Friday, November 7, 2008

signs of socialism in "Communist" China

The high point of this entry is that title. The rest is me talking about things I barely understand.

It is commonly observed that China's free-market-based rapid economic growth is decelerating more quickly than most predicted - and that this could possibly lead to social disruptions.

"Analysts worry that a sharp downturn could undermine the country’s already weakening investment climate and impair some of China’s biggest banks, which have bankrolled much of the boom.

Beijing worries that if growth slows to 8 percent or less, not enough jobs will be created in a country that is rapidly urbanizing — and that could lead to social unrest.

To prevent that, the government is preparing a large economic stimulus package, pushing new infrastructure projects, offering aid to exporters and searching for ways to prop up the nation’s severely depressed stock and real estate markets."

For China, which has been communist in name (and frighteningly unpredictable market dictatorship in practice) for decades, this means the billion or so people who have seen precisely zero benefit from the policies so far, who have been politely waiting for their turn to start climbing the economic ladder, may have to adjust their expectations. The kids they sacrificed 60% of their income to send through school so they could get one of the new white collar jobs will have a smaller chance of success.

It is during times of great progress that revolutions happen.

The temporary solution is a bit of socialism - in the form of public works projects much like those that helped bring the US out of the first world depression. This will take cash out of the government coffers. As some have observed, any decline in cash reserves in China is likely to upset US interest rates, since they are the biggest buyer of US treasuries - which help set interest rates. And that would be a bad thing.

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