The Coming Collapse of China

Discussion in 'China' started by Yusuf, Dec 31, 2011.

  1. Yusuf

    Yusuf GUARDIAN Administrator

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    http://www.foreignpolicy.com/articles/2011/12/29/the_coming_collapse_of_china_2012_edition
    The Coming Collapse of China: 2012 Edition

    I admit it: My prediction that the Communist Party would fall by 2011 was wrong. Still, I'm only off by a year.

    BY GORDON G. CHANG | DECEMBER 29, 2011

    In the middle of 2001, I predicted in my book, The Coming Collapse of China, that the Communist Party would fall from power in a decade, in large measure because of the changes that accession to the World Trade Organization (WTO) would cause. A decade has passed; the Communist Party is still in power. But don't think I'm taking my prediction back.

    Why has China as we know it survived? First and foremost, the Chinese central government has managed to avoid adhering to many of its obligations made when it joined the WTO in 2001 to open its economy and play by the rules, and the international community maintained a generally tolerant attitude toward this noncompliant behavior. As a result, Beijing has been able to protect much of its home market from foreign competitors while ramping up exports.

    By any measure, China has been phenomenally successful in developing its economy after WTO accession -- returning to the almost double-digit growth it had enjoyed before the near-recession suffered at the end of the 1990s. Many analysts assume this growth streak can continue indefinitely. For instance, Justin Yifu Lin, the World Bank's chief economist, believes the country can grow for at least two more decades at 8 percent, and the International Monetary Fund predicts China's economy will surpass America's in size by 2016.

    Don't believe any of this. China outperformed other countries because it was in a three-decade upward supercycle, principally for three reasons. First, there were Deng Xiaoping's transformational "reform and opening up" policies, first implemented in the late 1970s. Second, Deng's era of change coincided with the end of the Cold War, which brought about the elimination of political barriers to international commerce. Third, all of this took place while China was benefiting from its "demographic dividend," an extraordinary bulge in the workforce.

    Yet China's "sweet spot" is over because, in recent years, the conditions that created it either disappeared or will soon. First, the Communist Party has turned its back on Deng's progressive policies. Hu Jintao, the current leader, is presiding over an era marked by, on balance, the reversal of reform. There has been, especially since 2008, a partial renationalization of the economy and a marked narrowing of opportunities for foreign business. For example, Beijing blocked acquisitions by foreigners, erected new barriers like the "indigenous innovation" rules, and harassed market-leading companies like Google. Strengthening "national champion" state enterprises at the expense of others, Hu has abandoned the economic paradigm that made his country successful.

    Second, the global boom of the last two decades ended in 2008 when markets around the world crashed. The tumultuous events of that year brought to a close an unusually benign period during which countries attempted to integrate China into the international system and therefore tolerated its mercantilist policies. Now, however, every nation wants to export more and, in an era of protectionism or of managed trade, China will not be able to export its way to prosperity like it did during the Asian financial crisis in the late 1990s. China is more dependent on international commerce than almost any other nation, so trade friction -- or even declining global demand -- will hurt it more than others. The country, for instance, could be the biggest victim of the eurozone crisis.

    Third, China, which during its reform era had one of the best demographic profiles of any nation, will soon have one of the worst. The Chinese workforce will level off in about 2013, perhaps 2014, according to both Chinese and foreign demographers, but the effect is already being felt as wages rise, a trend that will eventually make the country's factories uncompetitive. China, strangely enough, is running out of people to move to cities, work in factories, and power its economy. Demography may not be destiny, but it will now create high barriers for growth.

    At the same time that China's economy no longer benefits from these three favorable conditions, it must recover from the dislocations -- asset bubbles and inflation -- caused by Beijing's excessive pump priming in 2008 and 2009, the biggest economic stimulus program in world history (including $1 trillion-plus in 2009 alone). Since late September, economic indicators -- electricity consumption, industrial orders, export growth, car sales, property prices, you name it -- are pointing toward either a flatlining or contracting economy. Money started to leave the country in October, and Beijing's foreign reserves have been shrinking since September.

    As a result, we will witness either a crash or, more probably, a Japanese-style multi-decade decline. Either way, economic troubles are occurring just as Chinese society is becoming extremely restless. It is not only that protests have spiked upwards -- there were 280,000 "mass incidents" last year according to one count -- but that they are also increasingly violent as the recent wave of uprisings, insurrections, rampages and bombings suggest. The Communist Party, unable to mediate social discontent, has chosen to step-up repression to levels not seen in two decades. The authorities have, for instance, blanketed the country's cities and villages with police and armed troops and stepped up monitoring of virtually all forms of communication and the media. It's no wonder that, in online surveys, "control" and "restrict" were voted the country's most popular words for 2011.

    That tough approach has kept the regime secure up to now, but the stability it creates can only be short-term in China's increasingly modernized society, where most people appear to believe a one-party state is no longer appropriate. The regime has clearly lost the battle of ideas.

    Today, social change in China is accelerating. The problem for the country's ruling party is that, although Chinese people generally do not have revolutionary intentions, their acts of social disruption can have revolutionary implications because they are occurring at an extraordinarily sensitive time. In short, China is much too dynamic and volatile for the Communist Party's leaders to hang on. In some location next year, whether a small village or great city, an incident will get out of control and spread fast. Because people across the country share the same thoughts, we should not be surprised they will act in the same way. We have already seen the Chinese people act in unison: In June 1989, well before the advent of social media, there were protests in roughly 370 cities across China, without national ringleaders.

    This phenomenon, which has swept North Africa and the Middle East this year, tells us that the nature of political change around the world is itself changing, destabilizing even the most secure-looking authoritarian governments. China is by no means immune to this wave of popular uprising, as Beijing's overreaction to the so-called "Jasmine" protests this spring indicates. The Communist Party, once the beneficiary of global trends, is now the victim of them.

    So will China collapse? Weak governments can remain in place a long time. Political scientists, who like to bring order to the inexplicable, say that a host of factors are required for regime collapse and that China is missing the two most important of them: a divided government and a strong opposition.

    At a time when crucial challenges mount, the Communist Party is beginning a multi-year political transition and therefore ill-prepared for the problems it faces. There are already visible splits among Party elites, and the leadership's sluggish response in recent months -- in marked contrast to its lightning-fast reaction in 2008 to economic troubles abroad -- indicates that the decision-making process in Beijing is deteriorating. So check the box on divided government.

    And as for the existence of an opposition, the Soviet Union fell without much of one. In our substantially more volatile age, the Chinese government could dissolve like the autocracies in Tunisia and Egypt. As evident in this month's "open revolt" in the village of Wukan in Guangdong province, people can organize themselves quickly -- as they have so many times since the end of the 1980s. In any event, a well-oiled machine is no longer needed to bring down a regime in this age of leaderless revolution.

    Not long ago, everything was going well for the mandarins in Beijing. Now, nothing is. So, yes, my prediction was wrong. Instead of 2011, the mighty Communist Party of China will fall in 2012. Bet on it.

    Gordon G. Chang is the author of The Coming Collapse of China and a columnist at Forbes.com. Follow him on Twitter @GordonGChang.
     
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  3. Ray

    Ray The Chairman Defence Professionals Moderator

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    China will be able to maintain its surge because it is still capable of undercutting foreign competition, even if the product is shoddy.
     
  4. civfanatic

    civfanatic Retired Moderator

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    Isn't Gordon Chang like the Chinese version of Arundhati Roy?
     
  5. Bhartiya

    Bhartiya Tihar Jail Banned

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    This prediction is quite logical, but will people's force be able to kill commies armies is what we should all wait to see, as far as manufacturing is concerned, China no longer can have an edga, as lifestyle of people has improved a lot and therefore, people would aspire for more luxuries which would again lead to more freedom and more space for expression. As more and more people get aware of the outer world, the changes wuld be quite visible, which may OR may not lead to a drastic change.... let's see what happens..
     
  6. RedDragon

    RedDragon Regular Member

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    Ha, Again.
     
  7. Bhartiya

    Bhartiya Tihar Jail Banned

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    ah, here comes my favourite comedian
     
  8. Param

    Param Senior Member Senior Member

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    Maybe he believes in 2012. Since the world will end in 2012 no one will be around to question his prediction.
     
  9. The Messiah

    The Messiah Bow Before Me! Elite Member

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    Keep on making predictions....one time by coincidence it will occur then say "i told you so".

    thats the mantra that is followed.
     
    masterofsea and charlyondfi like this.
  10. Ray

    Ray The Chairman Defence Professionals Moderator

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    These predictions are bogus.

    The facts of the case is more important.
     
  11. civfanatic

    civfanatic Retired Moderator

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    People make predictions all the time, most of which are false, but one or two might come true. They tend to emphasize the odd predictions that came true over all else, just like an addicted gambler emphasizes his occasional winnings over his numerous losses.
     
  12. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    China going down will not be good for Asia and the world. They will take others down with them.
     
  13. The Messiah

    The Messiah Bow Before Me! Elite Member

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    the house always wins.

    one of the reasons i dont gamble...another being even friends change when money is brought into the equation.
     
  14. Bhartiya

    Bhartiya Tihar Jail Banned

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    I dont think it would be that easy, Chinese authorities have a well planned map (or atleast a vague map) of their economic progress and obviously someone might have taught about the "LIFE AFTER MANUFACTUING" phase in China.Furthermore, they really care about their country unlike their dear neighbours, who neither have any plans nor any interests to bring their country on the centre stage..
     
  15. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

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    Think INDIA will help China in a serious crisis if China needs the help.......
     
  16. huaxia rox

    huaxia rox Senior Member Senior Member

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    the 1st mr Gordon Chang raised up the 'The Coming Collapse of China ' theory was when he was trying to sell his book in the US and this time there has to be another book coming...
     
  17. kickok1975

    kickok1975 Stars and Ambassadors Stars and Ambassadors

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    Last time when Gordon Chang predicted, the world waited 10 years only find out its full of BS. Many people wasted money bought his book. Now he is telling everyone to give him one more year. How about refund money plus interest first? I think most people would feel more comfortable to wait. Of course, without making money and getting public attention, I'm sure Mr. Chang would be quickly disapeared.
     
  18. asianobserve

    asianobserve Elite Member Elite Member

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    Gordon Chang is the Cassandra of China...:laugh:
     
  19. sob

    sob Moderator Moderator

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    Easiest way to get publicity is to make a sensational claim and then try to back them up with half cooked data.

    IF China collapses then the Lehman Bros. collapse will look to be completely harmless.
     
  20. asianobserve

    asianobserve Elite Member Elite Member

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    It certainly would. But it would be India's opportunity to take the helm in Asia, don't you think?
     
  21. Tianshan

    Tianshan Regular Member

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    if he is cassandra, then why was his prediction of china collapse in 2006, 2008, 2011, all wrong?

    cassandra was never wrong.
     

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