Posts Tagged ‘China’
We’re so vain…
Posted on: August 26, 2015
- In: Current Events | Economy | Open Thread
- 44 Comments
Apologies to Carly Simon, but…
We’re so vain, we probably think this economy is about us,
We’re so vain, we bet future swaps this economy is about us,
Don’t we? Don’t we?
A few years ago, when the Chinese economy was booming, politicians said it was an orchestrated plot to take America down. Now that the Chinese economy is struggling desperately, those same politicians are just as convinced it is – wait for it – a plot to take America down.
The political discourse around this issue is genuinely unhelpful. Just like Seinfeld’s Soup Nazi, Scott Walker snapped, “No state dinner for Xi,” the Chinese President Xi Jinping scheduled for a formal state visit. I guess the closest Benihana will have to do. Given the impetuous inanity passing for policy, here’s what you need to know about the China Syndrome of the Chinese economy in less than 800 words.
China’s stock market is relatively small. It’s mostly mom and pop investors who have borrowed the money to buy stocks – a majority of them don’t have a high school education. After gaining 140% last year, this year the Shanghai Composite Index has fallen 40% in the face of a tremendous amount of active intervention by the Chinese central government. It seems as though the Politburo can’t stop the crash.
The reason all these unsophisticated investors got into the stock market was the implicit support of the Chinese Communist Party. It appears to have been an overly optimistic act of faith in the Chinese Politburo’s economic stewardship.
With an abundance of labor, China bet the farm on being the world’s low-cost manufacturer and assembly line. Such an economic model is not sustainable for an economy needing to grow at a double-digit multiple to service a burgeoning middle class. The Chinese government has been notoriously optimistic in its economic forecasts (some say notoriously deceiving). There are more than a few economists who believe the Chinese economy is on the verge of recession, if not already there.
This is how it happened: When global demand went kaput in 2008, China decided to focus on massive domestic 
construction projects. There has been a massive, and I do mean massive, overbuild in China with unused stadiums, skyscrapers, and even whole cities. They sit empty.
Add to this the relocation of 250 million Chinese from rural settings to cities in just twelve years as official state policy. In essence, this top down policy from the Politburo turns China into a majority urban country in a dozen years. Put another way, it would be the equivalent of relocating 5 of every 6 Americans in the span of three presidential terms.
Chinese leadership is terrified of political unrest reminiscent of Tiananmen Square. Without sustained growth at a level sufficient to service a growing middle class, the leadership of China is at a crossroads. At once they are both risk-willing to try just about anything to thwart economic upheaval and at the same time, risk-averse against any potential calamities resulting from their actions.
There is a group of millennial Chinese numbering about 300 million – about the size of the total U.S. population. This group is better educated and likes its taste of the middle class lifestyle. The Communist Party worries most about this group. Quelling political unrest in this group would be difficult, almost impossible, because of the nomadic nature of these 300 million workers and their widespread geographic dispersion.
In its simplest terms, the problem is transforming a manufacturing, rural economy into an urban, consumption-based economy in less than a generation. For perspective, it took Great Britain 200 years, the U.S. 100 years, and Japan 50 years to do the same thing.
As with all instances of massive historical change, there are naysayers within the Chinese system. China’s top-down, hierarchical structure ensures elites have control over policy and decision-making. These traditionalists are wary of many of the enacted economic reforms. This current economic tsunami strengthens traditionalists at the expense of reformers like President Xi Jinping.
How does this affect us? Throughout history, when absolute control is threatened in China, it retreats back in on itself. Hibernation of the world’s second largest economy would be the equivalent of a worldwide recession and catastrophic to our economic well-being and the world economy in general.
Even more sobering is this: Political instability in a country with a standing army of 200 million soldiers and perhaps 3,000 nuclear warheads is indeed a worrisome thing. This is especially true in a region where China is surrounded by emerging economies – the “if you can’t make it, take it philosophy” would indeed present existential threats.
Again, my apologies to Ms. Simon: “Instead of clouds in my coffee, clouds in my coffee,” there are clouds on the horizon, clouds on the horizon.
Take the conversation in any direction you might like.
Wudja?
Posted on: September 30, 2014
Good afternoon Widdershins. Fall, the bestest of seasons, is upon us. This past weekend my hometown had its forty-third annual arts and crafts festival built around the making of sorghum molasses. It was all the fun you can imagine when you throw out the welcome mat for 40,000 humans and the town’s tornado ravaged infrastructure was built for fifteen hundred. I hope your weekend was a good one as well.
Today I thought we would play a short game of Wudja — would you rather have the life of person X over the life of person Y? For purposes of today’s little thought experiment, person X is President Obama and person Y is China’s President Xi Jinping.
So would you like to be Barack where he is “relicking the calf” on Iraq and Syria? A president elected by touting a 
fortuitous, opportunistic anti-Iraq War speech on a Chicago sidewalk where he was the last-minute substitute is faced with again spilling blood and treasure on the sands of the Middle East. He’s making decisions as would a make-up artist playing the part of a dermatologist — any decision is merely covering up a long-festering pustule that could erupt at any juncture.
You could be the Obama who is faced with finishing his presidency with the bookends of John Boehner and Mitch McConnell actively leading a Congress in rabid inactivity. Given that this Congress has been the least productive in the history of the Republic, the obvious next step is going for the world record in placing 535 people in simultaneous cryogenic stasis.
Or you could be the U.S. President who is protected by an agency that seems to recruit from the Barney Fife school of protective services. In any event the Secret Service has given Hollywood the premise for the next incarnation of the Home Alone franchise. Allowing a fence jumper to breach the North Portico into the White House, get through the East Room, almost to the Green Room and then issuing a misleading statement about the matter is a better film treatment than 95% of what the studios have turned out this year.
And just for good measure, there remains Sarah Palin and her ilk lumbering about the country like Brontosauruses proving that 140 million years just isn’t enough evolution for some walnut-sized brains.
Or would you like to be China’s Xi Jinping? The leader of a country of 1.3 Billion where between 150-170,000,000 still live in poverty. While a startling number, China has reduced its poverty by a staggering 71% in just three decades.
Xi has the privilege of running a government where corruption is almost as plentiful as the smog choking the skies. He also enjoys the burden of leading an economy that is slowing down where every decision is a Gordian knot of increasing wages for a growing middle class or making it less advantageous for Chinese manufacturing thus slowing the economy further.
Perhaps the newest Damoclesian issue began unfolding last Friday and escalated over the weekend. Succinctly put the issue is: Whether or not the central Beijing government will make good on the right of Hong Kong to democratically elect its leader — a confrontation building for almost 20 years.
The riots and demonstrations of the weekend were met with a violent response obviously sanctioned by Beijing authorities. What is most disconcerting to Beijing and Xi has to be, this is Hong Kong! The very same Hong Kong that is an affluent and orderly Eden bordering on obsessive compulsive adherence to civility and graciousness. Hong Kongers have somewhat of a superiority complex — seeing themselves well above and beyond the authoritarianism and disorder of mainland China.
Hong Kong two days ago…
When the British turned over Hong Kong in 1997, one of the central tent poles of the deal was allowing Hong Kong’s citizens to democratically elect their top leader for the first time ever in 2017. Chinese leaders reaffirmed the promise in 2007, but last July the government began to “crawfish” on the deal. The “newly reformed” deal is that Beijing must “approve” all the candidates from which the voters may choose. That doesn’t sit well with the wealthy, independent, and socially entitled Hong Kongers, especially the youth.
This whole episode is reminiscent of Tiananmen Square. For those living in Hong Kong, they believe they have a special obligation to maintain the memory of 2,600 peaceful protesters being mowed down. The obligation is a solemn one since all semblance of Tiananmen has been erased from the history of mainland China and the current generation knows nothing of the massacre.
Xi’s choice is literally an existential one for China. Can he allow democracy to gain a foothold? How can he differentiate between a two-system dichotomy ruling over a billion citizens? The greatest question is whether China has opened the door too wide and for too long to ever hope to close it to the infection of free enterprise capitalism? The inevitable loss of control terrifies Beijing. The eyes of the world would be well-advised to keenly watch China’s reaction to that fear since it will be a defining milestone for the next decade.
So wudja be Barack or Xi? There are no neithers in Wudja.
Unlike the Chinese intertubz, this is an open thread.
Be not afraid…
Posted on: July 9, 2013
- In: China | Open Thread
- 13 Comments
Good morning Widdershins. For those expecting to see one of Fredster’s brilliant posts this morning, we have 
decided to play whack-a-mole in order to frustrate Edward Snowden wannabes. Regular order will return once Pat feels better and is back to her side-splittingly funny dead-eye accurate satire.
While there are oodles of stories crossing the airwaves, like the House’s consistent embodiment of the lyrics to Turn Back Time, the Zimmerman trial, or the FISA court, I’ve been reading some off-the-beaten path pieces.
Every pundit and their dog whines about how China is going to overtake the U.S. economy and it will be the end of life as we know it. If you ask me, it is just another stale bromide left over from the “Evil Empire” and “Axis of Evil” days where we had to have a shiny enemy to keep us from noticing trickle down economics just kept wetting itself.
China has some monstrous problems — and if history is any guide, each time they have let down the “Great Wall” over thousands of years, it has resulted in an eventual reinstitution of isolationism resulting from their inability to trust themselves. This time around the unanswered question is this: Have they gone too far, too fast, to be able to quell the lure of a middle class lifestyle?
The first article is China’s Policy Factory: The NDRC. The National Development and Reform Commission is a superministry dating back to 1952 and Mao Zedong where it was envisioned it would set production targets for everything from steel to wheat through Five Year Plans. It’s grown a bit since then.
With 30,000 red pencil wielding bureaucrats spread throughout China, the NDRC decides just about everything from the size of the Shanghai Disneyland (116 hectares, now under construction), to how thin plastic bags should be (no less than 0.025 millimeters), to setting gasoline prices and taxi fares, and recently used its sweeping power to fine China’s two best-known liquor companies $73.25 million.
With its plenary control over the cost of just about everything, it’s sorta like Wal-Mart without the yellow smiley face price guarantee.
The actions of the NDRC have come under attack on Chinese social media of late and there is a worrisome backlash to its actions. You see, China must have continued strong growth in its GDP in order to ensure sufficient jobs for the hundreds of millions of farmers expected to leave the countryside. Therein lies another problem, the shrinking available workforce in China.
Which brings me to the second article about Chinese manufacturing. The country’s one-child policy is taking its toll. The number of working-age Chinese in 2012 fell by 3.45 million, to 937.27 million. While that’s just a small drop, it’s the first decline since record-keeping began and marks the start of a trend expected to accelerate in the next two decades. China no longer has an inexhaustible supply of young workers.
There’s also something else at work. In 2012, 25 provinces increased the minimum wage by an average of 20.2 percent. The current five-year plan ending in 2015 calls for base wages to increase by an average 13% per year, part of a policy to address growing income inequality. (Wouldn’t it be grand if our government recognized the inherent dysfunction engendered by a 700:1 disparity in U.S. income inequality between CEOs and factory floor workers?)
The reason I think this is important is too often “China fear” is the subject of too many headlines spewed by 
politicians and just as often, the predicate of those headlines is, “a shopping list oiled up by military contractors.” Suffice it to say, China has huge problems facing an economy where governmental control must continue to be centralized, but where its heavy touch must be perceived as lighter and lighter to assuage a growing middle class.
So the next time you hear a whining “China fluffing” politician start a sentence with “We must be afraid, very afraid“ before he or she rattles off a shopping list from the military/industrial complex, remember China has a world of problems to say “Grace” over, that is, if they said “Grace.“
And here is an fun fact to know and tell, in their fiscal year just ended March 2013, Booz Allen Hamilton reported $5.76 billion in revenue, 99 percent of which came from government contracts — one quarter of which were from U.S. intelligence agencies.
What are you reading?
This is an open thread.
The Widdershins 
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