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Tuesday, February 22, 2005

Chinese Riots and War Drums

George Friedman, who heads the private intelligence service Stratfor is worried about the combustible situation that is building up in China. No one is really paying attention to China because of the attention focused on Iraq and the War on Terror.

China with a population over 1.3 billion has designs on regaining control of Taiwan. With the global human population currently estimated at just over 6 billion, China is home to approximately 21% or one-fifth of the human species. China has to deal with a growing civil unrest between the haves and the have-nots. Friedman was recently interviewed by Barron's Magazine, some of his thoughts:

China, for example this year could see significant deceleration in its torrid economic growth rate and may well be on the cusp of a meltdown, he says.

"Today's China boom can only be compared to the dot-com frenzy of the late '90's in the hype and conviction that China will somehow defy all the rules of normal economic cycles."

Friedman sees growing imbalances, seething social discontent and a rotting financial structure...the rot of loan misallocation, a shaky banking system and a huge overhang of bad debts...much of today's economic growth in China is profitless, due to both the weight of moribund state owned enterprises in the economy and a mania for market-share growth at the expense of economic returns.

Chinese enthusiasts are ignoring the demographic time bomb of an aging population as a result of China's one-child per family crackdown.

Signs of trouble in China are beginning to accumulate just below the surface of glossy economic growth...China can't afford too much monetary restraint; any large increase in interest rates could trigger a cascade of loan defaults and pop the credit bubble.

...also noted a dramatic jump in riots, strikes, bombings and the like throughout China that have largely gone unnoted or unreported by the bedazzled world media. Social tensions figure to grow as a result of increasing layoffs at the state-owned enterprises and yawning disparities in wealth between China's populous agrarian hinterlands and the thriving coastly cities.

Friedman expects Chinese authorities to increasingly fan nationalistic fervor in an attempt to defuse growing tensions at home. The recent spate of saber-rattling with Taiwan is just one example.

Iran, North Korea Nuclear Threats Overhyped Says [Friedman]
In China, stresses spill over into riots [Christian Science Monitor, Nov. 22, 2004]
Class, religion spark riots across China [The Age, Nov. 3, 2004]
Chinese War with Taiwan in 2006? [TJN, Jun. 10, 2004]
Chinese Population Crisis [TJN, Jun. 3, 2004]
China's aging problem [IIASA, animation of demographic time bomb]

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