FOR THREE WEEKS, Zhang had watched the movements on the American markets and tracked the impact in China. He had instructed Bai to do whatever was necessary to support the domestic economy and maintain order in the Chinese markets. Under command from the finance ministry, lending between banks was still strong. Intervention in Shanghai and Hong Kong through the PIC and other state investment funds had restricted falls in stock prices to under fifteen per cent. But there was a limit to the length of time such measures could continue. If they went on too long, the same kind of problems would be stored up as had burst out in 2014.
Zhang’s faith in Bai was strong, but he was beginning to wonder whether the finance minister had been right in his advice. He hadn’t said, as Qin had done, that the American president would certainly save Fidelian. But he had said that if Fidelian failed, there would be a panic that would last days. The panic had certainly come, but it hadn’t lasted only days. By now it was three weeks. Was it a panic, or was it a crisis?
In one respect, at least, a crisis was not unwelcome to Zhang. Internationally China was heavily involved in the many discussions that were taking place on coordinated action to be taken should the crisis continue. Western finance ministers were nervously looking for commitments that China would stimulate its economy, and many European leaders had been on the phone to him asking for that assurance. Again China’s strength was needed, as it had been needed in ’08 and ’09. In ’08 and ’09 there had been so much talk, so many promises about the role China would be given in the institutions managing the global economy. Perhaps this time a few of them would be kept.
But it was the excessive stimulus of the Chinese economy that had been required at that time that laid the seeds of the disturbances five years later and the near destruction of the Communist Party regime, which only the army had prevented. That was something Zhang would not risk again. This crisis could not be allowed to build to a point where such a stimulus was required. Bai continued to tell him there was no risk of that. As long as that was true, there was no need for him to do anything.
The finance minister had delivered the message that he had received from the American Treasury secretary. Until now, Zhang had chosen to remain silent.
It wasn’t so easy for him to make a statement. People both in the party and the army were watching. He knew from various sources that the power he seemed to have exerted over the American economy had made a strong impression. If he made a statement, if he seemed to be trying to moderate what he had done, they would draw their own conclusions.
And yet if this ran out of control, if this turned from a panic to a crisis, it would present a pretext for Fan to step in.
But the statement from Peskarov changed everything. He had been told about it as soon as it was made. In the morning he met with Bai over a breakfast of rice congee. He also had Qin in the room.
Bai continued to maintain that the sense of panic would alleviate once there had been a few weeks without any more surprises. Peskarov’s statement, he said, was the last twist in a story that was coming to an end. It was mischievous, but didn’t change the economic fundamentals.
‘What about the political fundamentals?’ said Zhang sharply.
‘I think the world will soon see that Peskarov is merely meddling. That is what he is like.’
Zhang grunted non-committally and took a spoonful of congee, adding a pickle to it with his chopsticks. He ate thoughtfully.
‘Everyone now expects me to say something,’ he said.
‘You will look as if you are being forced to follow Peskarov,’ said Qin. ‘You will look as if you are forced to speak because of the Russians.’
‘Yes, but what if I don’t say it?’ He looked at Bai. ‘What then?’
‘There is no cause for a crisis,’ said Bai. ‘Everyone knows Peskarov is just blowing on the fire. His suggestion to open books is ridiculous. Who would believe what they saw in such books, anyway? Yes, there is more panic now. In another few days, everyone will forget about it.’
‘Won’t everyone think we want them to believe we had a political reason for letting the Fidelian Bank fail?’ said Zhang.
‘That is not the only interpretation,’ replied Qin.
Zhang took another spoonful of his congee. The influence that China’s state control of companies in the American economy gave him was striking. He had not really been aware of it himself before, but now that the case of Fidelian Bank had demonstrated it, one could not help but be in awe of the effect. If he was in any doubt, the anxiety he could detect when he spoke with Knowles had shown him the strength of the power he had discovered. It wasn’t even necessary to use it. Merely the awareness of it was sufficient to create an impact. It was like a military parade, or testing a bomb. Something to show that it was there. In the years of Chinese subjugation in the nineteenth century, when western powers had wanted to show their power over China, they had sent their naval vessels to sail up the Yangtze River to display their might. That was enough, they didn’t need to shoot. Fidelian Bank was an equivalent for the twenty-first century. One bank, a foretaste of what could happen. This time it showed China’s power over the west.
The weapon he had in his hands – which he had barely used even in the case of Fidelian Bank, and certainly not in any planned or coordinated way – seemed immensely powerful. But immensely powerful weapons, he knew, can be immensely dangerous, not only to the target, but to the one who uses them.
‘Do you not think that if I say nothing, President Knowles will think that I really plan to try to manipulate his economy?’
‘Who could imagine we would try to do that?’ said Qin. ‘It would be too dangerous. Anyway, to let a bank fail is not the same as to cause it to fail. Did you ask it to make so many bad loans? Did you tell the CEO to make such bad decisions?’
Zhang took a piece of pickled radish with his chopsticks and chewed it slowly. The situation was becoming extremely complicated. The further he had gone with this, the greater the stakes had become.
The showdown with Fan had been coming for some time, but he had not consciously chosen to precipitate it now. And yet it felt as if this matter of Fidelian that he had started had brought it to a head. His case had always been that it was economic power that would guarantee China’s ascendancy. Now all the factions in the regime – and Xu’s first amongst them – were watching to see if that was true and if he had the ability to wield it.
He was fearful of what would happen in Sudan. The situation there also had the potential to become very complicated. He did not think the American army would tolerate for long two of its soldiers being held hostage by a regime that many people in the United States would like to see removed. The president of Sudan had told him that his army was not aware of the Americans’ location but was searching for them. Zhang did not believe that. He wondered whether the Chinese military in Sudan was involved. The truth was, Zhang himself did not know whether the Chinese army in Sudan was operating purely as advisors or took part in anti-insurgency operations. Fan had staffed the force there with loyalists and had tight control over the deployment, and Zhang did not trust what the general told him nor the reports that he saw. He wanted the two airmen released. He had told this to the Sudanese president and he had told it to Fan. The stronger he appeared in his ability to confront the US with economic power, the more likely it was that Fan would be forced to comply.
Zhang knew that he had backed himself into a corner, unable to make concessions in the outside world because of the need to shore up his power at home. But at some point, that was always going to be the case. A final reckoning with Fan was inevitable. Now it seemed to have begun, so he must take his chances. Half measures would be fatal. Whatever he did, he would have to do with all his conviction.
Appearances were crucial. It was no longer enough for China to look like the victim of American browbeating, the posture with which the Chinese government had so often been satisfied in the past. With all eyes in the regime on the developing confrontation between him and Fan, China under his leadership needed to show a new strength. The more President Knowles made demands on him, the more he would be forced to resist them. Only if Knowles backed down on something, then he would be able to help him.
Qin understood all of this well, more so than Bai, whose political cunning was only slowly emerging from under the weight of his technocratic training.
‘Qin,’ he said, ‘let them give us something. Let them back down on South Africa. We must get something from this.’
Qin nodded.
‘What if he calls you?’ said Bai.
‘He should stop these calls!’ said Qin. ‘He should understand this does not help. We look as if we must do what the American president says. Soon we will hear about this one in the press like we heard about the other one.’
‘Then what should I do?’
‘Perhaps he will not call.’
Zhang turned to Bai. ‘You should be telling me to make the statement they want. You should be telling me to calm the markets.’
Bai nodded.
‘Well?’
‘I am also aware of all the other things, President Zhang.’
Zhang watched him. Bai, he knew, wanted to prove his political credentials. He wanted Zhang to see that he was more than an economist.
‘You told me at the start it would be a panic of a few days. Now it is weeks. Then it will be more.’
‘That is the price for showing our strength,’ said Bai. ‘Both outside and inside.’
Zhang shook his head. ‘That is too high a price.’
‘President Zhang, this is not like it was in 2008. The panic will go. We will not need to put in the stimulus we put in 2008. For a few more days, for a few weeks, perhaps, the panic will continue. But it will pass.’
‘Are you sure of that?’
Bai nodded.
Zhang looked into his bowl. The congee was finished. He took a piece of pickle with his chopsticks.
There was a knock on the door. Zhang’s private secretary entered.
‘President Zhang, the office of President Knowles has rung to schedule a telephone conversation with you.’