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EMU GDP Surprises, while the Yen’s Short Squeeze Continues

Overview: The month-end and slew of data is making for a volatile foreign exchange session, while the rash of earnings has generally been seen as favorable…



Overview: The month-end and slew of data is making for a volatile foreign exchange session, while the rash of earnings has generally been seen as favorable though weakness was seen among the semiconductor chip fabricators. China, Hong Kong, and Japanese equities fell but the other large markets in the region rose. Europe’s Stoxx 600 is up around 0.8%. It is the eighth advance in the past 10 sessions. US futures are higher and the S&P 500’s advance of nearly 7.6% coming into today, if sustained, would be the largest monthly advance since November 2020. Asia Pacific bonds played catch-up after the big Treasury rally yesterday, but European and American yields and benchmark 10-year yields are higher. The US 10-year is near 2.72%, up four basis points. European yields are mostly 5-8 bp higher. The yen and Swiss franc lead the advancing major currencies today, but sterling, the Canadian and Australian dollars, and the euro have given up their early gains. Most emerging market currencies are gaining on the greenback. Gold reached almost $1768 today, a $40 advance from the end of last week, but its gains have been pared and it is trading near $1757 ahead of the US open. September WTI has alternated between gains and losses this week. It fell about 0.85% yesterday and is up 2.25% today to around $98.60. On advancing sessions this week, September WTI has gained more than 2%. US natgas has steadied after falling almost 10% in the past two sessions. It may be the first decline in four weeks. Europe’s natgas benchmark is about 2.6% lower after falling nearly 2.9% yesterday. Still, it is up more than 21% this week. Iron ore snapped a five-day advance and fell nearly 3.3% today, ostensibly on disappointment that China does not appear poised to provide broad economic support. September copper, on the other hand, is extending its rally into the sixth consecutive session. It is up almost 5% this week after a 3.6% advance last week. Despite signs of a bumper North American crop, the September wheat prices have firmed, and are at their best level in three weeks.


Asia Pacific

The dollar fell by slightly more than 1.6% against the yen yesterday, the most since last November. It is off another 1% today what appears to be a major reassessment. The dollar was hit with a one-two punch of what was understood to be a dovish Fed and the second consecutive contraction in the quarterly GDP. The US 10-year yield, which we note has strong correlation to the exchange rate, fell to its lowest level (~2.65%) since early April. Moreover, what has reportedly gotten some levered accounts to cover short yen positions is the growing conviction that the US 10-year yield has peaked. In mid-May through mid-July, as the dollar rallied from below JPY129 to a little over JPY139, speculators (non-commercials) in the futures market were dramatically reducing their net short yen position from around 100k contracts to 50-60k (each contract is for JPY12.5 mln, roughly $92k).

Japanese data were a mixed bag today. Tokyo July CPI was firmer than expected. The headline rose 2.5% from 2.3%, while the core measure that excludes fresh food, rose to 2.3% from 2.1%. The measure that excludes fresh food and energy climbed above 1.0% (1.2%) for the first time since 2015. The unemployment rate was steady in June at 2.6%, though the job-to-applicant ratio edged higher (1.27 from 1.24). Industrial output has been disrupted with a lag by China's lockdowns. After collapsing 7.5% in May, Japan's industrial output jumped back in June, surging 8.9%, more than twice the Bloomberg median projection. The year-over-year rate was unchanged at -3.1%. While housing starts and consumer confidence were weaker than expected, the major disappointment was with retail sales. Economists in Bloomberg's survey anticipated a 0.2% gain, but instead retail sales slumped 1.4%, the steepest monthly decline since April 2021.

Reports indicated that US President Biden and China's Xi have instructed their staffs to prepare for a face-to-face meeting. Meanwhile, US Speaker Pelosi's once-tipped trip to Taiwan is unconfirmed. Separately, China's Politburo seemed realistic if even dour about the growth prospects. Few, if any, expect China's target of "around 5.5%” can be achieved. The IMF's new forecast is for 3.3% this year and 4.6% next. Over the weekend, China will report its July PMI and Caixin's manufacturing PMI. The composite stood at 54.1 in June and may have slipped a little.

The dollar fell to JPY132.50, its lowest level in six weeks today. The week's high, set on Wednesday was nearly JPY137.50. With today's loss, the greenback has retraced half of the rally off late May low near JPY126.35. The next retracement target (61.8%) is around JPY131.35, which also corresponds to the mid-June low. One of the most important takeaways is that like the Great Financial Crisis and the pandemic, there was no intervention. Officials seemed to say within the G7/G20 framework, expressed concerns about volatility. Also, the 10-year JGB yield, capped at 0.25% is around 0.18%, around the middle of this year's range. The Australian dollar poked above $0.7030 to trade at its best level since mid-June. However, profit-takers stepped in a knocked it back to $0.6990 in the European morning. Support is seen in the $0.6960-80 range. The greenback is slipping lower against the Chinese yuan for the third consecutive session and is near 2.5-week lows around CNY6.7360. It is the first back-to-back weekly loss since February. The PBOC set the dollar's reference rate at CNY6.7437, a little firmer than expected (CNY6.7422) in the Bloomberg survey.


The aggregate EMU figures showed higher than expected July inflation and stronger than expected Q2 growth. Inflation edged up 0.1% on the month, which lifted the year-over-year CPI to 8.9% from 8.6%. The core rate ticked up to 4.0% from 3.7%. The preliminary estimate of Q2 GDP was 0.7%. The median in Bloomberg's survey had forecast 0.2% growth. Growth in Q1 was revised to 0.5% from 0.6%. Germany stagnated, though Q1 GDP was revised to 0.8% from 0.2%. Separately, it reported that July unemployment rose to 5.4% from 5.3%. France grew 0.5% in Q2. The market had looked for a 0.2% expansion. French CPI rose 6.8% year-over-year, up from 6.5%. Italy surprised with 1% growth in Q2, and its CPI slipped to 8.4% from 8.5%. Spain's growth was also a pleasant surprise, accelerating to 1.1% after 0.2% in Q1. The median forecast was for a 0.4%. Spanish CPI also surprised. It accelerated to 10.8% from 10.0% in June.

The Swiss National Bank's  66-page report, reiterated that the central bank can adjust monetary policy when it sees fit, not just at meetings. Recall that the SNB hiked rates 50 bp at the June 16 meeting (the deposit rate is now -0.25%), ahead of the ECB, and opined that the Swiss franc was no longer excessively overvalued. Since the day before that meeting, the euro has fallen by slightly more than 7.3% against the euro. It is at its lowest level since the chaos following the SNB's lifted the franc's cap (euro's floor) in early 2015. In fact, the euro fell to new lows near CHF0.9700 yesterday. It has held that level today. The global rate development that helped the yen may have also given a fillip to the franc, but the sharpest move happened as the newswires publicized the report. The conventional narrative is that the SNB was highlighting the fact ahead of next week's (August 3) July CPI figures. While possible, it seems unlikely. Intermeeting moves are for emergencies. The July CPI may have declined on the month though the year-over-year rate is expected (median Bloomberg survey) to held steady at 3.4%.

The euro briefly pushed above $1.0250 but met a wall of sellers that pushed it back below $1.02 as the European morning progressed. Some of the selling may have been related to the 3 bln euros in options struck between $1.0247 and $1.0250 that expire today. Month-end flows may have also played a role. Initial support is seen in the $1.0160-80 area. Recall that the euro settled last week slightly below $1.0215. Sterling reached almost $1.2250, a new high for the month. However, it also has come off sharply, and is trading nearly a cent lower in Europe. Initial support is seen around $1.21. That was also around yesterday's low and a close below it would be a bearish technical development. That said, sterling closed a smidgeon below $1.20 last week.


Exactly what you call the fact that the preliminary Q2 GDP contracted after a 1.6% contraction in Q1 doesn't really matter much outside of cocktail conversations. Excluding inventories, the economy grew by 1.1%. The real issue is will it have policy implications and what does it mean for the capital markets. The Fed funds futures reduced the odds of a 75 bp hike in September to about a 25% chance from around a 37% chance after the FOMC meeting. The implied yield of the June 2023 Fed funds futures is trading about 18 bp below the implied yield of the December 2022 contract. At the end of June, it was at a 5.5 bp premium. The December 2023 contract's implied yield implies the market is almost 50 bp below the yield of the December 2022 contract.

For those who pour over the data releases, the personal income, consumption, and deflator data could be derived from yesterday's GDP figures. But for most of us mortals, we will look at income growth (steady around 0.5%) and consumption (GDP warns of risk of soft numbers including possible downward revision to the 0.2% gain in May). The deflator is expected to accelerate on the headline level but possibly unchanged at the core (4.7%). The Chicago PMI may only matter if it misses dramatically misses expectations for 55.0 (from 56.0). Shortly after it, the University of Michigan's final July reading. Sentiment is at levels associated with recessions. The troublesome 5–10-year inflation expectation stood at 2.8% in the preliminary estimate, which if confirmed, would match the lows since April 2021. At his press conference yesterday, Fed Chair Powell cited the Employment Cost Index. The Q2 iteration is out tomorrow. It is expected to have moderated from 1.4% to 1.2%, which would match the new four-quarter average. It would be the fourth consecutive quarter of at least 1% increases. There had not been even one since the end of 2006. The five-year average before the pandemic was 0.63%, though this is meant to provide context and not a normative claim.

Canada reports May GDP figures. The median forecast (Bloomberg's survey 13 estimates) is for a 0.2% contraction. An occasional decline in Canada's monthly GDP is not that unusual. It last fell in January (-0.1%). With the expected decline, it puts the year-over-year growth pace at 5.4%, the strongest since the middle of last year. It should not be an important driver of the Canadian dollar. Mexico reports Q2 GDP. The median forecast (Bloomberg's survey 11 estimates) is for a 0.9% quarter-over-quarter expansion after 1.0% in Q1. After the much larger than expected trade deficit (June $3.96 bln vs. the median in Bloomberg's survey for $1.2 bln), the risk may be on the downside. 

The US dollar initially extended its losses and fell to CAD1.2790, its lowest level since mid-June before rebounding to new session highs around CAD1.2835 in the European morning. Options for almost $600 mln at CAD1.2830 expire today. Initial resistance is seen near CAD1.2840-50. Still, the US dollar settled last week near CAD1.2915, and barring a dramatic surge, will close lower for the second consecutive week, something it has not done since late May/early June. The greenback fell to MXN20.2080, the lowest level since July 1. Yesterday's low was around MXN20.2750, and the dollar is back above there. It is knocking on initial resistance in the European morning in the MXN20.31-MXN20.32 area. The US dollar has fallen for the past five sessions against the peso. It settled near MXN20.53 last week.



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How Inflation Changes Culture

How Inflation Changes Culture

Authored by Jeffrey Tucker via,

The midterm elections are over (no Red Wave), but nothing…



How Inflation Changes Culture

Authored by Jeffrey Tucker via,

The midterm elections are over (no Red Wave), but nothing has changed. In fact, the Biden regime will probably become even more emboldened to pursue destructive economic policies because it will interpret the lack of a Red Wave as some kind of mandate.

Every day seems to be a day of spin, with every regime apologist assuring the public that inflation is getting better. Just look at the wonderful trend line! They point to the latest inflation numbers, which were down a bit from the month prior.

The regime insists that yes, inflation will vex us for a bit more time but will settle down in a few months. Plus, the president is working to fix this! And we know the American people are on board with him since no Red Wave materialized.

But in the footnotes, you’ll find the truth: it was a tiny drop and mostly for technical reasons and the main reason for the drop has already disappeared from the price trends.

Has any political propaganda on this topic ever been this ineffective? It’s truly a joke.

Where’s the Relief Coming From?

The producer price index that came out recently paints a clearer picture. It’s grim. It reveals no softening at all. In fact, it shows that there are plenty of coming price increases. Here is the index by commodities from 2013 to the present.

Remember how last year many people finally came to the conclusion that we had to learn to live with COVID? That was a smart choice because there was no way that the China-style suppression method could work.

Well, here we are now with a preventable inflation pandemic and the realization that we have to learn to live with inflation. Soon we’ll realize that we have to live with recession at the same time.

But what does this mean?

The impact will be felt not just in terms of economics but in culture. Inflation causes a society-wide shortening of time horizons.

True Prosperity

Let’s review some basics. All societies are born desperately poor, fated to live off foraging and just getting by. Prosperity is built through the construction of capital, which is the institution that embodies forward thinking.

To make capital requires the deferral of consumption: you have to give up some today in order to make tools that enable more consumption tomorrow. This means discipline and a future orientation. And it means, above all, savings that can be invested in productive projects. Only through that path can societies grow rich.

A key component of this concerns the stability of the medium of exchange. And not just stability: a currency that rises in value over time incentivizes saving and thus investing for the long term.

The late 19th century provided a good example of this. Under the gold standard, money grew more valuable over time, thus rewarding long-term thinking and instilling that outlook in the culture at large.

Live for Today

Inflation has the opposite effect. It punishes saving. It forces a penalty on economic behavior that is future-oriented. That means also discouraging investment in long-term projects, which is the whole key to building a complex division of labor and causing wealth to emerge from the muck of the state of nature. Every bit of inflation trims back that future orientation.

Hyperinflation utterly wrecks it.

Living for the day becomes the theme. Taking what you can get now is the method and the theme. Grasping and spending. You might as well because the money is only going down in value and goods are in ever shorter supply.

Better to live hard and short and forget the future. Go into debt if possible. Let the devaluation itself pay the price.

The Seeds of Destruction

Once this attitude becomes instilled in a prosperous society, what we call civilization gradually devolves. If inflation persists, this kind of short-term thinking can wreck everything.

This is why inflation is not just about rising prices. It’s about declining prosperity, the punishing of thrift, the discouragement of financial responsibility, and a culture that gradually falls apart.

Another factor in reducing time horizons is legal instability. This was my first concern when the lockdowns began. Why would anyone start a business if governments can just shut it down on a whim? Why plan for the future when that future can be wrecked by the stroke of a pen?

Many people had assumed that this new path would be short-lived. Surely the politicians would wise up and stop the madness. Surely! Tragically, it got worse and worse. The spending and printing began and ramped up over time. It was a perfect storm of sheer madness, and now we are paying the highest possible price.

The Hinge of History

We need to speak frankly about what’s happening to the global economy. It’s not just about supply chain breakages. Those can be repaired. It’s not just about inflation affecting every country. We are living amidst a fundamental upheaval in the whole world.

The most significant single danger to global prosperity now comes in the form of a devastating and deeply tragic wreckage of the country that was set to lead the world in finance and technology: China.

The WSJ summarizes the current pain:

China in 2021 accounted for 18.1% of global gross domestic product, according to International Monetary Fund data, behind the U.S. at 23.9% but ahead of the 27 members of the European Union at 17.8%. It accounts for almost a third of global manufacturing output, according to United Nations data from 2020. China’s economy expanded modestly at the beginning of the year but data for March and April point to a sharp slowdown.

The trouble there traces to the top. When Xi Jinping locked down Wuhan, the world celebrated him for achieving what no other leader in history had achieved: the eradication of a virus in one country. Even now, he gets accolades for this.

The rest of the world followed, and elites in all countries said that this path was the future.

Going Backwards

Now the virus is on the loose all over the country, and the eradication methods are intensifying. This is crushing economic growth and now threatening genuine economic depression in the country that only a few years ago was seen as the greatest economic engine of the world.

It’s truly the case that Xi Jinping has put his personal pride above the well-being of all people in China. The scientists in the country know that he is wrong about this but no one is in a position to tell him.

We cannot really trust the data coming out of China but officially the rate of infection in that country is one of the lowest in the world. Billions more people need to get the bug and recover in order to have anything close to herd immunity. This means that lockdowns are the way for years to come so long as the present regime remains in power.

American prosperity for decades has relied on: relatively low inflation, fairly stable rules of the game, and widening trade with the world and China in particular. All three are at an end. Yes, it is heartbreaking to watch it all unfold.

I’m not defending China’s human rights abuses. Far from it. But the best way to end these abuses is through engagement, not estrangement.

We all need hope right now but it’s very difficult to find, since we are on a course that is not likely to be fixed for a very long time.

Tyler Durden Wed, 11/30/2022 - 19:05

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Mish’s Daily: The Next Stop on This Fierce Bear Market Rally: A Global Recession?

Determining whether we are in a risk-on or risk-off climate is challenging, especially after a fantastic day of gains in every major US index.We should…



Determining whether we are in a risk-on or risk-off climate is challenging, especially after a fantastic day of gains in every major US index.

We should be in a risk-on environment. The Chinese stock market even rose, with technology and electric vehicles leading, as investors hoped for a more liberal COVID-19 governmental policy. With a gain of 4.4%, the Nasdaq composite, which had been the slacker, led gains among major US indices.

The S&P 500 (represented above by the SPY ETF) also surpassed its 200-day moving average for the first time in seven months. Markets are also approaching critical technical levels, which can accentuate positive or negative data, so keep an eye out tomorrow for PCE, the Fed's favorite inflation gauge.

Regardless of today's market action, there are indications that a global recession is imminent, with part of Europe potentially already in a recession and the US possibly next year. In particular, a rare 20-year recession signal is flashing red.

Global bonds joined US peers in signaling a recession, with a gauge measuring the global yield curve inverting for the first time in at least two decades.

According to Bloomberg Global Aggregate bond sub-indices, the average yield on government debt expiring in 10 years or more has slipped below that on short-term bond yields. On the heels of Fed Chairman Powell's dovish remarks today, the stock market rallied with heavy volume. Yet global bond yields signal a recession ahead.

Market conditions are ripe with profitable trading opportunities. Investors should pay close attention to commodities, currencies, bond yields, and inflation. If the PCE print is higher than expected, one-third or even more of today's gains could be erased quickly. On the flip side, if PCE is lower than expected, stocks might continue to run higher.

It is crucial to proceed with caution, as there is the potential for significant volatility in the coming weeks and months. We believe this ferocious bear market rally still has some legs – but don't wait too long to make your move, or your portfolio might get clawed quickly. If you are looking to capitalize on this ferocious bear market rally, our team can help your trading to protect your portfolio while allowing you to benefit from bullish trends.

Rob Quinn, our Chief Strategy Consultant, can provide more information about our trading and Mish's Premium Trading Service. Click here to learn more about Mish's Premium trading service with a complimentary one-on-one consultation.

"I grew my money tree and so can you!" - Mish Schneider

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Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Read Mish's latest article for CMC Markets, titled "Can the Commodity Super-Cycle Persist into 2023?".

Mish talks stagflation in her interview by Dale Pinkert during the F.A.C.E. webinar.

Watch Mish's appearance on Business First AM here.

Mish hosted the Monday, November 28 edition of StockCharts TV's Your Daily Five, where she covered some of the Modern Family. She also discusses the long bonds and gold with levels to clear or, fail.

ETF Summary

  • S&P 500 (SPY): 402 is support and resistance at 411.
  • Russell 2000 (IWM): 183 support; 191 resistance.
  • Dow (DIA): 342 support; 349 support.
  • Nasdaq (QQQ): 288 support; 302 resistance.
  • KRE (Regional Banks): 62 support; 66 resistance.
  • SMH (Semiconductors): 223 support; 232 resistance.
  • IYT (Transportation): 230 support; 237 resistance.
  • IBB (Biotechnology): 133 support; 139 resistance.
  • XRT (Retail): 64 support; 70 resistance.

Mish Schneider

Director of Trading Research and Education

Wade Dawson

Portfolio Manager

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Protests in China are not rare — but the current unrest is significant

Comparisons have been made to the 1989 demonstrations that led to the Tiananmen Square massacre. An expert on Chinese protests explains why that it half…




Protesters march along a street in Beijing on Nov. 28, 2022. Noel Celis/AFP via Getty Images

Street protests across China have evoked memories of the Tiananmen Square demonstrations that were brutally quashed in 1989. Indeed, foreign media have suggested the current unrest sweeping cities across China is unlike anything seen in the country since that time.

The implication is that protest in China is a rarity. Meanwhile, the Nov. 30, 2022, death of Jiang Zemin – the leader brought in after the bloody crackdown on 1989 – gives further reason to reflect on how China has changed since the Tiananmen Square massacre, and how Communist party leaders might react to unrest now.

But how uncommon are these recent public actions? And how do they compare with the massive weekslong demonstrations of 1989?

Having written extensively on protest in China, I can attest that protests in China are not at all uncommon – but that doesn’t make what is happening now any less significant. Alongside similarities between the current street actions and more typical protests of recent years, there are also parallels between the demonstrations today and those in 1989. Yet differences in China’s international status and domestic leadership reduce the chances for liberal democratic transformation now.

Not so unusual, but still unique

The current protests are ostensibly about the Chinese government’s strict “zero COVID” policies. They were triggered by a deadly fire in the northwestern city of Urumqi on Nov. 24, with some residents blaming lockdown rules for hampering rescue efforts. Unrest has since spread to multiple cities, including Beijing and Shanghai.

The specifics are unique to the pandemic. But in many respects, what we are seeing is not new or unusual – protests, in general, are not rare in China.

In fact, from 1990 through the present, popular protests have been more frequent and widespread in China than they were in the years leading up to the Tiananmen Square-centered demonstrations.

According to Chinese government statistics, the yearly count of domestic “mass incidents” or “public order disturbances” – euphemisms used to refer to everything from organized crime to street protests – rose from 5,000 to 10,000 in the early 1990s to 60,000 to 100,000 by the early 2000s.

Despite the lack of official numbers since 2006 – which ceased to be published after that year – verbal statements by Chinese officials and research by scholars and nongovernment organizations estimate the number of yearly protests to have remained in the high tens-of-thousands.

When protests turn political

This is not to say the recent multi-city protests are unsurprising or insignificant. To the contrary, the current media spotlight is, I believe, well-deserved.

Nearly all the thousands of protests appearing every year in the post-Tiananmen Square period have been localized and focused on specific material issues. They occur, for example, when villagers feel they are unfairly compensated for land acquisitions, when private sector workers are not paid, or when residents suffer from environmental degradation caused by waste incinerators.

In contrast, the anti-lockdown protests have emerged in numerous cities – reporting by CNN suggests there have been at least 23 demonstrations in 17 cities. They are also all focused on the same issue: COVID-19 restrictions. Moreover, they are targeted at central Party leaders and official government policy.

For the the closest parallels in terms of size of protest, one has to go back to the late 1990s and early 2000s.

From 1998 to 2002, tens of thousands of state-owned enterprise workers in at least 10 Chinese provinces demonstrated against layoffs and enforced early retirements. And in 1999, roughly 10,000 members of the now-banned spiritual movement Falun Gong amassed in central Beijing to protest their suppression and demand legal recognition.

But these protests were directed at issues that specifically affected only these groups and did not critique China’s top political leaders or system as a whole.

The only post-1989 examples of overt collective political dissent – that is, public action calling for fundamental change to the mainland’s Chinese Communist Party-led political system – have been exceedingly small and transpired off the streets. In 1998, activists formed the China Democracy Party, declaring it a new political party to usher in liberal democratic multi-party governance. Though the party persisted openly for roughly six months, establishing a national committee and branches in 24 provinces and cities, its leaders ultimately were arrested and the party driven underground.

A decade later, a group of intellectuals led by writer Liu Xiaobo posted online a manifesto called “Charter 08” advocating for liberal democratic political reform. Liu, who later received the Nobel Peace Prize, was jailed as a result. He remained in prison until his death, from untreated cancer, in 2017.

And while the massive and sustained protests in Hong Kong over the past decade exemplify political dissent, protesters’ demands have remained confined to political reform in the Hong Kong Special Administrative Region of the People’s Republic of China.

Calls for change and for Xi to go

So how much do the current anti-lockdown protests resemble the demonstrations that shook the regime in the spring of 1989?

Both have involved urban residents from various walks of life, including university students and blue-collar workers.

And in each case, the demands of protesters have been mixed. They include specific material complaints: In 1989, it was the impacts of inflation; in 2022, it is the effects of lockdowns and incessant PCR testing.

But they also include broader calls for political liberalization, such as freedom of expression.

A giant white statue with arm aloft stand above 100s of people.
The Goddess of Democracy stood as a symbol of protest during the 1989 Tiananmen Square demonstrations. David Turnley/Getty Images

Indeed in some ways, the protesters of 2022 are being more pointed in their political demands. Those on the streets of at least two major cities have called on President Xi Jinping and the Chinese Communist Party to step down. Demonstrators in 1989 refrained from such system-threatening rhetoric.

That reflects the changing political realities of China then and now. In early 1989, Party leadership clearly was split, with more reform-oriented leaders such as Zhao Ziyang perceived as sharing the activists’ vision for change. As such, demonstrators saw a way of achieving their aims within the communist system and without a wholesale change in leadership.

The contrast with today is stark: Xi has a firm grip on the party. Even if Xi were to miraculously step down, there is no clear opposition leader or faction to replace him. And if the party were to fall, the resultant political void is more likely to bring chaos than orderly political transformation.

Yet if the Chinese Communist Party is a different entity now than it was in 1989, its response to unrest shares some traits. Central authorities in 1989 blamed the protests on foreign “black hands” seeking to destabilize China. The same accusations have been raised in online posts now.

In fact, the government response to recent protests follows a pattern that has played out time and again in post-1989 protests. There is little to no official media coverage of the protests or acknowledgment by central Chinese Communist Party leaders. At the same time, local authorities attempt to identify and punish protest leaders while treating regular participants as well-intended and non-threatening. Central criticism – and possible sanction – of local officials portrayed as violating national policies follows. Meanwhile, there are moves to at least partially address protester grievances.

It is a messy and inefficient way to respond to public concerns – but it has become the norm since 1989.

Teresa Wright does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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