Will thecollapse? That is the question which I hope to explore today. Now, while it is true that the world’s is facing many difficulties such as those of energy production and property speculation, reasons like these are not why I think that the Chinese economy may collapse. The reasons why I think that this may occur are twofold:
1.), even if artificially aided, is impossible to maintain.
2.) Growing unrest within.
I shall explain these two points in order.
The People’s Republic of China has prided itself on its yearly 8% growth rate. Now, while it is true that many well-respected economists have disputed the veracity of the data coming out of China, for the purposes of this article I shall assume that they are true because I think that they eventual outcome will be similar either way. This rapid and continuous growth has become known as the Chinese miracle and is a paragon of the so-called ““. However, I think that China’s economy has become, in a large way, dependent on the fast and unsustainable growth. Eventually, there will be a contraction. This is a certainty that lays at the peak of any . How severe this contraction will be is largely determined by how fast the growth was.
Now, I am in no way saying that economic growth will eventually reverse itself. What I am saying is that after any period of growth there will be a contraction. How large the contraction will be is mostly determined by the previous rate of economic growth and the length of time in which that growth occurred.
Why does this bode ill for China? Well, my reasoning can be explained in that a an economy that is growing at a rate of 2% can better absorb a contraction of 1.5% than an economy growing at a rate of 8% can absorb a contraction of 6%. Even though both economies contracted by the same amount relative to their previous growth, the latter economy is likely to face a much larger crisis than the former economy would face, even accounting for relative size. However, this alone would probably not cause a wholesale collapse of the Chinese economy. For that, I will now move on to my second point.
To explain this point I shall briefly examine three aspects of: Population, class and ethnicity.
China is the most populous country on the planet. It is the home of over 1.3 billion people, representing nearly 20% of the total world population. One can only imagine the strain that this puts on a centralised bureaucracy like the one that exists in China. The system is open to staggering amounts of corruption and inefficiencies. These problems would be a very significant issue if China were to suffer a contraction because they would be a severe detriment to response and recovery, creating unrest.
China’s economic boom has created an ever-growing consumer class within the country itself. While this helps the country’s domestic economy it has created massive amounts of resentment from large majority of the population that has not experienced such an increase in their standards of living. In the event of a contraction this lower class would likely be hit the hardest and many of the new consumer class will plummet back into poverty. This would add significantly to the potential unrest.
Lastly, China is home to dozens of ethnic minorities many of whom are resentful ofdominance. Furthermore, even though it is common to think of the Han population as a single, cohesive group, nothing could be further from the truth. To think so is comparable to believing that all and all Europeans are a homogenous group. It is true that there are overwhelming similarities, but that only appears if you look at the picture on a Macro scale. On a Micro scale, there are clear and sharp differences. An economic crisis could very likely bring these tensions to the fore.
This unrest that could significantly grow in the event of ancould very well tip China over the precipice and plunge the country into chaos.
What I have outlined above or some variation thereof is what I think could very well happen. However, there is every possibility that I’m wrong and that China will not collapse, but either continue growing or morph into a different type of economy. But, I believe that China will suffer a contraction in the near future, whether or not this will be fatal remains to be seen.
I am certainly not an economist and am not even that well versed in economic theory. The above scenario was arrived at through logical (hopefully) thought. If anything that I have said is wrong, please tell me.