OPERATE WITH A SMILE
China, and much of the countries in the region always operate with a smile. Meaning, as Deng Xiaoping said: “China should disguise its ambition and hide its claw”. So things might look very different underneath than they do from the outside.
Various researchers have come in that respect to the conclusion that China’s growth numbers are not really to be taken at face value. It is a general pratice (as it has been in many former Soviet States as well) to paint a better picture. However, it seems that the numbers have been evened out somewhat. Meaning that the ‘bad’ periods are portrayed as less bad, but likewise, the ‘good’ periods might in fact be much better.
THE ROLLER-COASTER ECONOMY OF THE EIGHTIES
Nevertheless, for China as well, every growth goes with ups and downs, it is never a straight line upward. During the eighties and nineties the economy of the land of the Dragon has been characterized as the ‘roller-coaster economy’, because it had a very irratic behavior. And today, it does seem that the Chinese economy shows some extreme characteristics that look unsustainable.
40 to 50 percent of GDP are investments and there’s a high level of savings (both households as companies). The Cost of Capital is perceived as near zero. The companies simply stop paying the interest and up untill now, the government has always stepped in. With more foreign investment, that seems less likely to happen again.
SOCIAL UPHEAVAL AS A RESULT OF ECONOMIC CHANGE
However, with the fast monetary growth and wages that keep rising, it seems inevitable inflation is going to rise and recession is bound to occur again. Again? That’s right, so what happened last time?
We’d have to go back to the late eighties for the last time inflation led to a recession in the country. With food prices skyrocketing in the stores everywhere in the country, it of course reflected poorly on the competence of the Communist Regime. So, first off, students marched the streets, to be followed by as many as 100 million workers (!) nationwide. They were all protesting as a result of the downfall in the economy.
It all culminated on June 4th 1989 with the Tiananmen Square Massacre and that famous picture of a man in front of a tank. A picture that has only been iconic outside China, as it was censored internally. Instead, for the Chinese themselves this event is more iconic for protest that occur more and more and have an economic cause.
So the question is: what will happen if that economic downfall occurs again? Will there be massive uprisings? Who will step up or step out? And how would the regime react to something similar in Xinjiang?
