Thursday, January 08, 2009

Fasten your seatbelts...

Whenever I've heard talk of how China will become the next hyperpower and rule us all, I've always been more than a little skeptical. Yes, China's economy and power on the world stage has grown exponentially in recent years; yes, China is an emerging superpower. But the dominant one?

I don't know if people making these predictions really have a handle on how complicated and difficult China's situation is internally. Just how many people there are to employ and house and feed, in a country without enough arable land to feed itself, where the environment has become so poisoned that it will take decades to repair the damage, if it can even be repaired. China still has no consistent rule of law, no social security system, and it has over a billion people. That makes labor costs low, to be sure, but it also makes for an inherently unstable situation. By the Chinese government's own reckoning, there were something like 87,000 "incidents" of social unrest in 2007 - riots over unemployment, over non-payment of wages, illegal land seizures, pollution. But as long as growth is high and most people are working, the balance, so far, can be maintained.

I've looked at the US/China relationship in recent years as partners in a sometimes unwilling dance: interdependent, their movements made in response to one another - two puppets tangled together with no puppeteer. China's financing of US debt enabled the US to maintain its consumption based economy - and US consumption is one of the main drivers of China's export economy.

So what happens when the music stops?

John Pomfret reports on how the global economic crisis has affected China, and the news so far is alarming:
An official Chinese magazine this week predicted a massive increase in protests because of the global economic downturn. It reported that 10 million people, originally from the countryside, have been fired from their jobs in factories mostly on China's eastern coast. Another 8 million people are officially registered as unemployed. Meantime, a record number of people will enter the workforce this year, including more than 6 million who have graduated from high school or college. 2009, the magazine said, will be the toughest year in China in recent memory.

The piece, published by Liaowang, a magazine owned by the state-run New China News Agency, detailed a "perfect storm" of economic problems in China's cities -- factory closures and the non-payment of salaries to millions of employees -- cascading into China's rural areas, sparking land disputes as millions of recently-fired factory workers flood home.This perfect storm, the piece said, would "inflict a new pressure on our country's social stability and harmony."

What's that mean in English? Well, the article provided a few statistics. Labor protests jumped 93.52 percent in the first 10 months of 2008 over same period in 2007. In one city alone, the capital Beijing no less, protests to demand the back payment of salaries (Chinese employers routinely rip off their workers to the tune of an estimated $4 billion a year nationwide) increased 300 percent and the people participating went up 900 percent in November when compared to the same month a year earlier.
It may be that ultimately, China will emerge from this crisis in better shape than, for example, the US. After all, they have not been busily hollowing out real productivity from their economy and substituting it with obscure financial transactions and military empire-building. At some point, it's possible that China's vast internal market can shoulder the consumption load to keep the country running. But in the meantime, the logistics of dealing with armies of the unemployed, of people who are already living on a thin edge of survival, is a formidable challenge.

We're in for a bumpy ride.

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