IS CHINA TRULY IN THE BIG LEAGUES? AND, CAN IT BE TRUSTED? OR, IS IT STILL JUST A HOUSE OF CARDS?

Sure, China has the second largest economy, ranked by Gross Domestic Product, the primary measure of all economic activity within a country.  That measure, however, is mostly due to the country’s 1.36 billion population.  When qualitative measures are considered, such as Per Capita GDP and Average Annual Income, China ranks somewhat lower, than other, more advanced nations.

The International Monetary Fund had recently announced that the Chinese Renmimbi (RMB) would become a “Reserve Currency,” beginning on October 1, 2016.  It will then join the U. S. Dollar, Euro, Japanese Yen and British Pound as “freely exchangeable” currencies.  However, China had only recently stopped “pegging” the RMB (tying it) to the Dollar, and there have been numerous past occurrences of government interference with it’s trading in the open market.  Can its stability be readily expected?

China has across-the-board problems—not just in its export-oriented markets and its currency—but also with its manipulation of the stock and bond markets.  Additionally, examples of China’s dishonesty include: its cherry-picking of supposedly nationwide high school standardized test results from just Shanghai, its best-performing school district; it has enabled on-going disregard for established international copyright law with regard to intellectual property; and under-reporting past pollution results, just to name a few.

Admittedly, China has been made a permanent member of the UN Security Council, joined the World Trade Organization and the Group of 20 major economies.  And, due to its economic achievements, it will have a larger role in both the IMF and the World Bank in the near future.  But, due to its top-down economic manipulation, human rights violations and its deviant past actions, I maintain that it is still a House of Cards.

Although the government hierarchy speaks of democratic principals and market-based economics, truly everything is managed by the Communist Central Committee, the Party’s governing body.  For instance, the One-Child Policy, which limited families (with few exceptions) to have just one child; however, that will be modified this year.  But, recent surveys suggest that many Chinese women of child-bearing age have little interest in having another child.  Furthermore, it would be some twenty years before today’s newborns will be ready to join the workforce.

That instance of Social Engineering is truly one that has backfired on the CCP.  Currently, China’s workforce is aging rapidly, and the question is: where will the new workers come from?  The government-manipulated economy has never diversified toward more domestic consumption and a higher-end, professional workforce.  Such an economy might have enticed today’s older workers to work longer; but, now that appears to be too late.

This is a dilemma that authoritarian socialist governments have been failing to recognize for the better part of the past century.  But will they ever understand the risks at hand?  And, in the case of the Chinese government, it seems to believe that it is superior to the invisible hand of the marketplace and, over the past 35 years, even to nature.

NOTE:  There are a number of posts on this blog regarding China’s many and varied problems.  Just click on the China tag on the right and a list of those posts will appear.

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