[mukto-mona] Whither China?

China's Year of Living Precariously by Mark O'Neill   22 Dec 08 (http://asiasentinel.com/index.php?option=com_content&task=view&id=1622&Itemid=171)   An extraordinary domestic study lists concerns about rents in the social fabric See also: The Ghost of Christmas Future In Dongguan, an export center close to Hong Kong, the police last week reported a record rise in the crime rate – 5,300 cases in the first 15 days of December – and issued a handbook for residents to protect themselves from violence, street robberies and break-ins. The warning came during the same week that President Hu Jintao gathered China's elite into the Great Hall of the People to celebrate three decades of economic change that gave China the world's fastest growth rate and saw it turn from a starving country on the edge of bankruptcy into the world's fourth largest economy. It is thus more than true that there are in reality two Chinas and a government in a race to see which one will prevail. The global economic crisis has cast a heavy shadow over China's success story, with Dongguan and the rest of Guangdong Province, China's richest, providing dramatic counterpoint to the feverish efforts by China's leaders to contain the damage. In November, the government announced a huge Rmb4 trillion stimulus plan to attempt to ameliorate the slowdown, and that has been followed up by plans by provincial governments to add as much as another Rmb10 trillion in spending. Hardly a day goes by without another announcement of a major stimulus. Last week was typical. On Monday, for instance, the stock market reacted to news that the agriculture sector would be the recipient of major investments, making rural areas and residents a top priority in 2009. On Tuesday, the government announced a substantial boost in spending for the power grid and construction of nuclear plants. On Wednesday, it announced import and export tariffs would be adjusted for machinery and electronics. On Thursday, it announced the launch of yet another stimulus plan to boost real estate starting Jan. 1. On Friday, the State Council announced it would cut the fuel consumption tax. There are questions if it will work. In a remarkably frank study published last week called "Analysis and Predictions of Chinese society in 2009." the China Academy of Social Sciences set out the three big risks for the year ahead: Unemployment could go as high as 9.4 per cent because of the factory closures caused by the financial crisis, the Sichuan earthquake and other natural disasters and polluting firms shut by tighter environmental laws. The lack of affordable housing has urban residents angrier than any other issue: 47 per cent of people surveyed said that they lived in bad housing and could not afford their own home. "The housing conditions of low-income people in large and medium cities is far behind those of other groups of the population," the study said. That is being exacerbated by a collapsing housing bubble that may be almost as big as America's. Property prices, down from their peaks, still have as much as 20-30 percent to fall before 70 percent of the population can afford to buy Both the central and provincial governments have announced measures, including cuts to transaction costs easier mortgage terms, especially for first-time buyers, and extended payment schedules for developers' land premium installments, all to no avail. The increasing gap between rich and poor, officials and common people is cause for increasing outrage. "These two conflicts are the most likely fuses for social conflict," the survey. 68.8 per cent of those surveyed said that, during the last 10 years, officials had gained too many benefits, while workers, farmers and migrant workers had gained too little: 36.3 per cent said these conflicts would intensify in future. Corruption remains a major source of discontent, with 39 per cent telling the researchers they were unsatisfied with the government's attempts to deal with it. The study said it was no longer enough to rely on campaigns and individual leaders to fight corruption and that a new system was needed in 2009. Many people in senior positions are corrupt," said Lin Qi, a Beijing consultant. "The wife of Wen Jiabao, a geologist, is the chief valuer of jewellery in China." Formerly the vice-president of the Chinese Jewellery Association, Wen's wife, Zhang Peili is president and chief executive of Beijing Diamond Jewellery Co, which has operations in the mainland and Hong Kong. "In China, corruption is part of political struggle," said Lin. "If you have strong patrons, you are safe. But, if you lose in the struggle, then you may be arrested." The public is also angry that children of leaders occupy senior posts in large state firms, especially in finance and military-related industries. They see the Communist Party as a giant conglomerate, with dense personal networks that divide the spoils of economic success. Without entree into these networks, there is no chance of wealth or promotion. On the streets, the government is now facing the consequences of all these contradictions. It has been reported widely that in the first nine months of this year, more than 7,000 Guangdong companies closed or moved elsewhere, leaving behind unpaid bills and wages. Workers have taken to the streets to demand what is owed to them. Last Friday police locked 300 workers inside the Jianrong Suitcase factory in Dongguan, to prevent them holding a public demonstration about unpaid wages. In Dongguan, as in other cities, tens of thousands of migrant workers have lost their jobs but do not wish to return to a life of poverty in their home villages. Many have taken to crime. The city's police said that a popular tactic is to rob people as they leave banks or withdrew money from ATMs and escape on a motorcycle ridden by an accomplice. Pickpockets are active on the city's buses, especially when a traveler is dozing or uses his mobile telephone. Visitors from Hong Kong, with wallets containing cash, credit cards and passports, are a major target. In the handbook, the police advise people to lock the windows of their cars, carry their valuables inside their clothes, to not use mobile phones on buses and not ride in unlicensed taxis. In his speech last Thursday, Hu stressed social stability: "without stability, nothing could be done. Even achievements already made could be lost." One threat to the government is social disorder in the form of strikes, demonstrations and attacks on police and government buildings. But so far there is no sign of a Polish-style Solidarity that would co-ordinate the protests and give them a political focus. A second threat to Hu and his government is from those within the party who accuse him of betraying Socialism and promoting social inequality, corruption and privileges to foreigners. Where are the ideals of the revolution for which millions died? A third threat is from 300 intellectuals who issued Charter 08 on December 10 to coincide with the 60th anniversary of the Universal Declaration of Human Rights, calling for political reform, the separation of parliamentary, executive and legal powers, and freedom of expression and association. It is a particularly scathing document. In part it reads: "By departing from these values, the Chinese government's approach to 'modernization' has proven disastrous. It has stripped people of their rights, destroyed their dignity, and corrupted normal human intercourse. So we ask: Where is China headed in the twenty-first century? Will it continue with 'modernization' under authoritarian rule, or will it embrace universal human values, join the mainstream of civilized nations, and build a democratic system? There can be no avoiding these questions. The government promptly responded by arresting the two main organizers of the charter. Its nightmare is the Polish and Czechoslovak scenarios, where workers and intellectuals united, with the support of the US and Western Europe, to overthrow the party, exploiting popular discontent over many of the same issues that fester today in China. It nearly happened in the spring of 1989. The party is busy preparing to prevent a repetition 20 years later, and thus the feverish economic changes now being pushed forward. The US$2 trillion in reserves that China has in its vaults give Beijing an advantage that neither Poland nor Czechoslovakia had available to them. >> The Ghost of Christmas Future By Our Correspondent 17 Dec 08 (http://asiasentinel.com/index.php?option=com_content&task=view&id=1616&Itemid=590) The first quarter of 2009 is going to look frightening to Asia's exporters In the United States they used to say that no retailer ever goes bankrupt before Christmas.  The consumers flooding into the stores during the holiday season provided even sagging shopkeepers with a last dose of income and hope. The closing days of 2008 appear to be putting an end to such dreams, and not just for Detroit's distressed automakers. The retail blight in the US is likely to spell big trouble across the Pacific for the thousands of factories that supply consumer goods to the west.  The upshot could be a hard landing for China, despite official projections of 8-9 percent gross domestic product growth. As many as 6,500 retail shops are estimated to be closed for good in the US by the end of the year. US consumers habitually slow their spending to a minimum for the entire first quarter of the year. Many retailers who claw their way through a slow Christmas season will now be closing in greater numbers, synapsing their way up and down the food chain — to advertising agencies, newspapers and magazines, shopping mall owners and factories in Asia that supply them with gadgets, gizmos and finery.  The United States, Europe and Japan – all three of which are descending into recession – account for at least 56 percent of China's exports, which went negative month-on-month in November for the first time in seven years. Although exports to emerging markets grew by 20 percent in the first 10 months of 2008, these economies are also slipping. China's imports from other Asian countries are intermediate goods used as imports for export processing, meaning they will have little impact on the regional economies. China can be expected to face an export collapse in the first quarter of 2009, perhaps by as much as 19 percent to 20 percent from the cyclical high and a fall of perhaps 3 percent year on year for 2009, according to an estimate by Qu Hongbin, China chief economist for global banking for HSBC. China's exporters are already in trouble, particularly in the export-driven Pearl River Delta. For more than a year, squeezed by rising labor costs and falling margins, manufacturers have been facing a mounting crisis. Now, as bankruptcies and store closures rise in the west, fears are rising that the credit facilities on which the Asian supply chain is built will be severely strained. "All the decoupling theory is total bunk," says a top figure in Hong Kong's outsourcing industry. "People are holding out China as the locomotive that is going to pull the rest of the world through.  But China is just one big factory export processing zone for low-cost goods, based on western demand and cheap credit. It isn't going to work." The pace of western retailing bankruptcies is rising. The most recent collapse was KB Toys, a toy chain in the eastern United States that filed for protection on Dec. 11, saying it planned to hold going out-of-business sales at hundreds of stores.  It has 4,400 full-time employees and 6,515 seasonal employees. In the same week, Woolworths, the venerable British chain, greeted its 100th anniversary year by announcing that it would appoint administrators in an attempt to sell its stores for cash.  In November the US electronics retailer Circuit City announced it would file for Chapter 11 protection and close 155 of its locations, leaving some 8,000 employees jobless. Spectrum Brands, which sells batteries, lawn care equipment, pet supplies, grooming products and many other items, was said by Morningstar, Inc. to be in serious distress.  Although it was not filing for protection, Office Depot, which sources most of its supplies in Asia, announced on December 10 that it would close 126 stores and 33 distribution facilities in 2009.  Joseph Skrupa, editor in chief for RIS News, which follows the retail industry, told the Washington Post in December that an estimated 6,500 retail stores will close.  Consumer spending accounted for 72 percent of the US economy in 2007, built personal debt that ran to 133 percent of disposable income by the end of 2007. With the US economy headed down, average per capita bank credit card debt was US$5,710 as of November, the equivalent of two months average salary.  As an example of how consumers stopped spending, toy traffic through the ports of Los Angeles and Long Beach, which handle about half of US consumer imports, has declined by 10.3 percent as measured by tonnage according to IHS Global Insight. China makes nine of every 10 toys sold in American stores. In 2007 it exported US$14.2 billion worth of leather products, more than half the world's shoes, according to the US Department of Agriculture. China and India between them produce well over half the world's textiles, according to the USDA. Consequently the shoe manufacturers, textile producers and toy makers of the Pearl River Delta, on whom a large extent of China's torrid prosperity has rested, face even more frightening times going forward than they have faced over the last two years.  Exacerbating the fact that there are fewer orders – and substantial questions whether the strapped or bankrupt retailers at the other end of the supply chain are going to be able to pay off what already has been shipped – is the credit crisis.  Certainly, Hong Kong's banks are continuing to ration credit despite the fact that the Hong Kong Monetary Authority has pourd almost HK$130 billion into the system since September  Hong Kong dollar lending has virtually stopped, with loans going negative in October. Credit facilities are being withdrawn in China and Hong Kong as well, a growing problem for export-oriented companies. This can be expected to play itself out with the loss of hundreds of thousands of jobs in export-oriented industries in China and other Asian countries, and growing concern over social unrest. There is plenty of room for the leaders to get worried. According to a study of migrant workers reported by the highly respected Caijing Magazine, only a fraction of the unemployed have returned to their villages. Some 10 million peasant workers have lost their jobs, according to the report, but the more severe impact is expected after the spring festival, when the thousads of closed factories don't open up again. Riot police have already had to make their appearance in southern cities to contain laid-off — and unpaid — workers. The scenario is a vast army of angry jobless workers wandering the streets of once-prosperous southern China with little to eat and no prospects. That could be the ghost of revolution past.

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