Tuesday, December 16, 2008

Will China's Economic Slowdown Bring Political Unrest?

Conventional wisdom has it that China's economy must grow at least 8% to absorb the new workers pouring into its cities. Geoff Dyer in Beijing reports that the World Bank forecasts it will fall short of that next year "as it sharply cut its outlook for the country’s economy." As its economic growth falls from from recent double digit, the People's Republic faces danger as it approaches the thirtieth anniversary of Deng Xiaoping's opening to market forces. Also in the Financial Times, Gideon Rachman comments, "the only recent examples of social unrest in one of the world’s main economies have come there, not in the west. Laid-off workers in factories in southern China have staged protests that had to be contained by riot police. There have also been strikes and violent protests by taxi drivers in some cities across the country. The notion that the Chinese economy has so much momentum that it has 'decoupled' from the US looks like a myth."

2 comments:

Kenneth Shockley said...

China sure does seem to be taking this global recession hard. I would say that this article goes along with the one that you gave us for the final, in that... China, as well as the other countries running huge surpluses, will be facing some hard times if they can't generate an eternal demand.

By the sounds of this article, as well as a couple others you have posted, China is starting to have to face the fact that since they are a primarily exporting nation, and it seems as though everything we buy was made in China, that when we spend less during a recession, it will have a greater impact in China.

Protests being controlled by riot police as a result kind of has me worried. I'm not really worried about whether or not the People's Republic will stay in power so much as the leaders might decide to place more restrictions and limit the market's effect on their economy. I'm not entirely sure that it is possible to do so now, but I wouldn't want to see what the stock market would do if China stated that they were planning on it.

Gentz said...

Your totally right Kenneth! China depends more on exporting than most countries, so when countries(Mainly the US) decide that we don't need to buy as much because of a lack of funds in our own pockets. China gets hit hard.

8% is a huge amount of growth to be taking on a year to year basis. I think the US is somewhere around a 2-3%.(don't quote me on that number) I can only imagine what their cities infrastructures had to transform to cater to all the new people flocking to the city. If the cities are not doing anything, we should be getting ready to send some type of relief, because that just spells disease. Hopefully that's one of the things that the huge Chinese government rescue plan set to accomplish.