The end of China

 Scene from the Tibetan riots in 2008

Is China destined to implode once again? George Friedman, in his book The Next 100 Years, dismisses China's rise. The chapter is entitled "Paper Tiger". He suggests that the historical issues which have plagued China in previous times will resurface yet again, once the economic growth begins to retract. The recent strong performance of China's economy in the Global  Financial Crisis suggests China will continue to rise economically. But could Friedman possibly be correct?

Recently China's blogging community has been enraged by widely circulated figures which indicate that 0.4 per cent of the population possess 70 per cent of the PRC's wealth, while 91 per cent of those with assets of 100 million RMB or more are children of senior Communist Party cadres.

The article below, from the South China Morning Post (Hong Kong) suggests there is a timebomb ticking away just beneath the surface of modern Chinese society. How will this problem be addressed, when privilege is built into the system, and the perpetuation of the entire concept of the "PRC" depends on it? Further, social stability is seen to depend on growth of at least 8% for the foreseeable future (as George Friedman has pointed out). No country has endless growth. Sooner or later there will be a genuine recession, and that will be a real test (actually there is a recession in China's retail sector now - widely acknowledged by Chinese people themselves, but not widely discussed in the media - many shops, restaurants and bars are closing down in many cities, something not seen at this scale in the last decade).

It is easy to assume that things will remain as they are. China's economic juggernaut has surged ahead for 30 years. But in historical terms, this is not a long time. Futurists need to look at things with a little more depth.

Edward de Bono (of lateral thinking fame) likes to put forward provocations to stir people from their comfortable linear thinking processes. In the spirit of lateral thinking, here is my provocation for today. The success of the PRC is ensuring its inevitable demise; for the very process that has created its success has instituted a rigid class/power structure which cannot be readily dismantled. It's a bit like the bus in the movie Speed. Slow down, and it will blow up. 

Beyond money, there appears to be little else holding China together. Nationalism may be the final card in the CCP hat (during recent social unrest in Tibet and Xiniang, the authorities immediately pointed the finger at external sources - this is a deliberate policy to attempt to foster national unity by blaming outsiders). It's not something that those with long-term financial and emotional (friends and family) investments in China want to think about too much. But it would be foolish to dismiss the possibility. These are not new ideas, nor new concepts. Social instability, fragmentation and xenophobia are all recurring themes throughout Chinese history, including recent history.

  

Here is the article. There is no link, as the site is by subscription only.

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Rage against the rich

DAVID EIMER
Dec 17, 2009


China watchers like to say that most people on the mainland will grow old before they get rich. These days, that aphorism could be amended to: "Most people will get angry before they get rich." Rage against the wealthy is on the rise on the mainland. A new survey found that 96 per cent of respondents resented the rich, while 70 per cent felt there was a significant gulf between those with money and the poor. Almost half those polled expected that gap to grow wider. 


Such sentiments are not unique to the mainland. In the west, banker-bashing has become a sport, with everyone from US President Barack Obama down to the man on the street venting their spleen over the size of the bonuses paid to top wealth managers. That anger is inspired by the widespread belief that it was the excesses of the financial institutions that caused the global credit crisis. 


But on the mainland, already the world leader in wealth disparity, the resentment stems from the fact that most people believe the rich make their money through a combination of connections and graft. The survey, conducted by the Zhejiang Academy of Social Sciences, highlighted the way property developers are perceived as conspiring to manipulate the market to keep prices high. 


With ordinary people struggling to afford apartments, the developers, like bankers in the west, have become the most obvious targets for the disgruntled. 


They, though, are just the tip of the iceberg when it comes to the unacceptable face of capitalism. Whether it is coal barons profiting from unlicensed death traps of mines, or corrupt officials lining their pockets, no other place in the world can match the mainland for the absurdly unequal way wealth is distributed. Nor does any other nation have a political system which is seemingly designed to ensure that it continues. 


There has been much online outrage recently about reports in the media claiming that 0.4 per cent of the population, or the country's estimated 450,000 millionaires, possess 70 per cent of the mainland's wealth. The same stories revealed that 91 per cent of the richest millionaires, those with assets of 100 million yuan (HK$113.3 million) or more, are children of senior Communist Party cadres.
The "princeling"' phenomenon, where the son or daughter of a top official also rises, has been well documented in the international media. But it is rare for them to be outed so publicly at home. 


Normally, the domestic press presents the princelings as celebrities, while ignoring how many of them have profited hugely from their relatives' positions of power. 


That's understandable, given that the party is already inexorably linked to corruption in the public's mind. It was no surprise, then, that the four newspapers which published the reports on wealth distribution and the princelings were pilloried in the party mouthpiece People's Daily late last month. 


Their stories were condemned as "fake" and the figures said to have been invented by unnamed overseas websites. 


In fact, the statistics came from an official source, a joint study conducted by the Chinese Academy of Social Sciences and the Central Party School. Nor does the online community, normally quick to believe in anti-China conspiracies, seem to discount the newspaper reports. The joke doing the online rounds now is that the figure of 91 per cent is indeed fake, and that the real number of millionaires who are the children of officials is in fact higher. 


At the climate-change summit in Copenhagen, China's negotiators insisted that the richer nations should be paying poorer countries to cut their carbon emissions. It would be interesting to see Beijing's reaction if it was asked to apply the same argument to wealth distribution at home.

With few checks on their capacity to accumulate more riches, the mainland's millionaires are benefiting from the system at the expense of those without connections. That needs to change, before the rage against the rich turns into something more serious.