A slumping world wide economy, along with lack of adequate capital controls behind the Bamboo Curtain, has China sitting at the crossroads between free market capitalism and totalitarian communism.
Last spring, economic, financial and progressive talking heads- whose hind parts are where their head parts ought to be- were saying that China was to become the dominant economic player in the world by 2016. This, on the strength of an IMF report projecting GDP growth for China surpassing the US in GDP by 2016, just four years from now. The IMF report, progressives claimed, showed that China had a much better economic model to follow.
“Perfect order and global governance are not realistic expectations,” said George Soros last spring, according to the New York Times, as Obama dreamed of a Chinese presidency. “However, it is a sad fact that Western democracies provide less successful leadership than China.”
But just nine months later, a far starker contrast has emerged on China in a report issued by another international banking body.
The World Bank, in a 400 page report, issued a warning to China this week telling the world’s most populous nation that their new-found pseudo-capitalistic economic “model is ‘unsustainable,’ and the Asian giant is in danger of falling into a so-called ‘middle-income trap’ if it fails to launch meaningful remedies,” according to the LA Times.
At stake is not just the economic development of the country, but rather the political development a society that has one foot in the modern world and one foot in feudal past.
And none of it comes as a big surprise to the writers at Townhall Finance.
Here’s what I wrote last May as a response to the IMF report that the mainstream media celebrated as “proof” that the Age of America was ending, while China’s golden age was beginning:
Liberals wants you to know that America's best days are almost behind her.
They even pegged a date. And included pictures.
The date is 2016, says the mainstream media. [Execute Google Search Here]
That's the date when they say that the IMF warns China's economy will surpass America's in real terms.
The IMF disputes the claim.
(Source: MarketWatch)
Let's just say that I'm suspicious.
There are a number of problems with this projection as the "End of America."
The problems with ushering in a “great age” in China include rampant corruption, lack of freedoms, too many central planners, human rights abuses and- oh by the way- being, Communist. These and poor decision making on investments because they have too many dollars, all present little sticking points to China becoming the biggest economy in the history of the world, ever!
The Chinese invented – and failed to advantage of- gunpowder, pasta and, now, centrally planned crony capitalism.
Reformers, led by Premier Wen Jiabao are in the minority in China, a very big minority.
"It is obvious [Wen] is the symbol and the voice of the reforming forces ... The fact that he appears helpless is a very good reflection of China's political reality," said Professor Joseph Cheng Yu-shek. "You have people in the party who might be interested in reforms but they are certainly in the minority and can't do much."
As we have written about extensively on Townhall Finance, there is a tremendous amount of malinvestment in China.
Whole cities have been built that stand empty. Investment like that, as we proved here at home in the residential real estate market, can't go on forever. And apparently China’s great leap forward has finally taken a little stumble.
In the general upward slurge of growth a country can paper over a lot of problems. They just can't do it forever. Eventually when growth stall or slows, people get restless.
“Xinjiang’s security services are recruiting 8,000 new officers to conduct a crack down on illegal religious activities,’” reports the China Reform Monitor in a typical offering, “and security patrols targeting the migrant population in all villages, the official People’s Daily reports. The suppression of ‘religious extremists’ is part of a countrywide crackdown ahead of the 18th CPC National Congress to be held later this year. Some 41.5 percent of Xinjiang’s 21 million people are Muslim Uighurs and the authorities worry about the spread of extremism in the community.”
In fact authorities in China last year started the biggest crackdown on dissent in over ten years.
“Shenzhen officials seeking social stability before they host the Summer Universiade, an international sporting event for university students,” reported the China Reform Monitor “have arrested or evicted more than 80,000 people deemed a threat to security.”
80,000 people arrested or evicted to make way for an event. Here in the US people have legal standing when they are served a cup of coffee that’s too hot.
And sure, China's been a Keynesian Disneyland with more money than even Hillary could mismanage. But the problem with that is eventually investments have to return something or the park finally closes down, especially when your economy revolves around other economies purchasing goods from you.
A sustained hit from slower imports from both Europe and the United States will be devastating to China.
Last March, in the progressives continuing love affair with the command and control shown by the Chinese, the New York Times reported: “Obama has told people that it would be so much easier to be the president of China.” He was rightly savaged for that incredibly stupid, misguided and ill-informed comment leaked by incredibly stupid, misguided and ill-informed White House staffers to an incredibly stupid, misguided and ill-informed newspaper.
Come November when he’s looking for a job, perhaps Obama will get his wish and he can run for president of China.
The Chinese may have more money than Hillary could mismanage, but I think Obama might be up to the task. He can take George Soros with him
They both lack the command and control and that, according to the World Bank, is exactly what China needs.
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