The Prince of Risk A Novel(64)

It was not only air quality that was abysmal. The rivers were fouled. The Yangtze, the country’s primary tributary, was a repository of industrial waste, raw sewage, dead animals, and toxic chemicals. To put it more colorfully, the river was a stinky, brown, slow-moving, 3,000-mile-long cesspool. Deforestation in the mountain districts caused landslides and erosion. Strip mining denuded thousands of square miles of land. Toxic runoff poisoned water tables. There were no environmental laws to govern such practices.



And, worst, there was corruption. Power rested in the hands of appointed officials at every level of government. A village mayor’s power was absolute. The police chief’s power was absolute. A district governor’s power was absolute. Each had a fiefdom, and tribute must be paid.

On top of this creaky mountain sat the provincial mayor. Mayors of megalopolises like Chongqing (25 million), Shanghai (27 million), and Beijing (30 million) acted as de facto warlords: all-knowing, all-powerful, all ruthless. The federal government had no sway.

There was no national medical care.

There was no system of social security or pensions for the elderly.

In short, it was every man for himself.

The Chinese people were on their own.

And for the first time in their long, benighted history, they showed signs of no longer tolerating the bad with the good. Too many were being trampled underfoot by the headlong rush to economic primacy. Each day found public demonstrations taking place in one part of the country or another. Some were confined to villages, but others numbered hundreds, if not thousands, of angry souls. A month earlier, 50,000 people had filled the streets of Shenzhen to complain about government corruption. Before that, 25,000 had marched in Beijing. Unrest was no longer the exception but the norm. The first ripples of discontent were rapidly rising into a tsunami.

Yet despite all this, Astor knew that all would be forgiven so long as the nation’s economy was thriving.

In China, there was one rule and one rule only: make money and get rich.

There was a knock on the door, and a receptionist entered bearing a tray of mineral water, espresso, and biscotti. Astor added three sugars and knocked back his espresso in a single draft. His heart responded nicely. He sat a little taller. “So we’re agreed. Chinese exports are under pressure. If exports keep tanking, so will GDP. If GDP tanks, civil unrest will explode.”

“The country is in dire straits,” said Goodchild. “Credit is drying up. Real estate prices have collapsed. Factories are shuttering up and down the coast. The PMI numbers are bogus. So is the GDP. The only way out is to pump up exports, and the only way to do that is to devalue.”



Longfellow nodded. “The only way China can contain unrest is to stoke the economy. It goes back to the first rule. Make money. Get rich.”

While everyone in the world was certain the Chinese would accede to U.S. demands to increase the value of the yuan, Astor saw things differently. The Chinese would devalue.

If the Central Committee of the Chinese Communist Party wanted to quell unrest, the government must return GDP to more than 11 percent. The only means to boost GDP to that level was to boost exports, and the only way to boost exports was to keep the costs of those exports as low as possible. Ergo, devalue.

QED.

No shit, Sherlock.

And so he’d bet against the yuan.

But there was another reason.

After the meeting, Astor retreated to his private apartment. He checked his watch to make sure it was a reasonable time over there and used a landline to dial a fourteen-digit number. He had waited long enough.

“Hello, Bobby.”

“Just what the hell is going on?”

“A momentary disagreement in Beijing.”

“A disagreement? Sounds like anything but. Our trade rep said you’re continuing your policy of revaluing the yuan to the tune of an additional three percent this year.”

“He had to, didn’t he?”

“You tell me.”

Astor was pleased to hear his friend’s calm voice. They had known each other for ten years, dating to an investment conference in Hong Kong where they had both been featured speakers. At the time China was not actively investing abroad, but his friend had a plan to change that. The plan was the China Investment Corporation, the country’s first sovereign wealth fund, and it turned out to be a bigger success than anyone could have imagined. Since then, the men had met once or twice a year in New York, Beijing, Hong Kong, and even Paris. They shared opinions about their countries’ respective economies and the world at large. Each had been correct more times than not.



“You promised me your country was going to devalue,” said Astor.

“And so it will.”