Friday, 24 October 2008

The Great "Social Unrest" in China mystery

In my recent experience with Chinese economists I have found them and indeed other academics with an interest in China remarkably reluctant to mention the "social unrest" word in conjunction with a global recession.

Given China's reliance on exports and the number of jobs China has to create just to stand still each year coupled with an increasingly brave populous not (as) scared to speak out it appeared to me that the conditions for "social unrest" were aligning themselves nicely.

Yet this element seems to be absent from serious discussion. Clearly China is still well positioned to crush any unrest but with the eyes of the world increasingly on them it may not be as easy as in previous decades.

It was reassuring therefore to read in this week's economist that someone, somewhere has put a number to the issue. The Economist's number just so happens to match mine.

This means we are getting close. All eyes on China.

Here is the quote in the lead article "Into the Storm" looking at how the emerging world will cope with the current "global downturn" or as I prefer to call it "cliff jump".

In many places—eastern Europe is one example (see article)—financial turmoil is hitting weak governments. But even strong regimes could suffer. Some experts think that China needs growth of 7% a year to contain social unrest. More generally, the coming strife will shape the debate about the integration of the world economy. Unlike many previous emerging-market crises, today’s mess spread from the rich world, largely thanks to increasingly integrated capital markets. If emerging economies collapse—either into a currency crisis or a sharp recession—there will be yet more questioning of the wisdom of globalised finance.


Among the giants, China is in a league of its own, with a $2 trillion arsenal of reserves, a current-account surplus, little connection to foreign banks and a budget surplus that offers lots of room to boost spending. Since the country’s leaders have made clear that they will do whatever it takes to cushion growth, China’s economy is likely to slow—perhaps to 8%—but not collapse. Although that is not enough to save the world economy, such growth in China would put a floor under commodity prices and help other countries in the emerging world.


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