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Old January 8th, 2009, 02:04 PM
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Post Should China be worried about riots?

An interesting blog post about China.

Should the Communist Party be worried about riots?
Posted By: Malcolm Moore at Jan 8, 2009 at 11:08:37 [General]

My Chinese assistant says she has a "bad feeling" about 2009 already, although she can't quite put her finger on what is giving her the shivers.

I can: it's the Chinese government. Even Xinhua is now talking about the dangers of "mass incidents", the euphemism for riots and turmoil, as China's growth slows down.

Officials have been queuing up to trumpet bad news about falling exports, collapsing manufacturing and the need for everyone to tighten their belts.

The newspapers have also been unleashed, as long as the news is depressing. In the past two days, two new deaths from China's toxic milk scandal have been openly reported, a total reversal from the months of stonewalling about the scandal until now.

Which makes me wonder what the government is up to. Can it really be that concerned about riots if it is willing to allow newspapers to report them? If they were a real threat to its authority, there wouldn't there be a clampdown?

I suspect the government actually has little to fear. As I wrote in a previous posting, the riots in the south are not because workers have been fired, but because workers haven't been paid. These workers are not hell-bent on overthrowing the government, or on forcing democratic reform. They just want the cash.

As soon as they get their money, they will probably go back to their home provinces where they can either mind their patch of land or pick up jobs on all the roads and railways the government has promised to build next year.

Tao Wang, an economist at UBS, also points out that the current job losses are not without precedent. Between 1997 and 2002 around 35 million workers were laid off as China reformed its inefficient state-owned behemoths.

At the time, 20 million migrants returned home, without any obvious threat to the government. This time around, the job losses are not permanent, but cyclical.

The Asian Financial Crisis took a large chunk out of China's exports but it was more nimble in recovery than many of the Asian tiger economies around it. China's exports will pick up in less than a year, most economists believe, and the factories will reopen.

Meanwhile, China's property market, which is the real reason for the current economic weakness, may be on the road to recovery. Sales in December were substantially higher than those in October in Beijing (33pc rise), Shenzhen (124pc) and Shanghai (86pc).

This is in volume terms, so it's probably as a result of deep discounting and cheap social housing coming online, but it shows that the problem may not be as deep as expected and that Chinese house buyers react quickly to government measures (including easing lending restrictions on second mortgages).

Finally, I wanted to repeat that China really isn't an export-led economy (see my previous post). Industrial production growth has indeed fallen dramatically, from over 15pc at the start of the year to just over 5pc in November. However, headline manufacturing export revenue accounts for only around a fifth of overall gross industrial output, according to the official stats.

-Loud and Proud Desi Opinions
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china, economy, exports, slowdown, snakes, social unrest

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