I've said for some time that China was an accident waiting to happen. First, we have the exponential growth of the Chinese economy since the time of Deng Xiaoping that overturned the social contract established under the old governmental system established by Mao Tse Tung. Over 400 million people have been uprooted as a result of the setting up of China as the workshop of the world, and 100 million of those people have basically become homeless.
Industrial growth has used up the capacity of local airsheds and watersheds, and pollution has imposed significant costs on Chinese society. If the skies of Oregon are now visibly effected by Chinese air pollution, one can only imagine how bad things are near the factory sites of the Peoples Republic.
But this is only the tip of the iceberg. Every year, the number of civil disturbances has risen inside the PRC. My old information said that there were 30,ooo unreported civil disturbances, but updated information now indicates that last year there were roughly 115,000 civil disturbances. Why is there so much local unhappiness?
Simple. By violating the social contract that the Chinese Communist Party laid down of forced equality under the Mao system, severe inequality has resulted. Local party officials have colluded with industrialists on land deals that have forcibly removed peasants from their lands with no compensation. Everyone and their brother knows that the business frenzy of China has created too many billionaires to count. And China has a much more unequal society by money and political influence than the United States. All you have to do is to imagine the conditions that brought on the Occupy Wall Street movement, and then multiply that by perhaps a factor of ten.
One of the spinoffs from the get rich quick mentality that has infected the Chinese elite has been an exponential growth in corruption. This has creeped into every facet of Chinese life, from sitting in the classroom to recieving medical treatment.
Bribery is everywhere. However, the worst of the worst corruption has been reserved for the incestous relationship between local Chinese Communist Party officials and development projects.In many ways, corruption in China can almost be seen as a pyramid scheme, with the small fish feeding part of the percentage of their ill gotten gains to fish higher up.
It matters little whether it's Foxcomm making Ipods or the Peoples Liberation Army running their own factories for both consumer and military goods. Corruption is as pervasive as the air and water pollution.
Most recently, corruption has reared its ugly head over the sacking of Bo Xilai, former party leader of Chunquing. To hear the official press accounts, you'd think that Bo was merely one rotten apple in the barrel. I can assure you that this is government propaganda. In order to rise to the top of Chinese society, it's necessary to swim in a corrupt system. Thus, I would imagine that the old head of the Chinese government (Hu Jintao) and the new head (Xi Jinping), are as corrupt in their own way as Bo and his family were. And this corruption has spread its tentacles deep inside the Chinese military structure.
A whole rat's nest of princelings has been created in China. It's no accident that Bo's son attended high school at Harrow in England, followed by an undergraduate degree at Oxford, and that he's now in business school at Harvard. And since landing at Harvard, he's downgraded his wheels to a new Porsche. Doesn't everyone in the world recieve the same standard of education? So, instead of the 1% lording it over a now lower middle class, as it is in the USA -- China has its billionaires lording it over a society where over 1/3 of the country makes less than $400 a year. Talk about the class struggle!
And if this weren't enough, I've documented the threat of the Chinese housing bubble in my older post entitled (BEWARE! The China Scenario 4/29/11). The jury is still out as to whether this will create the conditions for a new financial implosion that would match the severity of what occurred in the United States in 2008.
The highly centralized dictatorial system in China gives their leaders significant freedom of action that would be envied by Timothy Geithner and/or the Federal Reserve Board. The Chinese government is taking steps right now to broaden types of credit by allowing for more open forms of capital investment, instead of the tightly controlled secret banking system being run by and for the benefit of various ruling famlies in the secret, underground banking system.
On top of all of these problems is the question of leadership at the top. Hu Jintao, current First Secretary of the Chinese Communist Party, is stepping down because of mandatory age requirements within both the Politburo and the Chinese Central Committee. Many veterans, who are 70 years old or older, are being forced to step down, being replaced by party officials in their 50s. This generational shift to much younger, more ambitious political warlords in place of the old greybeards is yet another variable in the complex equation as to whether the PRC will be able to transition smoothly this year.
Since the Chinese are so good at keeping significant pieces of news under wraps, it will continue to be difficult to know just what exactly is going on behind the scenes. The events surrounding Bo Xilai, I am sure, are being filtered by the other elites of the Chinese Communist Party as reported by Xinhua or other government news organs. There is no reason to believe that the counter-elites are either more virtuous or less corrupt than Bo. Only one example was the mini-coup in Beijing's neighborhood of ruling elites several weeks ago. Military and police supporters of Bo Xilai took to the streets demanding democracy. Whether there was gunfire or not was disputed in the press.
However, incidents like these are almost sure to reoccur in the summer. Whatever direction the PRC goes in the near future, there is only one thing certain. And that is, that the new government will find itself in the midst of an extremely rocky transition period.