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Why China’s Confidence Could Turn Out to Be a Weakness



In his decade of ruling China, Xi Jinping has tried to imbue its people with confidence, telling them that the country is doing very well compared with the chaotic West.

He has told the younger generation that China can finally look at the world as an equal. “It’s no longer as backward,” he said last year.

“The East is rising and the West is declining,” he declared, at a time when the United States and other Western countries seemed mired in high Covid infection rates, racial tensions and other problems.

Mr. Xi has told China’s 1.4 billion people to be proud of its culture, its governance system and its future as a great power, all of which adds up to his signature political philosophy, sometimes called the “confidence doctrine.”

While much of that pride is well placed, it also breeds cockiness. It gives Mr. Xi a justification for unwinding the policies of openness that helped China emerge from international isolation and abject poverty under Mao. It has also given a boost to extreme nationalists who trumpet Chinese superiority, and who are now urging military confrontation with Taiwan after Speaker Nancy Pelosi’s visit.

Their strident rhetoric shows how little they think of American power and how easily they think China would win a great-power competition with the United States. It is making more moderate nationalists feel uncomfortable, raising fears that Beijing could feel compelled to act tough.

Such posturing and nationalistic sentiment heighten the risk of war, especially as China establishes a new status quo with Taiwan, announcing on Tuesday that it would continue air and sea drills around the island democracy.

And in the context of the U.S.-China rivalry, this tendency toward overconfidence could also prove to be a weakness for Beijing, blinding it to its own challenges. It could be a blessing for the United States, if it can get its act together.

The Chinese people, not the government, have every reason to feel proud and confident in their achievements over the past four decades.

They lifted themselves from poverty and created some of the most successful companies on earth. They made their country a manufacturing colossus and the biggest consumer market for cars, smartphones and many luxury brands. They built new skyscrapers, subways, highways and high-speed railways, some of the best in the world.

The United States, on the other hand, has seemed embroiled in its many domestic problems and often too paralyzed to sort through its issues.

Before the pandemic, I got used to Chinese people coming back from trips to the United States and telling me how backward, shabby and underwhelming they had found it to be.

Some of them refused to take the New York subway system, saying it was dirty, smelly and full of service disruptions. They were appalled by the lack of public transportation in Los Angeles and the poor highway conditions in Silicon Valley. They didn’t understand why wealthy San Francisco was plagued with homelessness. They were greatly disturbed by gun violence and the failure of laws to control it.

Most of those people weren’t nationalists. They were educated elites who grew up in poverty, benefited from China’s opening up and had seen the United States as an ideal. The United States awed and disappointed them at the same time.

But for many other Chinese, especially younger ones, the idea of a rising East and a declining West is an accepted fact. News programs and social media are filled with such dogma, and political science classes, at the urging of Mr. Xi, are teaching it.

Yan Xuetong, a professor of international studies at Tsinghua University with a nationalistic bent, said at a Beijing conference in January that China’s college students need to learn more about the world. They often have a binary view, believing that “only China is just and innocent while all other countries, especially the Western countries, are ‘evil,’ and that Westerners are bound to hate China,” he said. Students “usually have a very strong sense of superiority and confidence” in international relations, he said, and often “treat the other countries with a condescending mind-set.”

“They use ‘wishful thinking’ in international affairs, believing that it’s very easy for China to achieve its foreign policy objectives,” said Professor Yan. He added that they also tend to believe conspiracy theories and other unsubstantiated opinions found online.

Many young people criticized him in turn, accusing him of condescension.

Chinese propaganda has always tried to highlight China’s achievements and the West’s failures. On Dec. 30, 1958, when China was entering the Great Famine that would result in the death of millions by starvation, the front page of the People’s Daily reported that the country was succeeding in industrial and agricultural production. In the international news section, stories about socialist countries like Vietnam and North Korea were celebratory, while ones about the capitalist West were all about their economic and political woes.

I grew up reading a newspaper column titled, “Socialism is Good. Capitalism is Bad.” Each week, millions of young readers like myself would consume biased pieces about an American girl going hungry or a North Korean boy living a happy life. We believed them, until China opened up and we realized that our socialist country was impoverished.

That changed to a degree in the 1990s and 2000s, as the Chinese Communist Party allowed some investigative reporting and public online criticism. But under Mr. Xi, everything about China exudes “positive energy,” including economic forecasts, while the West, especially the United States, is increasingly portrayed as evil or in decline.

The state broadcaster Chinese Central Television, eager to give the party credit for the country’s successes, made a documentary called “Amazing China” in 2018. In one section about achievements in poverty eradication, the film showed Mr. Xi sitting among farmers, talking about how their income had increased twentyfold in 20 years.

“Who else could have done this?” he asked rhetorically. “Only the Communist Party could have done this. Only our socialist system could have done this. It couldn’t have been done in any other places.”

But capitalist countries like Japan and South Korea had gone through similar economic transformations decades earlier.

In the past two years, many state news reports and theoretical essays have contrasted China’s orderly governance with the “messy West,” citing the United States’ mishandling of the pandemic, its widespread protests against racism and its many mass shootings. When the United States and a few other Western countries struggled with their Covid responses, state media and many Chinese social media influencers urged them to “copy China’s homework.”

Wang Jisi, a professor of international studies at Peking University and a top expert in U.S.-China relations, complained at a peace forum in July that C.C.T.V.’s main news program ran at least two stories about the United States every night, and that both were negative. “They’re either about the U.S. having another mass shooting, another example of racial tensions or its messy handling of the pandemic,” he said. “Why can’t we talk about what’s happening in Africa or Latin America and not talk about bad stuff in the U.S.?”

In an interview with an academic journal this year, Mr. Wang tried to correct the idea that the United States is in decline. He argued that while America’s international standing had experienced relative decline between 1995 and 2011, its share of global output rose in the decade after 2011. There is not enough evidence to conclude that America’s economy is in irreversible decline, he said, though he acknowledged that U.S. soft power had diminished.

For China, the danger of drinking its own propaganda Kool-Aid is that it stops looking at its own problems while exaggerating America’s weaknesses.

The Communist Party’s aversion to truth and its obsession with control are backfiring. Mr. Xi’s zero-Covid policy, which relies on mass testing and lockdowns, is wreaking huge damage on the Chinese economy. But since no criticism is allowed, the country is largely going along with strict restrictions while much of the world is in the process of returning to normal.

Despite all its issues, the American democratic system still seems to be working, with its checks and balances that allow for different views to win out and for new strategic approaches to emerge. The 2020 presidential election is an example, with the Democrats returning to power. So is Kansas’s vote to preserve protections for abortion rights in its Constitution, after the Supreme Court overturned Roe v. Wade.

Congress passed the CHIPS and Science Act recently to help global semiconductor manufacturers set up operations in the country to better compete with China. And President Biden’s administration is better at working with allies than his predecessor’s was.

“When people stop queuing up for visas in front of the U.S. consulates,” said Mr. Wang, the professor, “then the U.S. is in decline.”

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Savingforcollege.com. Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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