived endorsement of government officials and state media, and are now demanding reimbursement from authorities.

Rather than move to make sure people got the best and most accurate information about where and how to invest their money, the Chinese government, instead, has decided to restrict even more information.

A series of leaked media directives published by CDT further illustrates efforts to manage discontent. Trying to steer a course between inciting panic and stoking further exuberance in June, the State Administration of Press, Publication, Film, Radio and Television told broadcasters not to “join the chorus of the bull or bear market. Rationally lead market expectations to prevent inappropriate reports from causing the market to spike or crash. […] Do not conduct in-depth analysis, and do not speculate on or assess the direction of the market. Do not exaggerate panic or sadness. Do not use emotionally charged words such as ‘slump,’ ‘spike,’ or ‘collapse.’”

Additional directives instruct editors to focus on “illustrative examples of steady growth,” while downplaying or holding back on anything negative about the property and stock markets.

Wall Street Journal reporter Laurie Burkitt retweeted one of the best reactions to the Chinese government actions:

In China, “the markets are like K-Y Jelly. They can play a decisive role, but they aren’t the main actor.” – Jim McGregor @AmCham_China

— Laurie Burkitt (@lburkitt) April 15, 2016

And yet, the government continues to see it self as the main actor.

Why does this matter to journalists or even the people in the United States?
A great misunderstanding of how the Chinese markets work led to a global run on markets. And yet, only after the Western markets started falling because of what was happening in China, did people start figuring out the fall was an overreaction.

There is not enough foreign investment in the Chinese market for it to be a major problem. The London consultancy Capital Economics has said foreigners own just 2% of shares. — BBC  1/7/16

The smoke and mirrors situation in China built up by the ruling elite created a situation where otherwise strong Western investment instruments collapsed in just a matter of days. To be true, the collapse of the Chinese stock markets did indicate the Chinese economy was slowing. But again, had there been better reporting in China — that is had the government NOT restricted what reporters can cover — then the news about the slowing Chinese economy would not have come as such a shock.

The anti-free press fixation of the Chinese government is not just morally wrong, but it clearly also has a direct impact on U.S. investors, including a lot of retirement funds.

By the way, this has all happened before.

Back in the early 1990’s — when I lived in Shanghai — the government opened stock markets in Shanghai and Shenzhen. The party and government leaders encouraged people to invest. The people, figuring that the government has always taken care of them in the past will guarantee they will be taken care of in the future.

When the market collapsed in early 1992, millions of people lost their life savings. Men and women in their 60s discovered they had to now work many more years and save a lot more of their earnings to prevent starvation in their old age.

At that time the government did not step in to make good the losses. Deng Xiaoping was effectively in charge and forbade any bailouts. (Except for key companies, of course.) He made it clear the people will have to learn about the ups and downs of a marketplace economy with Chinese characteristics. He even allowed for and encourages small private companies to be set up.

The new leadership, however, has seem hell-bent to restore the all-pervasive nature of the Communist Party in Chinese society. They have apparently become nervous about the growing middle class. Seems once people get a taste of economic freedom, they tend to want political and social freedom as well. And that is not allowed.

So the government stepped up it campaign to crush freedom of speech and expression — including reminding the media their job is to represent the party — and stepped up its campaign of the government being mother and father.

The Chinese leadership claims they are concerned with preserving stability and avoiding social unrest. Yet the keep taking steps that lead to more social unrest.

By restricting the media to being only mouthpieces of the government, people will turn to rumors and whispering campaigns for information. And, as anyone who has played the “telephone game” will know, what goes in at the start is not necessarily what comes out the other end.