Mainland best-seller offers insight into official mindset

If you intend to spend Christmas reading books, the mainland best-seller Huo Bi Zhan Zheng (The Currency War) may be a good choice. Not that the book has anything intelligent to say. But it offers a look into the mindset of many senior officials in the country nowadays and the backdrop of various financial policy decisions, including the 'Hong Kong equity through train'. It is no ordinary best-seller. It is widely read and cited by officials in Beijing. It is so popular that Fred Hu, the executive director of Goldman Sachs, has written a harshly worded book review, titled 'The Fabricated Currency War', in the latest Caijing magazine. So what is the book about? Its author Song Hongbing, a Washington-based information technology guy, claims to have uncovered plots by international bankers to manipulate political and economic developments in the west in the past 300 years because they control currency issuance rights. Among the plots was the 'instigation' of the first world war by the 'privately owned' Federal Reserve of the United States; the propping up of Adolf Hitler by Wall Street venture capitalists; and the assassination of John F. Kennedy who had signed a bill that would hurt bankers' profit. The breakdown of the Soviet Union; 'the Asian financial crisis and the slowdown of the Four Little Dragons; and the dragging of the Japanese economy... Can these all be coincidence?' the book asks. 'Military attacks will destroy buildings and kill people. With the massive size of China, military acts are not going to do any fundamental damage to the country's economy... But when a country is attacked by financial war, it will quickly create internal instability and then chaos,' Mr Song warns Beijing about further financial liberalisation. Many of you would have found these claims too ridiculous to deserve any response but not Mr Hu, who walks the corridor of power in Beijing. In his 6,200-word criticism, Mr Hu said: 'With its smooth writing and rich citing of historical references and fables, the book has turned boring financial matters into interesting reading for many people... Regrettably, most of its accounts are erroneous and out of context ... which may mislead policymakers. 'If readers, in particular policymakers, treat this as a serious work and take its conclusions and recommendations seriously, we can't help but feel surprised and even disturbed.' The fact that Mr Hu has chosen to speak up against the book almost seven months after its publication indicates that the big 'if' that worries him has already happened. Sure, any trained financial official will have little difficulty in locating the weak logic and poor evidence in the book. Sure, the conspiracy theories raised by many, including a Nobel laureate, have been there since the 1997 Asian financial crisis. But the so-called historical findings by Mr Song are still alarming. The scepticism and fear in the book play to nationalist sentiment in the mainland that dates back to 2005 when the Americans barred CNOOC from acquiring the oil company Unocal and foreign investors were seen making a fortune from stakes in mainland banks. This comes amid growing concern over asset bubbles and a fierce debate on whether the country's financial front is opening up too quickly and broadly. Against this backdrop, it is not difficult to understand how financial security has been named as one of the key concerns of President Hu Jintao. Nor is it difficult to appreciate how the decision to allow mainland individuals to invest directly in Hong Kong stocks has become a highly political issue in Beijing. So political that it may cost central bank governor Zhou Xiaochuan his job. Mr Zhou is understood to have been criticised for 'misleading' the authority into the crucial decision which was announced on the eve of a major market collapse worldwide in the summer and 'held back' by Premier Wen Jiabao because of stability concerns last month. His closeness with the international financial world, in particular Hong Kong, and even his love of western classical music and red wine has been mentioned by critics. Given Beijing's concern about stability in the run up to the Olympic Games, some insiders suggest Mr Zhou will stay in his job for the time being. Yet his political fate remains undecided. As Hong Kong lobbies for more yuan business and capital inflow from Beijing, our officials should perhaps spend some time reading the book before opening their mouths.