Never mind Europe, keep your eyes on China

This week Sky News ran an item on one of those huge cities in China built from new with major dual-carriageway roads running in and out, and shopping malls and industrial estates all ready for occupation.  The problem is that no-one is occupying any of it!  The place could be described as a ghost town except that no-one ever lived there long enough to die there so there are no ghosts.  All it lacked was tumbleweed blowing down the main highway.  It reminded me, although it was on a much larger scale, of the south coast of Spain which, back in the '80s/'90s, was a forest of cranes as housing estates and blocks of appartments went up on every piece of open ground.  I can remember asking myself at the time where on earth were all the people who would buy these properties.  Well now we know, there weren't any, or at least, not anywhere near enough.  With China, of course, you have to multiply everything by a hundred thousand and my guess is that when their property market finally melts, taking most of their banks with it, the shock waves will make Europe look like a 'little local difficulty'.

Also, the Chinese are yet to feel the full backlash from the slowdown of their biggest customers, America and Europe.  As always it will be 'the little people' who will suffer the most but the problem is, using my 100,000 multiplier, there are simply zillions of them.  They have all just begun, and some of them have become accustomed to, enjoying the better things of life.  This new prosperity is only a generation old and if, suddenly, their prosperity is snatched from them the Chinese Communist Party (CCP) will be in big trouble.

According to this report in The WSJ, the CCP are increasingly on the backfoot when it comes to preaching austerity to the masses:

One evening early this year, a red Ferrari pulled up at the U.S. ambassador's residence in Beijing, and the son of one of China's top leaders stepped out, dressed in a tuxedo. 

Bo Guagua, 23, was expected. He had a dinner appointment with a daughter of the then-ambassador, Jon Huntsman.

The car, though, was a surprise. The driver's father, Bo Xilai, was in the midst of a controversial campaign to revive the spirit of Mao Zedong through mass renditions of old revolutionary anthems, known as "red singing." He had ordered students and officials to work stints on farms to reconnect with the countryside. His son, meanwhile, was driving a car worth hundreds of thousands of dollars and as red as the Chinese flag, in a country where the average household income last year was about $3,300.

The 'old guard' of Mao-ists had the intelligence to keep their luxoury living very private, but this current crop cannot hide their affluence, indeed, they seem ready to flaunt it:

The episode, related by several people familiar with it, is symptomatic of a challenge facing the Chinese Communist Party as it tries to maintain its legitimacy in an increasingly diverse, well-informed and demanding society. The offspring of party leaders, often called "princelings," are becoming more conspicuous, through both their expanding business interests and their evident appetite for luxury, at a time when public anger is rising over reports of official corruption and abuse of power.

That sort of thing will last only as long as the mass of the people continue to improve their standard of living.  The minute it stops, is the moment the prawn balls hit the fan!  China is a giant nation but it has a flaw running through it from top to bottom - corruption.  Again, everyone will put up with it so long as their fair share continues to flow but in the long run corruption multiplies like cancer cells and the inefficiencies grow and slowly but surely weaken the body-politic.  America, too, is weakening but, provided they have the sense to vote in a free-market Republican next year, there is every chance that it will regain its original vigor.  With China, on the other hand, the only alternative to the CCP is the army!  Yes, quite so!  And you're right, it's 'being so cheerful as keeps me so young', thank you for asking!

 

Comments

[Whyaxye]

Not sure you are right about the army being the only alternative. We would probably have said that about the USSR, but instead there emerged an alliance of mafia-type criminals and ex-apparatchiks. If the worst happened, China might break up, but we would still get the markets destabilised by new multi-billionaires who all want a chunk of our economy.

Hope this keeps you nice and cheerful!

[A K Haart]

I agree with you about China. If any of us comes across a good China-watching blog, we should give it a plug. This link is seriously chilling.

http://newnostradamusofthenorth.blogspot.com/2011/11/chinas-dark-secret-millions-of.html

[David Duff]

The particular problem with China, 'W', is the disparate nature of its various ethnicities. In a way, it is no different from the so-called European Union which seeks to meld Scandinavians in with Mediterraneans. I agree that the possibility of China falling to gangsters, or 'warlords' as they used to call them, is very real but that would presage the break up of China as one entity - which has happened 'many a time and oft'. The only national organisation with the means and the power to hold it together is the army. However, I stress my lack of detailed knowledge of Chinese affairs.

[David Duff]

Sorry, AK, our comments crossed. That site is now on my 'Favourites' list - thanks.

[Michael Snow]

"America, too, is weakening but, provided they have the sense to vote in a free-market Republican next year, there is every chance that it will regain its original vigor."

Republicans will keep shooting themselves in the foot with the elitist 'ideal' of no compromise on a modest increase of tax on the rich a la Warren Buffet.

And "...every chance [America] will regain its original vigor" could not be believed by anyone who has a sense of the scope of our debt which is a cancer consuming the capital needed for a free-market.

[David Duff]

Michael, welcome to D&N. I take your points although I think back to that old, ham-actor who everyone wrote off as a 'has-neen' but who, in the course of just a few years, turned America around. Come on, you Americans are supposed to be the positive people and us Europeans the gloomy cynics!