China’s Economic Crisis

While I’m not one of those Sinologists that makes his living predicting the “Coming Collapse of China,” (any day now Gordon…) I do believe that the PRC has some serious structural problems that it is currently facing, and addresses them with varying degrees success. These, exacerbated by the current economic crisis is a dangerous cocktail.
I think Beijing has a pretty good idea about the things going on in China, even if there is no consensus on how to improve state-society relations and deepen the PRC’s governance. They know about the hundreds of millions of (sometimes disposed, sometimes not) migrant workers, they know about the labor riots at State-Owened Enterprises that are slowly being forced out due to China’s burgeoning capitalist (i said it) economic system, they know about the widespread unpopularity of their Family Planning policies (more colloquially know as the “One-Child Policy”).
These problems are endemic: serious issues that the CCP (Chinese Communist Party) has to deal with. My point is that they expect to deal with them. People weren’t clamoring for democracy 10 years ago when these same problems existed, and I think – mostly due to the CCP’s vice-like control over the internet through the quite-aptly-named “Great Firewall,” and the immense censorship bureaucracy – that the likelihood of a homegrown, grassroots democracy movement in China is extremely slim. Similarly, I don’t see any of the above mentioned problems (by the way, this list is by no means all-inclusive,) decimating CCP legitimacy by themselves.
I am concerned about China’s economy. Would it be so far-fetched to think that China is no more than a paper tiger…well i suppose in its case, a paper elephant? Could China’s sometimes double-digit growth rates have been forged to attract foreign investment? Maybe. Do foreign investors and very likely the Chinese themselves, place too much faith in the seemingly-indefatigable  Chinese economy (in the latter case, resting much of the legitimacy of the party-state apparatus on the economy’s continued growth)? Certainly. China’s economic model is that complex: make cheap (sometimes toxic, see melamine) things, and sell them domestically, but mostly abroad.

There is nothing special about the Chinese people that makes them really, really good at making low cost consumer products. Koreans did it, the Japanese did, but both of those formerly planned economies are now focused in technology and other sectors requiring the highly-skilled labour market that simply doesn’t exist in the PRC. China has a lot of people, but so do India, Indonesia, Thailand, Vietnam and the Phillipenes. And it’s a lot cheaper to produce in those countries in South East Asia than it is in China, to the extent that they often times hire little slave kids (serious, and less serious).
My point, is that the CCP has put probably 50 eggs in the “Continued Economic Growth” basket, and the other two in the “Nationalism and Patriotic Education” basket. My fear is that this current economic crisis will best the PRC. I’m kind of in the same school of thought as Minxin Pei, who argues that China is doomed to a exist as a semi-developed autocratic state, and will miss it’s full potential. Granted the CCP leadership is closely watching this economic crisis, and has pumped $586 billion into its economy, but considering the immense size of the Chinese economy and the depth of this crisis, it may not be enough. That, and I think only an economic crisis would threaten the legitimacy of the CCP in a way that would lead to a significant change in China. I’m not talking collapse, but stagnation or merely a new paradigm for China. It may lose it’s “emerging superpower” status, and instead, be forced to relegate to a position like Russia (in the current low-price-of-oil world): Much less relevant than they want to be.

.i