President Xi Jinping Warns of Gray Rhino Risks

China must be on guard against highly improbable, unimaginable “black swan” events while also fending off highly probable but often neglected “gray rhino” risks, Chinese President Xi Jinping told senior Communist Party officials at the opening ceremony of a study session at the Party School of the CPC Central Committee January 21st.

Xi spoke shortly after newly released economic data showed that in 2018 China’s economy had slowed to the lowest rate in 28 years.

“In the face of a turbulent international situation, a complex and sensitive environment, and the arduous task of reform … We must be highly vigilant against ‘black swan’ and ‘grey rhinoceros’ incidents,” he said. Xinhua News Agency issued a full statement on his talk.

Xi cited areas in which China faces major risks: politics, ideology, economy, science and technology, society, the external environment, and party building.

His comments generated worldwide news coverage, from Australia to Indonesia to Argentina, and helped send U.S. stocks down over concerns about the effect of a slowing Chinese economy on global growth.

Columnist Ana Fuentes of Spain’s El Pais newspaper wrote, “More than black swans, it appears that 2019 will be the year of gray rhinos, threats that we have identified but have not been able to or known how to stop.” Top on her list was the crisis of governability in the West.

THE GRAY RHINO: How to Recognize and Act on the Obvious Dangers We Ignore, was released in China by CITIC Press in February 2017 and has become an influential best-seller.

Who’s Talking about The Gray Rhino in China

Pointing to the existence of a gray rhino -a highly probable, high impact danger that nevertheless is being neglected, downplayed, or outright ignored- is a way to create a sense of urgency toward addressing it before panic sets in. Senior Chinese officials have used the term extensively for exactly this purpose for issues from financial risk to US tax policy to urban fire safety, earning it a spot on the “Top Ten New Terms of the 2017 Chinese Media” list compiled by China’s National Center for Language Resource Monitoring and Research in December 2017.

China’s President Xi Jinping keeps a copy of the Chinese edition of THE GRAY RHINO on his bookshelf, where media commentators noticed it during his 2018 New Year’s Day Speech, and has discussed the gray rhino with senior economic policy makers.

A reference to the gray rhino on the front page of People’s Daily in July 2017 following the National Financial Work Conference sent the prices of risky stocks down more than 5 percent in a day. The concept influenced Chinese policies on heavily indebted companies (covered on the front page of The New York Times) whose aggressive overseas expansions the government reined in.

In a much-commented-upon essay posted on the central bank’s website in November 2017, People’s Bank of China Governor Zhou Xiaochuan warned that China faced many gray rhinos, three in particular: macro-level financial high leverage and liquidity risk; credit risk including non-performing loans and increasing bond market credit defaults; and finally, shadow banking and criminal risk.

Cai Qi, secretary of the Beijing Municipal Communist Party Committee, referred to urban safety as a gray rhino after the tragic Daxing apartment fire in November 2017.

Senior Chinese officials told The Wall Street Journal in December 2017 that the US tax reform was a gray rhino threat to China, and raised interest rates in response to it.

China Banking Regulatory Commission director Guo Shuqing told People’s Daily in January 2018 that gray rhinos and black swans threaten China’s financial stability.

At Davos in January 2018, Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), the nation’s stock market regulator, warned that China’s debt was a gray rhino, again generating headlines worldwide.

Shortly afterward, Fan Hengshan, vice secretary general of the National Development and Reform Commission (NDRC), the country’s top economic planning agency, warned in a commentary in the state-controlled Beijing Daily that the year to come faced many gray rhinos.

Baidu Baike, China’s largest online encyclopedia, explains the gray rhino and its evolution in China.

Read more below for additional detail on recent gray rhino coverage from China.

Close to retiring, China’s central-bank chief warns of financial riskThe Economist. November 9, 2017.

China’s Central Bank Governor Warns About Financial Risks — AgainThe Diplomat, November 9, 2017.

Chinese Banks Enjoy Few Bad Loans But Central Bank Warns Of Risks Forbes, November 11, 2017.

Hidden Debts Accumulate at Local LevelsCaixin Global. December 27, 2017.

Beating Targets: China’s Economy Grew 6.9 Percent in 2017The Diplomat, January 18, 2018.

China eyes black swans, gray rhinos as 2018 growth seen slowing to 6.5-6.8 percent: media. Reuters, January 29, 2018.

Use your browser to translate the following links from Chinese.

Zhou Xiaochuan: China must be vigilant “black swan” and “gray rhinoceros.” Gold Network. November 5, 2017.

Debt, shadow banking, capital market volatility, “gray rhinoceros” are moving toward China? qq, November 10, 2017

Zhong Wei: Considering Grey Rhino, China Should Balance Overall Gradual Reforms and Partial Radical Reforms. qq. November 16, 2017.

Exchange currency “gray rhinoceros” annual inventory. Gold Network. November 24, 2017

Ren Guanqing. The Greatest “Gray Rhinoceros”: an interview with Michele Wucker author of the Gray Rhinoceros Phoenix New Media, November 30, 2017.

Yearender: China moves to tame its “gray rhinos.” Xinhuanet. December 17, 2017

Observer: Why We Ignore Obvious Dangers

In this Year of the Gray Rhino, I wrote for the New York Observer about how issues that are anything but the unexpected have sideswiped the Democratic and Republican parties:

Screen Shot 2016-05-26 at 1.12.49 PMThis year’s presidential campaign is full of the unexpected. Yet the underlying issues are anything but. It’s hardly news that middle- and working-class incomes have stagnated and that Americans are fed up with a government that even squabblesover an impending public health crisis like Zika. Why, then, have the country’s two leading parties been taken aback by voters who are mad as hell and not going to take it anymore?

It’s because everyone—not just politicians—underestimates the power of the obvious problems that loom right in front of us. So it’s a surprise when inaction creates unpleasant consequences. The Democratic and Republican parties are learning this lesson the hard way.

The truth is that we get into most trouble when we’ve ignored obvious problems. I call these issues “gray rhinos” because they are huge and charging right at us and ought to be harder to ignore. Yet we miss the most important information—like calling rhinos black and white even though they are all gray.

Read the full article at observer.com