Who's Afraid of the Red Chinese?

[The Rabbi]

China to raise a key interest rate
BEIJING: China is raising a key bank-lending rate for the first time since 2004 in an unexpected move to cool off its economy.

Beginning Friday, the central bank's benchmark one-year lending rate rises to 5.85 percent from 5.58 percent, the Wall Street Journal reported.

News of the imminent rate-hike cut the share price of European mining and energy stocks as investors mulled the possibility that China's sizzling growth -- and thus demand for metals and oil -- would slow.

Beijing aims to dial back an economy that is growing at an annualized rate of more than 10 percent.

Economists responded to the news by suggesting that China may follow the relatively modest interest rate hike with a move to raise the value of its yuan.

The Wall St Journal reported this same story yesterday but with additional information about overbuilding and speculation in the Chinese economy.
Those old enough to remember wil recall Brazil, Thailand, South Korea, Argentina, etc etc and their currency crises in the late 1990s.  In each case the crisis started with something like this: "hot money" coming into the country looking for investment, being channeled to industry and real estate in increasingly speculative ventures, those ventures failing, and an ensuing crisis.  I dont see this as any different in form but very different in scale.
If China goes through a crisis like Thailand or Mexico, I seriously doubt the political system there will survive.  With as many ethnic minorities as the old Soviet Union it will tend to split apart.  That will delay its emergence as an economic super power maybe forever.

[K Frame]

Red Chinese?

Nah, they don't scare me.

Green Chinese?

They terrify me!

I've actually been wondering the same thing... Just how long can the Chinese economy maintain its current pace? It's not just superheated, it's beyond that.

If the Chinese economy does start to tank, though, imagine what will happen to the price of oil...

[mtnbkr]

With as many ethnic minorities as the old Soviet Union it will tend to split apart.

This could be interesting.  I'm not a historical expert on China, but IIRC, China has been "China" for centuries.  How would the lines be drawn if it starts to fragment?  With the FSU, it had only been one nation for a few decades.

Chris

[K Frame]

I wouldn't worry too much about China breaking up like the old Soviet Union.

The main reason?

Over 90% of the population of China, or over 1.175 billion of the nearly 1.4 billion people in China, are ethnically Han Chinese.

The remaining roughly 9 percent of the population is spread among something like 55 other ethnic groups, many of which have strong associations with the Han Chinese.

Simply put, there's no true ethnic fracture lines as there were with the old Soviet Union.

[garrettwc]

Chris, my thinking is somewhat along yours. The Soviet Union came into being after WWII as the Russians decided to just stay and occupy the lands they had crossed over fighting the Germans. China has been China since before the Great Wall was built. I don't see a society that can conceive and complete such a structure imploding.

I would be more concerned with the opposite happening. Keeping their industrial growth going by gearing up their military machine (similar to the U.S. coming out of the depression leading up to WWII). Their growth has been phenomenal. If the taps were suddenly turned off, the people wouldn't stop being thirsty would they? Given their "filtered" access to information, it wouldn't be hard to convince them that the West is responsible for their plight and rally them to action.

[charby]

I doubt that China would start or be able to start an all out war with the US. Just be the end of really cheap goods imported from China and sold at Mao-Mart... I mean Wal-Mart.

C

[roo_ster]

If unrest grows in frequency & virulence, expect the Chicoms to deploy all that new military hardware against their own people.  It's hard to overthrow a facsist government from under the treads of a BMP.

It'll be bloody, but just about every chapter in China's history has been soaked in blood.

Any ethnic unrest will be met with swift & violent suppresion by Han chinese units.

[Sindawe]

I'm not a historical expert on China, but IIRC, China has been "China" for centuries.

Longer than that actually.  China has been "China" since 221 B.C. when the leader of the Qin state successfully conquered the other states and unified the nation.  This is a SMALL part of the terra cotta army that guards his tomb.



http://www.china.org.cn/english/kuaixun/74862.htm

The History Channel just did a two hour program on his life, and I remember reading about the army in Nat. Geographic shortly after it was discovered in 1974.

China is a factor that the U.S. needs to be aware of and treat with respect, but not necessarily fear.  I think the majority of the Chinese want the same things we do in the Western world.  To make money, raise our families and see our children exceed us in lifes accomplishments.

RE: The old USSR.  It predates WWII by 17 years (using the German invasion of Poland as the start of WWII).  Territory it rolled over and expelled the Germans from became satellite/buffer states 'tween the USSR and NATO dominated Europe.  Can't say that I fault their reasoning, since they'd been invaded several times by the European powers over the centuries.

[Art Eatman]

Economics 101 says that if China's economy tanks, the price of commodities will drop.  In 2004, they were using about one-half of the world's supply of cement and steel.  They're importing oil in an equal amount with Japan, and they're buying gold for their central bank.  Even if it doesn't "tank", but slows down notably, there would at least be a levelling off of prices.

Historically, China has never sought to acquire new lands.  Its claim to Tibet is way old, and Taiwan was part of Mainland China until the Nationalists moved into it in 1949/1950.  The exception might be in Siberia, but I don't see China going to war with Russia over that corner.  They seem to be doing in Siberia what illegal-immigrant Mexicans are doing in southern California, only far more quietly.

The puzzle problem for China for which I have no answer is the ratio of young males to young females, and I don't have enough knowledge to predict the results of that.  It doesn't look good, seems to me.

Art