The China effect

(international economics) The story of the red dragon.

After the mini-crack on the 27th of February, when the Shanghai Stock Exchange market plunged nearly 9%, we could say with certainty that 2007 will be (yet again?) the year of China. The world stock exchange markets followed the negative trends and as an example I can name the Wall Street that had its worst week since the 11th of September 2001. All the signs show that the biggest in population country – with the highest economic growth – is after a more active role in the international scene as the Chinese economy will not just continue being the provider of cheap labour for the big multinational companies of the West.
Today, the Chinese government is following a “hybrid” solution of absolutistic governance – with a political party of 70 million members – and Anglo-Saxon capitalism. As a result we have not only an exceptional economic growth but also the creation of ideological contradictions and social inequality that has an effect to the rest of the world, since we do live in a globalized society. It actually affects the middle class of Europe and the U.S.
“Made in China” products was a strategic choice of the American and the European industrial elite with the move of production lines in the Far East in a vicious circle of production and consumption
The Chinese miracle seen in another perspective: for each factory that opens in China, we have the closure of another one in France, Germany, the U.K., the U.S. Each product made in China by either an anonymous Chinese company or a worldwide known brand and bought for example in Europe, is the proof that western societies are turning very fast into service and consuming economies, where the majority of the products will be imported from China or other low-cost labour developing countries. Actually this was no accident. It all started with the “China card” played by Richard Nixon and Henry Kissinger in 1979 and the European and American funds followed in a competition of whom will invest the most in this developing country so that they will profit from a future growth. It is by this that the Chinese tiger has evolved into one of the worlds leading economies in terms of annual growth numbers. And this tiger is only growing and becoming more confident, looking for a place in the world scene.
The ambitions to expand that the fast evolving Chinese economy has and the need to control raw materials – especially oil – is well known and we can understand the importance of such plans for a fast growing economy looking to become less dependant from others.
The Chinese miracle is accompanied by a frightful human cost. That is the numbers of people migrating from the rural areas of the country and into the big cities, where they are experiencing the worst treatment in their work, as reported recently by Amnesty International in the last report for the social class emerging problem of the Chinese society and economy, a harsh answer to the supporters of the Chinese economic miracle.
With the Cultural Revolution, Mao Zedong forced millions of people to leave urban areas and move to rural areas in order to become farmers and cultivate the country, with catastrophic consequences. Today we have Deng Xiaoping that has caused one of the biggest moves of people within a country’s borders in the human history, where more than 200 million farmers moved to bigger cities in the last 5 years and according to the calculations made by Amnesty International the numbers of these people will reach 300 million by 2015.
All this happens in a country ruled by the people’s party that launched the “one country, two systems” – something that today probably looks like more of a “one system – two countries”, one of the richer and one for the poor.