Geopolitical Synchonicity

December 6, 2008

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Michael Panzner, on his website When Giants Falls, writes about the global economic crisis affect China and warnings of ensuing social unrest.

Geopolitical Synchronicity

Courtesy of Michael Panzner

I’m not sure if it is 1) pure coincidence; 2) string-pulling or "promotional" efforts by those with some sort of axe to grind; 3) intense competition among editors and reporters to jump on what could be the next "hot" story; 4) or some combination of all three, but it often seems that certain developments start attracting a lot of media attention, all at once.

Such was evident in the post I put together on the problem of growing violence on and around our southern border, entitled "Failed State in Our Own Backyard?" My commentary included links to numerous recent articles detailing the unsettling fallout stemming from ongoing battles between the Mexican government and ruthless drug cartels.

In the latest example of what might be described as "geopolitical synchronicity," there are a growing number of reports discussing the potential for social unrest in China in the wake of increasingly unsettled economic conditions. Needless to say, if things were to get seriously out of hand, it would likely have far-reaching repercussions.

Below are three examples:

"Slowing Economy Spurs Disquiet in China" (Spiegel Online):

With factories running out of money and workers fearing for their wages, the global crisis has hit China at full tilt. The country’s political leadership is implementing aggressive countermeasures.

An eerie quiet has descended on the world’s factory, especially in places where machines are suddenly at a standstill. In Dongguan in southern China’s Pearl River Delta, hundreds of workers from the bankrupt Weixu shoe factory march silently through the city, causing traffic jams on wide streets usually crowded with a constant stream of heavily loaded trucks.

Dongguan is an important motor in the Chinese export machine. The city, not far from Hong Kong, is home to row after row of low-wage factories. The streets are normally empty during the day. At Weixu, for example, migrant workers lived in dormitories directly on the factory grounds, crowded into small, multiple-occupancy rooms.

But now the drudges are out in public, staging street demonstrations somewhere in Dongguan almost every day. Many factories are running out of money and work now that China’s consumers in Europe and the United States are buying less.

The 2,000 Weixu workers do not carry protest signs or use whistles. China does not permit unions that could organize the protests….

The global economic crisis is hitting China with such force that the government and party have been completely taken by surprise and are increasingly overwhelmed. Even though the police are under strict orders not to provoke demonstrators, friction is growing in Dongguan…

The protests may be just the beginning. The People’s Republic of China, whose economy grew at an astonishing 11.9 percent in 2007, is suddenly feeling the extreme extent to which it depends on the global economy.

Until recently, many Chinese economic experts took a completely different view of the situation. Encouraged by Western economists, they believed that China was in the process of economically "decoupling" itself from the West.

Sounding almost generous, Prime Minister Wen Jiabao noted that China’s greatest contribution to the world will continue growing strongly and smoothly. But he failed to explain how that will happen if the main buyers of Chinese mass-produced goods, most of all the United States, are ailing.

Meanwhile, "Grandpa Wen," as the Chinese call their premier, is traveling hastily through the country, and he is apparently horrified by what he sees. "Factors that harm social stability will increase," he warned in the party publication Qiushi (Seeking Truth).

In the past, Wen and his Communist Party strategists viewed growth of eight percent as a magical minimum to preserve social stability and, with it, party control. But last week the World Bank announced its forecast of only 7.5 percent growth for China next year.

It sounds like a lot — by Western standards. The economies of the major industrialized countries can only dream of such growth rates, even during economic booms. But it is not a lot, given the double-digit growth rates of the last five years and the country’s problems. For this reason, the Chinese government is determined to take decisive counter-measures. It plans to invest about €450 billion ($563 billion) in new projects, including bridges, railways and airports, to stimulate flagging growth...

Beijing Seeks to Avert a Horrific Scenario...

Things could get a lot worse, economists at the People’s University in Beijing warned in a recent report…

China’s current economic policy is looking like a roller-coaster ride. Beijing raised interest rates several times until this spring, hoping to curb inflation. Prices were stimulated by raising the exchange rate of the yuan to the dollar, as well as by rising costs of raw materials and food. But no one mentions inflation these days. In fact, the world’s factory is now trembling at the prospect of deflation, or a consistent decline in prices...

Wen and his team are also faced with an enormous structural challenge. Three decades after the legendary reformer Deng Xiaoping opened up the People’s Republic to capitalism with his reform policies, the Chinese low-cost factory appears to have reached the end of its useful life. The strategists in Beijing sense that a system in which China produces obsessively and the rest of the world does little more than consume cannot function in the long term.

To address this new reality, planners in Beijing have cautiously begun to lift their country to the level of a high-tech nation…

But then change came far more rapidly than planned. First, a devastating snowstorm wreaked havoc on the government’s industrial policy plans, and then there was the earthquake in Sichuan Province. Finally, there were the Olympic Games…

The world financial crisis, which now threatens to expand into a global recession, is taking care of the rest.

China is far from being in an actual recession — that is, a shrinking economy. Nevertheless, the country must provide new jobs for an additional 10 million migrant workers flooding into the major cities each year.

To offset declining demand from abroad, Beijing is now trying to stimulate domestic consumption, as the Communist Party eyes the country’s 800 million farmers as potential new consumers…

The current crisis is also likely to intensify trade tensions between the world’s factory and its biggest customers, the European Union and the United States. In October, China’s trade surplus climbed to a record $35 billion, mostly because China, as a result of the crisis, imported drastically fewer goods than in the previous month. There is plenty of material for bilateral talks, and yet Beijing, angry over French President Nicolas Sarkozy’s plans to meet with the Dalai Lama, called off its summit with the EU in Lyon that had been planned for this Monday.

Despite the crisis, China remains undeterred in pursuing its global ambitions. In the presence of President Hu, the heads of the state-owned Chinese shipping company, Cosco, signed an agreement with Greece last week. Cosco plans to build its own container terminal at the Athens port of Piraeus — as a strategic launching pad for Chinese trade with Eastern Europe.

"China ‘Faces Mass Social Unrest’" (BBC News):

Rising unemployment and the economic slowdown could cause massive social turmoil in China, a leading scholar in the Communist Party has said.

"The redistribution of wealth through theft and robbery could dramatically increase and menaces to social stability will grow," Zhou Tianyong, a researcher at the Central Party School in Beijing, wrote in the China Economic Times.

"This is extremely likely to create a reactive situation of mass-scale social turmoil," he wrote.

His views do not reflect leadership policy but highlight worries in elite circles about the impact of the economic slowdown.

Mr Zhou warned that the real rate of urban joblessness reached 12% this year and could reach 14% next year as the economy slows.

China’s annual GDP growth has already slowed to 9% in the third quarter, from 10.1% in the second. Some forecasters see growth slowing to 7.5% next year…

"Loss of Homes Threatens Social Stability in China" (VOA News):

China’s rapid economic growth has benefited millions of people, but it also increasingly has become the source for much domestic unrest as the widening wealth gap helps solidify a growing sense of social inequality. One flashpoint for Chinese people who are not wealthy is the loss of their homes, often by local authorities who seize the land and then sell it for big profits.

Forty-two-year-old Gao Shuhuan has lived in this home for nearly half her life. "This is my house. Within half an hour, it will be torn down by force," she cried. "They are tearing it down without paying us a cent in compensation."

Crowds gather on both sides of a line of security guards who were hired to keep ordinary people away…

In a rapidly modernizing China, events like these have become commonplace. Catching a complete demolition on videotape, though, is a rarity…

Gao’s house was in Beijing’s Fengtai District. Fengtai officials refused requests for an interview. But in a faxed statement, they said the area that includes Gao’s house was "legally turned into state-owned land" and will be used for "housing and development."

Gao Shuhuan’s house has been reduced to rubble Lawyer Mo Shaoping says ordinary people losing their homes is a significant source of social unrest in China. "If as a citizen, your private ownership is not respected and protected," Mo said. "Society will not be stable or harmonious."

Mo says more than half of the people who come to Beijing to petition the central government have complaints about housing issues or land seizures.

Recent regulations gave residents the right to sue if they think their compensation is not fair. However, Mo says the courts usually do not rule in favor of the plaintiffs and so their success rate is, in his words, "really small."…