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15
Nov
2009
Melt-down E-mail
City Life - Blogs & Columns
Written by David A. Dayton
China is headed for a melt-down of historic proportions. The only question is when it will happen.

The only way that it will not happen is if the laws of economics do not apply to China. (Warning: massive over-generalization coming up….) And many Chinese already will tell you that the rules do not apply here. I’ve had well educated Chinese who question some of the numbers themselves still say things like “It’s our right/destiny,” and “We’re not like the West.” All too often questions from foreigners about the wisdom of those driving the economy, the one child policy, currency manipulation, lack of tranparency, etc. are met with ridicule, nationalism and accusations of racism. The current state of the US Ponzi scheme economy is like China’s get-out-of-the-discussion-free card.

Within China, there is very little rational discussion about the true state of the Chinese economy. Partly because there isn’t very much “true” information and partly because no one wants to believe anything but the good news–it’s been so good for almost 30 years now; an entire generation of Chinese don’t know anything but double digit growth.

But the problem in China is more than just numbers. The success of China’s economy is political. And personal. One of the problems of tying the (economic or Olympic or political or whatever) performance of the country to the national identity is that when you have (economic) problems citizens take it personally. Suicide numbers go up when the national team doesn’t qualify for the World Cup (again). They have personal conflict about buying Japanese cars and debate why America is so powerful when it’s both religious and thousands of years younger than China. Criticism of China by foreigners to all but the most internationalized of Chinese citizens can be seen as a personal attack.

That’s one of the reasons why the crash in China, when it happens, will be even more devastating than what’s happening in the US now. People will see it as a failure of history, culture, government; and personal failure too.

Another great blog on this is at Zhongnanhai. The post entitled “China’s Bubbles and Demographics” is a great look at just what I’m saying here–there are serious long term problems ahead. These problems will result in one or more bursting economic bubbles. In the blog there are three specific articles quoted and since sometimes I have issues with filters and blogs within China I’ve attached the direct links here, here and here. You’re welcome.

Finally, Bill Dodson at the This is China blog linked to another article in the NYT saying much the same thing.


David A. Dayton is the CEO of Silk Road International (SRI), an U.S.-owned and managed international procurement agency based in China. Click here to visit SRI's Website.

Our valuable Editor David A. Dayton has been with us since Monday, 02 November 2009.

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