Popular unrest or increasing signs of a ‘China Spring’ appears to be proliferating in China.
From the Wall Street Journal, (bold emphasis mine)
China's massive economic-stimulus program has supported near double-digit growth, but also stoked inflation, piled up debt and fueled another unwelcome development: social unrest.
In 2010, China was rocked by 180,000 protests, riots and other mass incidents—more than four times the tally from a decade earlier. That figure, reported by Sun Liping, a professor at Tsinghua University, rather than official sources, doesn't tell the whole story on the turmoil in what is now the world's second-largest economy.
But what is clear is that the level of social tension and number of protests against the government is rising. That is a sensitive subject as the ruling Communist Party prepares to mark the 62nd anniversary of the founding of the People's Republic of China on Oct. 1.
Earlier I made this observation
China’s top-down political system and her attempt to bottom-up the economic system looks rife for a head-on collision course.
And it’s just a matter of time.
Like in the recent “Arab Spring” populists revolts, consumer price inflation has partly fuelled the unrest.
Again from the same Wall Street Journal article (bold emphasis mine)
Rising prices might not figure as a direct trigger of unrest, but inflation remains a key source of discontent. In an annual survey of social attitudes published by the Chinese Academy of Social Sciences, inflation shot to the top of the list of problems in 2010, up from fifth place in 2009.
There is a reason for that move up the ranks. A sweeping monetary stimulus in 2009 and 2010—with the banks issuing 17.5 trillion yuan ($2.7 trillion) in new loans—translated into higher levels of inflation, reflected largely in food prices. In 2011, the problem has become more severe. The latest data show food prices rose 13.4% year-to-year in August. Prices for pork, China's favorite meat, rose 52.3% to a record level. The urban poor, who spend a large share of their income on food, are hardest hit by food costs.
But what truly has been provoking such restiveness has been China’s strong arm or repressive and inflationist policies combined with cronyism.
If inflation provides the powder keg, the spark that ignites social unrest is likely to come from land grabs. A decade long real-estate boom has made land a valuable commodity. Weak legal protections for property rights and alliances between government officials and developers mean that land often is seized without adequate compensation for residents…
That number could climb. China's local governments have spent the past three years amassing debt—10.7 trillion yuan according to a June estimate by the National Audit Office. Concerns are mounting about whether local governments can repay that debt. This month, local media reported that 85% of local-government borrowers in Liaoning, a province in North East China, didn't have sufficient revenue to make interest payments.
Why did the banks make so many loans to projects with little hope of repayment? One word: land. According to the National Audit Office, 2.5 trillion yuan of loans to local government—23% of the total—depend on sales of land for repayment. Some analysts say the real percentage is much higher.
In 2010, China's local government raised 2.9 trillion yuan in revenue from land sales. Repaying debts will mean selling almost the same amount of land over again. If town halls want to continue paying for hospitals, schools, and other services, the implication is a massive increase in land sales. Even worse, as local governments bring more land to market to pay their debts, excess supply pushes prices down, and the area of land that has to be sold increases.
While China’s current economic boom may have forestalled what may have been a major political revolution, signs are on the wall where continuing policies will likely widen the cracks or amplify political strains until the foundation to China’s bubble economy implodes.
As I earlier wrote,
The desire to uphold the Keynesian unemployment goals will backfire and result to China's version of today's MENA political crisis.
Political instability are corollary to boom bust cycles.
No comments:
Post a Comment