Wednesday, September 12, 2012

Big Trouble In Big China

The great savior of globalized corporate capitalism seems to be fraying at the edges:
I wanted to find out what was on the minds of ordinary people. What did they talk to one another about? So in 2007, with permission of the authorities, I put up billboards featuring images of trees, like the “wish trees” in Daoist, Buddhist and Confucian temples, where people tie notes about their private desires to the branches, hoping that the wind will blow their prayers to heaven. Chongqing residents stuck hundreds of their leaf-shaped notes onto the branches of my “trees.”

Their wishes and worries were candid, heartfelt and startling: people had lost their optimism and were yearning for security and freedom from anxiety. Income is a primary worry for those who have lost their jobs or land. Pensions and social welfare payments are almost nonexistent. People struggle to pay for education. They can’t afford medical treatment; clinics and hospitals require patients to pay cash in advance. A serious illness can spell financial ruin for an entire family.
In other words, China’s “growth miracle” has left the majority of Chinese in exactly the same boat as their American counterparts. Welcome the miracle of globalism. It was always about benefiting a small international elite.
China’s one-child policy has turned family life from a source of solace to a font of anxiety. Parents now get just one chance for a child to succeed and to support them in their old age. Single children carry an unbearable burden of parental and grandparental expectations.

In sum, a spiritual hunger has taken hold even as physical hunger has receded. Anxiety and resentment are turning people inward; the Chinese are being consumed by anomie, a listless sense that life has little meaning.
What Keeps The Chinese Up At  Night (New York Times)

This commentary puts it well: all of the dazzling infrastructure and the speed with which it is built have made a mirage-like miracle causing starry-eyed wonder:
It’s so easy to be like Tom Friedman and get totally dazzled by the Beijing airport and the Shanghai skyline and the fast railway and revamped subway systems and the spirit of irrepressible optimism that seems to pervade both cities. I was dazzled by it too, and still am. I love it there. And this spirit of optimism isn’t limited to just two cities. I felt it in Chengdu and Kunming, in Xi’an and Guangzhou. But as I’ve mentioned before, for the past year I’ve been editing an executive summary of weekly business, manufacturing and financial news from China, and I’ve been amazed at the intensity and speed of the current slowdown.
People are openly using the “R” word as China’s export-dominated economy grinds to a halt, and the shiny promise of a billion consumers falls short:
It remains to be seen whether this is a variant of errors made by the Fed in 1928 and the Bank of Japan in 1990 when they tried to calibrate a soft-landing after an asset bubble had already run out of control. Charlene Chu from Fitch Ratings issued a note last week warning that China's banking sector assets are near $21 trillion, up from $9 trillion in late 2008. This is extraordinary rate of banking growth. Even a modest shock could "wipe out the sector's entire earnings," she said.

Be that as it may, Dr Cheng said fears of a disintegrating political model are now eating in economic confidence. "This legitimacy crisis is worse than in 1989, and may be the worst in the history of the Communist Party. People are afraid that it could lead to revolution if it is not handled well."

The worry is that the transition could go badly awry as 70pc of top cadres and the military are replaced, the biggest changeover since the party came to power in the late 1940s. "That is what is causing capital flight. All the top officials are trying to get their money out of the country," he said.

Dr Cheng grew up during the Cultural Revolution. That makes one very sensitive to the risks of sudden lurches in the Chinese ruling system, not always for the better. He said the scandal around Bo Xilai and the party machine in Chongqing – and the fight-back by Mao nostalgics – is a symptom of a much broader crisis. The word in Beijing is that Bo Xilai alone has squirreled away $1.3 billion, but there are other even worse cases. Mr Cheng said a former railway minister – known as Mr 4pc — had ammassed $2.8 billion. "This level of corruption is unprecedented in the history of China and unparalled in the world," he said. (I would have thought Russia's oligarchs are right up there, but never mind).
China’s Revolution Risk. Ambrose Evans-Pritchard, The Telegraph

Is automation finally coming for Chinese labor:
George Magnus of UBS has a 29-pager out on Monday questioning if the Asian miracle may finally be over? FT Alphaville is still poring through the details, but couldn’t wait to bring you a substantial chunk of the note which is dedicated to the role of technology and its impact on Asian market dynamics.

We’ve noted on more than one occasion that economists may be missing a trick when it comes to how technology is changing the global economy. More so, that developments like 3D printing, could even pose a black-swan risk for Asia in their own right.

It’s refreshing then that someone of Magnus’ economic standing– who usually prefers to focus on demographic shifts — is now taking a closer look at how technological changes are impacting the economic landscape.
How Technology Is Killing The Asian Growth Miracle (FT Alphaville)

It's already well-known that Chinese elites have been buying up foreign real estate and getting dual citizenship for their children. It's also known that corruption is endemic and the rulers are enriching themselves. It's also known that there has been increasing discontent, and that the Chinese spend more policing their own people than they do on the military:
The number of annual protests has grown steadily since the early 1990s, from approximately 8700 “mass group incidents” in 1993 to over 87,000 in 2005. In 2006, the Chinese Academy of Social Sciences estimated the number of annual mass incidents to exceed 90,000, and Chinese sociology professor Sun Liping estimated 180,000 incidents in 2010.Mass incidents are defined broadly as "planned or impromptu gathering that forms because of internal contradictions", and can include public speeches or demonstrations, physical clashes, public airings of grievances, and other group behaviors that are seen as disrupting social stability.

 And apparently toilets are a major issue:
I was learning an important lesson. China may be undergoing the most incredible economic transformation, but the Chinese Communist Party's instincts have not changed.

It may let you speak to the idle rich and the abject poor but threaten to embarrass it - even with something as trivial as some criticism from the World Toilet Organisation - and the sinews of power become all too apparent.
The Forbidden Public Toilets of Beijing (BBC)

Could a revolution in China be the ultimate Black Swan?

And I just had to include this:
Initially, the Chinese press agreed, labelling the project an “Arc de Triomphe of the East”. But the tone changed this week following a torrent of online criticism.

“Is it an arch or just plain pants?” wondered the front page of the Shanghai Daily. Headline-writers at state-run agency Xinhua were more direct. “New giant tower branded 'pants’,” they wrote.

“This should be called the Pants of the East, not the Gate of the East,” complained one user of China’s Twitter-like micro-blog Weibo.

Another micro-blogger suggested walking through the Gate of the East would be “humiliating”, “like being forced to crawl between someone else’s legs.”

Some were more risqué with their critiques, pointing out that London’s phallus-like “Little Cucumber” — Norman Foster’s 30 St Mary Axe or Gherkin project— would fit snuggly inside Suzhou’s Gate to the East.

“Together, together!” cooed one of the raunchier posts.

Other bloggers condemned the 4.5bn yuan construction as a further example of the increasingly odd foreign creations appearing on Chinese skylines.

“Any design that can not be sold in foreign countries can come to China and sell at a good price,” wrote one.

“Why does China look like the playground of foreign designers with laughable architecture ideas?” said another blogger quoted by Xinhua.
British-designed skyscraper resembles big pants, say angry Chinese (Telegraph)

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