The warnings have been frequent over the past year, beginning with the inaugural “The Emperor Wears No Clothes” back in August 2010. Then there was:
Then, in “Assume China Will Have a Financial Crises, What’s Next,” I stated “The Party” may be lucky to escape with just a financial crises.
A November story in the WSJ entitled “Why China is Unhappy” provided some color on the current mood of the Chinese people.
- 40% of Chinese are unhappy with their lives
- 70% of farmers are unhappy, primarily due to land seizures
- 60% of the rich are emigrating or considering to do so
Sentiment precedes action: a study on the Egyptian uprising showed negative social mood, as measured by text mining mainstream media, correctly forecasted the insurrection. When combined with various forms of oppression, which by itself is the dominant risk factor in uprisings, you have a tinderbox. China sits 11th most likely to experience an increase in violence against the government, without a financial crises as a factor, according to the Mincord Model.
Even the state run newspaper, China Daily, warned of a “crises of confidence” in government. Increasingly, acerbic statements are being leveled at China’s central government, not just the thuggish local governments; people realize the amoral behavior reaches the top rungs.
Factors contributing to the turn in social mood include: inflation, oppression, concentration of wealth in the hands of the connected, better benefits for the political class, and SOE’s getting preferential treatment while entrepreneurs go bankrupt.
The government’s response: increase policing of the internet by forcing people to associate their real names with internet identities. More oppression will compound rather than solve China’s problems.
The Chinese government could reform, encourage local elections, but this is unlikely without a crises. In a darker scenario, the government appeals to nationalistic tendencies, employs the time tested “rally around the flag” political maneuver, and unleashes their hostility on its neighbors, or the West.
Among the possibilities, the status quo appears to be the least probable outcome, leaving us with the question:
Can 1 million communist party members pacify 1 billion people amidst an economy that is detonating?
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