China: What Could Trigger China’s Economic Internal Shock?

The Epoch Times ^ | 09/05/04 | Heide B. Malhotra

[TigerLikesRooster]

What Could Trigger China’s Economic Internal Shock?

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By Heide B. Malhotra The Epoch Times

Sep 05, 2004

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A man sits with his bicycle in front of a wall of a new development under construction in Beijing, 05 September 2004. China's economy is on unstable ground, and there are many factors that could trigger shock in its system. (PETER PARKS/AFP/Getty Images)

The Taipei Times suggested that China’s economic crisis might be triggered by internal rather than external shocks. The Times left it up to the reader to come to a conclusion as to what could cause such internal shocks.

Given the many secrets China has veiled behind the façade of “state secrets,” it is hard to find the probable trigger. Since the Cultural Revolution, China’s populace has been instilled with the constant fear of revealing something that could set off reprisal against the entire family clan. The Chinese psyche has not overcome such fears. We even perceive it in those Chinese that immigrate to other countries. Divulging what Westerners expect to be openly discussed could have detrimental effect to those left behind.

Still, it’s not that hard to identify factors that will affect the economy. What comes to mind? How about China's one billion plus populace which continues to increase daily? As children grow into adults they need employment. The Chinese news agency Xinhua suggests that about 15 million people enter the job market annually. Others suggest numbers as high as 25 million. What about employment opportunities? Can China’s ruling party create enough jobs to hold down unrest? Or has the battle already been lost?

Official statistics report a 4.5 percent unemployment rate. It is purported that these numbers are vastly inaccurate, as they only account for urban unemployment and include only those laid-off from government employment. They do not include those that were laid-off from state-owned companies (SOEs). A more realistic number, counting all of those looking for work but can't find it, is probably far above 20 percent. It is scary to read that The Observer stated in early 2004 that 80 percent of those living in rural areas are unemployed.

Jobs are scarce! The Communist leadership is moving from government ownership to private ownership without creating new jobs. Private owners look at the bottom line, radically trimming off excess labor, and increasing unemployment. And, lots of jobs that could be held by the average uneducated worker are taken over by the growing number of slave labor camps, places actually illegal, under international agreements signed by China. No one can compete with such labor camps, as they do not compensate the enslaved detainees.

Chinese authorities have steered the economy away from socialism towards capitalism, while holding onto the reigns of power. This has created problems for China. Industrialists in China have all the freedom to pursue profit, but none of the democratic constraints found in a country where government and business is accountable to the free press. Corruption and economic crimes are rampant and difficult to control, given that those that govern are often those with the most corrupt behavior. It has cheap, unregulated labor with no labor-run unions and foreign investments flooding into China, expecting wages that would not be maintained in any democratic country.

Social justice, given ineffective and unenforced laws, is non-existent. A national infrastructure for the unemployed and a social welfare system are non-existent. The government so far, shows no interest in addressing or implementing a social system, similar to those in democratic countries, though one can find “Band-Aid” fixes. Most of these fixes are found only in foreign-invested enterprises, such as minimum wages. As long as official corruption is rampant, relief for unemployed labor will not be had.

Social protestors are brutally suppressed by China’s police force and are quickly whisked away to jail and accused of exposing “state-secrets.” Large protests have sprung up throughout China. In February 2004, 2,000 workers from the Tieshu Textile Factory in Suizhou, Hubei Province protested; in March 2004, 1,000 Anhui winery workers protested; and also this year, in inner Mongolia, 7,000 retrenched workers in the Military Factory in Baotou protested.

[TigerLikesRooster]

Ping!

[Montfort]

I skimmed the article, and did not see the looming problem of a shortage of women (from being aborted under the "one child" policy).

The de facto bigamy of many well-heeled Chinese men and Chinese men who leave their families in one place to work long-term in another place, exacerbates the problem.

[RonHolzwarth]

What Could Trigger China’s Economic Internal Shock?

Oh, how about an earthquake or the cracks in the shoddily made concrete bursting the Three Gorges Dam?

That would unleash the biggest flood the world has ever seen, and wipe would wipe Shanghai, the economic capital of China, into the sea.

Think that might have an effect?

[meyer]

Wouldn't we see that?

I do think that energy costs could stifle their economy though.

[EagleUSA]

It will be interesting to see how China either manages their new-found prosperity, or has it come down like a house of cards. They are walking a thin line -- trying to have it both ways. The world of statistics and probability say something will break....

[ThanhPhero]

The questions this guy asks are all wrong because his assumptions are wrong. He is a socialistwho believes it is up to the government to create and preserve jobs and capital.

[aspiring.hillbilly]

Cant imagine why every thing in the stores has made in china

[RonHolzwarth]

About the Three Gorges Dam - they seriously seem to believe that it will hold up over geologic time. That is a preposterous idea.

Cracks HAVE ALREADY been found in it - and it is not even full yet!

It was built astraddle a geologic fault, so an earthquake is not at all unlikely to destroy it within our lifetime.

And there is another thing, this is however more of a theoretical risk though - some believe that massive weights of water can either cause an earthquake, make it more likely, or make one occur earlier. Such as the one that occurred near Oroville, California, in 1974, shortly after the dam there was filled.

Essentially, the Three Gorges Dam is a bet placed by the Chinese government. If they win the bet, they get some energy for a time, and if they lose the bet, well, they lose everything between the dam and Shanghai.

There were many who thought that China's energy needs would be better served by perhaps three smaller dams across the Yellow River. It's called the "Yellow River" because of the very large amount of sediment it carries - how long do you think the dam will take to silt up and become useless? Decades? Centuries? Geologic time?

And China has a terrible record as far as building dams that later burst. The worst record in the world, in fact.

The decision to go ahead and build the dam was made at the very top levels of the communist Chinese government, right after the Tianaman Square protests, as a display of government control, mostly, is what many believe.

And, when it does go, China will lose everything between the dam to Shanghai.

Things will be a lot different then. China will change from an economic powerhouse to a beggar nation overnight.

[RonHolzwarth]

Oh, there is another thing I forgot to mention - the Three Gorges Dam is very, very far from where China needs the energy. The electricity produced will have to be transported great distances.

Another problem that I didn't point out above - a lot of China's best farmland will be flooded. That's good for the United States and other food producing nations, though. China will need a LOT of food to feed that huge and growing population! But, will they be able to pay for it?

And, as a matter of intellectual honesty, I really ought to point out the positive effect of the dam - it is not ALL bad.

The Yellow River has historically flooded over and over, costing thousands of lives. The Three Gorges Dam, if successful, will end that for a time.

[struggle]

Like I have said, study the Japanese bubble of 1990. Now think of it 5X with a non-democratic government willing to kill its own if opposed. It is the same huge over-inflation of dangerous capital, and will result in a rebellion that will lead to millions dead. Most of rural China split from the government, the government will send the troops in, and then the urban population will rebel. Get ready for the big burst.

[RonHolzwarth]

Can't imagine why every thing in the stores (seems to be) made in China.

Because of the very low wages paid there. Also, prisoner labor seems to be used there, which is prohibited here.

Also, the Chinese Yuan is undervalued, making Chinese goods even more attractive to foreign purchasers. Seems the Chinese government has a policy of collecting US dollars,,,

AND American consumers have a habit of shopping based on price. Been to Wal-Mart lately?

[B4Ranch]

ping

[razoroccam]

I guess the dams are not all that they are cracked up to be.

[FITZ]

That could lead to some discontent. The Chinese labor is only useful to us as long as it stays 0.25 an hour. If the Chinese actually decide they'd like to have something of what they make, they'd need higher wages. Then the corporations pack up and move the factories someplace else and China collapses. Or else Americans whose wages have fallen down to such low levels stop going to Walmart as often and there is no more demand for the cheapest possible products.

[printhead]

I think the 30's term was "liebenschraum"

[RonHolzwarth]

liebenschraum? I have studied some German and that throws me. "Lieben" means to like, or to love. "Scraum" is not a German word, so there is apparently some transcription error.

I tend to think you are referring to the word "Lebensraum," which translates roughly to "living space," which was Hitler's Nazi idea that the Germanic peoples would better utilize the land, and needed living space at the expense of other ethnic groups.

However I do not feel that way at all towards the Chinese, I have many Chinese friends, Mainland, Taiwanese, and also from Hong Kong. I have only the greatest respect for them and their ancient culture. If Americans had half the work ethic of Asians,,,

True, my ethnic heritage is Germanic, BUT we were already here during World War I, having already left Germany, and later Russia, decades before.

During World War I, German was no longer spoken on the street, but only behind closed doors, out of embarrassment at what the government of Germany was doing.

And later, during World War II, it was even worse. Then, German was no longer spoken even inside the home, except for the old people who knew no English at all.

It is a terrific temptation to confuse the government of a country with its people. I am sure that the Chinese will outlive communism, Chinese culture is already 5,000 years old.

[DeaconBenjamin]

And, when it does go, China will lose everything between the dam to Shanghai. Things will be a lot different then. China will change from an economic powerhouse to a beggar nation overnight.

When it goes, you know it will be blamed on a pre-emptive attack by Taiwan, supported by the US. That will be real ugly.

[DannyTN]

I don't know why they expect a shock.

China is still building hard currency reserves and they are building manufacturing assets like crazy. If they were building hard currency deficits I could see a problem. But the worst that would happen in China is a period of hyperinflation afterwhich they still have the hard currency reserves and the manufacturing assets.

Nothing changes down on the local farms. It's not like the local farm family is going to lose their life savings. Hyperinflation doesn't kill chickens.