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.

No time to add brilliant commentary. I just want to say this reminds me of the fen qing throwing eggs at Japanese cars and businesses back in 2005. What a great way to further your cause.

Hundreds of Taiwanese protesters surrounded a hotel Wednesday where a Chinese envoy was attending a dinner banquet, tossing eggs, burning Chinese flags and trapping him inside into the early morning hours.

Chen Yunlin, the highest-ranking Communist Chinese official to ever visit Taiwan, has drawn daily protests since his five-day trip began Monday.

He was able to leave at 2:15 a.m. after police with riot shields and clubs began shoving the protesters away from the front of the Grand Formosa Regent Taipei hotel. Some demonstrators had to be dragged or carried away

The Chinese official came to sign a trade agreement with Taiwan that many believe will greatly ease tensions between the rivals. But many of the protesters distrust Beijing and oppose closer ties with the island’s biggest security threat….

Many of the approximately 800 protesters Wednesday night supported permanent independence, and some chanted ”Communist bandit get out.” They tossed eggs and pounded on cars that tried to leave the Grand Formosa Regent Taipei hotel.

Brave heroes or crazed idiots? Your call.

Every once in a while my work puts me in the presence of greatness. It did so yesterday when I had the pleasure and privilege of working with South African Justice Edwin Cameron, the only public official in all of Africa to publicly state that he has AIDS. He is probably also the only openly gay official on the continent. Oxford-educated and a Rhodes Scholar, Justice Cameron’s contributions to human rights and AIDS awareness, and his personal courage, cannot be exaggerated.

Yesterday he spoke with reporters in Beijing about a recent Renmin University-UNAIDS survey [pdf file] on the attitudes of Chinese people in six cities - Kunming, Shenzhen, Shanghai, Wuhan, Zhengzhou and Beijing - toward AIDS and AIDS sufferers. The survey sampled four groups, migrant workers, blue collar workers, white collar workers and youth, and it provides some depressing if not especially surprising findings:

- More than 48% of respondents thought they could contract HIV from a mosquito bite, and over 18% by having an HIV positive person sneeze or cough on them.

- Around 83% of interviewees had never searched for information on HIV/AIDS.

- Nearly 30 % did not know how to use a condom correctly.

- Only 19 % said they would use a condom if they had sex with a new partner.

- Nearly 11% of respondents had had sex with people who were not their spouse, girlfriend or boyfriend during the past 6 months; 42% of those respondents had not used condoms.

- 30% think HIV positive children should not be allowed to study at the same schools as uninfected children.

- Nearly 65% would be unwilling to live in same household with an HIV-infected person and 48% of interviewees would be unwilling to eat with an HIV-infected person.

In other words, we haven’t made much progress since I first started writing about this topic five years ago, at least not in terms of people’s attitudes and awareness. In terms of treatment, there has been huge progress in China, including anti-discrimination laws and free retrovirals for anyone with AIDS. The government needs to do much, more, however. Justice Cameron said, for example, that while the government provides free retrovirals for treatment of AIDS, people must still pay for medications for opportunistic infections from their own pockets, which can easily impoverish them.

I don’t really know what it is about natural leaders, the way they stand out in a crowd even when silent, and the way that they make those they’re talking with feel like they are the only person in the entire world. Edwin Cameron has those qualities, and the reporters he spoke to were visibly moved when he made an urgent appeal to them to encourage HIV sufferers in China to act as activists and to speak out the way he has. That is the only way to overcome stigma, he said., noting that what makes AIDS so insidious is that in many places it remains “a silent disease.” People suffer in silence for fear of ostracism if they tell the truth. This fear discourages Chinese people from getting tested, and those who are tested seek to hide their HIV status at all costs.

“This is a tragedy,” Justice Cameron said. “The Chinese government has a good treatment program. But there is a disturbing pattern here: 35-40,000 people in China are receiving antiviral treatment but more than double that number need treatment.” And they remain silent, and will die unnecessarily, as AIDS today is fully treatable. He pointed to activists in the US in the 1980s who generated a wave of publicity and awareness that put a human face on the disease, lessening the stigmatization in America dramatically. In China and Africa, there are few such activists. That is one of the keys to ending stimatization, he said: Africa needs a Magic Johnson to tell people they do not need to be ashamed of having AIDS.

It isn’t just a matter of fearing ostracism from friends and family, however. He said that AIDS sufferers still get turned away from health clinics in China’s provincial areas. The most poignant moment came when he described to reporters how he needed a special invitation sent from the Chinese government to its consulate in South Africa for him to be permitted entry into China. He added that when he comes to the US he must undergo an even more humiliating ordeal, being tested at the airport to determine whether his AIDS is under control (I am not sure exactly what they test for).

Hu and Wen have visited hospitals and spoken out on AIDS, he said, but efforts to educate the public remain seriously inadequate. “I beg them to do more,” Justice Cameron said.

Perhaps the most controversial topic he discussed was how markedly different the AIDS epidemic is in southern and western Africa, where the level of infection is above 11 percent. This is, he explained, “a mature epidemic, meaning that everone, gay or straight, young or old, knows someone who has died of AIDS.” This is unique; no other geography on earth has seen a massive AIDS epidemic that has spread beyond the main risk groups (injection drug users, plasma donors, “MSM” - men having sex with men - and sex trade workers). It was feared back in the time when I wrote my original post that China would be like Africa, home to a massive epidemic seeping into the mainstream, heterosexual population. It appears that will not happen. Justice Cameron said no one was sure why this phenomenon occurred only in a specific section of Africa, but said the reason could be genetic. In China, the number of people infected by shoddy plasma collection has leveled off, and the levels of infection are beginning to mirror those in other countries, with MSM and injection drug users being the most affected groups.

Working with Edwin Cameron was an inspiration. It was also inspiring to see the level of interest in this topic among the Chinese media. You can se some of the articles here and here. This was the high point of my nearly two years in China, and a day I’ll never forget.

[Bumped up to keep an open thread on top.]

Busy with some big events. But want to share some links and open a thread now that the ones below are running out of steam.

First, a superb book review on the life of China’s female migrant workers who leave the countryside for work in cities like Dongguan.

The women’s road from village to factory job is lined with manipulators and cheats, and the schools, which busily copy one another’s curriculums, in turn teach the virtues of lying as a means of getting ahead. “People who are too honest in this society will lose out,” one instructor told the author.

That’s true in a lot of places. Here especially, for lots of reasons.

Second, a surprisingly intelligent Dowd column of Colin Powell’s endorsement of Obama and the knee-jerk revulsion so many Americans feel at the notion of a Muslim in their midst.

In a gratifying “have you no sense of decency, Sir and Madam?” moment, Colin Powell went on “Meet the Press” on Sunday and talked about Khan, and the unseemly ways John McCain and Palin have been polarizing the country to try to get elected. It was a tonic to hear someone push back so clearly on ugly innuendo.

Even the Obama campaign has shied away from Muslims. The candidate has gone to synagogues but no mosques, and the campaign was embarrassed when it turned out that two young women in headscarves had not been allowed to stand behind Obama during a speech in Detroit because aides did not want them in the TV shot.

Violence in Taiwan:

Taiwanese television showed Zhang Mingqing, vice chairman of a mainland association handling cross-strait relations, lying on the ground beside his eyeglasses. Other footage showed an elderly woman hitting his car window with her cane and a pro-independence activist with a green headband stomping on the roof of the car.

That followed an incident Monday in which about 200 demonstrators yelled, cursed and heckled Zhang as he took the podium at Tainan National University of the Arts. Zhang was in Taiwan for an academic symposium, ostensibly in a nonofficial capacity. Taiwan and China often communicate through unofficial channels, given their strained relations.

Finally, Pomfret sounds gloomy about how the global financial crisis will affect China.

Any time the official New China News Agency files a piece with the headline: “Experts: China’s economy has ability to recover from slowdown,” it’s time to worry about China’s economy. You’ve already heard the news, no doubt.

Five straight quarters of slower growth. China’s National Bureau of Statistics announced this week that the nation’s economy grew at an annual rate of 9 percent in the quarter ending Sept. 30, the lowest since 2003 — when the SARS epidemic turned the economy upside down. Exports are shrinking so fast that some economists are predicting the sector will not grow at all next year.

More ominously for “social stability,” however, are the lay-offs. More than half of China’s 7,000 plus toy makers are out of business. More than 67,000 small- and medium-sized enterprises have gone belly up in the first nine months of this year, according to a report in the China Business News this week. There are an increasing number of reports about labor unrest among those turfed out of work.

For the record, I think Pomfret’s view is way too bleak. China has what it takes to deal with the situation: Money.

I think the only good news today is that Al Qaeda “endorsed” McCain. They endorsed Kerry the last time and look what happened.

A late-night quickie:

The European Parliament on Thursday awarded its top human rights prize to jailed Chinese dissident Hu Jia despite warnings from China that its relations with the 27-nation bloc would be seriously damaged if it did so.

In selecting Hu to receive the Sakharov Prize for Freedom of Thought, the European lawmakers said they are “sending out a signal of clear support to all those who support human rights in China.” Hu has advocated for the rights of Chinese citizens with HIV-AIDS and chronicled the arrest, detention and abuse of other activists.

After I posted a few weeks ago that I felt Hu was deserving of the Nobel Peace Prize, I had an opportunity to discuss his career with friends of mine (Westerners involved in government) who are much more familiar with his activities than I. Since then, I’ve had rather mixed feelings about Hu Jia.

His arrest is certainly prima facie evidence that today’s CCP retains much of the prickly, pig-headed, uptight, asinine qualities of yore. And yet, there’s no denying Hu was often a self-promoter, practically shouting at the government, “Arrest me,” especially considering his timing. (He was warned that such antics right before the Olympic Games would not be tolerated, and he persisted in a most in-your-face manner.) None of that even begins to justify his arrest, but maybe it raises questions about Hu’s judgment and motivations?

Hu did dedicate much of his time to raising awareness of AIDS and environmental issues in China. But my friends, one of whom works at the United Nations, challenged me about what Hu has actually done aside from draw attention to himself and get himself arrested. I mentioned a project he launched to help AIDS orphans in Henan, and they countered that it was more hype than anything else. “Basically he wrote some emails,” my friend countered. “Do we award the Nobel Prize to someone who just sent out emails?” Before anyone jumps on a high horse and says I’m slandering Hu Jia (whom I’ve defended many times on this blog), please understand I am only saying I don’t know - that maybe he’s an example of our emotions (mine included) making us jump to conclusions. Or maybe he actually did deserve the Nobel Prize. As I said, mixed feelings.

Whether he deserves the Sakharov Prize is up for debate, as with any prize for political activism. In any case, if this inspires greater scrutiny of China’s repressive tendencies, paranoia and eagerness to arrest anyone who threatens to shed light on them, then I’m glad Hu Jia won.

I meant to put up a one-liner, and suddenly it became a tome. Good night.

Funny, how what sounded like such a crazy notion to some just a year ago now seems to be pretty much accepted as a given the world over. Soros saying as much gives the point - obvious as it always was to the prescient - added weight.

China will be the biggest winner of the current financial crisis, US billionaire and philanthropist George Soros said. The financier gave an interview to Germany’s Die Welt, in which he told of the roots of the crisis and said that the mortgage bubble only triggered the process, which entailed the economic collapse. The businessman also explained the reason why the Bush’s administration proved to be unable to cope with the crisis.

The United States and a part of Europe will have nationalized banks and huge debts. China will become the new global financial empire….

“The USA’s influence has already begun to decline. For the past 25 years, we have been running a constant current account deficit. The Chinese and the oil-producing countries have been running a surplus. We have consumed more than we produced. While we have run up debt, they have acquired wealth with their savings. Increasingly, the Chinese will own a lot more of the world because they will be converting their dollar reserves and US government bonds into real assets. The power shift towards Asia will occur as a result of the sins which America committed during the recent 25 years,” Soros said.

You can ignore Soros at your own risk. His track record has been nothing short of astonishing. And for my right-wing friends who fell for the Fox News smears of Soros as a deranged leftist, all I can say is do your homework. Soros is a man of principle, a great philanthropist and a huge friend to liberal causes. Yes, he has a few - very few - skeletons in his closet (insider trading in 1988) like other billionaires do, but all in all he is a hero, and a role model for other billionaires.

We all know how much China sucks in so many ways. Most of us also know what an amazing country it is, how splendid many of its people are and what promise it holds for the future. Right or wrong, fair or unfair, we are in decline while Asia in general and China in particular are rising. That is not a judgment call on whether China should hold this honor. It’s just the way it is, like it or not. And in a lot of ways I don’t like it. It’s just what’s so. They were smarter than we were. I have to hand it to them.

The reasoning behind this is just so tortured:

The US government is cutting its funding for the supply of contraceptives to family planning clinics run by Marie Stopes International in Africa, alleging that it condones forced abortions in China.

MSI has categorically denied that it supports forced abortions or coercive sterilisation in China or anywhere else in the world, and says that the actions of the Bush government will result in more abortions in Africa, as women will be unable to get contraceptives and will end up with unwanted pregnancies.

One of George Bush’s first acts after becoming president was to stop all US funds to foreign organisations that helped women in any way to get an abortion, including providing advice. The UN Population Fund (UNFPA) lost $34m that Congress had appropriated for it in 2002.

…”At a time when governments have pledged to increase their commitment to improving the health of women, only the Bush administration could find logic in the idea that they can reduce abortion and promote choice for women in China by causing more abortion,” said [MSI CEO] Hovig.

I think the nation will breathe a collective sigh of relief after we’ve sworn in Obama and Biden. A pity they’ll face the near-impossible task of cleaning up all the crap Bush & Co. will leave behind, like numerous wars, a battered global reputation, a broken economy and a whole lot more. But at least it will put an end to nonsense like this.

A rare spoof about China.

A final link for the night, and it’s a good one. Artists in China have to go to great lengths to get their works approved, often to no avail. An interesting and unusual look at what the Propaganda Department does, how the censors operate, how artists seek to second-guess them, and the effects of their efforts on Chinese talent.

A tiny snip, and then the computer goes off.

About the intellectuals, Mao Zedong often remarked, “If they don’t listen to us, we won’t give them food.” This kind of dependence on the state for one’s physical existence has handicapped Chinese writers and artists and intensified their self-censorship. Worse, China’s literary apparatus automatically excludes and isolates writers who are determined to exist outside it. Every now and then, some young writers raise a war cry against the Writers’ Union, but the truth is that most writers, old and young, are eager to join it.

Is it that hard to figure out why?

Wait. That is not my theory, but that of the author of an article written more than four years ago that a reader pointed me to and that I recommend you read. Not because it’s necessarily right, but because it’s fascinating to see where we actually stand four years after the writer’s prediction.

Today, the currency and export policy of China is anchored around its peg to the dollar. The main reason for this is that by artificially undervaluing its own currency, and therefore overvaluing the dollar, China artificially stimulates its manufacturing exports. The second reason is that by buying the excess U.S. dollars and reinvesting them in U.S. government bonds, it acts as a foreign lender to the United States. The third reason is that this foreign lending stimulates American demand for Chinese manufacturing exports and allows the Chinese government to relieve its current unemployment problems… No doubt, most of these loans will turn out to be very expensive because they will be repaid with greatly depreciated dollars, which in turn will exacerbate down the road the growing financial distress of the banking sector in China.

Therefore, it is clear that China travels today the road to Depression. How severe this depression will be, will critically depend on two developments. First, how much longer the Chinese government will pursue the inflationary policy, and second how doggedly it will fight the bust. The longer it expands and the more its fights the bust, the more likely it is that the Chinese Depression will turn into a Great Depression. Also, it is important to realize that just like America’s Great Depression in the 1930s triggered a worldwide Depression, similarly a Chinese Depression will trigger a bust in the U.S., and therefore a recession in the rest of the world.

Unless there is an unforeseen banking, currency, or a derivative crisis spreading throughout the world, it is my belief that the Chinese bust will occur sometime in 2008-2009, since the Chinese government will surely pursue expansionary policies until the 2008 Summer Olympic Games in China. By then, inflation will be most likely out of control, probably already in runaway mode, and the government will have no choice but to slam the brakes and induce contraction. In 1929 the expansion stopped in July, the stock market broke in October, and the economy collapsed in early 1930. Thus, providing for a latency period of approximately half a year between credit contraction and economic collapse, based on my Olympic Games timing, I would pinpoint the bust for 2009. Admittedly, this is a pure speculation on my part; naturally, the bust could occur sooner or later.

Of course, macro-economic predictions like this usually prove to be far off the mark (except those made by me), the most (in)famous perhaps being Gordon Chang’s prediction of “The Coming Collapse of China.” In the case of the article above, the story seems to have occurred almost in reverse - a US (and increasingly European) crisis is what is plunging the world into a recesion, not government-generated inflation in China. America’s economic crisis, not China’s, was the catalyst for the tailspin, and if China is be plunged into a depression, it will be for reasons very different from what the author envisaged. (He was shrewd enough to say that his theory might be offset by “an unforeseen banking, currency, or a derivative crisis spreading throughout the world.” And what we are seeing today was certainly unseen by most in 2004.)

However…however… I honestly believe China is going to be one of the few players that emerges from the current crisis relatively unscathed (and “relatively” is a key word.). Simply because of the size of its own domestic markets and the trade it carries out in Africa and Asia. It will suffer, lots of factories will continue to close and lots of dreams will be erased and jobs lost. But it won’t be depression. What it will be, more than anything else, is a test for the CCP. Running a country the size of China with the staggering problems is hard (to say the least), but it sure helps when the economy is roaring year after year.

One of the most frequently repeated motifs is that as long as the economy is kicking, most Chinese don’t give a damn about human rights and censorship and corruption. Once things slow down and people have more time (and more fear), as they see their opportunities dimming, as they realize the joy ride they were counting on was finite while the ruling classes are doing just fine - will they lose some of that Zhongguo jia you spirit and begin to demand their government do better? Will they look at they way America ousted the Republicans, and demand that same freedom? Short answer: probably not; at least not yet. China is better positioned to weather the current storm without enough rampant misery in the cards to get people thinking about revolution. The government can still spend its way out of this mess they way it usually does. One day China will face an economic moment of truth, the way America is facing one now. I’m pretty sure this isn’t it. Yet.

I swore I wouldn’t post anything today, that I’d focus only on my homework. The Internet is such a monumental distraction. And that will be the subject of an upcoming new post.