SteveM on "China in 2009: a year for surprise"

SteveM — Fri, 16 Jan 2009 07:00:12 +0000

China's discovering something everyone should know: capitalist economies are inherently cyclical.

She go-a up; she go-a down, as Chico would say.

This sort of thing is inevitable; it's not a bug, it's a feature.

The market pricing mechanism is a feedback governor, and like all such it 'hunts' around an equilibrium.

The long expansion of the past two decades means something like this had to come sooner or later.

Every long expansion leads to the same sort of reckless conviction that things will go up forever, and meets the same denouement. The recession squeezes the inefficient and restores labor discipline and more realistic prices. Then the cycle starts again.

Only the details differ. It's been happening since the Tulip Mania of the 17th century, if not before.

Public policy can shorten the recession a bit, but it can no more prevent it than it can change the weather.

WebMouth on "China in 2009: a year for surprise"

WebMouth — Thu, 15 Jan 2009 13:42:39 +0000

I think China will come out of this recession in a much better position. Once it stops lending to the U.S and funding its excessive spending that it can't afford it will be able to concentrate on improving the quality of life of its own people.

China in 2009: a year for surprise, Kerry Brown

Wed, 14 Jan 2009 02:51:41 +0000

The first weeks of 2009 find China consumed by the same anxiety as the rest of the world. No one in Beijing's top leadership wants a repeat of 2008's high-wire ride (the Beijing Olympics) and lows (the Tibet protests, the Sichuan earthquake, the contaminated milk-powder scandal). But the year of quiet development and consolidation that it might hoped for is not in prospect, for China shares with other leading players such as the United States and the European Union the predicament of a global economy in deep crisis.

Kerry Brown is an associate fellow on the Asia programme, Chatham House, and director of Strategic China Ltd. His books include Struggling Giant: China in the 21st Century (Anthem Press, 2007)
The realities of recent years are turned on their heads. China finds its exports shrivelling, and swathes of factories in the industrial Pearl River delta and elsewhere closed down. Perhaps 10 million workers, according to one estimate, have lost their jobs since mid-2008. There have been increasing reports of angry demonstrations in the hinterland, with even normally reliable groups such as teachers in Xi'an, central China, striking in protest against poor wages and rising prices.

The averagely informed Chinese citizen is as baffled by everyone else by how much of a mess the American economy is in. The more conspiratorial see in the US predicament an international ruse designed to make them become a bit softer towards the world's final superpower. But the evidence of recession in the west, from financial indicators to the lengthening list of collapsed companies, show that this downturn is no clever game (see Nouriel Roubini, "Warning: More Doom Ahead", Foreign Policy, January-February 2009).

Any hopes that China would somehow be insulated from the fallout have disappeared. A monument to this sobering reality is the swathe of vast five-star hotels thrown up in Beijing in the pre-Olympics months. Many now have a ghostly look as darkness falls, with a solitary lit window in a mass of darkened glass the only sign of habitation. The heat of high expectations has been succeeded by a cold shower.

The fear factor

China's leadership as well as its people are worried. Indeed, the country's cautious, pragmatic political elite is dominated by fear. The ruling party is effectively a state within a state, focused in the end at preserving its power, no matter what the cost. At least, this is the impression it would like to give others. A long-term resident of Beijing commented to me that President Hu Jintao and prime minister Wen Jiabao see themselves as surrounded by potential threats, and that in response to anyone who dares to try to offer a competitive political challenge their trump-card is to deploy the power of the law, the army and the security services.

A case in point is the way that members of the Charter 08 group, led by veteran activist Liu Xiaobo, were rewarded with their declaration released on 10 December 2008 appealing to the authorities to allow more openness and political competition in China by being chucked into one of the "detention centres" in the suburbs of the capital. But Hu and Wen are careful to be seen as acting within the law, and in the strictest legal interpretation Liu and his colleagues are now no longer under arrest. They are just being subjected to "residential surveillance", restricted in their movements and actions. It is an old trick, but for many years this tactic has worked - for it instils fear, isolation, and, most wished for of all, silence.

In their own terms, Wen and Hu are right. Mass unemployment, economic uncertainty, and rising threats to the party in power have never led to good things in the past. The smiling face that the world saw during the Olympics is at best wearing a weary grin at the moment. Tourists to Beijing and Shanghai may still perceive stability and calm, but those who look a bit closer see surprising levels of violence and discontent. For their part, the authorities are aware of the extent of unrest across China - from the demonstrations in the factory-zones by recently laid-off workers demanding their wages from absconding Taiwanese owners to the upsurge of student anger directed against Japan in (of all places) the respected Fudan University in Shanghai.

When will these background murmurs start to become a shout, and then a roar? And if they do, how far will the party be willing to go to keep a lid on things? Its past record is clear enough. If violence there must be, then so be it; the justifications and the cleaning-up can be dealt with later. It escapes no one's attention that 2009 is also the fiftieth anniversary of the Tibetan uprising of 1959 and the twentieth anniversary of the Tiananmen protests of 1989.

The new partner

So 2009 is going to be a tough year for China as well as for the rest of the world (see Dexter Roberts, "China 2009: The Confidence Deficit", Business Week, 31 December 2008). The Chinese political elite seem keen to forge closer links with the United States, and it will be looking to Barack Obama to help reinvigorate a relationship whose strains under George W Bush have been hard to conceal. The thirtieth anniversary of the establishment of diplomatic relations between the two countries on 1 January 1979 - celebrated with a lavish two-day conference in Beijing on 12-13 January 2009 - might in principle be a propitious new beginning.

Yet the character of Obama's foreign policy is yet to be established (see Christian Brose, "The Making of George W Obama", Foreign Policy, January-February 2009). The early signs are that in any case the new president's main policy focus will be domestic: the need to clear up the mess his own country is in. Where China is concerned, the most intimate and yet fractious issue between the two countries is the same: trade. This has as much potential to cause dispute as cooperation, especially given the protectionist pressures likely to be exerted on the Obama administration. Moreover, it is unlikely that getting cosy with protocol-obsessed leaders in Beijing and helping them display their international credentials before their own people and the world will be one of Obama's priorities.

The bold front

What might change the dynamic here? One thing that might is if the Chinese government suddenly took a positive, bold and unexpected action. It could, for instance, take the massive foreign reserves it has accumulated in the central bank, and make sensible, stabilising, strategic investments in the rest of the world (see William MacNamara, "China eyes developed mine assets", Financial Times, 5 January 2009).

It could also make a strong, proactive and defensible move to show international leadership, by demanding that international forums like the IMF and the World Bank were fundamentally reformed to take greater note of the needs of developing countries, and be more representative of them (see Krzysztof Rybinski, "A new world order", 4 December 2008).

It could start genuinely to take a lead on the international efforts on climate change, or on energy security, or even on issues in Africa, where it has so many interests now. If it did any or all of these things, the world would sit up and take notice.

Something along these lines may well happen. This leadership may be bolder and braver than it can appear. The enigmatic smile of Hu Jintao might finally come to be seen as the stillness of wisdom, when China makes its move on the international front. While western capitalism is sinking to its knees, the chance for China to show leadership looks like it has come. The critics are confident that they will be proved right - that China will remain fixated on its own problems, maintain a low profile, and do nothing on its own out front. But there is a chance that, sometime in 2009, China will act in a way that both surprises and shows the world that it has indeed become a major - and constructive - power.

If 2008 was a year when the prizes were awarded, 2009 will - one way or another - be a year of real endurance-tests. But China will be competing for more than gold medals - it will be seeking the fair and proportionate position in the global economy and the world system that reflects how far the country has travelled. After all, 2009 sees yet another momentous event: the sixtieth anniversary of the foundation of the People's Republic of China in October. This is not a year to be timid.

The stakes couldn't be higher; nor could the rewards. The end of 2008 was marked by western political leaders competing to claim that they had saved the world. The end of 2009 may yet become a moment for wide acknowledgment that in many ways, China just has.

Also by Kerry Brown on openDemocracy:

"China goes global" (2 August 2007)
"China's party congress: getting serious" (5 October 2007)
"Shanghai: Formula One's last ride" (15 October 2007)
"Beijing's political tightrope-walk" (12 March 2008)
"Taiwan and China: an electoral prelude" (4 April 2008)
"China on Olympic eve: a globalisation of sentiment" (10 July 2008)
"The Olympics countdown: Beijing to Shanghai" (6 August 2008)
"China changes itself: an Olympics report" (20 August 2008)

Among openDemocracy's many articles on China in 2008:

Jeffrey N Wasserstrom, "One, two or many Chinas?" (15 February 2008)
Robert Barnett, "Tibet: questions of revolt" (4 April 2008)
Wang Lixiong, "China and Tibet: the true path" (15 April 2008)
James A Millward, "China's story: putting the PR into the PRC" (18 April 2008)
Chang Ping, "Tibet: looking for the truth" (8 May 2008)
Li Datong, "China and the earthquake" (2 June 2008)
Emily Lau, "Tiananmen, 1989-2008" (4 June 2008)
Jeffrey N Wasserstrom, "Tiananmen's shifting legacy" (26 June 2008)
Li Datong, "China's leaders, the media, and the internet" (4 July 2008)
Li Datong, "Death in Shanghai, law in China" (15 September 2008)
Jeffrey N Wasserstrom, "China's long march to modernisation" (7 October 2008)
Will Hutton, "The China fix" (25 October 2008)

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