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If ever the word "unraveling" could be applied to a country, it can be applied to China today.
Imagine the following scene: It's a downtown area where people are walking along, going about their business. Somebody accidentally bumps into somebody. Words are exchanged. An argument ensues, and then a fight. Within a few minutes, crowds are gathering, taking sides, and fighting among themselves. Soon, the security police are called in to restore order. Word spreads quickly, thanks to mobile phones and text messaging. Within a few hours, there are 50,000 people pouring into the region, fighting each as well as the police, and full-scale mass riot ensues.
Has anything like this happened in America, even in the 60s? I can't think of anything. But this kind of thing is happening with increasing frequency, several times a month in different regions of China. In fact, public protests have been skyrocketing, with tens of thousands recorded last year.
China has a history of secular rebellions - the huge White Lotus rebellion in the 1790s and 1800s decade, the Taiping Rebellion in the 1850s and 60s that killed 15% of the population, and Mao's Long March that launched the civil war between Mao and Chiang Kai-shek in the 1930s and 40s killed tens of millions.
So the increasing patterns of local protests and mass riots are scaring the hell out of the CCP (Chinese Communist Party), since they have enough of a historical sense to know that one of these mass riots could spiral out of control into a full-scale war. (Generational Dynamics predicts that this will indeed happen.)
Japan and China in confrontation over comfort women: Meanwhile, countries throughout region are increasingly anxious as China makes major new military announcements.... (7-Mar-07)
China's Foreign Minister replies to "China threat" to US and Japan: And China changes the official transcript to hide what he really said.... (1-Mar-07)
China: Shanghai stock market bubble appears close to bursting: People have been pawning their homes and borrowing money from friends and family... (26-Feb-07)
Vice President Dick Cheney, in Australia, criticizes China's military buildup.: Cheney repeats Donald Rumsfeld's similar warning in Singapore in 2005.... (23-Feb-07)
Boys, boys, boys! China is running out of girls.: A look inside a Chinese maternity ward... (1-Feb-07)
China successfully tests an anti-satellite weapon: In a military escalation clearly targeting the United States,... (19-Jan-07)
China says that increasing numbers of "major mass incidents" threaten government: Lauding the Chinese Communist Party's "courage to confront realities,"... (10-Dec-06)
China says that its economy is "sound and stable": But dissident newspaper "Epoch Times" says China's economy and Communist Party are crumbling.... (6-Dec-06)
International concern is growing over China's "overheating" economy: It was only supposed to grow 8%, but it grew 11.3% in the second quarter.... (28-Jul-06)
Why did China agree to join a U.N. Security Council resolution condemning North Korea?: Henry Kissinger has one theory, but mine is quite different.... (19-Jul-06)
New Pentagon report details China's preparations for war: "China's leaders have yet to adequately explain the purposes... (24-May-06)
China's plans for war with America: China is openly making plans for all-out war with the United States,... (1-May-06)
An eerie similarity: Chinese President Hu Jintao and Donald Rumsfeld: Hu gives President Bush a copy of Sun Tzu's "The Art of War" when they meet on Thursday.... (20-Apr-06)
Secretary of Defense Donald Rumsfeld under fire: Rumsfeld is the only person in Washington, Republican or Democrat, who knows what's going on in the world... (17-Apr-06)
Maoist rebels bringing chaos to Nepal and the entire region: Nepal orders all-day curfew in Kathmandu for second day... (9-Apr-06)
China's People's National Congress paralyzed by ideology: China's top officials were unable to stop from committing a "historic error"... (17-Mar-06)
Bird flu: World holds breath for China and Vietnam Lunar New Year celebrations: If we get through the next month without a pandemic, we may be OK till next season.... (30-Jan-06)
China reports 2005 economy still overheated at 9.9% growth: Like a railroad train careening down the track out of control,... (26-Jan-06)
China Prime Minister warns that country is becoming unstable: Blaming local governments for making a "historic error,"... (24-Jan-06)
China and Taiwan step closer to military confrontation: Taiwan President Chen Shui-bian took the offensive on Sunday,... (3-Jan-06)
Japanese minister calls Chinese a considerable military threat: Relations between China and Japan continue to increase in anger and hostility,... (22-Dec-05)
Chinese killing of Dongzhou protesters revives memories of Tiananmen Square massacre: Chinese armed security forces fired on villagers protesting land confiscation, killing many peasants... (11-Dec-05)
Slowing China economy may become deflationary due to overcapacity: Economic problems are growing against the backdrop of continually deteriorating relations with Japan... (1-Dec-05)
George Bush lectures China on being more like Taiwan: It's incredible that President Bush told China to be more open and democratic,... (17-Nov-05)Japanese and Chinese relations are deteriorating sharply : Between China's search for oil and Koizumi's shrine visit, the level of anger and suspicion is rising fast. (23-Oct-2005)
Violent beating of democratic activist in China illustrates country's increasing instablity: Government authorities are thought to be responsible for the attack on Lu Banglie,... (11-Oct-05)
Department of Defense increasingly sees China as a military foe: A front page article in today's Wall Street Journal... (8-Sep-05)
China and Japan head for military confrontation over disputed islands.: Meanwhile, a Chinese general threatens America with nuclear war over Taiwan.... (16-Jul-05)
The mysterious Baltic Dry Index reveals a great deal about the Chinese economy: China is causing wild volatility and turmoil in shipping, iron ore and steel prices,... (5-Jul-05)
How generational changes affect Japan and China: A page one article in today's Wall Street Journal... (28-Jun-05)
Rumsfeld expresses alarm over militarization of China and North Korea: Defense Secretary Donald Rumsfeld spoke in Singapore on Saturday... (4-Jun-05)
China makes five demands of Japan: After Japanese leader apologized at length for Japan's history,... (25-Apr-05)
Neither China nor Japan backing off from increasing confrontation: As conflict increases, America's Pacific strategy is coming apart at the seams.... (20-Apr-05)
Increasingly militaristic China denounces US-Japan statement on Taiwan: China is militarily surpassing America in the Taiwan Straits,... (21-Feb-05)
US dollar weakness and China's growing economic strength dominate World Economic Forum: There's always craziness when world political leaders talk about economics... (31-Jan-05)China appears to be approaching a major civil war : Unrest is spreading, and economic disparities make China a textbook case for a massive civil war in the making (16-Jan-2005)
Up to 50,000 workers riot and clash with police in southeast China: As income disparities and food problems continue to grow in China,... (26-Dec-04)
Taiwan dodges a bullet for now by repudiating President Chen: Rather than further antagonize Beijing and risk an early war,... (12-Dec-04)
New Chinese military chief ratchets up talk of war.: When Hu Jintao (age 61) replaced Jiang Zemin (age 78) as Chairman of China's Central Military Commission on Sept. 19,... (1-Oct-04)
Speaking of China, the economy grew by 9.7% in the first half: This compares with a 9.1% growth last year,... (15-Jul-04)
China is getting more girls: With a huge surplus of boys, ultrasound exams are illegal in China,... (15-Jul-04)Is China unraveling?: Should you invest in the world's fastest growing economy? Analysts say yes, but there are ominous generational signs of financial and social instability in China. (10-Sep-03)
The riots are an overt sign of a large collection of problems that are plaguing China, and are getting worse almost on a continuous basis, as described in the following sections.
China is addicted to a special kind of crack cocaine: A bubble economy that's been growing at almost 10% a year for 20 years. When that bubble bursts, after 20 years, it's going to be chaos.
For a year or so, China has been trying to slow the economy down to a 7% growth rate, and reach a "soft landing." They're using various methods to do this, such as restricting the number of loans.
The Chinese yuan currency is pegged to a fixed rate versus the dollar. This means that as the Fed raises interest rates in America, interest rates also go up in China. So keeping the yuan pegged to the dollar is another tool in the attempt to slow down the economy gradually.
It's a sad principle of macroeconomics that any change hurts someone. I learned this years ago: When gasoline prices skyrocketed to 50-60 cents a gallon in the mid 70s, Texas thrived and the Northeast suffered a major recession. (In Texas, the bumper stickers read, "Freeze a Yankee.") Then, in the mid 1980s, when oil prices collapsed, the Northeast thrived and got its revenge as Texas suffered.
In China, the entire country is tuned to the 10% growth rate. I don't believe that a "soft landing" is possible, but even if it is, I believe that any recession will cause severe social unrest, because of the problems in the following sections.
The entire social structure set up by Mao in the 1950s is completely unraveling. The idea was that the rural peasants would work the farms, and the city dwellers would work in the factories. The peasants were not permitted to move to the cities, but that was ok because the income was about the same.
That's true no more. Large conglomerates and business enterprises have been buying up the individual farms, converting them into large agribusinesses, just as happened in America following the Great Depression.
In China, though, this has made it impossible for peasants to earn a living. The result is that there's been a huge migration of peasants to the cities in the hopes of finding a job. In many cases, the young migrants earn money in the cities and send it back to their families, who have no other source of income. Many of the girls work as prostitutes, except the ones who are lucky enough to become mistresses of wealthy government officials.
This situation is not a trivial matter. The migrant floating labor population is estimated at 113 million, or more than a sixth of China's work force of 744 million people.
There's no guarantee of finding a job, of course. Much of the work is menial and seasonal, and doesn't pay much.
In fact, girls can earn a great deal of money from prostitution because of the law of supply and demand. There's a huge imbalance of males over females, because of a "one child per family" policy instituted by China in the 1980s to curb population growth.
Potential parents knew that without a son to support them, they would starve when they grew older. Thus, many parents used ultrasound to determine the sex of the unborn baby, and would abort a female. Infanticide of female babies also was common.
So young men in poverty, without the money to attract a wife, will not create the families that would given them a stake in the established rule of law. These young men are thus free to participate fully in the anti-government rebellions that the CCP right fears so much.
Another large group of migrants consists of the tens of millions in the "miserable generation" of people that grew up in the 1950s and early 1960s. They grew under conditions of mass starvation and execution, thanks to Mao's "Great Leap Forward" policy, that created a huge man-made famine. Tens of millions of people died.
When the Chinese "generational awakening" period began in the mid-1960s, it was because the kids in the "miserable generation" were beginning to make their political strength felt against Mao and his old guard. Mao wanted to short-circuit the awakening by re-establishing the revolutionary spirit that had motivated him and his followers during the crisis civil war. (Of course, we know that it's impossible to do anything of the sort.) So in 1966 Mao initiated Great Cultural Revolution, to repair the situation, and formed the Red Guards to implement the assault on dissidents. The Red Guards, mostly younger students, soon brought the country to the verge of chaos; they fought pitched battles, carried out summary executions, drove thousands to suicide, and forced tens of thousands into labor camps, usually far from home. Intellectuals were sent to the countryside to learn the virtues of peasant life. Countless art and cultural treasures as well as books were destroyed, and universities were shut down. Insulting posters and other personal attacks, often motivated by blind revenge, were mounted against educators, experts in all fields, and other alleged proponents of "old thought" or "old culture," namely, anything pre-Maoist. Hundreds of thousands more deaths occurred under the Red Guards. [Stearns, p. 1024]
Thus, the kids in the "miserable generation" got no education and developed no job skills.
Today, the people in this generation are are in their 40s and 50s, and they survive on state handouts or what they can scrounge from the underside of China's economy as older migrant workers. They raised their voices during the 1989 Tiananmen Square protest, but they were brutally crushed by the CCP.
So their resentment took a different route: They became followers of a spiritual movement called the Falun Gong. Older people would get together to meditate and do exercises. Once again, Beijing became alarmed, and declared in 1999 that practicing the Falun Gong was illegal. Rumors have it that millions of Chinese have been jailed simply for doing the equivalent of Richard Simmons exercises.
Nonetheless, the Falun Gong movement continues to grow and gain adherents. Their leaders believe it to be the modern version of the God-Worshipper's Society, a spiritual movement which launched the Taiping Rebellion, and was a form of Christianity combined with Buddhism.
Unemployment is low in Shanghai and the other booming big cities in southeast China because they're export-oriented, but cities like Harbin in the northeast provinces (Liaoning, Jilin and Heilongjiang, the former Manchuria) have very high unemployment. This is the "rust belt," where large government-owned factories and chemical plants that thrived under Mao's programs in the 1950s have been increasingly stagnant since the 1980s. Millions of older of workers are being laid off each year, mostly in the "miserable generation," so many of them will never find another job, as long as they live.
Beijing has been pouring billions of dollars into the northeast for such things as job-training centers. If there's a recession, and money becomes scarce, then this aid will not be sustained. There's already a great deal of unrest in the northeast, and it could quickly increase.
Nominal unemployment is lower in the southeast because of the high concentration of migrant laborers, but income disparity is extremely high.
Guangdong province has been a major beneficiary of the new economy, as it's one of the wealthiest provinces, earning about $2,000 per year per person, but is adjacent to Jiangxi and Guangxi provinces that earn only $100-200 per person per year. These enormous income disparities form a major engine of the social unrest.
Guangdong is a historically significant region for riots. China's last two crisis civil wars both began in this region. The Taiping Rebellion began here in 1852, and Mao Zedong's Long March began here in 1934. In each case, the results were devastating for China. The rebellion spread north to Beijing and out into the midlands, killing tens of millions of people each time. There have been recent mass riots in Guangdong, but they've been put down quickly by the security policy. If these mass riots grow and spread, deaths will once again reach the hundreds of millions.
China's relations with Taiwan are becoming increasingly hostile. China's 1989 Tiananmen Square massacre triggered Taiwan's 1990 Wild Lily student rebellion, whose purpose was to advocate Taiwan's nationhood and independence from China. One of the leaders of the Wild Lily rebellion, Chen Shui-bian, has been Taiwan's president since 2000, and has announced plans to move towards independence, albeit slowly.
In fact, Taiwan is just one of China's problem provinces. Two of its western provinces, Buddhist-dominated Tibet and Muslim-dominated Xinjiang, also have secessionist movements. In a way, the western provinces are even more important to China than Taiwan, since China must maintain hegemony in Central Asia for its own security.
Thus, Chen's election and plans have infuriated the CCP, which can't afford to be weak on Taiwan without giving comfort to Tibet and Xinjiang, In fact, China's rhetoric took a great leap forward in December, when new statements said it was China's "sacred responsibility" to use Chinese armed forces "to stop the Taiwan independence forces from splitting the country,"
My feeling is that the Taiwanese are biding their time right now, waiting for the right moment to declare independence. They've very well aware that any move in that direction today would bring an immediate invasion, so they're waiting until the right moment, when they have leverage.
Such a moment could come if a new Chinese rebellion began to spiral out of control. Not only would Taiwan then move toward independence, but they even might be forced to choose sides, and thus to side with the rebellion against the CCP.
Documents leaked from North Korea indicate that they have been mobilizing for war since April, 2004, focusing on an attack from the U.S. But North Korea is believed to have several nuclear weapons and the missiles to deliver them, and Beijing knows that some of those missiles may be headed in their direction.
Food has been getting increasingly expensive in China. According to recent studies, industrial construction and erosion are eating up 0.5% of China's farmland each year. China lost 2/3 of its farmland in 40 years, but has 2.3 times as many people.
(Using my standard benchmark measure of 0.96% annual increase in food production per acre of farmland, the above figures mean that the amount of food per capita is ((2 / 3) / 2.3) * (1.0096^40) = 42% of what it was 40 years earlier.)
Or course China's food problems are consistent with what's happening in the rest of the world. A Washington Post analysis earlier this year indicated that food prices are skyrocketing around the world. This is happening because of what I call the "Malthus Effect," which causes the population to grow faster than the food supply, except during major genocidal wars. Population growing faster than the food supply causes food to become relatively scarce, causing food prices to rise. China has particularly added to this problem in the couple of years, as it's been importing food to feed people in its overheated economy.
This makes China's food problems especially critical, when combined with the other problems. If there's a recession in China in 2005, then China won't be able to import enough food to meet its shortfall, and migrant workers will be unable to get jobs and make money to send back to their families in rural areas. This is certain to foment further social unrest.
China is almost a textbook case of a genocidal civil war waiting to happen. It could be triggered in any of three ways: (a) A collapse of the 20 year old financial bubble; (b) A regional mass riot spiraling out of control; or (c) Any "major incident of Taiwan independence."
Any one of these three triggers would soon trigger the other two. Generational Dynamics predicts that all three will occur in the next few years.