China: Fragile – handle with care

My article last week, entitled ‘Enter the dragon’, painted a picture of China as a rising global heavyweight dominating international markets such as Africa in the international economy. However, the Chinese global project contains certain antagonisms, which could undermine this projected global dominance.


How long can China ignore it's domestic issues?

It has been well documented and commented on for some time that the Chinese domestic economy relies on an enormous housing bubble, on the surface not dissimilar from the Western bubble which burst so spectuacularly in 2008.  However, many argue that China’s current housing bubble is unlike previous ones seen in Japan in the 1980’s and the USA in the recent period, this is due to China’s bubble not resulting from excessive debt .  Unfortunately, as a result of what happened to the U.S. housing market, the debate has revolved around the bubble of inflated house prices and home owner-debt and not issues such as the access to affordable housing for the Chinese, which is arguably a more immediate concern. The real crisis in the Chinese housing market is the lack of affordable housing and rents leading to poor access to the housing market thus affecting the domestic economy.

The introduction of different state measures to counter the ever increasing house prices, such as governmental taxes on homes in Shanghai and Chongqing, indicates that the claims that China’s housing bubble could be at crisis points seems a real life threat in the coming period.  This governmental interference highlights the severity of the problems generated by such a housing bubble and unaffordable rents. Furthermore, the development of China overseas can be seen as China seeking financial and material product to compensate for this declining performance of the domestic economy. This view is certainly held by Professor M Venkataraman of the University of Addis Ababa, “For China to become a major power, it needs to continue its double-digit economic growth of recent years. For this it needs energy and markets.” This ‘international crusade’ is an example of this economy  trawling the global seas for financial and material ‘catch’ to maintain China’s overall growth as the domestic economy appears to be slowing.

The issues in China do not solely revolve around the economy. The dramatic movement of Chinese to the West could jeopardise the Communist Party’s (CCP) totalitarian grip on its country. Chinese students studying abroad, learning critiques of their own domestic regime and then returning must inevitably play a part in reformation of China’s political system. This could result in the Chinese regime having to succumb to political reform maybe even their very own perestroika, similar to what was seen in the Soviet Union in the late eighties/early nineties. There is already a growth of criticism mounted toward the Communist regime mainly manifesting itself in ‘internet activism’, which has been met with further censorship of new technologies by the state. Looking forwards, these factors could play a part in political reform in China as the CCP aims to survive in a global age. If not, a rise in organised criticism (albeit electronic) could be the catalyst for the beginning of the end for this regime.

Furthermore, the political and economic pressures China is struggling with hide, deeper environmental challenges. The main discourse around Chinese, and indeed global, environmentalism has revolved around pollution and climate change. However, one of the CCP’s biggest tasks is facing up to the enormous water shortages within China, specifically the north, where about 42 percent of China’s population lives but only about 8 percent of the country’s water resources lie. In resolving this issue there have been many ideas advocated by the CCP, such as a water diversion project from central China to the north. However, recently CCP plans have come under enormous criticism from environmental and academic experts.

Despite China’s growing influence in the international economy and its growing power within the World Trade Organisation, China is a country that suffers from many domestic issues. These are vast, affecting the political, economic and environmental system of this large nation. Although the main dialogue around China, especially in the west, is of its growing power and dominance, it does seem that despite these claims there are substantial issues which could ultimately undermine the Chinese project. Western powers would be well advised to watch this Eastern goliath closely over the coming years as its inexorable rise may not be a simple as once thought.


About Henry Fowler

Unite Branch Secretary. Labour Party. Trade Union officer.

Posted on July 16, 2011, in Coalition Government, Foreign Affairs and tagged , , , , . Bookmark the permalink. Leave a comment.

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