Authorities in China must ditch secrecy in favour of transparency to ensure fair markets
If Beijing has taken to heart recent damaging lessons of poor communication, this was conspicuously not in evidence last week. On Wednesday, the People's Bank of China posted a misleading article on its website that said the Shenzhen-Hong Kong stock connect scheme would be launched this year, contrary to expectations it would be delayed. Later, the PBOC inserted a line explaining that the article contained outdated remarks made on May 27 by the bank's governor, Zhou Xiaochuan , but not before markets surged on the unexpected positive news. There was no explanation. It may have been human error, but the markets deserved better. Anywhere else the central bank would have owned up and officials would have calmed markets by explaining the blunder.
Official secrecy remains institutionalised in modern China. Beijing needs to reform a decision-making process that makes a mockery of openness and fairness when it comes to market-sensitive information. It is still common for it to be revealed internally before being made public, tempting insiders to capitalise on that to profit.
The Communist Party seems bereft of any idea of how to break uncommunicative habits that might have served a purpose when it was a closed country, but not now that China is the world's second-largest economy. Take the lamentable effort to explain devaluation of the yuan in August, triggering worldwide concerns about a currency war and an economic slowdown. It shows how rumour thrives on a void of official information. Instead of explaining the move, officials left it to Xinhua to report that it was aimed at reflecting market developments. The market did not buy this, or a later attempt by officials at damage control. It was two weeks before Premier Li Keqiang made it clear there would be no further devaluation, but by then the damage was done. Or take the botched 1 trillion yuan (HK$1.2 trillion) attempt to prop up shares after the subsequent global stock market sell-off. Not only was there lack of transparency about the funds, but questions for officials and brokers about how firms were singled out for support.
By clinging to opaque processes, officials can unknowingly contribute to rampant corrupt dealing. Sadly, this obsession with secrecy contributes to much misunderstanding about China. Instead of criticising foreigners for it, officials should open up and try to do a better job of explaining themselves. Then the world might better appreciate that many of China's policies have a lot going for them.