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BAHAYA KARTU KREDIT DAN KREDIT KONSUMEN (CONSUMER LOANS)

Dias Satria SE.,M.App.Ec.

(Dosen Jurusan Ekonomi Pembangunan Universitas Brawijaya)

Penggunaan kartu kredit dalam kehidupan modern tentu sudah tidak mungkin dapat dipisahkan lagi. Hal ini berkembang seiring dengan kemajuan teknologi, informasi dan peradaban manusia yang semakin modern, yang cinta akan kemudahan, life style dan inovasi.

Tumbuhnya penggunaan kartu kredit didukung dengan semakin berkembangkan akses penggunaan kartu kredit di setiap aktivitas bisnis di tempat-tempat perbelanjaan, serta kebutuhan masyarakat modern untuk dapat menikmati sistem pembayaran yang canggih dan simple.

Namun penggunaan yang berlebihan dalam kartu kredit dapat menyebabkan permasalahan yang serius bagi nasabah tersebut, serta issuer (Bank yang bersangkutan).

Permasalahan dalam penggunaan kartu kredit yang harus diwaspadai oleh nasabah, antara lain:

Pertama, Nasabah biasanya tidak mengetahui secara pasti penghitungan bunga yang rumit, yang dikenakan oleh bank. Nasabah juga harus lebih kritis dalam menerima tawaran bunga 0% atau rendah, jika mampu membayar pada jatuh temponya. Hal ini disebabkan karena biasanya bunga yang dikenakan setelah masa jatuh tempo akan semakin tinggi dari suku bunga rata-rata.

Kedua, Nasabah sebaiknya mengetahui secara pasti kemampuan keuangannya. Apakah dari sisi keuangan mereka telah mampu menggunakan kartu kredit atau belum!. Selanjutnya nasabah juga harus memahami bahwa biaya bunga dan fee yang dikenakan pada kartu kredit biasanya lebih tinggi dari suku bunga modal kerja atau investasi. Sehingga sebelum meminjam mereka sudah mengetahui beban bunga dan fee yang harus ditanggung.

Ketiga, Nasabah sebaiknya mengenal karakter pribadinya dalam mengatur keuangan. Jika mereka merasa bahwa manajemen keuangan pribadinya sangat buruk, maka penggunaan kartu kredit yang berlebihan akan membahayakan masa depan keuangan mereka. Hal ini semakin parah, jika penggunaan kartu kredit lebih dipentingkan karena alas an gaya hidup atau life style dibandingkan penggunaan yang rasional untuk berjaga-jaga (safety net).

Terakhir, Nasabah harus memahami bahwa penggunaan kartu kredit yang berlebihan dan tidak berhati-hati dapat menimbulkan permasalahan resiko penipuan (fraud risk). Hal ini mungkin terjadi pada kasus penggunaan internet, atau penggunaan di merchant-merchant kecil yang diragukan kredibilitasnya.

Tentu saja kewaspadaan dalam penggunaan kredit bukan berarti menghindarkan diri anda dari penggunaan sistem pembayaran yang modern, seperti: kartu kredit, karena sistem pembayaran yang maju ini tentu juga memiliki kemanfaatan yang juga luar biasa dalam aktivitas bisnis.

Namun penggunaan yang membabi buta, tanpa didasari dengan pemahaman, kemampuan dan karakter yang baik, tidak hanya akan merugikan diri anda sebagai nasabah. Namun juga akan membahayakan bagi issuer atau bank pengeluar kartu kredit. Dan, sistem perbakan dan keuangan secara umum.

Selanjutnya, kewaspadaan juga harus ditingkatkan oleh para issuer kartu kredit (Kredit konsumen) atau manajemen bank, yang saat ini mulai meraup keuntungan yang menjanjikan pada kredit konsumen (kartu kredit). Semakin tingginya penetrasi pasar pada kartu kredit (kredit konsumen) didorong oleh kemajuan teknologi informasi, yang memungkinkan penilaian nasabah dalam waktu yang singkat menggunakan model credit scoring yang canggih. Teknologi ini secara umum mampu menangkap motivasi, keadaan keuangan dan ekonomi seseorang, yang mencerminkan kelayakannya dalam mendapatkan kartu kredit (kredit konsumen).

Namun perlu difahami meski suku bunga kredit konsumen (kartu kredit) lebih tinggi dibandingkan dengan suku bunga modal kerja dan investasi, namun bukan berarti kredit ini tidak memiliki resiko kerugian yang besar pula.

Hal yang harus difahami oleh para issuer (manajemen bank) untuk menghindari resiko atau default tidak terbayarnya tagihan kartu kredit, adalah bahwa NPL (Non performing loans) atau macetnya pembayaran kredit konsumen (ex:kartu kredit) secara umum sangat terkait dengan siklus bisnis suatu perekonomian. Dimana jika perekonomian sedang mengalami pertumbuhan dan pembangunan, maka kemungkinan terjadinya default akan semakin kecil. Sebaliknya, jika perekonomian sedang mengalami resesi atau penurunan kinerja ekonomi maka sudah bisa dipastikan kemungkinan terjadinya default atau NPL akan semakin tinggi.

Di sisi lain, kredit konsumen memiliki tingkat resiko dan biaya yang tinggi. Pertama tingginya resiko kredit konsumen sangat berhubungan dengan kondisi keuangan, ekonomi seseorang atau keluarga. Sehingga jika nasabah terkena penyakit yang parah, kehilangan pekerjaan atau mengalami tragedi atau kecelakaan, maka akan mempengaruhi pembayaran kredit mereka. Kedua, biaya yang tinggi dari kredit konsumen terkait dengan nominal yang kecil dan jumlah yang banyak, sehingga meningkatkan biaya transaksi yang tinggi bagi bank.

Dalam konteks ini, maka manajemen asset yang tepat perlu untuk dilakukkan oleh manajemen bank, dengan tidak mendominasi peneterasi kredit di sisi kredit konsumsi. Diferensiasi dan antisipasi resiko tetap harus diperhitungkan untuk dapat meningkatkan keuntungan dan mengendalikan resiko yang tidak membahayakan bagi bank.

Bagi Nasabah, penggunaan kartu kredit dan pengajuan kredit konsumen tetap harus dipertimbangkan secara matang kemanfaatan dan biayanya. Sehingga keputusan tersebut tidak merugikan posisi keuangannya dimasa depan. (http://www.diassatria.web.id)

Analisis Asosiasi Kurs dan Harga Saham :
Pendekatan Error Correction Model
(Periode 2000-2003)

Dias Satria

ABSTRAKSI

Globalisasi di sektor keuangan semakin meningkat seiring dengan kontribusi portofolio asing di pasar keuangan domestik. Tingginya mobilitas modal portofolio di pasar saham dan pasar uang telah meningkatkan volatilitas dan resiko yang berasosiasi dengan stabilitas kurs secara umum. Perkembangan inilah yang diupayakan untuk dipelajari melalui hubungan antara kurs dan harga saham. Dalam melihat kemungkinan mekanisasi yang berbeda antar hubungan kurs dan harga saham khususnya sejak era floating exchange rate, maka penelitian ini diharapkan dapat menjawab bentuk hubungan yang terjadi antar variabel tersebut. Hasil estimasi menunjukkan konsistensi secara teoritis dengan pendekatan portofolio balance, dimana pergerakan indeks saham berpengaruh kuat terhadap fluktuasi kurs. Hal ini didukung dengan hasil estimasi model ECM (Error Correction Model) yang menunjukkan signifikansi baik dalam jangka pendek dan jangka panjang, yang juga berarti model telah konsisten secara teoritis. Pada akhirnya, penelitian ini ditujukan untuk memberikan informasi bagi tercapainya stabilitas sistem keuangan, serta menginformasikan jalur moneter yang lain (harga asset), yang penting untuk mengukur determinasi kurs dalam jangka pendek.
Kata kunci : Globalisasi, Portofolio, Kurs dan Saham

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A special report on India

An elephant, not a tiger

Dec 11th 2008
From The Economist print edition

For all its chaos, bureaucracy and occasional violence, India has had a remarkably successful past few years. James Astill (interviewed here) asks how it will cope with an economic downturn

Reuters

EARLY next year, perhaps in April, India’s coalition government will face the judgment of 700m voters. Being mostly poor, they will not be happy. Recent months, moreover, have brought particular hardships: high inflation, a patchy monsoon, a slowing economy and vanishing jobs. In a worrying time, the terrorist attacks in Mumbai on November 26th-29th came as a particularly harsh blow. They gave the world images of India that jarred with the shining message of its recent progress. For three days India’s most cosmopolitan city and aspirant international financial centre echoed with gunfire. Amid the slaughter wrought by just ten well-organised assassins many individual Indians acted heroically. Yet the institutional response, as so often, was poor. Properly trained troops took over nine hours to arrive at the scene. Most of the 170-plus victims died during that time.

The Congress party, which leads India’s ruling coalition and runs Maharashtra, the state of which Mumbai is the capital, is likely to suffer for this. To make amends, Congress sacked the interior minister, and Maharashtra’s chief minister. The government, led by Manmohan Singh (pictured above), has also raised a cry—though not, thankfully, its fists—against Pakistan, whence the terrorists probably came.

Yet for most poor Indians terrorism remains a small part of their troubles. To deal with those, Sonia Gandhi, Congress’s leader, will reissue a lot of unkept promises when the election campaign begins: to bring everyone electricity, piped water, schools and jobs. She will say little about what this government has actually done: there hasn’t been much.

At the same time Mrs Gandhi and her prime minister, Mr Singh, have presided over the biggest investment-led boom in India’s history. In the past five years the economy has grown at an average annual rate of 8.8% (see chart 1). Services, which contribute more than half of GDP, have grown fastest, above all India’s computer-services companies. Infosys, TCS and Wipro are now world-famous names. But Indian manufacturing has also done well. Its impressive run culminated in January with the launch by Tata Motors of an ultra-cheap family car, the Nano.

A world of fewer opportunities

India is now facing harder times. Its stockmarket has been sliding all year. As global credit has dried up, even Tata Motors, one of India’s best companies, has been struggling to lay its hand on capital. India’s economy is slowing rapidly and confidence is fragile. Previously soaring foreign investment in the country is expected to dip. Nobody yet knows how serious the slowdown will be, but in theory a recession in the rich world should hurt India less than other emerging markets: exports amount to only about 22% of India’s GDP, against 37% of China’s.

Diplomatically, India has also started to matter more. The US-India nuclear co-operation agreement, which was approved by America’s Congress in October, was the clearest sign of this: to let India in from the nuclear cold, the developed world has made an exception to the counter-proliferation regime. Mr Singh can take much credit for this. A courteous and scholarly former finance minister who launched reforms in 1991 that unshackled India’s mixed economy, he has been an effective envoy for India.

At home, often stymied by his coalition’s leftist allies, he has done much less well. But, among his few successes, he can claim that India, the world’s fourth-biggest emitter of greenhouse gases, has started to get serious about climate change. It refuses to consider cutting its carbon emissions, arguing that they are still very low per Indian. But guided by Mr Singh, India’s bureaucracy has at least accepted that, being hot, poor and agrarian, India will be badly hit by climate change.

That makes India’s main priority, reducing poverty through rapid economic growth, even more urgent. According to the World Bank, in 2005 some 456m Indians, or 42% of the population, lived below the poverty line. In 1981, by the same measure, the numbers were 420m and 60% respectively. The government’s own estimates are lower. But everyone agrees that poverty in India is falling much too slowly.

Pick another wretched statistic: there are plenty of them. India has 60m chronically malnourished children, 40% of the world’s total. In 2006 some 2.1m children died in India, more than five times the number in China.

To make a serious dent in poverty, India needs to keep up economic growth of around 8% a year. In the medium term that should not be too difficult. More impressive even than the success of India’s best companies is the zest for business shown by millions of Indians in dusty bazaars and slum-shack factories. They are truly entrepreneurs. It is no coincidence, as is often noted, that Indians have prospered everywhere outside India.

But India’s task remains daunting. Some 65% of Indians live on agriculture, which accounts for less than 18% of GDP. Shifting them to more productive livelihoods—and so reducing poverty—would be hard even if the number of people of working age was not growing so fast. Roughly 14m Indians are now being added to the labour market each year, and that number is rising. Half of India’s people are under 25 and 40% under 18 (see chart 2). They cannot all work for Infosys. Indeed, because of India’s historic underinvestment in education, many are not obviously skilled at anything. By one estimate, which may be optimistic, only 20% of job-seekers have had any sort of vocational training. If India cannot find employment for this lot, poverty will not be reduced and India may face serious instability.

Its democracy will be no defence. India is already worryingly violent. A Maoist insurgency in eastern India, which Mr Singh has called “the greatest internal security challenge we have ever faced”, is an obvious ill omen. Where it is spreading, in poor, agrarian and broken places, the “invisible threads” that bind India, in the phrase of Nehru, its first prime minister, are almost non-existent.

In recent years India has been creating more jobs than the gloomier scenarios suggested. Between 2000 and 2005 its rate of employment growth doubled, to 2.6% a year. But that is still insufficient, and there are also fears about the quality of jobs being created. To escape throttling labour laws, Indian entrepreneurs tend to keep their operations small: 87% of manufacturing jobs are with companies that employ fewer than ten people. These tend to be both less productive than jobs in bigger companies and less protected by the law.

If India is to sustain a growth rate of 8% or higher, as it aims to do, it will need to manage four potential constraints. The most pressing, its rotten infrastructure and the dreadful quality of its education, are, alas, not new. But the government’s response has long been inadequate, and with India’s burst of high growth these two problems have become more urgent than ever. India’s current rulers, the mahouts to an elephantine state, seem at least to understand this. But their efforts to end these troubles remain unconvincing. India’s other big constraints, its cumbersome labour and land laws, should be easier to fix. But there is depressingly little sign that this will happen soon.

India is getting stronger, but its problems are also growing. In the end, the pattern of its progress suggests, it will succeed. But it may be a long and painful grind.

Economics focus

A stimulating question

Dec 11th 2008
From The Economist print edition

Can emerging economies now afford counter-cyclical policies?

Illustration by Jac Depczyk

IN JUNE 2002 the World Bank staged a headline bout between two heavyweight economists. In one corner was the IMF’s chief economist, Kenneth Rogoff; in the other, the IMF’s chief critic, Joseph Stiglitz. The subject of their fight was the emerging-market crises of the 1990s. Mr Stiglitz accused the fund of fanning the flames by prescribing fiscal austerity and tight money. He, by contrast, advocated “counter-cyclical policies”—lower interest rates and undiminished public spending, which might offset a collapse in private demand.

The fund had meekly absorbed round after round of punishment from Mr Stiglitz. So it startled everyone when the IMF’s chief economist came off the ropes to land some stinging criticisms of his own. He ridiculed what he called the Stiglitzian prescription: “You seem to believe that if a distressed government issues more currency, its citizens will suddenly think it more valuable. You seem to believe that when investors are no longer willing to hold a government’s debt, all that needs to be done is to increase the supply and it will sell like hot cakes.”

Six years later the emerging economies face another financial crisis. Some of them are again raising interest rates. But a surprising number are flirting with the Stiglitzian prescription: they are issuing more currency and selling more hot cakes. For example, the central bank of Thailand, which raised interest rates to more than 23% in 1997, lowered them this month by a percentage point, its biggest cut in eight years. Its neighbours in Indonesia, Malaysia and South Korea have also eased rates recently.

Emerging economies have also turned on the fiscal taps. Malaysia, South Korea and Russia have unveiled stimulus packages, all of them dwarfed by the splurge China announced last month. On December 6th India’s central bank cut its key rates by a percentage point. The next day its government, which will run a budget deficit of over 8% of GDP in the year to March, nonetheless made room to cut excise duties and spend another $4 billion.

In rich countries, such counter-cyclical policies are the norm. But in emerging markets, policymakers have often found themselves amplifying business cycles. They would lower interest rates in good times, then raise them in bad. In times of plenty, they gorged themselves. In times of dearth, they fasted.

What explained this perverse policymaking? It is too easy to blame the IMF. Mr Rogoff, after all, had a point: counter-cyclical policies are tricky. Unlike America, where interest rates can plunge and the budget deficit soar without calamity, emerging markets have had to worry about investors losing confidence and their currencies collapsing.

Emerging economies struggle to fight business cycles partly because theirs are more pronounced. In the “typical” Latin American recession between 1970 and 1994, output fell by an average of 8%. In the OECD, it fell by 2%. The tax base is narrower in emerging markets and revenues more volatile. Latin American recessions can cost the exchequer 20% of its revenues, compared with 6% for the OECD as a whole.

Paying for the sins of the past

This lack of fiscal muscle makes creditors wary of buying emerging-market bonds during bad times. This, in turn, prevents governments from borrowing to smooth the cycle, as their rich counterparts can afford to do.

If governments cannot borrow freely in bad times, the only response is to save more in good times. Several emerging markets face this slowdown from a position of unaccustomed fiscal strength. Chile is a shining example. It accumulated a budget surplus of 8.8% of GDP last year, thanks to soaring revenues from its copper mines. This abstemiousness has served it well as the commodity cycle has turned.

In setting its interest rates, the Federal Reserve worries about growth and inflation. It does not concern itself unduly with the dollar. Policymakers in emerging economies, by contrast, cannot afford that luxury. In countries prone to high inflation, a stable exchange rate helps to anchor prices. Such economies have also usually borrowed in dollars or euros, because their creditors insist on being repaid in hard currency. A precipitous fall in the currency can make these debts insupportable.

For these reasons, emerging economies must often raise interest rates in the teeth of a slowdown in an effort to defend their currencies. This “procyclical” monetary policy damages the economy, inflicting losses on banks and their clients. But it may be the lesser of two evils. Rich countries can afford to treat their currencies with benign neglect. Emerging economies cannot.

The “fear of floating” is, however, abating. A growing number of emerging economies have sought to earn their own spurs as inflation-fighters, rather than importing the credibility of the Federal Reserve or the European Central Bank. Thirteen emerging markets now target inflation, allowing the exchange rate to float more cleanly. Brazil and Chile have let their currencies plunge without raising rates.

Prudent emerging economies have taken advantage of a growing acceptance of their currencies. Brazil’s government has retired or exchanged $80 billion of debt indexed to other people’s money. A 10% fall in the real now lightens its debt burden, lowering the ratio of net debt to GDP by 1.3 percentage points. Some countries have also accumulated arsenals of foreign-exchange reserves and so worry less about their foreign debt.

Adding the fiscal efforts of China and other emerging economies to the stimulus planned in developed countries, the world economy will receive a fiscal boost of about 1.5% of global output next year, according to UBS. Even Mr Rogoff thinks America will need a fiscal expansion of $500 billion-600 billion in each of the next two years. In this fight, he and Mr Stiglitz are in the same corner. Hot cakes, anyone?

China and India

Suddenly vulnerable

Dec 11th 2008
From The Economist print edition

Asia’s two big beasts are shivering. India’s economy is weaker, but China’s leaders have more to fear

THE speed with which clouds of economic gloom and even despair have gathered over the global economy has been startling everywhere. But the change has been especially sudden in the world’s two most populous countries: China and India. Until quite recently, the world’s fastest-growing big economies both felt themselves largely immune from the contagion afflicting the rich world. Optimists even hoped that these huge emerging markets might provide the engines that could pull the world out of recession. Now some fear the reverse: that the global downturn is going to drag China and India down with it, bringing massive unemployment to two countries that are, for all their success, still poor—India is home to some two-fifths of the world’s malnourished children.

The pessimism may be overdone. These are still the most dynamic parts of the world economy. But both countries face daunting economic and political difficulties. In India’s case, its newly positive self-image has suffered a double blow: from the economic buffeting, and from the bullets of the terrorists who attacked Mumbai last month. As our special report makes clear, India’s recent self-confidence had two roots. One was a sustained spurt in economic growth to a five-year annual average of 8.8%. The other was the concomitant rise in India’s global stature and influence. No longer, its politicians gloated, was India “hyphenated” with Pakistan as one half of a potential nuclear maelstrom. Rather it had become part of “Chindia”—a fast-growing success story.

Next year the country will mark its 60th birthday as a people’s republic (in Confucian tradition, 60th birthdays are particularly significant). Reform and opening has thus taken up half of China’s communist life. But officials are being careful to manage expectations of further change. Deng once suggested that direct elections to national leadership posts could be held by 2050. No one mentions that now. On the economic side huge challenges loom, among them an ageing population and a blighted environment, both of which could drag down growth.

Deng, who died in 1997, is often described as the chief architect of reform, as if the sweeping changes of the past 30 years were mapped out by him. He himself more accurately described his approach as “crossing a river by feeling the stones”. The ultimate objective has never been clear. Since 1992 it has been to set up a “socialist market economy”, but officials struggle to explain how this differs from a real one. Deng announced that year that the party’s “basic line” (party-speak for reform and opening under one-party rule) would not change for 100 years. This implies a lot more stone-groping.

Party leaders revel in this obscurity. It gives them flexibility in policymaking and makes it easier for them to forge compromises between factions. One of the most important political changes in China over the past 30 years has been a move away from the vicious factional strife of the Maoist era, a tendency that persisted well into the 1980s and fuelled the pro-democracy upheaval of 1989. In 2002, for the first time in China’s communist history, power was smoothly transferred from one set of leaders to another without killings or purgings. The new leaders express the same commitment to reform, but have a more left-wing agenda.

Papering over some of the party’s history has helped them too, damping public demands for political change. The history of the reform programme itself has been sanitised and simplified in order to minimise public questioning of leaders’ motives and actions. No mention is made, for example, of a vital part of the background to the party meetings, Democracy Wall—a 200-metre-long brick structure in front of a bus depot west of Tiananmen Square. For a remarkable four months in the winter of 1978-79, until Deng decided to shut it down and jail some of its activists, citizens plastered the wall with posters calling for freedom and democracy. The area is now a plaza flanked by shopping malls.

Party officials, preferring their heroes to be larger than life, have massaged history to imply that the meetings 30 years ago were a clarion call for reform and opening. They were not. The dismantling of the Maoist edifice after the Chairman’s death in 1976 began more by stealth. A shift of emphasis towards rebuilding the economy was already under way long before the meetings began. Political rapprochement with the West—a key part of the “opening”—began several years before Mao’s death, driven by a shared dislike of the Soviet Union.

The rule of prudence

The word “opening” did not even appear in the communiqué issued on December 22nd 1978, at the end of the two meetings. “Reform” was mentioned only once. A draft policy document on agriculture adopted by the leaders and promulgated the next year specifically rejected the idea, now considered a hallmark of China’s rural reforms, of contracting out rural land to peasants to farm by themselves. By contrast, Mao’s disastrous “people’s communes” were praised. Deng’s reformist victory was suffused with compromise, a pattern that persists to this day.

Some in the Chinese media now talk of a “Beijing consensus” as an alternative philosophy to the “Washington consensus” of liberal economics that lately seems so discredited. China’s state-run news agency, Xinhua, recently said the Beijing consensus meant “prudence in market reforms”. Deng was certainly prudent. He knew the importance of giving the Maoists some face, even as he consolidated his grip on power and allowed experiments to be carried out with precisely the kinds of changes the Maoists disliked. Rural reforms began in late 1978 in the central province of Anhui even as the party was holding its meetings in Beijing. Peasants in one commune there secretly started parcelling out land, expecting death for it, but soon gained backing from a provincial leader and Deng ally, Wan Li. Others gradually followed suit. By the time communes were formally dismantled in 1984, most had long disappeared in all but name.

Prudently, too, the government itself avoids pushing the idea of a “Beijing consensus” as an alternative to Western capitalism. It is fearful of accusations that it harbours plans to challenge American power and change the world order. It was actually an American, Joshua Cooper Ramo, who helped the phrase gain currency in 2004 with the publication of an enthusiastic pamphlet for the Foreign Policy Centre, a British think-tank. “What is happening in China at the moment”, Mr Ramo wrote, “is not only a model for China, but has begun to remake the whole landscape of international development, economics, society and, by extension, politics.”

For at least the first half of the reform period, few were so confident. Today’s soaring city skylines are mainly the product of rapid growth in the past 15 years. And much of that growth is a product of hard-nosed liberal economics rather than any magic Chinese touch. Two of the most far-reaching reforms of the past 30 years—the dismantling of tens of thousands of state-owned enterprises (SOEs) and the privatisation of urban housing—did not take off until the late 1990s. In the case of enterprise closures, massive suffering (and not a little protest) was involved as millions were left unemployed.

Pro-democracy unrest in the late 1980s played a far bigger role in turning China capitalist than either officials, or admirers of China’s supposed gradualist approach, suggest. The protests in China were ruthlessly crushed, but they—and the collapse of communism elsewhere—triggered fierce debate among Chinese leaders about the direction of reform. Some argued that a planned economy and tight social control were essential to the regime’s survival. Others said the tumult had been fuelled by precisely these strategies. Deng, at long last, decided Maoism should be dealt a decisive blow. He emerged from retirement in 1992 to put a stop to the bickering and set China on a decisive path towards a market economy. The boom was instantaneous.

In 1978 Deng showed no such clarity of thought. He astutely read the tea-leaves of public opinion but had no grand vision. The 1980s were consumed by leadership struggles. Bao Tong, a former member of the party’s Central Committee who was jailed for sympathising with the protesters in 1989, says Deng’s original plan for the meetings 30 years ago was no more than to produce a consensus on the need to focus on the economy, then in tatters after the ravages of the Great Leap Forward in the late 1950s and the Cultural Revolution from 1966 until Mao’s death. Reform and opening was not even on his agenda.

But the meetings did not proceed as expected. Deng, who was away on a foreign tour for the first few days, came back to find that discussions had been taken over by festering political grievances aired by leaders who had suffered under Mao. Delegates demanded the rehabilitation of purged colleagues and a re-evaluation of protests in Tiananmen Square in 1976, a few months before Mao’s death, which had been declared “counter-revolutionary”. For ordinary Chinese, it was the Beijing party committee’s decision, while the work conference was under way, to declare the Tiananmen protests “entirely revolutionary” that signalled the biggest change that year—not anything Deng or his allies said about the economy.

Voices from below

The party likes to gloss over this. June 4th next year will be the 20th anniversary of the crushing of Tiananmen’s more famous protests, in 1989, in which thousands may have died. As they celebrate reform’s 30th birthday, officials do not want to suggest that any re-evaluation of the 1989 unrest may one day be possible. Not that they are likely to face much pressure to do so. The bloodshed is a distant memory now.

But public opinion continues to shape the progress of China’s reforms. Liberal Chinese economists complain that the country still falls well short of what they would call a market economy. The currency is not fully convertible, so capital flows in and out of the country are controlled. So too, still, are some prices, including those of electricity, fuel and water. In January the government imposed new controls on some food prices. It lifted them again this month. Non-state-owned enterprises are now producing two-thirds of China’s manufacturing output, but SOEs dominate key sectors such as banking, telecoms, energy and the media. Between 2001 and 2006 the number of SOEs fell from 370,000 to 120,000, but this still left assets worth $1.3 trillion in state control. There is much more work to do.

But the present set of leaders headed by President Hu and the prime minister, Wen Jiabao, worry more than their predecessors did about public reaction to painful restructuring. They have reason to be cautious. In the late 1990s around 30m workers were laid off as a result of SOE reform. China Labour Bulletin, an NGO based in Hong Kong, said in a September report that millions of these workers were left barely able to support their families, thanks to widespread corruption and a lack of clear policy guidelines. Messrs Hu and Wen, with their signature slogans of building a “harmonious society” and “putting people first”, want to give the impression that theirs is a more caring kind of capitalism. A change of tack, they feel, is necessary to avert a public backlash.

Brakes began to be applied in 2004 after Larry Lang, a Hong Kong-based scholar and popular TV commentator in China, drew attention to asset-stripping during management buy-outs of SOEs, then a common form of privatisation. This struck a chord with many Chinese, who felt that factory bosses (officials, in effect) were getting fabulously rich as a result of such buy-outs, while workers were getting next to nothing. Officials responded by suspending the practice. Two years later, to stop him riling the public even more, they cancelled Mr Lang’s TV show.

Cao Siyuan, an economist who helped draft China’s first bankruptcy law in the 1980s and now runs a bankruptcy consultancy, says the privatisation of larger SOEs has now all but ceased. Talk in the 1980s of encouraging private involvement in all competitive industries, he says, has been abandoned in favour of giving SOEs privileged positions in sectors the government regards as strategic (a term liberally interpreted). Mr Cao expects about 3,000 firms, most of them SOEs, to go through formal bankruptcy proceedings this year compared with 3,200 last year. The numbers that qualify for bankruptcy are ten times higher and rising, he says, but local officials are blocking SOEs from applying in order to preserve government reputations.

The lagging land

China was highly praised around the world for dismantling the communes and for the big increase in agricultural output that followed (although raising prices paid to peasants for their grain helped, too). But the rural power structure has changed little since commune days. Land remains collectively owned, even though it is leased out to individual households to farm. This system has shut farmers out from the boom that cities have enjoyed as a result of the rapid emergence in the past few years of a free market in property.

In October President Hu chaired a Central Committee plenum that was clearly intended to echo the one held 30 years ago. But it proved an anticlimax. Mr Hu and his colleagues remain fearful that any big change in the land system will unleash an avalanche of peasants on cities already struggling with meagre social provision. Although turning peasants into city-dwellers is crucial to maintain the fast growth of the past 30 years (nearly 10% a year on average since 1978), the government wants to keep a firm grip on the process. Migrants are allowed into big cities on sufferance. During the outbreak of SARS in 2003 Beijing was all but emptied of them. Many left in August during the Olympic games, as officials put indirect pressure on them to stay away.

APThought liberation is a long way away

Like Deng and like Jiang Zemin who succeeded him, Mr Hu has paid little more than lip service to the idea of political reform. He repeats Deng’s disingenuous line that without democracy there can be no socialism or socialist modernisation. But some Chinese scholars have pointed out that even communist Vietnam—whose leaders eye with envy the success of China’s economic reforms—has done better on the political side. In an article published in May by an official journal, Reform Internal Reference, Gao Shangquan, a prominent Chinese economist, said that Vietnam had “fewer ideological obstacles than we have”—fewer arguments, he said, over what constitutes socialism and capitalism. In another article in June he noted that only last year a petition signed by 170 people (many of them former senior officials) had accused the party of leading China towards a “capitalist restoration”.

Mr Hu certainly has no plans to weaken the party’s influence, much less to allow opposition to organise. The authorities have detained or questioned several signatories to an unusually bold call for political liberalisation issued by around 300 intellectuals on December 10th to mark the 60th anniversary of the universal declaration of human rights. And Mr Hu has devoted considerable effort (and the party considerable funds) to rebuilding the party’s grassroots organisation, which was dealt a body-blow by the closure of state-owned enterprises and the rapid growth of the private sector. Party officials have sent thousands of teams to persuade private firms to allow the establishment of trade unions (which in China are controlled by the party) as well as party cells.

Their efforts have met some resistance, not least from foreign-invested enterprises. Wal-Mart, an American retail chain with around 100 superstores in China, was especially stubborn. Repeated meetings were arranged by party officials with Wal-Mart representatives in the eastern city of Nanjing in 2006 after the firm’s (reluctant) decision to allow a union branch. The officials, on instructions from the trade-union chief, Wang Zhaoguo, demanded a party cell too. Only six party members could be found in a workforce of more than 400, and those six did not feel a cell within Wal-Mart was needed. But the company succumbed, and others have followed. By the end of 2006, party cells had been established in more than two-thirds of larger non-state enterprises.

Early this year, some official newspapers published calls for a new round of “thought liberation”. Some Chinese scholars openly appealed for a new phase of reform focusing more on politics. But crises intervened—upheaval in Tibet in March, an earthquake in May that killed tens of thousands—and so, too, did the deadening impact of the Olympic games, during which the authorities tried to suppress any hint of dissent. Now Chinese officials fret about the possibility of growing unrest as the economy suffers the impact of the global crisis. Democrats must wait.

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