China: Calamity or Calm? WaPo vs. NYT

For some background perspective, just yesterday “Dr. Doom” Roubini said China is on the verge of “falling apart.” That’s a pay site, but here is a chunk, thanks to another site:

[T]he risk of a hard landing in China is sharply rising; a deceleration in the Chinese growth rate to 7% in 2009 – just a notch above a 6% hard landing – is highly likely and an even worse outcome cannot be ruled out at this point. The global economy is already headed towards a global recession as advanced economies are all in a recession and the U.S. contraction is now dramatically accelerating. The first engine of global growth – the U.S. on the consumption side – has now already shut down. The second engine of global growth – China on the production side – is also on its way to stalling.

Thus, with the two main engines of global growth now in serious trouble a global hard landing is now almost a certainty. And a hard landing in China will have severe effects on growth in emerging market economies in Asia, Africa and Latin America as Chinese demand for raw materials and intermediate inputs has been a major source of economic growth for emerging markets and commodity exporters. The sharp recent fall in commodity prices and the near collapse of the Baltic Freight index are clear signals that Chinese and global demand for commodities and industrial inputs is sharply falling. Thus, global growth – at market prices – will be close to zero in Q3 of 2008, likely negative in Q4 of 2009 and well into negative territory in 2009. So brace yourself for an ugly and protracted global economic contraction in 2009.

John Pomfret of the Washington Post wholeheartedly agrees with the doomsters (and Roubini’s track record is spectacular, there’s no denying that). He also specifically takes issues with the NYT editorial board for its somewhat rosy belief that China can spend its way – and the world’s – out of a recession.

There’s been a lot of talk in recent weeks about how China could ride to the rescue of a global recession, using the latent power of 1.3 billion consumers to power global GDP. Who would have thought that we’d be calling on China to save our bacon? Witness a New York Times editorial on Oct. 26 with the remarkable headline: “As China Goes, So Goes….” What the Times called for, and what others have seconded, is for China to unleash domestic demand, ramp up imports, thereby keeping the global economy afloat.

First, before we get into why this probably won’t happen, let’s pause for a second to reflect on just how amazing it is that we’re asking China to prop us up. Yes, yes, China did yeoman’s work during the Asian financial crisis of 1997. But that was a pretty localized mess. What the Times — and others — are asking China to do is not just be a responsible player in its region (which at the time simply meant not devaluing the yuan). No, what the Times and others want China to do is to step forward and in a flash take over the United States’ position as the engine of global growth. That’s a pretty big demand for a country with a per capita GDP that’s in 109th place on the International Monetary Fund’s World Economic Outlook Database, squarely between Swaziland and Morocco.

As to whether China will take up the challenge: I think not. China would have to restructure its economy if it wanted to significantly grow its domestic demand. But right now China’s economy is facing real problems.

You have to read Pomfret’s entire post to see why he so strongly agrees with Roubini, and why he believes the crisis will make the CCP only more reactionary (as opposed to enlightened, as the NYT editors optimistically hope). After looking over the dismal situation, he comes back to his central thesis, first discussed here back in 2004, i.e., that as long as China’s pig-headed reactionary government is in charge, they will keep blocking their own path to superpower status and will probably never arrive there.

Unlike Pomfret, I’ve predicted China would have yet another soft landing. I’m willing to consider that I may be wrong, unlikely as that may be. The Roubini-Pomfret scenario is too frightening to imagine. If they are right, we are talking about the possibility of civil war. If there were a true financial collapse in China, either that or anarchy are not inconceivable. China’s situation is so, so tenuous, despite the amazing strides it’s made. That’s why so much here is subsidized and the iron rice bowl is still an important crutch, and why the government is going to be the candyman for the unemployed, either simply handing out money or setting up massive infrastruture projects to keep people employed and, most important, pacified.

Which brings me to my last half-baked point. I was speaking with a friend today who is involved with one of those gigantic Chinese manufacturing companies; this one makes concrete. When I expressed my worry that concrete makers would feel the pinch when overseas orders drop off and Chinese businesses stop expanding and building new structures, he said that scenario is simply wrong. “China is about to pour billions and billions of dollars into infrastructure projects to keep the economy going,” my friend reminded me. “This company is planning on a huge expansion of business.” So again, can China spend and build its way out of this? Stranger things have happened, no?

So many tectonic plates rubbing against one another, so many ways this whole thing can go, not just for China but for the world. For now, perhaps out of willful ignorance, I stick with my prediction: a relatively soft landing for China. Pomfret’s one of my heroes and I’ve agreed with him on just about everything in the past. Same with Roubini. But this time, they both had better be wrong. Otherwise, we are all in a lot more trouble than we ever imagined. It won’t be at all pretty, no matter how much we may dislike the CCP and hope for its demise.

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Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.

The Discussion: 81 Comments

I once said:

“Dunno if China’s willing to sacrifice the savings account in order to save the world.”

They won’t do it for saving the world, they will do it to save themselves from political chaos and social unrest. Soon people will switch from “China is very clever and will emerge victorious” to “why didn’t we see this coming?”.

I have since switched my previously pedantic tone to a more moderate one (I came close to be ejected from the forum ;) )

But what is transpiring now in the news is exactly what I meant back then.

I also hope that this will not be true. But as I said, I fear the worse. This whole thing is like the SARS or the Melanin crisis, it’s unfolding day after day into “what is really going on”.

But you can’t sweep under the carpet 700 billions dollars.

November 6, 2008 @ 11:52 pm | Comment

Now I wonder how long it will be before the mainstream media connect the situation to the economic war scenario…

Most probably when the East / South America starts showing its teeth to the West.

We live in a depressing and predictable world…

November 7, 2008 @ 12:32 am | Comment

Consumer spending is not likely to save China from the worldwide recession, but government spending might. The national railway system will be upgraded to accommodate bullet trains. Airports will be expanded. Every city will be digging to build a subway system.

But most importantly the country needs to invest in its people. This means dramatic spending increase in education. Primary education must reach every corner of China and higher education must improve its quality. Universities should set up endowed chair positions, offering internationally competitive wages, to attract world class scholars.

There are so many good places to spend money and China has it.

November 7, 2008 @ 12:35 am | Comment

Not a so long time ago I said…

“If the US alone acted with their single power, it would not be enough to make a difference (20% export). But couple that with a worldwide crisis (i.e. Export market demand slowing down globally and not just from the US). And then it can become a real threat to China’s grow.”

And now…

“And it is not just Chinese exports to the U.S.: until a few months ago the U.S. was starting to contract but the rest of the advanced economies (Europe, Canada, Japan and Australia/New Zealand) were growing at a sustained rate, thus boosting Chinese exports. But there is now strong evidence that a severe recession has now started in almost all of the advanced economies. You can thus expect that Chinese export growth to Europe, Canada, Japan, etc. will sharply decelerate in the next few quarters, thus adding to the fall in Chinese net exports.”

Richard, do you see any similarity between these 2 texts ? I am not sure you read one of my older Tome post titled: Taming the Dragon

But what I am seeing today is scarily confirming what I envisioned previously. Including the mainstream medias picking up the trends.

I hate to sound like “SEE I TOLD YA!!!!!”, it’s childish I know…

But it’s really shaping this way.

November 7, 2008 @ 12:59 am | Comment

I know Richard you will beat me with a wooden stick for doing that, but I really want to share this information with your readers, hoping they will read it and comment on it… So from now on, I’ll be guilty of copy pasting a previous post and I’ll join the rank of Red Star, shame on me… :(

Please do not blast me, I am only doing so because I know that most of the people won’t take the time to search your site to read my obscure post. And I have learned now to not post lenghty posts on forums, I swear, this is an echo from the past when I was trying to pass too many information in a single post.

Taming The Dragon

And now a paranoid break for everyone to wind down and laugh at me…

I am still trying to figure out the global outcome of this crisis, and I am glad to see that I am not entirely crazy (some might argue on this point, I have to admit)… Since some of my apprehensions are becoming reality. At least the media are starting to catch up on these issues.

For a while, I’ve been speaking about the possibility of the following scenario: What if the current (engineered ?) financial crisis was aimed at China ?

What if what we were witnessing right now was just a gigantic planned domino effect in order to slow down the development of the Dragon ?

The current popular reasoning is that China will be able to avoid the economic turmoil, mainly because of domestic consumption. This makes no sense.

Where are the numbers and studies to support these claims ? Is there anybody here that can point me to solid data about this (honest request) ?

China’s GDP is a big fat lie (in the same line as mostly anything “official” in this country), and this since the opening reform of the country.

So can anyone explain me how we are supposed to draw rational conclusions based on these loquacious calculations ?

Here’s a study made by Carsten Holz. His main focus is on the Mainland economy with “Chinese characteristics”… (Btw, am I the only here that whenever I hear the words “Chinese characteristic” it instantly equals to me as: “the following could / has been heavily manipulated in order to fit in a certain predefined Chinese vision of the world = BS ?).

http://repository.ust.hk/dspace/bitstream/1783.1/2085/1/DeconstructexpappGDP28Oct03.pdf

I don’t expect anybody to read this lenghty piece, so I’ll just give the outlines:

“China’s National Bureau of Statistics has on repeated occasions explained in great detail how its GDP statistics are derived from underlying data. Based on these explanations, this article reconstructs Chinese official household consumption, which accounts for half of GDP. The findings are condemning. Not only do the various official explanations offered between 1997 and 2001 differ from each other, but none allows the researcher to accurately reconstruct household consumption. The relationship between the GDP component household consumption and the underlying data, furthermore, varies from year to year, which suggests that time series comparisons of Chinese GDP may be invalid.”

Some key quotes (worth reading in its entirety if you have time)

“Third, time series comparisons of the consumption data with the underlying data reveal roller-coaster relationships that stretch credulity.”

“Two clearly identifiable effects are a tendency of official GDP to underestimate actual GDP throughout all years until 1994, and to overestimate GDP growth between 1994 and 1995.”

“That households routinely consume one-quarter to one-third more consumer goods, in terms of value, than they report, especially in the rural case, is also not plausible (questioning the level of NIA commodity consumption).”

The last extract brings me to one point: The internal consumption is overrated and takes into account the global population. But the actual projected ratio of distribution is ridiculous.

Why ? because in the event of an economical crisis in China, the rural sector contribution to the GDP will be next to nothing. The people that are loosing their job right now (thousand of factories shutting down as we speak in Guangdong – other regions to follow soon) are the first on the line of fire. These people’s power of consumption is already not much, and it will become almost zero.

So that would leave the urban regions: The stock market has been crumbling since the last 1-2 years (from a 6000 peak to now what ? 1800 ?), house prices and real estate market are going down the drain (40% in certain areas). This is also a clear sign that people are cautious and cutting on expenses.

So my question is: Where will this magical internal consumption comes from in the event of a major crisis here ?

Do you think that the new measure giving the ability to the farmer to rent and transfer their land is a coincidence ? Of course it’s not. It’s a direct answer to the fear of what is coming next. In addition to distributing evenly the wealth in the country, they hope it will help to put a plaster on the job losses. So it’s a very good timing for them.

I think that all the elements are now coming together for the perfect storm. As stated in some other articles, the power and the support of the people to the CCP comes mainly from the economical miracle that they generated. But what will happen once it’s not true anymore ? High unemployment rate leads inevitably to social unrest (it’s already starting in some regions).

So in my opinion this is a double direct strike from the US to China: And impending economic blow and a direct influence on the social stability of the country.

If the US alone acted with their single power, it would not be enough to make a difference (20% export). But couple that with a worldwide crisis (i.e. Export market demand slowing down globally and not just from the US). And then it can become a real threat to China’s grow.

These links are a courtesy of China Herald: http://www.chinaherald.net/2008/10/china-crisis-watch-6.html

http://www.ibankcoin.com/flyblog/index.php/2008/10/19/chinese-industry-on-the-brink-of-collapse/

“This financial crisis in America is going to kill us. It’s already taking food out of our mouths,” the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.

http://abcnews.go.com/International/wireStory?id=6066427

http://news.bbc.co.uk/1/hi/business/7679180.stm

http://www.npr.org/templates/story/story.php?storyId=95727213

http://www.ft.com/cms/s/0/03f8445c-9df0-11dd-bdde-000077b07658.html?nclick_check=1

I would really not be surprised to see some article about what I envision soon. Maybe not also. I tried to search about this but could not find anything in the media yet about this concept.

I am not an expert or even an economist. So please feel free to debunk what I say. I would actually be very happy to hear some professionals on this.

Also, please take into consideration that English is not my mother language, I know, I sound like a 14 years old boy writing an essay.

Finally…

Food for thought:

http://chinaredux.com/2007/02/24/dick-cheney-as-chinas-worst-enemy/

http://www.pbs.org/wgbh/pages/frontline/shows/iraq/etc/wolf.html

“There are three additional aspects to this objective: First the U.S must show the leadership necessary to establish and protect a new order that holds the promise of convincing potential competitors that they need not aspire to a greater role or pursue a more aggressive posture to protect their legitimate interests. Second, in the non-defense areas, we must account sufficiently for the interests of the advanced industrial nations to discourage them from challenging our leadership or seeking to overturn the established political and economic order. Finally, we must maintain the mechanisms for deterring potential competitors from even aspiring to a larger regional or global role.”

Nothing is happening in this world due to pure coincidences. Only fools would think this way.

November 7, 2008 @ 1:10 am | Comment

Best thing China could do is to invest in a national social security scheme. It has to do it sometime and providing protection for the least fortunate would be a very good idea while it has:

a) a budget surplus
b) relatively low national debt
c) foreign exchange reserves (though I’m not sure how easily that can be used)

especially given the slow-down is already leading to an increase in unemployment. Things will only get worse, whether one thinks they will get terrible or just bad, so there’s no time like the present.

November 7, 2008 @ 1:33 am | Comment

Oab the economic contraction will affect most nations of the world. This is not a deliberate coordinated “economic war” between the US and European Allies against China. It is the result from the many business ties and connections between all the nations of the world, the global economy is not uniform and homogenous, so the affects of economic problems in one part of the world do not impact every nation in the same way or to the same degree.

All the nations are connected through financial institutions in order to make business transactions. When one country gets a cold then another country sneezes.

The united states did not make a speculative bubble in real estate as a way to unite with europe to attack china. However it is possible the banks playing games with credit default swaps were dishonest in selling these “investments” to other national banks and institutions.

The current economic crises cost the republicans control of the american government. why would they screw themselves to wage a dubious economic war with china?

November 7, 2008 @ 1:47 am | Comment

Was this really just a brain fart or she just slipped out of her scripted speech ?

I mean, why the hell was she using this term… ECONOMIC WAR! Did her pea brain had somehow access at some point to some “sensitive” information during the crash course she received in order to be able to campaign?

And she ended up clumsily using this information to push her non-related agenda?

Fishy I say… really fishy…

November 7, 2008 @ 1:55 am | Comment

“The current economic crises cost the republicans control of the american government. why would they screw themselves to wage a dubious economic war with china?”

Because there is no such thing as two parties…

;)

November 7, 2008 @ 1:57 am | Comment

what are you babbling about my paranoid young friend?

your link does not work.

November 7, 2008 @ 2:00 am | Comment

Are you in China ? I just tried it and it’s working, but I am using a VPN.

Try this one:

http://www.reuters.com/article/joeBiden/idUSN1532969120081015

November 7, 2008 @ 2:03 am | Comment

oab, feel free to come to the united states in october/november 2010 and watch the election process to verify the existance of political parties in the US. I am sure joe the plumber and sean hannity would be happy to guide you.

i am surprised the palin supporters and the joe the plumber types haven’t joined forces with the chinese fenqing yet. they both seem to have the same paranoia, delusions, and hatred of the media.

oab where do you and your buddies stand on abortion, gay marriage, and issues of souls and conception? gun ownership? israel? you should look into starting your own version of the Taiping rebellion. I am sure the RNC would be happy to get you started if you share with them your hatred of bias in the mainstream media.

November 7, 2008 @ 2:11 am | Comment

Did anybody else mention an economic war during this campaign? It’s just odd…

But yes Lindel you are right, I am paranoid a bit…

November 7, 2008 @ 2:15 am | Comment

So Sarah Palin is part of a conspiracy to wage an economic war against china by creating a financial crises in the US and coordinating the crises with europe there by loosing the election and her chance to be in the whitehouse?

yet she does not know which countries are part of NAFTA.

sounds like a good plan. are we winning?

November 7, 2008 @ 2:21 am | Comment

She’s part of nothing, she’s a pawn being used in a scenario that is out of her game. She’s the impersonation of the mass, the average dim-witted Joe of this world that understands shit all about what’s going on.

She’s a decoy to push the public opinion further into what should happen next in the global masquerade. She’s the equivalent to what you could refer as: When somebody stands next to a precipice, just push him a bit. She’s the extra push, the final nail in the coffin.

Lindel, you really did not read anything I have posted on this forum to say such absurdities…

I proudly stand for the following: Same sex marriage, the right for abortion, democracy, free speech, non totalitarian regimes, gender and races and religion equality and many other themes linked to the well being of the human race.

I am insulted that you link me to fanatic movements. I am the exact opposite.

I am the devil’s advocate. So this is why I am exploring the different sides of the picture.

Can you do this also ? Or is the world you live in black and white ?

November 7, 2008 @ 2:32 am | Comment

Jesus, how much of a genius do you need to be to realize that the whole China miracle is driven by outside investment and exports ?

It’s spelled out in neon letters… Sadly, China was nothing than an busted out ideological dream before foreign investment came in. Nothing.

So what happens when the money tap shuts off ?

I’ll let the headline news of the following week answer this question.

Enjoy!

November 7, 2008 @ 3:33 am | Comment

Let see. Oab.

First. Everyone around the world is working overtime to take care of the financial crises and get the finance system working again. It is is doubtful the money tap will ever get completely cut off. My personal wealth in my 401k and various stock accounts took a 25% hit, but I am hanging fast. The global business and finance community is working to contain the financial crises and keep the economy growing. People richer than I are extremely motivated to fix the financial crises and get the economy and stock market going again. Eventually they will succeed at that. The money tap never gets cutoff completely. There is no reason to get paranoid about an economic downturn. They come and go much like the weather or monsoon season. It is not the end of the world. The real conspiracy was a bunch of manhattan bankers gambling with credit default swaps and calling it investing.

Second. Sarah Palin is a politician and still the governor of alaska. She has 3 issues that are important to her: 1) Build Natural Gas Pipeline, 2) Drill in ANWR, and 3) Federal Funds for Alaska. If we see sarah palin on the national stage over the next two years it will be to politic the obama adiministration to get the gas pipeline built, to expand drilling in alaska and get more federal dollars sent to alaska. All politicians in the US read polls and react to election results. Obama and the Dems won a lot this week. Starting January 2009 they will be the party in power. Sarah Palin will adjust her politics accordingly. I doubt she will carry the banner of the evangelical conservative republicans. She will carry the banner of the Governor of Alaska. She will read the political climate in 2010 to see if being with Obama and the Dems is good or bad for her politically and adjust her politics accordingly.

Her first big problem to face is her senator stevens. I doubt she is even thinking about china or the financial crises. She will assess her political situation, probably beef up her press office and webpage, work her alaska governorship, and then see what move she will make in the 2010 time frame.

Economic War with China is not something she knows or cares a lot about. I think she will try to shape US energy policy to benefit alaska and provide her a national issue to hang her hat on. For now that means working with the democrats and obama. So that is what she will do until she decides it is more beneficial to her to work against them.

November 7, 2008 @ 4:38 am | Comment

“For some background perspective, just yesterday “Dr. Doom” Roubini said China is on the verge of “falling apart.””

Other than that, Mrs. Lincoln, how was the play?

November 7, 2008 @ 4:52 am | Comment

The message of Chinese CCTV seems to be that China will fair much better than the US in the financial crisis and that the end result will be a less powerful and economically diminished (shuai tui) USA.

November 7, 2008 @ 5:14 am | Comment

Oab,

You do not seem to understand the nature of economic development. Initially, foreign investment and export helped China begin its economic growth, as every country at its development era. Then the technology and know how previously not avaiable spreaded and human capital and productivity increased. With higher productivity, income increased and consumption demand grew. For most countries, this is the common path. Just because China’s huge population, the development period is especially long. After 30 years, export is still the major driver of the economic growth.

What will happen if the money shuts off? It is extremely unlikely in reality. But what if in theory? First money will never dry out because China government can create money out of the thin air. The foreign reserve is needed because China would need to buy something from foreign countries, like resources and technology. When there are knowledge and demand, money is just a mean to allocate and distribute resources in the production. And a big chunk of the foreign reserve will stay in China even all foreign investors withdraw their investment…since those foreign reserve are the value added by Chinese workers.

Thus, the China miracle means the successful organization of resources to imporve productivity and then the spending power in China. It is not a mercy of foreign investors…they got their returns.

November 7, 2008 @ 5:32 am | Comment

I put my bets in massive infrastructure program. Maybe even beyond the borders of China, not a bad way to get a job for the greater number of workers.

Starting to setup a safety net. Being the candyman is not a bad start.

Evolution of political system, rights, freedom, civil society, etc? Hard to say, they are usually the first victims in times of crisis.

November 7, 2008 @ 5:53 am | Comment

It looks like the difficult economic climate in China is putting intense competitive pressure on US law firms in China, perhaps, driving them to engage in questionable business practices? You’re SO Busted!

http://asia.legalbusinessonline.com/news/breaking-news/30623/details.aspx

November 7, 2008 @ 6:26 am | Comment

The world wants China to be the new engine of world economic growth—the new Santa Clause.

“He knows when you are sleeping…
He knows when you’re awake…
He knows if you’ve been bad or good…
So be good for goodness sakes…”

http://asia.legalbusinessonline.com/news/breaking-news/30623/details.aspx

November 7, 2008 @ 6:47 am | Comment

Buck, as I said, they are the “candyman.”

Bao, last warning: if you keep plastering links of questionable relevance to threads, and bombarding those threads with comments, I have to ask you to go. We’ve now talked about this many times. If you want a soapbox to spread your stream-of-consciousness, there are many excellent free blog services that allow you to do so. Thanks for your understanding.

November 7, 2008 @ 9:17 am | Comment

1. Hong Kong paid for China’s economic development over the past 30 years, through FDI (the first 50% to go in, which was the most risky) and later, through exports from Hong Kong companies in China (about one-third of China’s total exports these days).

2. The Central People’s Government doesn’t have the money to drive the economy through infrastructure work, but it can borrow and it will. The forex reserves, by the way, are kind of nice to have but certainly are not the government’s money.

3. Domestic consumer demand is only very slowly going to replace exports and investment as the key driver of growth. The transport and warehousing infrastructure are simply not ready, nor are the manufacturers making the kinds of products that will sell in Zhengzhou and Yining.

November 7, 2008 @ 9:56 am | Comment

Understood, won’t happen again…

November 7, 2008 @ 10:00 am | Comment

The problem I have with these article is that, surely, it lists all the textbook model of an economy, iterating their all the “macro indicators” and the coming to a conclusion that China is coming to a hard landing.

The other big half of the equation that is not given the same weight is how much CPP will respond. I don’t know how Pomfret and Roubini come to the point that CPP will be merely reactive, other than their own opinion. CPP has alot of tools available to them at the moment.

November 7, 2008 @ 10:15 am | Comment

Richard, I think this is where you and most expat dont understand China because you dont live on their wages. For the past 5 years, China has experienced near double digit growth annually. Those double digit growth, however, did not lead to same rate of growth for majority of the population’s personal wealth. It would be the top ultra-upper class of the Chinese population to feel the dramatic change in their wealth.

Here is what I think CCP is going to do. Regardless the actual GDP growth will be for 2009, CCP will always add extra one or two percent to it. I mean who the hell can dispute their number? To majority of the Chinese population, there is no difference between a 5% growth and 10% growth, at least not in the short term. In the long term, however, CCP needs get their balls together and boost their domestic demand.

The Chinese have survived the worst kind of disaster for the second half of the 20th century. From GLF, anti-left/right movement, cultural revolution, you name it. It is absurd to think that China would be destabilized simply because growth rate goes from 11% TO 5%.

It is difficult to go from miserable to be more miserable.

November 7, 2008 @ 10:35 am | Comment

Fob, if you’ve been reading my site regularly you know I subscribe to the belief that this crisis will NOT undo China. However, if growth did fall from 11 to 5 percent, which I don’t think will happen, I believe there would be a period of anarchy, if not civil war.If hundreds of millions are suddenly left without hope, jobs and food there would be major political convulsions. If not, the CCP wouldn’t be getting ready to hire them to build bridges, or simply pay them off.

November 7, 2008 @ 10:43 am | Comment

An interesting view about the “middle” class of China.

http://www.businessweek.com/globalbiz/content/may2007/gb20070509_866451.htm

“China doesn’t have a middle class,” said Arthur Kroeber, director of Dragonomics Research and editor of China Economic Quarterly.”

“He prefers to divide Chinese consumers into two classes: Surviving China and Consuming China.”

And thank you for the suggestion Richard, I thought about starting my own blog (I need to drastically improve my English first, to be taken seriously).

I agree with you that my posting style, especially previously, is inappropriate.

November 7, 2008 @ 10:46 am | Comment

Oab,

Hey, is your Chinese any good? You want to start a conspiracy website/blog with me that caters to both Chinese and non-Chinese? We can gather data from various international conspiracy websites and translate them INTO CHINESE!

I can help with setting up and administration of the website. We can simply find some cheap shared host at first to get this started. We can even develop custom web-applications/plug-ins, if the need arises.

What do you think?

Do you know of any Chinese conspiracy websites? I’m sure those exists, but what we can offer is connection with the larger international conspiracy movement!

November 7, 2008 @ 11:54 am | Comment

Richard, you are talking about anarchy or civil war…you think this is a better result since it still will not undo China??

November 7, 2008 @ 11:55 am | Comment

Dude, imagine that we can become as big as Alex Jones of the Chinese world, lol. I know the government will shut-down but we can get around them!

We can make conspiracy viral-videos that caters specifically to the Fen-Qings!!! DUDE!!

November 7, 2008 @ 11:56 am | Comment

I would not advise anyone to play and spread information and myths that could potentially challenge the official Chinese government views. Especially if you live in China, and I for sure won’t be the first to do it (Alex Jones would not live long in China but on the other hand he might get the chance to receive a Nobel prize).

I hope I am not being perceived as only blindly promoting conspiracy theories. Many of my “findings” are based on personal researches and knowledge (reading books, the trend in the news, very simple and accessible stuff).

I am expressing opinion and theories, but I am not actually convinced that any of this is really true or even makes sense totally. I am just curious to see if it resonates with some people as it did for me. And this is also why I welcome others’ comments to debunk what I say and prove me wrong.

And yes, I admit, right now I am fascinated to see some of my doomsday scenarios unfolding in the reality. This explains why sometimes I get excited and torpedo spam the blog.

For the few people that have been following my reasoning, it will be clear to them that I am exploring two conceptually conflicting trends: The Globalization (NWO) and the classic war scenarios with the good and the ugly sides (US vs China).

November 7, 2008 @ 12:24 pm | Comment

[...] the proponents of an economic hard-landing vs. soft-landing against each other. [Peking [...]

November 7, 2008 @ 12:47 pm | Pingback

I have been persistently pessimistic about the Chinese economy, and despite the rabid rantings of some commenters here, I have only 200RMB in investments, saved for a taxi in case I happen to end up in China again. This is not China-bashing, but rather reality: if all other economies experience periodic retreats, who are we to say that China will enjoy continued 10% annual growth? Or even 5%? Of course, retreats in growth are normal. But what would “average” (or even below average) growth mean for China? If China fails to achieve 10% or even 5% annual growth, does it have the transparency, policy consultation, social network, and “social stability” necessary to make it through those times and rebuild?
My answer is of course not! If I knew how to underline that sentence, I would. In everyone’s historical memory, there are plenty of examples of China descending into absolute chaos for much more ridiculous reasons than a financial collapse. And even within urban areas, I have never gotten the impression that anything is really that “stable,” apart from the idealistic yet tired proclamations of upper-classers living in a completely separate reality. In contrast, if your only salary is 700 a month, which your boss does not necessarily pay you, and then your company takes a turn for the worse, then you and your entire family in the countryside are in fact no better off than when Mao wrote his report on the Hunan Peasant Movement 80 years ago.
While, in the short term, China (as an abstract whole) might make it through this economic crisis, this does not necessarily make the fundamentals of the national economy any stronger. The entire system is based solely upon unsustainable development, corruption, and desperately wishful thinking. If there are not massive repercussions (on a national scale) over the next year, these repercussions will only be held off until the next crisis. I don’t mean to be overly apocalyptic, but it is beyond a doubt true that modesty and realism are often far too lacking in discussions of the Chinese economy.

November 7, 2008 @ 3:48 pm | Comment

Haha, really? Please share your kindness and pass whatever the heck you are smoking, dude. The situation today is very different from Mao’s era. This is true on so many levels it ain’t even fun-nay. Even if everything went to the shiters today, I really don’t see 60 million starving to death. Things are just too different for that to happen. Although the impossible is always possible, to a certain extent. Me personally thinks you are just a hater, but I digress.

November 7, 2008 @ 4:01 pm | Comment

Thank you for your in-depth analysis, pointing out in such specific and convincing terms that “things are just too different,” and that I am perhaps just a “hater.” Are these quotations from Sarah Palin? Faced with your well-crafted arguments, I am nothing but convinced!
“Me personally thinks” you are just a bit too vague and unable to face the realities of all economic systems, to which China can never be a complete exception… but I digress, as you did all too quickly.

November 7, 2008 @ 4:28 pm | Comment

who are we to say that China will enjoy continued 10% annual growth?

No one’s saying that. It’ll slow, just not as suddenly as some people will like (causing social problems).

November 7, 2008 @ 4:41 pm | Comment

Okkkayyy, mr. I wrote “On the Electrodynamics of moving bodies.” You are awesome, I bow down to your greatness.

I’m ashamed that I have to copy your greatness in mastering the art of seems to be saying something smart but not really saying shit. You satori rhetorical questions such as: “does it have the transparency, policy consultation, social network, and “social stability” necessary to make it through those times and rebuild?” Fine. At least it’s clearly stated, although with nothing to back up any of that. But to then make the claim that somehow everything will become so bad it will be like during Mao’s days…

Get real man. What part of your post is ‘convincing?’ You merely stated a bunch of opinions. LOL. What the hell do you mean by “I have never gotten the impression that anything is really that “stable,” apart from the idealistic yet tired proclamations of upper-classers living in a completely separate reality?” Don’t try to pass what you think off as fact. Seriously, do you know WHAT MAO’s DAYS were even like? If you are going to make that claim you better jump through some mental hoops to convince me. Otherwise it’s just intellectual laziness.

Either way, I don’t really care, I’m merely a fool, I don’t expect much from myself. I admit, I’m intellectual weak and lazy. I like reading these posts, but I don’t really care to dedicate any effort into any sort of deep analysis on these issues, I got other crap I gota do. Therefore I read your post, I went, bah, that’s bullshit, cos Mao’s days were crazy. So I said as much. But you just came back with something like “No faggot, shutup.” Because we’re on the same level. But then, I really thank you for your much needed comic relief as you try to pass your post off as some masterpiece of Internet bullshit.

I may even come back tomorrow to argue with you some more, cos right now I’m about to pass out.

To summarize: Don’t fucking say it’s going to be like Mao’s days when no way in hell it’s going to get that bad! Only way that happens is if everything just plain went to hell. People going all revolutionary in the head and going batshit crazy; hHaving all the school stop teaching; Guandong a hair away from Civil war, with people dying from real bullets and shit; masses of youth wandering around destroying and KILLING people! And, a crap load of people are starving to death, etc. You want know what Mao’s days were like? Invent a time machine and travel back to 6/4, that’s maybe 1/3 of what Mao’s days were like… Hell, since you got a time machine, travel back to Mao’s day and shake his hand!

November 7, 2008 @ 5:01 pm | Comment

Sorry, corrections: Change “But you just came back with something like ‘No faggot, shutup.’” to “You should just came at me with ‘No faggot, shutup.’ and I would be fine with it.”

November 7, 2008 @ 5:06 pm | Comment

The NYT weighs in…

A couple key graphs:

While few economists expect China to fall into recession, analysts are forecasting the worst growth in more than a decade, with the economy expected to expand by as little as 5.8 percent in the fourth quarter this year, down from about 11 percent in 2007.

Analysts worry that a sharp downturn could undermine the country’s already weakening investment climate and impair some of China’s biggest banks, which have bankrolled much of the boom.

Beijing worries that if growth slows to 8 percent or less, not enough jobs will be created in a country that is rapidly urbanizing — and that could lead to social unrest.

To prevent that, the government is preparing a large economic stimulus package, pushing new infrastructure projects, offering aid to exporters and searching for ways to prop up the nation’s severely depressed stock and real estate markets.

November 7, 2008 @ 5:29 pm | Comment

From the BBC website comes a report entitled: “Chinese job losses prompt exodus”

http://news.bbc.co.uk/2/hi/asia-pacific/7713594.stm

This trend isn’t going to reverse itself in a week or two, so I think it’s fair to describe China’s economic deceleration as a crisis.

November 7, 2008 @ 6:48 pm | Comment

I heard that the Afghan Army is hiring.

Can Chinese people join the Afghan Army?

November 7, 2008 @ 8:20 pm | Comment

@stp

“But most importantly the country needs to invest in its people. This means dramatic spending increase in education. Primary education must reach every corner of China and higher education must improve its quality.”

Completely agree. But what do you mean by quality? How will you measure it? How will you implement it given the low base you are working from?

“Universities should set up endowed chair positions, offering internationally competitive wages, to attract world class scholars.”

No chance of attracting genuine world class scholars. Why? Because even with all the money in the world, China is still essentially a fascist country. You’d never get any non-scientists and any scientists researching in China would be considered as morally compromised by colleagues. China sticks its nose into its academics’ business too often.

“There are so many good places to spend money and China has it.”

China has plenty of money and places to spend. Can it do so efficiently without mysteriously losing half of it? That’s the million dollar question……

@kevin

“but it is beyond a doubt true that modesty and realism are often far too lacking in discussions of the Chinese economy.”

Absolutely. But, going back to Richard’s point, I don’t think that anarchy and civil war are likely. The PLA has a monopoly on dispensing violence in the country and I don’t see anyone being able to stand up to them on a countrywide scale. If things get so hairy that the CCP is unable to pay the PLA then that could change. I would say worse case scenario is you have a coup by the PLA who take over and then blame it on the current leadership or some other scapegoat. They would keep the CCP name but it would represent the fourth version of the party. (I would argue that pre-Mao, Mao and post-Mao CCP could be seen as different versions of the party as the policies followed were so different you essentially have continuity in name only). In putting forward this scenario and saying it is not as bad as civil war or anarchy doesn’t mean that I think such a transition would be seamless or, indeed, particularly fun-nay.

November 7, 2008 @ 9:09 pm | Comment

“No chance of attracting genuine world class scholars. Why? Because even with all the money in the world, China is still essentially a fascist country. You’d never get any non-scientists and any scientists researching in China would be considered as morally compromised by colleagues. China sticks its nose into its academics’ business too often.”

I was reading a little Confucius today (seriously). The Confucians have this idea that a superior man (junzi) is to be realized through self-cultivation (xiu shen). I’m wondering…How THE F…CK is one supposed to engage in “self cultivation” in a place where you can’t speak the truth?!

November 7, 2008 @ 10:12 pm | Comment

Unless you enjoy speaking to yourself, I don’t see how necessary it is to speak out in order to be able to mature your thoughts.

In my opinion, the meaning of this Confucian approach is just the basic adage that says: Draw your own conclusion and do not rely on others to find the truth. By not doing so, you’ll just become part of the mass.

Basically meaning, think by yourself.

November 7, 2008 @ 10:29 pm | Comment

Si wrote: “China has plenty of money and places to spend. Can it do so efficiently without mysteriously losing half of it? That’s the million dollar question……”

The Chinese can’t even undertake a corruption investigation in a transparent, non-corrupt manner! It’s quite hopeless!

http://www.reuters.com/article/newIssuesNews/idUSN3135958220081031

November 7, 2008 @ 10:31 pm | Comment

“Unless you enjoy speaking to yourself, I don’t see how necessary it is to speak out in order to be able to mature your thoughts.”

being able to speak out means that you can debate and thus hear opposing viewpoints and viewpoints that might not have occured to you. did not confucius say “amongst three people one person will be my teacher?”

November 7, 2008 @ 10:39 pm | Comment

Not sure I would agree about China’s universities not being able to attract scholars, si. They’ve been I know that in my own field they’ve brought in some of America’s best experts, and I’d be surprised if they weren’t doing the same in other subjects.

Thanks for the snip from the NYT, Lisa. This seems to be the No. 1 topic, by far, among journalists here at the moment. They (or their editors) don’t care about any other stories lately.

November 7, 2008 @ 10:43 pm | Comment

@richard

really? long term? tenure? research? could you give some examples? i am not being sarcastic, i am genuinely curious. my knowledge area is mainly hums, and social science depts which i don’t really see translating well to china, if they were invited.

November 7, 2008 @ 10:55 pm | Comment

I agree with you Si, it’s important. I was more thinking about the equivalent of meditating on subjects to find your own answer. I did not meant that before doing so, you would not have to speak and exchange in your entire life.

As you just mentioned, I don’ think the whole Confucian approach advocate simply one single step, being: A superior man is to be realized through self-cultivation.

But taken out of context, it gives this impression.

November 7, 2008 @ 10:59 pm | Comment

In my own industry, I don’t know about tenure or long-term, but I do know they’ve drawn some of the best names (would prefer to tell you by email). But I’m not in the sciences. There, more than in any other area, China is definitely drawing some of the world’s brightest scholars, mainly foreign-born, overseas-educated Chinese. Many articles have been written about China’s huge investment to woo these scholars (quite successfully) to their universities. For the details, just do some searching.

For names and salaries, this article should give you what you want.

November 7, 2008 @ 11:10 pm | Comment

And now the next phase…

As I said before: from blogs to the reality.

Do you people think it’s just a coincidence that such terms are appearing in the mainstream news?

These are strong words, that captivates the intellect and the passions, you don’t use such words lightly, especially when you are the leader of the French Nation.

If you have time, read the article and notice the 2 trends: Economic War and… India as the next market.

And also it’s worth paying attention to the fact that “The last thing the Chinese need now is a rapidly falling dollar. Their inflation is already running at 6.2pc.”

And I maintain my point that Palin has been briefed during the campaign and that she slipped and used the term during one of her speech, like a bad comedian that doesn’t know where to place a punch line and end up spoiling the one-act play. Or like somebody that is too dumb-witted to keep a secret (Shhhh… don’t tell them it’s a surprise for after the elections).

November 8, 2008 @ 12:02 am | Comment

What the pessimists completely ignore is that this is really the first time since the depression that the world has been faced with a situation like this. Only this time, we know so much more than then and (the hope anyway) this time, there seems to be a deeper understanding of the need to avoid a beggar-thy-neighbor approach.

I am not saying this necessarily means everything will be fine, but I am saying that we are essentially in uncharted territory here (and I never ever say that because I virtually always believe history is a great guide) so who really knows?

November 8, 2008 @ 12:37 am | Comment

Of course Dan we are in uncharted territories, who would be stupid enough to say something else than the mass’ mantra? I agree with you Dan, a 100%. What we are witnessing right now is something very different from what our old boring history books taught us.

People are so fragile and worry for nothing nowadays. Don’t worry young boy, I’ve seen it all, it come and goes, believe me. This is just a bump in the ride.

“The majority of countries set up relief programs, and most underwent some sort of political upheaval, pushing them to the left or right. In some states, the desperate citizens turned toward nationalist demagogues – the most infamous being Adolf Hitler – setting the stage for World War II in 1939.”

I wonder what’s next… Really… Don’t you?

Well, buckle your seat belt my “old” friend. You ain’t seen nothing yet. Keep puffing your pipe and rocking the chair as the world sinks before your own eyes, it’s very useful for us, the youngsters.

November 8, 2008 @ 2:01 am | Comment

While the Dancing Chickens are in for a real treat on the other thread, the world is still turning… (clapping hands) Dance Chicken, Dance!

And let me announce to you tonight, that we are heading for a serious shit storm.

“We are facing the greatest economic challenge of our lifetime and we are going to have to act swiftly to solve it,” Obama said.

And yes, Obabush, we heard that a month ago. But thanks to you for keeping the flame alive.

This is the start signal ladies and gentleman, this is where we are going. I have no more doubt about it. Not a single doubt.

Fuck, I was really hoping for at least a couple of months of illusions, not 2 days.

Terrifying… Terrifying reality. I am honestly scared right now.

November 8, 2008 @ 4:28 am | Comment

Oab wrote:
“Unless you enjoy speaking to yourself, I don’t see how necessary it is to speak out in order to be able to mature your thoughts. In my opinion, the meaning of this Confucian approach is just the basic adage that says: Draw your own conclusion and do not rely on others to find the truth. By not doing so, you’ll just become part of the mass.”

The problem is that a society where people keep their thoughts to themselves while monkeying the party line is a rather perverted society indeed. Pure cynicism! Presumably the object of self-cultivation (xiu shen) is to create an honest person, a superior man (junzi), not a society of fake human beings who teach their children to lie and be dishonest to get ahead. The Chinese can’t even see how MAD this is! This is the way that the Nazis acted—murdering Jews while knowing (not publicly acknowledged, of course) that the anti-semetic propaganda was all a lie. The Confucian approach to morality is all well-and-good, but it becomes a lie unless one first creates an environment where people can engage in self-cultivation (xiu shen). At a minimum, this means creating an environment where people can speak the truth.

November 8, 2008 @ 5:08 am | Comment

Oab wrote: “I was really hoping for at least a couple of months of illusions, not 2 days.”

Don’t worry. No matter how bad things get, we’ll never, never ever run out of BULLSHIT!

http://hk.youtube.com/watch?v=qNv-oDbBZQU

November 8, 2008 @ 5:18 am | Comment

Dan wrote:
“What the pessimists completely ignore is that this is really the first time since the depression that the world has been faced with a situation like this. Only this time, we know so much more than then and (the hope anyway) this time, there seems to be a deeper understanding of the need to avoid a beggar-thy-neighbor approach.”

So you think that the Wall Street Bailout is an example of enlightened, morally-upright, wise governance? BULLSHIT! They’re grabbing as much as they can before the shit hits the fan. The War has just started. The Chinese have targeted US law firms in their anti-corruption crackdown. Do you really believe that only US law firms engage in bribery in China?

Much of the US$700 billion is now being horded by US financial institutions as ammunition to buy up the best financial institutions when the smoke clears.

November 8, 2008 @ 5:39 am | Comment

The Chinese Natural Science Foundation has special grants, about 10,000 US dollars per month, to give overseas Chinese scholars, who can work in China for 1 to 3 months, during the US summer break. Prestigious Universities, such as the Shanghai JiaoTong University, are now offering US $100,000 annual salary to world class scholars. A personal friend of mine who works in Paris has just been offered such a position.

November 8, 2008 @ 9:23 am | Comment

Speaking of prestigious Chinese universities recruiting foreign talent, whatever happened to that handsome, sexy American man, Tim Lies, who is/was a professor at Peking University? He was part time rock star, actor who calls himself “MEGWOMAN”.

http://us.profile.myspace.cn/index.cfm?fuseaction=user.viewprofile&friendID=250356172

November 8, 2008 @ 10:54 am | Comment

I am a chinese school,If you stay in beijing, and want to learn chinese,please call me:15011596274.MR zhou.

If you no time come to school,we can sent teacher to your home.

Of curse,First,you will be have 2 hours of free class.trust me,try it.

November 8, 2008 @ 11:22 am | Comment

“…are now offering US $100,000 annual salary to world class scholars.”

The Chinese educational system is not set up for scholarship. Under the Chinese system, the role of “scholars” is to provide the intellectual justification for whatever the government wants to do. It’s a tough environment, but I guess that there are plenty of foreign lackeys who are willing to do that in return for whatever.

November 8, 2008 @ 11:31 am | Comment

“Eagle” wrote: “…am a chinese school,If you stay in beijing, and want to learn chinese,please call me:15011596274.MR zhou.”

Title of a new book: “The Terrified Confucian”.

November 8, 2008 @ 11:39 am | Comment

Hi eagle, and thanks for your contribution to the thread.

Oab, what are you talking about, with that Obabush crap? Please don’t answer. It’s purely a rhetorical question, intended to remind you why almost no one will interact with you here.

November 8, 2008 @ 11:48 am | Comment

“Hi eagle, and thanks for your contribution to the thread.”

LMAO. Love it!! This is too much fun. OK, back to jousting with MW on the Taiwan thread.

November 8, 2008 @ 12:01 pm | Comment

Eagle,

Can I get a “teacher” who’ll spank me if I’m a “bad student”?

November 8, 2008 @ 12:28 pm | Comment

The only thing China could do is to reduce the difference between richman and poor man.Because the people who is rich can not spend all of their money for their demand,but investment.As a poor man whose demand is so much can not have money to spend.so in china investment is too much,and demand is poor
what I say is the most important things in China
but Chinses goverment would do nothing useful

November 8, 2008 @ 1:02 pm | Comment

Dude, lots of stuff going on here. Even The Eagles are in Chinese teaching business. Back to the original theme, for alll the pessimistic or optimistic opinions about whether china is going to have a hard landing or soft landing, what’s really missing is the comprehensive data and logical analysis. I’d be interested in knowing if the Chinese economic stimulus package (mainly big-ticket infrastructure projects)will adequately offset the export decline and thereby the economy would be able to absord laid-off workers due to the coming massive factory closedowns. Without the comprehensive data to compare the projected increase in domestic demand and decrease in export, all opinions are just hunches.

November 8, 2008 @ 4:26 pm | Comment

@buck
“Can I get a “teacher” who’ll spank me if I’m a “bad student”?”
That will cost you some extra RMB.

November 8, 2008 @ 4:34 pm | Comment

About education, what do you think of this? Huge queues in Shenzhen Job fair.

http://tinyurl.com/64ceeh

It seems they are already overflowing with educated persons!!!

How on earth are they going to provide a (reasonable)good job for them?

November 8, 2008 @ 4:39 pm | Comment

ecodelta

I posted something about this 3 weeks ago, but at this time not much people paid attention to it.

It was not a hot topic since everybody was still stuck in the “China will surf the wave” mindset.

November 8, 2008 @ 5:16 pm | Comment

http://tinyurl.com/5qfpgc

China must be radically reassessed by investors and could be lurching towards a more dramatic economic slowdown than Beijing authorities will admit, a CLSA report says.

The grim assessment from Eric Fishwick, chief economist at CLSA, an Asia specialist private equity firm, argues that it will be impossible for China to achieve anything like the growth rates it is presently projecting for next year.

Even with aggressive government measures, growth in 2009 could plunge to 5.5 per cent, he said.

The super-bearish forecast depends on certain weak signals that may emerge in the fourth quarter of 2008, but comes amid reports from the Chinese electricity sector that suggest the country’s mighty manufacturing engine-room is already sputtering badly.

Anywhere near 5.5% would be a disaster for the government. Can it be that bad? We all hope not, but we shall see.

November 8, 2008 @ 11:09 pm | Comment

Can China attract big time academics?

One of the better known world class scholars working in China now is Andrew Chi-Chih Yao. This guy is a super star, a winner of the Turing Prize, the equivalent of Nobel in Computer Science. Born in Shanghai and raised in Taiwan, Yao held a prestigious chair position at Princeton University before he moved to China to work at Tsinghua University. Here is his website:
http://www.castu.tsinghua.edu.cn/yao
Wikipedia also has some information about him:
http://en.wikipedia.org/wiki/Andrew_Yao

November 9, 2008 @ 1:03 am | Comment

Check out Shing-Tung Yau’s criticism of Chinese academic corruption.

November 9, 2008 @ 2:41 am | Comment

585 billion stimulus plan, just as expected, CPP hits big and hits hard.

November 9, 2008 @ 10:20 pm | Comment

This is a conspiracy of the United States, but just the beginning of the game is not over yet, I am a person from Tianjin, China!

November 10, 2008 @ 2:50 am | Comment

yyx_0@163.com This is my E-mail you can keep the exchange Dennis Young

November 10, 2008 @ 2:53 am | Comment

[...] was coming. None of us knows whether it will work, and as I pointed out last week, there are some very different schools of thought on the topic. From today’s Times: In a sweeping move at a time when major projects are being [...]

November 10, 2008 @ 9:35 am | Pingback

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