Is China About To Enter An Era Of Instability?

Bear In A China Shop — Arthur Kroeber, Foreign Policy

It’s not the booming economy that’s about to burst — it’s bigger than that. Social discontent and, yes, income inequality could rip China apart at the seams.

Time and again, China has defied the skeptics who claimed its unique mixed model — an ever-more market-driven economy dominated by an authoritarian Communist Party and behemoth state-owned enterprises — could not possibly endure. Today, those voices are louder than ever. Michael Pettis, a professor at Peking University’s Guanghua School of Management and one of the most persistent and well-regarded skeptics, predicted in March that China’s economic growth rate “will average not much more than 3% annually over the rest of the decade.” Barry Eichengreen, an economist at the University of California, Berkeley, warned last year that China is nearing a wall hit by many high-speed economies when growth slows or stops altogether — the so-called “middle-income trap.”


My Comment: When I first visited China in the mid 1980s, I was the junior member of a business delegation that was being “wined and dined” by the Chinese business/political elite of Fujian Province. They dressed simply, were driven in small Japanese cars and vans, and had simple homes. When I visited China last year to meet old business acquaintances and friends …. their children and those who are now in positions of power love to flash in the form of good clothes, expensive cars, and beautiful homes …. and they are all physically fat.. While this may be great for the 20-30 million Chinese who have prospered in the past 25 years, or the 100 million who have risen to the middle class …. for the billion who are still poor …. envy and a quiet bitterness is rising. Should China experience a recession …. which it will one day …. the fear is that this envy and bitterness may transform into something worse …. and in my opinion they are right.


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