Social Unrest in China On the Rise
Posted by Jason Apollo Voss on Jun 14, 2011 in Blog | 0 comments
In my “What My Intuition Tells Me Now” 2011 Predictions post of 13 December, 2010, I said that China was going to experience a lot of social unrest this year as they tried to reign in their overheated economy and inflated gross domestic product (GDP). Here specifically is what I said:
“The Chinese are on the brink of two ugly things: massive asset inflation and the bursting of that bubble, and social unrest. Expect to see social protests in China as the haves and have nots gap widens. In typical authoritarian fashion though, the protests will be convincingly squelched. Expect to hear, if not see the true, dark underbelly of China.”
Enter today: two stories from the Wall Street Journal…
Why is China raising bank reserve requirements? Because raising the amount of equity that a bank has to keep on hand -its reserves – lowers the amount of money it can lend out. Why would China want its banks to lend less money? Put another way: why do people borrow money?
People, including businesses, borrow money because they want to build or buy something. That something in China is property. Currently there is massive property inflation that is comparable to the real estate bubble that burst in North America and Europe back in 2008. This inflation is permeating the economy as the prices of commodities, like wood and steel, that support the building of property also inflate.
Also, there is a massive and continually widening gap between the haves and have nots in China. Not a good situation in a country that politically still calls itself communist. Not a good thing for a political system that oppresses its people in exchange for social equity. Oops! Hence, social unrest.
Regarding the social unrest, let’s let reporters do the reporting:
“A wave of violent unrest in urban areas of China over the past three weeks is testing the Communist Party’s efforts to maintain control over an increasingly complex and fractious society, forcing it to repeatedly deploy its massive security forces to contain public anger over economic and political grievances…
“Antigovernment protests have become increasingly common in China in recent years, according to the government’s own figures, but they have been mainly confined to rural areas, often where farmers have been thrown off their land by property developers and local officials.”
Unfortunately for China this situation is complicated by the fact that they run a police state government that is dishonest with its people, with foreign investors and even with itself. That means that the Chinese authorities are always processing some degree of misinformation and myth. It is very difficult to manage anything in life without good information.
This is my way of saying that these converging problems – looming economic bubble burst and looming social unrest – are only going to get worse in my estimation. But the real reconciliation that China needs to blow past is its social contract with its people. That is, is China a communist government with a one-party choice for its people, or a free capitalist society? The two are not compatible with one another and China has an existential choice looming.
Many people are describing the post-American world, but honestly folks, until China deals with this colossal issue the United States has very little to fear.
Jason
