When the bubble pops, or in the remote chance that it deflates gradually, the wealth the Party gave the people will deflate too. The promise will have been broken. And there’ll still be the medical bills, pensions and school fees.
Source/Credit: The Daily Beast
By/From David Frum | September 13, 2012
What is yet to come keep a few up at nights.
David Frum brings this excerpt from a "most thought-provoking pieces" he says he has read about China in a long time.
The piece is written by a British resident of China who is married to a Chinese woman. He explains his reason to leave China. Frum in his The Daily Beast post quoted what he called "a long extract from a longer article," which he says, "you'll want to read the whole thing."
Social status, so important in Chinese culture and more so thanks to those 60 years of communism, is defined by the display of wealth. Cars, apartments, personal jewellery, clothing, pets: all must be new and shiny, and carry a famous foreign brand name. In the small rural village where we live I am not asked about my health or that of my family, I am asked how much money our small business is making, how much our car cost, our dog.
The trouble with money of course, and showing off how much you have, is that you upset the people who have very little. Hence the Party’s campaign to promote a “harmonious society,” its vast spending on urban and rural beautification projects, and reliance on the sale of “land rights” more than personal taxes.
Once you’ve purchased the necessary baubles, you’ll want to invest the rest somewhere safe, preferably with a decent return—all the more important because one day you will have to pay your own medical bills and pension, besides overseas school and college fees. But there is nowhere to put it except into property or under the mattress. The stock markets are rigged, the banks operate in a way that is non-commercial, and the yuan is still strictly non-convertible. While the privileged, powerful and well-connected transfer their wealth overseas via legally questionable channels, the remainder can only buy yet more apartments or thicker mattresses. The result is the biggest property bubble in history, which when it pops will sound like a thousand firework accidents.
In brief, Chinese property prices have rocketed; owning a home has become unaffordable for the young urban workers; and vast residential developments continue to be built across the country whose units are primarily sold as investments, not homes. If you own a property you are more than likely to own at least three. Many of our friends do. If you don’t own a property, you are stuck.
When the bubble pops, or in the remote chance that it deflates gradually, the wealth the Party gave the people will deflate too. The promise will have been broken. And there’ll still be the medical bills, pensions and school fees. The people will want their money back, or a say in their future, which amounts to a political voice. If they are denied, they will cease to be harmonious.
Meanwhile, what of the ethnic minorities and the factory workers, the people on whom it is more convenient for the government to dispense overwhelming force rather than largesse? If an outburst of ethnic or labour discontent coincides with the collapse of the property market, and you throw in a scandal like the melamine tainted milk of 2008, or a fatal train crash that shows up massive, high level corruption, as in Wenzhou in 2011, and suddenly the harmonious society is likely to become a chorus of discontent.
How will the Party deal with that? How will it lead?
Unfortunately it has forgotten. The government is so scared of the people it prefers not to lead them.
In rural China, village level decisions that require higher authorisation are passed up the chain of command, sometimes all the way to Beijing, and returned with the note attached: “You decide.” The Party only steps to the fore where its power or personal wealth is under direct threat. The country is ruled from behind closed doors, a building without an address or a telephone number. The people in that building do not allow the leaders they appoint to actually lead. Witness Grandpa Wen, the nickname for the current, soon to be outgoing, prime minister. He is either a puppet and a clever bluff, or a man who genuinely wants to do the right thing. His proposals for reform (aired in a 2010 interview on CNN, censored within China) are good, but he will never be able to enact them, and he knows it.
Read original post here: Eye on Economy: If You Thought the 2008 Recession Was Bad, Wait 'Till China's Bubble Pops
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