Recalling Jian Yang’s past: questions for him and his leader

It was two years ago last Friday that Newsroom and the Financial Times jointly broke the story of National list MP Jian Yang’s past, as a Chinese Communist Party member and fifteen years spent as a trainer in the PLA military intelligence system.   There was a strong suggestion that he had been removed from Parliament’s foreign affairs committee after the New Zealand security services discovered his past and had drawn it to the attention of the then Prime Minister.    Anne-Marie Brady’s Magic Weapons working paper was released at about the same time, highlighting the extent of PRC attempts to influence, or interfere in, affairs in New Zealand.

A bit more of Jian Yang’s story seeped out over the following few months, including his residency application documents for New Zealand, in which –  so he later acknowledged –  he had actively chosen to misrepresent his past, (so he also told us) on the instructions of Beijing.      There was also rather more confirmation of just how close to the PRC Embassy in New Zealand Jian Yang is and was –  leading one serious government relations type, with a diplomatic background, to go on record stating that he was always very careful what he said around Jian Yang (and Raymond Huo, once again a Labour MP).   The implication –  never stated directly –  was that whatever was said around him might well end up in the hands of the PRC Embassy.  At the time, of course, Jian Yang was full member of the government caucus, and although Cabinets often keeps their own caucuses in the dark about some things, caucus members generally know more than you or I do about what the government is up to, or is thinking.

But after that brief flurry the issue died down.    Labour and the Greens showed no interest in questioning whether someone of that background, never once heard to utter a word of criticism of the PRC, should really be serving in our Parliament.  National closed ranks behind Jian Yang –  not once in the subsequent two years has a single past or present National MP expressed as much as an iota of concern.   And Jian Yang went quiet, simply refusing to talk at all to any English-language media (despite English being the first language of most of National’s voters), but only too happy to talk to quiescent regime-complicit Chinese language outlets.   If you can get away with it –  and have all the morals that must have accompanied CCP membership and service with PLA military intelligence –  I suppose why would you do anything else?  People –  all of us – respond to incentives and –  given his actual background –  simply going to ground and staying there must have looked quite the most attractive option.

Optimists –  naive ones perhaps –  wondered if perhaps National, embarrassed to have been caught out, would gradually sideline Jian Yang and he’d eventually quietly step aside by the next election, perhaps to be replaced with another regime-sympathetic,  well-connected, good-with-the-donors recent migrant, but one without such an uncomfortable back story.

Silly them (well, in my optimistic moments perhaps I was one of them).

For Jian Yang is still with us.  Still not talking to the English-language media (except a few comments in his rather ineffectual service as National’s spokesman on Statistics), still sharing an office in Auckland with fellow list MP (and now National’s Finance spokesman) Paul Goldsmith, recently promoted to chair the (not overly important) Governance and Administration Committee of Parliament, still in business with National Party president (and regime cheerleader) Peter Goodfellow), and……most recently, accompanying Simon Bridges on his trip to the PRC, including that gruesomely awful fawning interview with CGTN (saying what so much of the rest of the New Zealand establishment only support in practice by their silence) and his meeting with Guo Shengkun, the Politburo member responsible for the entire apparatus of repression (“law and order”) in the PRC, including the concentration camps in Xinjiang.   Yes, it was a big week for Jian Yang.  If Simon Bridges wasn’t just regurgitating briefing notes from Jian Yang, he might as well have been.  The Embassy will have been pleased.   Perhaps unsurprisingly, Jian Yang was out in the media (Chinese language only) praising his leader for his praise of the CCP  (Raymond Huo was also out praising Bridges, at least until he deleted the relevant tweet).

And not a peep out of any other political party expressing any concern about Jian Yang (or Bridges).

That tawdry episode –  Bridges abasing himself before the PRC, aided and abetted by their own (former) man now sitting in his caucus –  was a bit much for Daisy Lee, an independent researcher born and raised in the PRC, and now living in Auckland.  (There was some background on Daisy and her husband –  he’d been a Tiananmen Square protestor in 1989 –  in this Sunday Star-Times article.)  Daisy has written an article on Jian Yang and his place in the National Party, and asked if I would run it here.  I helped her with some of the English, but it is her text, her stories, and her challenges to Jian Yang (and, at least by implication) to the National Party.

Of his residency application, she reminds us

In this nine-page document, Jian Yang declared that the whole period from 1978 until 1993, the year he departed for Australia was spent solely at one school, Luoyang University.

But the facts reveal, and Jian Yang later acknowledged, that the relevant certificates are falsely made to cover up his total 15 years with the two military universities, the PLA Air Force Engineering Institute and Luoyang PLA University of Foreign Language. The notarised document in both Chinese and English declares that Jian Yang enrolled in Luoyang University in 1978. But a simple search – Wikipedia or the Chinese Baidu – indicates that that university wasn’t even founded until 1980.

Jian Yang eventually told us that Beijing instructed him to misrepresent his past, but never explained the notarised certificate. It won’t be just anyone who has the authority to instruct a state-owned university to issue a series of false documents just to satisfy a request from an ordinary Chinese citizen. Chinese intelligence authorities perhaps?

It is commonly understood among the Chinese community that an active serviceman in China is not allowed to emigrate overseas, and does not even have an ordinary citizen’s passport.

The sort of thing that should bother the National Party, you’d once have hoped.

Jian Yang seems to spend a great deal of time with regime-sympathetic Chinese in New Zealand.  Daisy asks about others from the PRC.

In the past two years I have seen Jian Yang’s smiling face on his sign displayed on Auckland’s Great South Road. The same smile I have seen in pictures of a number of occasions including him meeting Politburo member Guo Shengkun on his recent trip to China with Simon Bridges, and his visit to the new PRC consul general in Auckland with the National Party’s president Peter Goodfellow in July.

I hope that one day Jian Yang will smile on some other groups from China. Among the Chinese diaspora they include Falun Gong practitioners and human rights activists. They also include the Xinjiang Uyghurs, exiled Tibetans, and members of house churches in China. Most of them fled to New Zealand to escape persecution. Many don’t speak much English and so aren’t easily about to tell their stories to National’s leaders.

Meanwhile, these same people see Simon Bridges and Jian Yang meeting with Guo Shengkun. From a regime keen to suggest to Chinese diasporas that they are not beyond Beijing’s reach, what sort of chilling message must that send?

Even among those with less immediate reason to fear

I could have chosen not to write this article, but the embarrassment of Simon Bridges’ performance in the staged interview with CGTN, the CCP’s English-language mouthpiece, has led me to decide to give Jian Yang a chance.

A chance to stop encouraging and assisting New Zealand politicians like Simon Bridges to worship the brutal regime and people like its representative Guo Shengkun, one of the most powerful figures in the CCP who is responsible for all of the religious and political repression apparatus. To stop praising the CCP. And to stop hiding from the local English-language media, or anyone who might ask awkward questions.

Over the last two to three decades, there have been significantly increasing numbers of Chinese who have moved overseas and the majority of these immigrants are well educated middle class and business people. The main reason for them to leave China is that they hated the corruption, pollution, and suppression which are all the problems caused by the CCP’s 70 years in power.

It is naive to believe pro-CCP politicians can receive more votes from their Chinese constituents for praising Xi and Guo, or for being silent about a brutal regime that continues to corrupt and repress their families and relatives in China.

(Daisy might be right about that, although evidence to date suggests it is a rather good values-free fundraising strategy.)

She ends

The next election is approaching and the public deserve better answers from Jian Yang.

The full article is here.

One can only agree that there are hard questions that Jian Yang should answer.

But personally I reckon Peter Goodfellow and successive National Party leaders (Key, English, and Bridges) are now –  fixed with knowledge – just as culpable, if not more so and shouldn’t be allowed off the hook.  For the earlier leaders, the questions should be along the lines of “what did you know and when did you know it?” and “what steps did you take to ensure that as an MP Jian Yang is operating only in the interests of New Zealand, not those of the PRC?”   For Bridges, why do regard it as appropriate to have a (former?) CCP member, former longserving member of the PLA military intelligence system, who has never said a word of criticism of the PRC or the CCP, and who remains very close to the PRC Embassy as a serving member of your caucus?  Would you be willing to have Jian Yang serving as a minister in a future National government (and if not, why not)?  And so on.    The questions could usefully be extended to all current National MPs, every single one of whom was elected in 2017 (or came in on the list since) knowing they would serve with Jian Yang, and not one of whom has been willing to express even a scintilla of public concern or unease  (perhaps someone has had private concerns, but after this amount of time private concerns count for little or nothing –  as members of Parliament you have a higher duty than to mere “caucus discipline”).

And then, of course, we could extend the questions to the Prime Minister and to the leaders of the Green Party.  Why, for example, have you expressed precisely no concern about this individual –  with such a questionable background –  serving in New Zealand’s Parliament?  And, of course, Winston Peters who did once express some concern, but no longer does so.  Beijing probably wouldn’t like it if he did –  nor, probably, would the Prime Minister.

And, of course, there are the agencies –  MBIE and DIA –  that gave Jian Yang residency and citizenship on the basis of false documents.  Is anything ever going to be done.  If not, why not?

Are there any values that guide our political class around the PRC?   Fear and opportunism don’t count.

There has been a very robust debate in Australia over the last week or so about the regime affiliations of new Liberal backbencher Gladys Liu (lots of extracts from various perspectives here).     Seems to me that although there are legitimate and important questions to ask about Gladys Liu, what has emerged to date raises far fewer questions than Jian Yang’s position should.  And yet the media and the political classes passed over in silence the two-year anniversary of learning of Jian Yang’s background, serving one of the most dreadful regimes on the planet, none of it recanted, even as he himself chose to join his leader in print praising the Party.   They will be happy in Beijing.   Could they have imagined on 1 October 1949 having such a quiescent and compromised dependency in the South Pacific only 70 years later?

The rest of us –  ethnic Chinese and otherwise – should be alarmed, by Jian Yang himself and by those who continue to make space for him to serve in New Zealand’s Parliament consciously choosing to ignore (or even embrace) how compromised he appears to be.

 

Monetary policy and the yield curve slope

A month or so ago there was a great flurry of media coverage when the US interest rate yield curve “inverted”.  In this case, long-term government security interest rates (10-year government bond yield) moved below short-term government security interest rates (three month Treasury bill yield).   This was the sort of chart that sparked all the interest.

US yield curve

The grey bars are US recessions, and each time the long rate has been less than the short-term rate a recession has followed.   This chart only goes back to 1982 but it works back to at least the end of the 1960s.    There haven’t been any recessions not foreshadowed by this indicator, and there haven’t been times when the yield curve inverted and a recession did not come along subsequently (sometimes 12-18 months later).   Who knows what will happen this time.  It is, after all, a small sample (seven recessions, seven inversions since the late 1960s), and there is nothing sacrosanct (or theoretically-grounded) in using a 10 year bond rate.  Use the US 20 or 30 year government bond yields and right now the curve wouldn’t even be (quite) inverted.

But there are good reasons why changes in the slope of the yield curve might offer some information.  A long-term bond rate isn’t (usually) controlled by the central bank or government and might have a fair amount of information about what normal or neutral interest rates are in the economy in question. By contrast, short-term rates are either set directly or very heavily influenced by the authorities.    When the short-term rate is unusually far away from the long-term rate one might expect things to be happening to the economy, whether by accident or design.

Back in the day, when we were trying to get inflation down in New Zealand (late 80s, early 90s), the slope of the yield curve was for several years, off and on, a fairly important indicator for the Reserve Bank.  At times we even set internal indicative ranges for the slope of the yield curve (at the time, the relationship between 90 day commercial bill yields and five year government bond yields), and for a while even rashly set a line in the sand of not allowing the short-term rate to fall below the long-term rate.      We used this indicator because neither we nor anyone else had any idea what a neutral rate (nominal or real) would prove to be for New Zealand, newly liberalised and then post-crash, money supply and credit indicators didn’t seem to have much content, and we didn’t want to take a view on the level of the exchange rate either.  But whatever the longer-term interest rate was, if we ensured that short-term rates stayed well above that long-term rate, we seemed likely to be heading in the right direction –  exerting downward pressure on inflation and, over time, lowering future short-term rates as well.

But what about the New Zealand yield curve slope now?     Here is the closest New Zealand approximation to the US chart above, using 90 day bank bill yields and the 10 year (nominal) government bond yield.  I’ve shown it the other way around – 90 days less 10 years –  because that is the way we did it here (partly because of the long period, until 2008/09, when short-term interest rates were normally higher than long-term ones, rather different to the US situation).

nz yield curve 1

I can’t easily mark NZ recessions on the chart, but there were recessions beginning in 1987, 1991, 1998, and 2009, and each of them was preceded by this measure of the yield curve slope being positive,  But, for example, the slope was positive for four years in the 00s before there was a recession.    Against this backdrop, there isn’t really much to say about where we are right now (just slightly positive).   And take out whatever credit risk margin there is a bank bill yield (20 basis points perhaps?) and the slope of the curve would be dead flat.

But what about a couple of other possibilities.  Unlike the 90 day bill rate, term deposit rates  and bank lending rates directly affect economic agents in the wider economy, and as I’ve shown previously the relationship between the 90 day bill rate and term deposit (and floating mortgage) rates has changed a lot since 2008/09. margins

In this chart (constrained by data availability to start in 1987), I’ve taken the six month term deposit rate (from the RB website) and subtracted the 10 year government bond yield).

nz yield curve 2.png

That starts looking a bit more interesting.  The level of this variable –  even after the recent Reserve Bank OCR cuts –  is close to a level which has always been followed by a recession.   (It is a small sample of course; even smaller than in the original US chart).

What about the relationship between the floating residential first mortgage interest rate and the 10 year bond rate?  Here is the chart.

nz yield curve 3

The only times this indicator has been higher than the current level –  even after the recent OCR cuts are factored in, as they are in the last observation on the chart – have been followed by pretty unwelcome economic events (the 1991 recession wasn’t strongly foreshadowed by either this indicator or the previous one).

It is a small sample, of course, and there are no foolproof advance indicators.   But if I were in the Reserve Bank’s shoes right now, I would take these charts as yet further warning indicators.

On which count, it is perhaps worth keeping a chart like this in mind.

NZ yield curve 4

We’ve had 75 basis points of OCR cuts this year but only about 45 basis points of cuts in the indicative term deposit rate (latest observations from interest.co.nz).  It is not as if these retail interest rates are at some irreducible floor –  retail deposit rates in countries with much lower policy rates are also much lower than those now in New Zealand.  It is a reminder that, against a backdrop of a very sharp fall in New Zealand long-term interest rates (real and nominal) –  even after the recent rebound the current 10 year rate is still more than 100 basis points lower than it was in December –  monetary policy adjustments have been lagging behind.   Long-term risk-free rates have fallen, say, 110 basis points (almost all real), and short-term rates facing actual firms and households are down perhaps 40-60 points (floating mortgage rates nearer 60).

The Reserve Bank cannot (especially after a decade of persistent forecast errors) have any great confidence in any particular view of neutral interest rates for New Zealand.  With inflation still persistently below target and (as the Governor and Assistant Governor have recently highlighted) falling survey measures of inflation expectations, there isn’t a compelling case for the Bank to have lagged so far behind the market, allowing short-term rates to rise further relative to long-term rates.   The Governor has appeared to suggest that the Bank will only seriously look again at further OCR cuts at the next Monetary Policy Statement in November.  I reckon there is a much stronger case than is perhaps generally recognised for a cut at the next OCR review next week.