China

Happy Golden Lucky: Is It Over For China?

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He seems like such a nice man.

If you enjoyed Sen. Charles Schumer's (D-New York) anti-Chinese tirade yesterday, you may also like Gordon G. Chang's fascinating prediction of the end of China Inc. in World Affairs. The story is almost wall-to-wall good news, but such is the market for declinist narratives that Chang's book is called The Coming Collapse of China.

This article, however, bears the title "The Party's Over: China's Endgame," and it has the more modest goal of demonstrating that the Communist Party's control is slipping. It's pretty persuasive on that point. Chang says the recession has already begun to undermine the party's essential claim that it knows how to deliver prosperity:

China's economic model, which allowed the Chinese to take maximum advantage of boom times, is particularly ill suited to current global conditions. About 38 percent of the country's economy is attributable to exports—some say the figure is higher—but global demand at this moment is slumping. (Last March, the normally optimistic World Bank said the global economy would contract in 2009 for the first time since World War II and that global trade would decline the most it had in eighty years.) Globalization, which looked like an inevitable trend in early 2008, is now obviously going into reverse as economies are delinking from each other. So China is now held hostage to events far beyond the country's borders.

It's the Pak-ah-pu that's really ruining this country.

As we saw in the Great Depression, the exporting countries had the hardest time adjusting to deteriorating economic conditions. That is proving to be the case now as well. China's exports fell 16.0 percent last year, and forecasts show a weak export sector for at least the remainder of this year. As a result of declining exports and other factors, Beijing presided over the world's fastest slowing economy. China's economy, in fact, grew by about 15 percent in 2007, but fell to negative growth at the end of 2008.

Beijing stopped the precipitous decline with a $586 billion stimulus program, announced in November 2008. The plan created a "sugar high" as the central government flooded the country with money, but resulting growth will be short-lived. The state's stimulus plan favors large state enterprises over small and midsize private firms, and state financial institutions are diverting credit to state-sponsored infrastructure. The renationalization of the Chinese economy with state cash will eventually lead to stagnation.

But the economy could fail before stagnation eventually sets in.

This mall's got everything except shoppers.

Nobody loves the recession more than I do, but I think Chang may be putting too much emphasis on transitory developments. China's post-Mao, and particularly post-Tiananmen, growth could certainly be screwed up by the ruling party, but it's important to remember that the party didn't create the growth in the first place.

Chang faults Prime Minister Wen Jiabao for not re-orienting the economy toward consumption rather than exports, noting that China's stimulus went mostly toward infrastructure and heavy industry. That sounds like a classic misallocation of resources, but it's nothing that we haven't seen on this side of the Pacific. Although Chang doesn't get into it, the dispute over the alleged undervaluing of China's currency is part of this same argument over the party's reluctance to encourage consumption.

But you know who I'd like to be? The autocrat whose big challenge is to stop preventing my people from buying more stuff that they want to buy, in massive, beautiful shopping malls that didn't even exist when I took office. I think I could solve that problem.

That strain of we-should-have-their-troubles runs through the piece:

As a people, the Chinese are not particularly obedient these days; they incite as many as 127,000 disturbances a year—perhaps more. Whatever the exact number, the political system is obviously having increasing difficulty channeling discontent as the Chinese people, believing in their rights and fearing their leaders less and less, wrestle for control of their future.

Tellingly, the most disgruntled people Chang highlights are not dispossessed kulaks or starving peasants or oppressed cosmopolitans but those universal symbols of socialism in retreat: workers bellyaching about layoffs. Many labor fights have ended violently. Undoubtedly some budding Chuck Schumer in Guangdong is even now lecturing the unemployed about how their problems are all the fault of the Americans and their Beijing lackeys. But the unifying theme is that people are able to stand up to their government:

Fighting The Man in Urumqi.

The Uighur protests that erupted in Xinjiang last July, for instance, were sparked by news—which spread rapidly—of murders at a factory at the other end of the country, in Guangdong province. Worker demonstrations in early 2002 started in the northeast and spread to the center of China in a matter of days as laborers realized they shared common grievances. ("It's the first time we have seen protests occur in the same industry, over the same issues, in different cities in China," says Han Dongfang, a labor activist exiled from the mainland.)

Best of all, the ruling party is busy producing the kind of leaders a free society most needs—mediocrities:

China's system is now weeding out the Mao Zedongs and even the Deng Xiaopings in order to prevent the rise of charismatic leaders, particularly someone like a Chinese Gorbachev. The individuals surviving this vetting, not surprisingly, lack the dynamism and ability of their bloodthirsty but imaginative predecessors. As the current leadership works to keep the lid on, small problems grow into big ones and big ones become gigantic. None of these problems has threatened the existence of the regime because increases in economic output in recent years have masked dislocations. But as the economy begins to contract, these problems may become too big to ignore—and perhaps too big to solve. As a prominent businessman told me last spring—smiling broadly as he sat in his spacious office in a Shanghai skyscraper—"No one fears the government anymore."

Chang takes seriously the possibility of a revolution, and it would be wonderful to see another communist party become extinct. And China could certainly use a cooler looking flag. But the work of accommodating change already seems to be happening:

"Now, no Communist official is loyal to or will sacrifice for the party," said democracy activist Peng Ming, just after he was released by the regime. "When I was in jail, the prison warden and guards were very respectful to me. Even when I criticized them, they would not criticize me back. Why? They said, 'This regime will not last long. Who knows you won't be our next leader? If we mistreat you now, you will come after us when you come to power.'"

All this may signal a weakened or nonexistent Communist Party in the future. Maybe it portends the kind of national reversal Chang hints at (and his book title makes explicit). But keep in mind the truth that unifies all nations: People prefer MTV to leprosy.

Whole piece, courtesy of Arts & Letters Daily.

NEXT: Suppressing Good News for Justice

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  1. Chang faults Prime Minister Wen Jiabao for not re-orienting the economy toward consumption rather than exports, noting that China’s stimulus went mostly toward infrastructure and heavy industry.

    Help me out, here:

    How is a country that is a mix of first, second, and third world regions “misallocating resources” to infrastructure and heavy industry that are likely useful for domestic development as well as foreign trade?

    I mean, I’m sure lots of their stimulus was blown on featherbedding and bad projects, but this seems a little sweeping.

    1. I will help you out, over investment in heavy industry was one of the things that killed Communism.

      “infrastructure and heavy industry that are likely useful for domestic development as well as foreign trade?”

      That is what Stalin thought. Hey let’s build the White Sea Canal and so forth. Just because it is “infrastructure and heavy industry” doesn’t mean that it is the most efficient use of resources. And, as you of all people should know, it is highly unlikely that central planners are going to give it to the right places even if they get the right sectors. China will end up with a bunch of un-needed or over engineered infrastructure projects and a bunch of heavy industry that is not profitable or filling a need.

      1. a bunch of un-needed or over engineered infrastructure projects and a bunch of heavy industry that is not profitable or filling a need

        That sounds strangely familiar…

        1. Yeah. It is almost like it is happening somewhere familiar and close or something.

          1. How do you spell UAW in Chinese?

        2. Keep moving, citizen. Nothing to see here.

      2. Occam’s Razor: Broken Window Fallacy.

      3. Not only that, but they bragged all the time about the superiority of Big, Important, Large-Scale Projects over piddling gadgets that people might actually want to buy. The whole premise behind the famous Kitchen Debate was that Americans were frivolous and weak because they preferred nice appliances to electrometal factories as big as cities.

        And yet when the chips were down, even Khrushchev would rather have visited Disneyland than a housing project.

        1. Good point Tim. Contrast the Soviet Unions recovery from the War with that of Japan. Japan was building all those piddling little things that consumers wanted (and shipping them to the US virtually for free thanks to the Vietnam War) and Russia was building all of that heavy industry. How did that turn out?

          Intellectuals and planners love big stuff and VIP tours. It is just more fun to tour a steel plant than it is some dress making factory in the back of a warehouse. Thus, they fall for the “lets build heavy industry” fallacy every time.

          1. Didn’t turn out so hot for either country.

          2. Well in understanding the USSR’s size fetish, Dave Thomas was there first, as usual.

            1. Wait a minute…he wasn’t pointing to the Ukraine, he was pointing to Kazakhstan.

          3. What do you mean, “virtually for free thanks to the Vietnam War”? Did we load up ammunition ships with blenders on the return trip or something?

            1. A guy named Mersk developed the SeaLand concept where you basically stack tractor trailers into container ships like legos. No one wanted to use it. The shipping industry was very conservative. His first customer was the Defense Department. They had to send huge amounts of stuff to Vietnam to supply the war. Well, the stuff only went one way. So Mersk’s company would make the one way run from the West Coast to California. Like any defense department contract, it paid them a fortune. They made money even if they came back empty. But, they still had to have the ships come back to the West Coast to make another run. So, what they did was go to Japan and fill up with goods there on the way back. Since the costs of the trip were already paid for, they could charge very low shipping rates. It was all profit. So, Japan was able to ship its goods at rates below cost.

              1. I hate to tell you but your facts are wrong. Maersk is a Danish shipping line, the biggest in the world. Containers were actually the invention of a tarheel truck driver turned shipping magnate named Malcolm McLean, who founded SeaLand, which was later sold to Maersk. But people really were resistant to the change, since for millennia people had used the breakbulk method of loading freight on to ships. Of course, one of the biggest resistors to change was the longshoremens’ union, since fewer workers would be needed.

                1. I got the names wrong. My mistake. But, DOD was the first adopter. And the shipping companies did make below cost runs from Japan as a stop off on their way back from Vietnam. Thus, the Vietnam war did indirectly contribute to the Japanese economic miracle.

                2. Of course, one of the biggest resistors to change was the longshoremens’ union, since fewer workers would be needed.

                  …and fewer items could be “lost” during loading and unloading.

    2. ALrighty then. Thanks.

  2. Stimuli are definitionally misallocated (unless I get ’em).

  3. The one thing they could do that would be disastrous?

    As they continue to transition to more of a consumer nation, they’re also showing signs of maybe wanting to exit or renegotiate WTO agreements.

    Basically, now that domestic companies need to focus on their own burgeoning market more, the nation’s industries are looking for the government to protect them from foreign competition.

    …which is about as predictable as can be. Of course, there’s no need to go into the specifics of why protecting domestic industries with trade barriers is a bad idea, not around here!

    Because we’re all smarter than that! We know Wal*Mart is the solution to our economic problems, not a problem in itself. Because we’re all libertarians, and we’re smarter than that. Aren’t we?

    Aren’t we. : [

    1. I’d like to hear why you think Wal-Mart is the cause of our problems (and for that matter, what our problems are.)

  4. Nice post, Tim. And when you consider that 1) leprosy is quite treatable these days and 2) MTV was basically killed by the Internet, it’s a pretty sweet world we’re living in, as long as you’ve got a job and Obama hasn’t targeted you for execution.

    1. How profound! In fact, that seems very familiar! A word, if you don’t mind sir?

  5. By the way, do we ever get 50 Cent Army around here?

    Let’s see…

    China is a weak nation.

    China is afraid of Falun Gong.

    China is afraid of students at Tienanmen.

    China is afraid of foreign competition.

    China will never be strong.

  6. And they missed the best sentence of the whole article.

    “Anything can happen in a country filled with secret societies, revolutionary cells, private armies, illegal political parties, underground congregations, and clandestine triads.”

    I have never seen china depicted as such an interesting and exciting place.

    1. Aparrently, you have not been to Hong Kong, John 🙂

      1. John used to run a heroin ring out of the Kowloon Walled City, dude. His nom de plume was Fu Shampoo for some reason.

        1. Stop blowing my cover Warty. We don’t talk about those days anymore. I was a different man then. I would never put someone who owed me money head in vice anymore. And I gave away my shark tank years ago.

          1. Hmmm, John that is interesting. I recently procured a shark tank with the name “Ping Pong Fong” etched into the ornamental carving. You, uh, wouldn’t happen to know anything about this, would you?

            1. If it came with a large Tiger shark, be good to him and make sure he gets human blood at least once a week. He meant a lot to me.

      2. No I haven’t. but I hear it was quite the place before the Chicoms got their filthy paws on it.

        1. It still is a happening place. Chicoms are smart enough not to kill their golden goose (yet).

          An ex-GF of mine is a fashion buyer dealing mostly with China for a major clothier and she said Hong Kong is probably the most cosmopolitan city she has traveled. Her quote, “New York on Steroids”

          1. It is the one place in East Asia I have ever had any desire to visit or live.

    2. secret societies, revolutionary cells, private armies, illegal political parties, underground congregations, and clandestine triads

      It’d be more exciting if they didn’t always have these things. First it was the Manchus, a tyrannical, corrupt, increasingly inept government with values out of step with the Chinese people. Eventually no one thought them worth defending, the Nationalists got rid of them (the Triads were meant to do it, but they missed the boat).

      Then the Nationalists turned out to be a tyrannical, corrupt, increasingly inept government with values out of step with the Chinese people. Eventually few thought them worth defending, and the Communists showed them a thing or two.

      And now there’s the Communists.

      It’s all very exciting history, but in the same way thrillers are exciting even though you know someone is going to pull off a twist in the end.

  7. Not to mention that their economy is filled to the brim with corruption. The country seems quite fragile in many ways, more likely to suffer major convulsions than overtake the US.

  8. …the normally optimistic World Bank said the global economy would contract in 2009 for the first time since World War II…

    WTF? How did the Chinese economy not contract during the collectivist idiocies of The Great Leap Forward and the Cultural Revolution? I need a new needle for my bullshit detector.

      1. Fuck you, Warty. If you’re going to point out my stupidity every time I do something stupid, we’re gonna be here all day.

        1. A man has got to have some purpose in life.

        2. A man’s got to know his limitations.

  9. Just wait until China’s gigantic housing bubble pops. That’s when things will really get interesting.

    1. My understanding is that the run-up in Chinese housing isn’t as bubblicious as the US run-up. The Chinese still operate under lending requirements that mean the buyer has to put in equity, etc. The Chinese are also quite hostile to derivatives. All told, my take is that whatever the overheating in their housing market, it isn’t a credit-driven bubble, and any contraction shouldn’t be as contagious.

      1. China has no growth management regulations so it will not have a housing bubble like many regions here did.

        Note: i am making assumptions about how property rights work in China.

  10. The “heavy industry discussion reminds of me Stalin’s particular industrial fetish, high-voltage electrical engineering. He just looooved those big transformers and huge insulators.

    1. Read The Forsaken. The bits about the Ford factory in Stalingrad (I think) are fascinating.

      1. That looks like a great book. A similar thing happened to Koreans. Japan had and has a sizable Korean population. In the 1960s, North Korea put out a bunch of propaganda to get them to move back home to North Korea and help the mother land and all of that. They met the same fate as the Americans in that book. What is horrible to consider is that most of the people killed by Stalin were probably taken in by propaganda by American communists who knew better but put out the propaganda anyway. Just a little more blood on Walter Duranty and the New York Times.

        1. The part that turned my stomach most was how the American ambassador knew what was happening to the immigrants, but ignored them. People would go to the embassy to beg for help to get out of the country, get turned away because the Soviets had taken their U.S. passports, and then the NKVD would disappear them as they left the embassy. Vile.

          1. OMG. Like it wasn’t obvious they were Americans. FDR also turned over all of the Russian exiles in Western Europe back over to Stalin and their deaths as part of the Yalta agreement.

            Ladies an Gentleman, your FDR Administration.

            1. big deal, Truman was president when they assasinated Patton. The same folks run the show no matter who plays the leading man.

            2. That didn’t actually get implemented. US forces made a policy of assuming a captured soldier (including POWs in German camps) was German unless he insisted otherwise.

              The British, on the other hand, were very diligent about returning Soviet POWs in German camps. As surrender was a violation of the Soviet military rules, you can guess what happened to them then. Kind of cuts against the general perception of Churchill’s vs Roosie’s attitudes towards the USSR, no?

    1. Cool stuff. We learned about this working with the Juvenile Diabetes folks. What’ll they think of next…it’s truly amazing.

      Of course, more importantly, props on clever SF reference.

  11. Chang takes seriously the possibility of a revolution, and it would be wonderful to see another communist party become extinct. And China could certainly use a cooler looking flag.

    The college that I went to was in a small Midwestern town that put on an international street fair every year. They hung national flags from the lamp posts of the main street and labled each country’s flag with a little sign underneath. This is what they had for China.
    God bless them, but I’m not sure how many people understood it.

  12. Yes, I am sure we would all like to see communism in China have a Happy Ending.

    1. It already has. China is ruled by Communists in name only. In fact i would call China the only functioning libertarian oligarchy the world has ever seen.

      1. So a country that routinely imprisons and kills members of a small religious sect (the Fulon Gong), threatens its neighbors with annihilation (Taiwan), and has strict controls on speech and the internet is a “functioning libertarian oligarchy”? Have you gone insane Joshua? Are you trolling? Smoking something?

        1. Economically it is fairly libertarian. A Chinese woman studying here in the US told me the other day that she would never want to live here because our taxation system is too complicated.

          1. I disagree. The Chinese government at all five (5!) levels still controls about 1/3 of the economy. They are stoking bubbles with schemes not unlike the regs here that forced banks to finance shitty mortgages. And they won’t even let the Yuan appreciate, yet.

        2. If you will note i used two modifiers to the libertarian label:

          Oligarchy and functioning.

          It is still a non-democratic state and it still preserves itself. I do not think an oligarchy of any kind could remain functioning without repressing people to maintain itself.

          I am simply pointing out that this is what an authoritative libertarian state would look like and the type of libertarianism you and i would like would have to be democratic or at least representative.

          That said China is a way nicer oligarchy then say a socialist or fascists or communist oligarchy.

          I guess we could argue over which is better, a socialist democracy or a libertarian Oligarchy. My opinion is that a socialist democracy wins that fight, but i am open to discussion.

          1. I am simply pointing out that this is what an authoritative libertarian state would look like and the type of libertarianism you and i would like would have to be democratic or at least representative.

            Bullshit. There is no reason democracy is required to have a libertarian state. There are historical examples of “benevolent despots” during the Enlightenment who, despite being autocrats, chose not to interfere with free speech or freedom of religion.

            1. There are historical examples of “benevolent despots” during the Enlightenment

              there is another name for the enlightenment…the age of slavery.

              China is tame compared to your “benevolent despots”

              Hell look at France which was nearly as benevolent as England….something got those poeple riled up enough to cut vaginas out of nuns and chop off the head of everyone above a horse shoer.

          2. And I’d go with a libertarian dictatorship over a socialist democracy in a heartbeat. I care much less about casting a vote to decide who gets called “leader” than I do about being able to go about my business without having to worry about said leader stopping me.

    2. I’m sorry, I think I was too obtuse. I should have included a link:

      Yes, I am sure we would all like to see communism in China have a Happy Ending.

  13. They said, ‘This regime will not last long. Who knows you won’t be our next leader? If we mistreat you now, you will come after us when you come to power.'”

    Few truer words have ever been spoken.

    1. I’d like to think so, but they’ve been saying the same thing about Castro for what’s it been, 45 years?

      1. Cuba has been under embargo. That legitimizes the regime into perpetual revolution.

        Had we lifted the embargo, it is my opinion that Castro wouldn’t have lasted five years.

  14. When I was in jail, the prison warden and guards were very respectful to me. Even when I criticized them, they would not criticize me back. Why? They said, ‘This regime will not last long. Who knows you won’t be our next leader? If we mistreat you now, you will come after us when you come to power.'”

    The subtext here is that the Chinese people merely expect another dangerous dictator to come to power. They don’t expect freedom. That doesn’t bode well in my opinion.

  15. The Great Leap Forward was an extraordinarily creative intervention in Chinese economic development.

  16. Stupid asshole.

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