A Turning Point for China
07/10/2012 Deja un comentario
(…..) However, China appears to be facing a multiple crises, each exacerbating the other. China could have its turn at instigating global recession. The rest of the globe should expect turbulence and uncertainty. There is a political crisis arising from the fact that the leadership transition is clearly not going as smoothly as planned: The party appears riddled with acute factionalism, heads are falling, but opacity remains. Dramatic fall of powerful princeling Bo Xilai and his wife and their sordid scandal eroded party’s legitimacy. Unexplained disappearance of the presumed incumbent to the presidency before his sudden reappearance two weeks later raised serious questions about the secretive party’s mode of operation. The most profound crisis, one that lies at the heart of all the other crises, is the social crisis. In discussions with Chinese intellectuals in recent weeks, word that keeps emerging is “anger.” People are angry at inequality, injustice, corruption, pollution, flagrant abuse of privilege, exorbitant prices of real estate driven by speculation. Social unrest is expressed through increasing number of demonstrations over quality-of-life issues, for example recently in Dalian, over toxic chemical plant, and by a hyperactive blogosphere. China’s environmental crisis, with the world’s highest levels of pollution and permanent urban smog, fuels the social crisis. The economic crisis arises not so much because of a 2%, or more, fall in the growth rate, but in a surprisingly widespread pessimism in respect to the future. The state is too bullying, the financial system is byzantine, the education system fails to provide needed quality, and goals of innovation and higher value-added set out in the 12th Five Year Plan appear unattainable because of party’s refusal or incapacity to carry out reforms. The social and economic crises are rendered more acute by China’s looming demographic crisis as the population rapidly ages and the proportion remaining active in the labor market diminishes. In some respects perhaps most dangerous of all crises is the geopolitical. Needless to say, it’s exacerbated by the simultaneous economic, social and political crises. China is currently in a state of territorial conflict with at least three neighbors (Japan, Vietnam, Philippines) while relations with a number of major powers, notably India, Russia and US, are tense. These are further fueled by a increasingly strident rising nationalism, now being ramped up with anti-Japanese demonstrations and the display of military might. Though war still seems reasonably remote possibility, by no means can it be ruled out totally. World should take notice. A more optimistic scenario is that social, political and geopolitical turbulence will not degenerate into chaos, that somehow transitions are managed, even if anxious uncertainty lingers for the next few years. The China economic boom will cease; the developing countries should anticipate a possibly steep decline in demand for commodities. China will likely become more protectionist, reflecting paralytic state of the global trade agenda and retaliation for likely protectionist measures from others, notably the US. But trade war may be averted. Overall, the locomotive will probably still be there, slower and prone to unscheduled swerves and stops. Once this difficult transition period is completed, China may resume its “peaceful global rise”. There are far more pessimistic scenarios, including violent social unrest, economic collapse, extreme environmental degradation, political chaos, military confrontations. The outcome depends on the answers to 2 fundamental questions: Is the leadership capable of implementing needed radical reforms? How will China’s relations with its neighbors and with rest of the world affect its internal development and global economic and geopolitical environment? Answers to these questions should influence the fate of the world.