Why Do Some Experts Predict China’s Economy Is Going To Collapse As Fast As It Expanded?
Posted by China Sourcing CommentatorAug 4
I was just wondering what reasons and justifications these experts used. Being the world’s #1 exporter, with a surplus of over 3 trillion US$ (1/3th of the American dept!) and with it’s massive middle class getting richer and richer every day, I don’t see how it could collapse.
The country’s economy have been growing faster than any other country’s economy for the past 20 years and it’s current growth was unequaled in the history. China is now a very important place for international business. A few years ago, it only produced cheap goods but it now produces textile, high quality technology, etc.
How is this supposed to fail?
Thanks in advance for your explanations.
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Well, some of the reasons for it’s success are also the reasons it could be subject to failure.
1. The economy is significantly based on EXPORTS, particularly to the west, so if North Americans and Europeans slow down buying stuff, China’s economy suffers disproportionately.
2. There are HUGE inequities between the poor and the worker class and the monied class in China, there is the old Churchill truism that the vice of capitalism is the unequal distribution of it’s benefits and the virtue of socialism is the equitable distribution of its misery. It’s like that. Education, science, infrastructure are all based on the middle 60% of Chinese who are still damned poor when compared to those in other countries (US/EU/Japan).
3. A small segment of Chinese society (5-10% of the whole) may try and to a degree succeed in achieving something approaching the lifestyle of those in the west, (cars, houses/apartments, office jobs, good education) but there will be a LARGE majority which not only won’t but could never achieve this lifestyle, they will be pissed off.
4. Environmental devastation, in the US particularly environmentalism gets short sheet unless something truly tragic happens (Katrina, Exxon Valdez , drought, etc) in China, stuff like that happens EVERY DAY, whole river systems have become so toxic, that people get chemically burned by touching the water , let alone drink it or use it for cooking etc. This has gone on for the last 20 years or so. Desertification, water pollution, air pollution, ambient toxicity in the environment (lead/dioxins etc in everything in the environment)
5. The Environment 2.0 – With global climate change/warming whatever, it may not matter that polar bears go homeless, polar bears don’t have nuclear weapons so it doesn’t much matter if they are desperate communist party members too.
In China that matters a great deal as you somehow have to keep 1/2 your people fed reasonably consistently (with all the problems mentioned above). Its more than likely you could understandably become somewhat emotionally sensitive to Pakistan or India or someone else laying claim to your water reserves. Wars have begun for less.
6. Regional conflicts spilling over, Whether it’s Kim Jong Il, Perez Musharaf , some Russian disaffected General or Nationalists in Japan or Indonesia there are going to be 4 and potentially as many as 7 nuclear armed states right next door and at least 2 of which (at the least) are not entirely friendly to Chinese interests. This is NOT an entirely happy situation under any circumstances. Any conflict between these states (India / Pakistan) , (Indonesia/Philippines), (Russia&Anybody), would be bad news and invariably involve China.
7. Straight economics, the Chinese “stock” market is laughably corrupt,a single US citizen with a 401k may have holdings in dozens of companies in a reasonably well diversified portfolio. In China with 1.6 billion people, there are approximately 100 companies traded on their stock-market, more than a few of these are tied to the government somehow, and there is not even a semblance of the accountability that exists in other countries in the EU , US or elsewhere.
Finally, our national destinies are linked at the hip.
8. Eventually one of two things will happen with US debt.
A. US citizenry may wake up and demand the government put a 20 year plan or something to retire 80% of the debt.
B. US citizenry does NOT demand the government retire the debt.
Either way , China is screwed,
A, is obviously preferable for all concerned but that’s just NOT very likely (This only really hurts China a very little bit).
B. Is far more likely and will have bad consequences, because China and Japan and most recently India are starting to buy strategically significant amounts of US debt.
The problem is that US politicians currently have an alcoholic relationship with tax-cuts and debt and they clearly aren’t all that serious about actually paying that debt so if the intention to default on that debt became obvious for some reason there could be a RUN on our debt. Our citizens would not buy stuff and the economy could be in for a nasty shock. This would SCREW China royally since they’ve bought so much of our debt, coupled with the exports/trade hit and resurgent concern about US national interest,. We’d be screwed but that pain would hurt everyone else along with us.
Alternatively, the thinking is that you can drop an economic “bomb” on the US economy by demanding debt payment or dumping that debt onto the market , either way you bite the hand that feeds and things could get ugly, if the US economy was significantly affected, you would see citizens rioting in the streets to at least appear to get an “A”, situation started.
No, it wouldn’t actually collapse. That’s a strong word to use.
Although I’m sure different experts have different reasons for predicting a collapse, two major issues come to my mind regarding a collapse.
1) They have horrible environmental problems. Much of their drinking water is unhealthy including their major rivers. If they don’t start cleaning up their environment, they will have a large increase in health problems, which will be very expensive. If they do clean up their environment, it will result in increased government spending and possibly decreased productivity.
2) China has over 7 million more males than females. While this is not currently a problem, these people will one day be unable to work, and they will not have spouses or children to take care of them. Thus, China will have a large population of people requiring care, and the government will probably have to pay for the care. This is similar to the problem the USA is facing with retiring baby boomers.