Here at the frontier, the leaves fall like rain. Although my neighbors are all barbarians, and you, you are a thousand miles away, there are still two cups at my table.

Ten thousand flowers in spring, the moon in autumn, a cool breeze in summer, snow in winter. If your mind isn't clouded by unnecessary things, this is the best season of your life.

~ Wu-men ~

Wednesday, November 19, 2008

China's Economy

I found this article at It's about the current state of the Chinese economy. They are not untouched in the world wide recession. Furthermore, because China has so many people, and all the numbers are so large, they have very little margin for error and they plot their course for the future.

I've placed an excerpt below. If you click on the title of this post, you'll be directed to the full article.

Crash and Burn

How the global economic crisis could bring down the Chinese government

Joshua Kurlantzick, The New Republic Published: Tuesday, November 18, 2008

Normally, the Pearl River Delta, a manufacturing hub in southern China, whirs with the sound of commerce. Alongside massive new highways, clusters of factories churn out toys, electronics, and other consumer products for the world; in Pearl River cities like Guangzhou, nouveau riche businesspeople cut deals at swank hotels.

But in recent months, the Delta has started to seem more like Allentown, circa 1980s. As the global financial crisis hits Western consumers' wallets, orders for the Delta's products have dried up. And angry factory workers, many owed back pay, have taken to the streets. In one recent incident, some 300 suppliers and creditors "descended on the River Dragon complex [a factory where the owners vanished] looting warehouses in the hopes of salvaging something," As USA Today reported.

This unrest is likely to spiral. As the Chinese economy sours for the first time in years, the government this week announced a $586 billion stimulus package. But in some ways, much more is at stake: While, in the U.S., a financial failure would simply mean another dent in George W. Bush's reputation, in China it could mean the breakdown of the entire political order.

For years, the Beijing regime has stayed in power using a basic bargain with its citizens: Tolerate our authoritarian rule and we'll make you rich. And for years, this seemed to work, leading many China-watchers (myself included) to conclude that Beijing was rising into great-power status. But as the financial crisis shows, that bargain rests on weak foundations. And if Beijing breaks its end of the deal, its people, already holding rising numbers of protests, may well break theirs.

Despite its reputation, Beijing's autocracy is anything but absolute. The government long ago abandoned real communist ideology, and its current leader, Hu Jintao, a cipher with a background as a rural bureaucrat, has about as much revolutionary charisma as Bob Dole. And while China's security apparatus is sophisticated, the country is too large, with too many educated, Internet-savvy people, for Beijing to brainwash its citizens the way Kim Jong-il has in North Korea. Most urban Chinese I've met are knowledgeable about their leaders' strengths and flaws, and certainly don't see them as some kind of gods, the way Mao was viewed in the 1950s and 1960s.

So, since the late 1970s, when China's leaders began opening its economy, they have placed their bets on their ability to deliver continued economic growth. "At the time of the Tiananmen protests in 1989"--a time of economic downturn--"China's urban educated populace had good reason to be angry," notes China expert Jonathan Unger, in a study of China's middle class. "Their salaries were low, and sour jokes circulated about private barbers earning more with their razors than hospital surgeons with their scalpels." But as China's economy has grown at explosive rates in recent years, he writes, "there has been a deliberate government policy to favor [this urban population] through their pay slips and perks." China's leaders channeled foreign investment to the urban east coast, created social welfare policies that favored the cities, and, for years, prevented rural people from migrating to the cities, thus keeping the job market open for young urbanites. Deng Xiaoping himself, the author of China's economic reforms, made clear the strategy of favoring the middle class and making growth equal stability. "Let some people get rich first," Deng famously declared.

For the most part, their gamble succeeded. For three decades, China has posted annual growth rates of over 10 percent, and this nominally communist country now seems more capitalist than Wall Street. Even in small provincial cities like Lanzhou, where I visited last year, massive malls, open-air markets, and new skyscrapers dot the downtown.

Since the 1989 Tiananmen crackdown, China's urban middle classes have bought into this growth--and the regime. In one Pew poll, over 80 percent of Chinese said they were satisfied with conditions in their country, almost three times the percentage of Americans who were satisfied with conditions in the U.S. (To be sure, this figure relied primarily on surveys from urban, eastern China, where satisfaction is higher than in poorer, rural areas.) Indeed, when I have interviewed young Chinese professionals in cities like Shanghai, I've found little interest in political change. "There's no point in talking about [politics] or getting involved," one yuppie Chinese told Time magazine for an article entitled "China's Me Generation" last year.

Now, that bargain is breaking down. Exports constitute nearly 40 percent of China's GDP--far too high a figure. (By comparison, in the U.S., exports account for about 10 percent of GDP most years.) And the global financial slowdown is already taking a terrible toll. Some 10,000 factories in southern China's Pearl River Delta area had closed by the summer of 2008. Gordon Chang, a leading China analyst, estimates that 20,000 more will shutter by the end of this year. In the third quarter of 2008, Beijing also reported its fifth consecutive quarterly drop in growth, and several private research firms expect a sharper slowdown next year. Additionally, unemployment is skyrocketing; in Wenzhou, one of the main exporting cities, about 20 percent of workers have lost their jobs, Reuters recently reported.


Frankie Perussault said...

Interesting! I've only perused your blog. I'll come back for more! Do you live in Ann Arbor by any chance? I was a post graduate student in anthropology there in 1980-81. Never went back since. Would love to!

Rick Matz said...

I'm closer to Detroit than Ann Arbor. I travel to Ann Arbor to train in Taijiquan.