What Would a Chinese Economic Implosion Look Like?

[Bob Kohm]

Stratfor is out with a reiteration of the most interesting fact about the Chinese economy--"China's economy (according to China) needs 8% annual growth, to keep the roughly 16 million new people entering the work force from rising in jobless protest—and to keep up with climbing wages and to sustain a growing retired population. A combination of exports, loose lending practices, super low margins, and government spending help keep up the growth. Sound healthy to you?".

To my eye China looks quite a bit like Yugoslavia from a "national composition" viewpoint-- several unrelated and distinct nations bound together under one authoritarian government. In the post-Tienanmen years, we've seen China move from a command economy to a much looser entrepreneurial model with strong government subsidies and supports that has ameliorated the need for strong social controls from the military and internal security apparatus. If that economic model sees a reversal (as seems inevitable as the Chinese growth bubble continues to inflate and stretch credibility), what do you see as the likely outcomes for China internally and for the world economy? Would we see a soft landing for China or, once prosperity and nearly full urban employment take a hit, do we see a return to the 1989 societal fractures leading to an authoritarian crackdown? At the far end of the spectrum, is a Soviet-style dissolution of the PRC a realistic possibility? Something in between? Does losing the Chinese ATM presage global economic problems? You're there, Mac-- any ideas from the "popular" standpoint?

Thoughts?

[joncarlos]

It would look like their PM calling the US and saying "so, about that 8 trillion dollars..."

[TranaGreg]

my $0.02 - the economic issues are very real but as far as the possibility of dissolution I just don't see it. Whereas Yugoslavia was a 20th century creation, China has been around in various forms for over 4000 years. I'd bet you'd see half the population die from starvation before any large scale dissolution occurs.

[Bob Kohm]

my $0.02 - the economic issues are very real but as far as the possibility of dissolution I just don't see it. Whereas Yugoslavia was a 20th century creation, China has been around in various forms for over 4000 years. I'd bet you'd see half the population die from starvation before any large scale dissolution occurs.

I'm curious as to why you think you'd see depopulation before dissolution. Do you think that's a result of natural cohesion, government force, or some other factors? My take is that it's unlikely but possible as I see the Uighurs already trying to stage a Xinjiang break away, Tibet's natural abhorrence of Beijing, the possibility of Shanghai becoming the political center of a new nation much more economically robust than a Beijing led one, and Hong Kong/Kowloon and Macau reasserting independence. I think it's out at one end of the spectrum of possibilities, but China's various forms of the last 4000 years have looked very different at different times. There will always be a "China" with a capital in Beijing which makes the Yugoslavia analogy not quite a 1:1, but I see China as the Serbia in the Yugoslav equation.

[billbuckner]

[billbuckner]

http://www.pcworld.com/article/228716/chinese_prisoners_allegedly_forced_to_play_world_of_warcraft.html

[Hammer]

Hopefully it wont affect my 10% discount card at PF Changs.

[TranaGreg]

I'm curious as to why you think you'd see depopulation before dissolution. Do you think that's a result of natural cohesion, government force, or some other factors? My take is that it's unlikely but possible as I see the Uighurs already trying to stage a Xinjiang break away, Tibet's natural abhorrence of Beijing, the possibility of Shanghai becoming the political center of a new nation much more economically robust than a Beijing led one, and Hong Kong/Kowloon and Macau reasserting independence. I think it's out at one end of the spectrum of possibilities, but China's various forms of the last 4000 years have looked very different at different times. There will always be a "China" with a capital in Beijing which makes the Yugoslavia analogy not quite a 1:1, but I see China as the Serbia in the Yugoslav equation.

It's hardly a scientific explanation but after having travelled the country & done some reading here's my sense of it - there's definitely a western mentality which is different from the rest of the country - yes Xinjiang & obviously Tibet have little if any attachment to China as an ongoing entity. But in the rest of the country it's less straightforward; the western mainland provinces - the two I spent some time in are Yunnan & Sichuan - certainly don't have a lot of love for Beijing, but I wouldn't classify them as independent in midset; in fact I'd equate the relationship between Sichuan & Beijing as similar to the relationship between Arizona & Washington - there's an attitude that policy from the centre may or may not apply locally depending on the flavour of the day, but it's a leap to suggest that this would manifest itself in a seccessionist movement. It's more a case of the distant provinces figuring out how to work around those policies which they don't agree with.

And I also think that China's propensity to use force internally, brutal if needed, combined with the people's general respect for authourity (very different than in the US) reinforces the idea that the chances of a national breakup is remote.

[Fresno Bob]

My guess would be a Shanghai-led coastal schism away from a Bejing-based "People's Republic"

[Trader Mac]

These are just my opinions:

1. I don't see China ever letting Tibet and other provinces go. Yes, there is talk that some want to break away, but I don't see Beijing letting it happen.

2. There is a HUGE building boom in China and you would think there would be a housing bubble collapse like in America. Just looking out from my apt. you can see tall building cranes everywhere.

3. A recent Time article looked at the current economic centers vs. 2025. China has about 6-7 cities in the top 25 in 2025 with my city of Tianjin at #12.

4. I just don't see China collapsing like America has. I think they will take a few steps back but not on the scale of the US. The Chinese are a VERY resourceful people. It is amazing to see the capitalistic spirit on the streets with people just setting up shop on the side of the street. One thing about China is that people still don't use credit that much. Most of the time people save up for an apartment before they move in or for making major purchases. I don't know the numbers, but I would guess there is very little debt per household in China which would have to be a plus during an economic downturn.

I know these are just random thoughts, but maybe there's a little insight in there.

[chancellor]

Given recent economic data from China, I thought this - http://blogs.the-american-interest.c...ing-hemmed-in/ - was an interesting read.

Walter Russell Mead definitely leans right, but I think folks of all political spectra will find his article (and the attached NYT article, if you can sign in) interesting.

[onejayhawk]

I will second those saying that China is not going to fragment. The issue was raised some yers ago, why did Europe dissolve into a dozen different countries, when, at the same point in its development, China did not. Both have major river and mountain boundaries, and diverse language groups, yet China was essentially unified, while Europe has never approached unity. The upshot was that the single written language and the universal access to civil service entry provided the necessary adhesion, allowing a national identity to grow up. As the saying goes, dynasties came and dynasties went, but China endured.

Also, their bureaucracy is far more entrenched than even ours.

J

[chancellor]

Another Walter Russell Mead article that will be of interest, IMO, to those interested in foreign affairs. As noted earlier, Mead definitely leans right politically, but has been highly complimentary of SecState Clinton's work in Asia. Great quote from this article:

That within a few months a leading Chinese official and a leading dissident should both have turned in extremis to American diplomats should, by the way, make Americans everywhere stand a little taller. We have somehow managed to acquire a reputation for honest dealing and political courage in China; it should be our goal to preserve that. There are times when it is appropriate to be proud of your country, and this is one of them.

Linky: http://blogs.the-american-interest.c...on-in-beijing/

[Kevin Seitzer]

Thanks for the Walter Russell Mead articles, Chance. I've read some of his stuff previously and liked it. Good to be reminded that there are still at least a few good columnists left on the conservative side.

[chancellor]

Thanks for the Walter Russell Mead articles, Chance. I've read some of his stuff previously and liked it. Good to be reminded that there are still at least a few good columnists left on the conservative side.

Thanks, I like him a lot. He's thorough, well-researched, and while conservative, isn't afraid to be complimentary to some of the traditional conservative "bogeymen" - like anyone named Clinton.