China update

In my 2011 predictions I had some fairly strong predictions for China.  While it has only been a little more than a month since that post China is very much a part of the news at the moment.  That’s because Hu Jintao, the Chinese leader, is currently visiting the United States, and because China’s fourth quarter gross domestic product figures have just come out.

I am going to take these in turn.

• Chinese-U.S. summit

That which has been discussed so far has been m.o.t.s.  That is, “more of the same.”  In other words, neither president has said or done anything to change the nature of Chinese-U.S. relations at this point.  The dynamic of these relations has been firmly entrenched for over a decade.  But something inescapable is happening and almost everyone with access to news knows it.

China keeps growing economically.  Countries whose economies are large need a military to protect their global interests.  Militaries tend to clash at some point.  I don’t think there is anyone who doesn’t envision a time in the next 50 years where China and the United States have a reckoning.  Mind you, I’m not saying a war, but a reckoning.

But for now, the current summit between the two nations is not the venue for amping up the tension between the two nations.

But for now, what about that economy?

• Chinese GDP

The world’s second largest economy reportedly grew 9.8% in the fourth quarter.  While it may seem on the surface that this is a good thing, I assure you that the government of China is worried.  Why?

The economy of China is in the midst of a bubble that they are afraid is about to burst.  In fact, the government has been enacting a number of ‘austerity measures’ to rein in the economy.  Those actions don’t seem to be working.  In fact, I said in my 2011 predictions:

“The timing of the bursting of [China’s] economic bubble is difficult to assess.  This is because the government there has demonstrated a willingness to use lying, manipulation, and authoritarianism to gloss over its problems.  Yet, inevitably a day of economic reckoning will come in China.  Just how severe its economic bubble bursting is, and its timing, is crucial.”

So the faster than expected economic growth in China is not a good thing.  It means that more austerity measures need to be put into place.  Further, it also increases the likelihood of chaos in the global economy when the bubble finally does burst.

Separately, I find it interesting that the Chinese have a fourth quarter gross domestic product number out already.  The Chinese economy has more than triple the number of participants as the U.S. economy.  And the accounting systems in China are a little backward.  Yet, here we have a number published a mere three weeks after the end of the year.  This is amazing.  Amazingly suspicious.

Yes, I do mean to imply that the Chinese data are not trustworthy.

In conclusion then, I don’t see any reason to alter my 2011 prediction on China.

Jason