Tuesday, March 13, 2007

Dangerous rise of unrest in China

Jim Hoft at Gateway Pundit has the news that there has been a massive riot in China, complete with torched police cars and injured citizens and police. The official excuse for the unrest is the "rising public transport costs", but commenter Jacksonian has a bit more background on the troubles:
The official corruption is, I believe, the cronyism being shown for handing out loans by the Beijing government, which has caused the rate of non-payment on those loans to skyrocket. Estimates place between 30-60% of China's GDP to be grounded on bad loans. If you start to foreclose on the loans people go out of work, if you don't foreclose the infrastructure collapses under debt load as investment dries up and the production capabilities are seen as unsustainable. Which they are. The rapid 'modernization' and 'capitalism' introduced in the 1980's has been funneled to those that are well connected with the Communist regime.

The surface affluence still does not address the vast number of rural poor, poor living conditions even in cities, the rapid overpopulation of cities, no pressure to repay on loans, no market pressure to use work-efficient equipment as there are so many unemployed as to make labor cheap, and a slow liquidation of civil society as the information revolution puts cheap, modern telecom and storage into the hands of the unemployed. This is a confluence of crony capitalism, at best, and State directed capitalism at worse, rapid decay of family structure, large movements of populations to anywhere good jobs might become available and the slow undermining of the agricultural base of China by that rapid movement of mostly young and educated Chinese to the cities.

Please, read the whole thing.

Of course, similar problems plague the state of IL, on a smaller, nonlethal scale (one hopes it will stay that way). Cronyism, corruption, half-a$$ed financial management, the collapse of family structure and values... who'd a thunk they might bring about chaos? Is there some way our own small problems can be solved? If so, could the solution for us be applied to China? or is it too late for both?

It does grow harder to remain optimistic about anything.

1 comment:

A Jacksonian said...

My thanks for the link!

The problem in China is endemic due to the banking system being controlled by the regime, so that so much of the economy is now based on bad loans or "Non-Performing Loans" (NPL) that the entire structure has no stability. Compare Japan before the bubble burst there only having 10% of GDP depending upon NPL and the various Asian Tigers ranging between 12% - 15% for same. China at 30%-60% has a larger problem in scale and depth than any of its neighbors have. The entire system driven towards industrial expansion via the crony-empowered banking system now has endemic social problems as well as environmental and economic ones. The City of Beijing estimated that it lost $1.5 billion in economic activity due to pollution alone.

Add in price controls on gasoline leading to bi-directional smuggling, and such simple things as not even having a decent understanding of how to run a company (which, amusingly, many street gangs in the US at least the the idea, if not in great detail) and I think any State in the Union would shine in comparison to China. Average NPLs in the US are under 1% for businesses and in the 1.3-1.5% for individuals. The SBA runs at a much nastier rate of 10%, but that is what we expect from a Federal program: lack of proper management.

As a Nation we have other indicators that point to long term problems, but economic ones are not amongst them. Now if you want a *real* mess, take a look at Iran's oil problem and my longer view of it and similar problems... which is a good method of curing insomnia.