No, this isn't about Chinese militarism, or nationalism. Instead, it underlines some points made in Winds of Change.NET's long look at China's possible futures.
The projections re: China's "inevitable" economic rise to surpass the USA by 2040 or whatever fool date miss a whole lot of things, but here are two:
- The rural time bomb
- The demographic/ pension problem - which points toward the real second time bomb
"A peasant "time bomb" threatens to stunt China's rise to global economic superiority unless immediate measures are taken to fix the problem, say experts. The Chinese state has lost much of its legitimacy with the country's rural majority, a turnaround that could have increasingly adverse effects on the long-term socio-economic development of the country, according to Joshua Muldavin, an Asian studies expert at Sarah Lawrence College in New York.
With greater land seizures by the state and reduced levels of rural subsistence, more peasants are having to migrate to urban areas in search of work where disappointment often awaits, making "peasant landlessness ... a time bomb for the state," Muldavin told an audience Thursday at the Carnegie Endowment for International Peace.
"There are two Chinas," he said. One is for investors, and the other is the "rural hinterlands," where official corruption, a growing gap between rich and poor and unemployment led to some 87,000 incidents of unrest in China last year, said Muldavin. It is believed that many more go unreported."
This is not entirely uncommon as industrialization takes hold, but when you combine it with China's environmental capacity (Industry needs water. People and agriculture need water. What if there isn't enough for both?) and the subject of the next time bomb, things could get "Chinese interesting" fast. So, on to the demographic/ pension/ investment time bomb:
China's pension system is facing a demographic time bomb -- the consequence of the one-child policy -- which could seriously damage its future economic prospects, says a new report from Deutsche Bank's research department.
"Low retirement age compounds the demographic problem. China is graying fast but at a very low income level. Low effective retirement ages will see the working age population already reaching its peak between now and 2010 and will lift the old-age dependency ratio much higher than conventionally thought," says the report.
In effect, China is getting the demographic profile of an advanced industrial country with a mature welfare system, but with an economy still clambering out of developing status. And repairing the existing pension crisis is going to cost a minimum of 7 percent of its gross domestic product.
The DB survey lists three structural challenges in today's system that need to be addressed. The first is that the pension system is burdened by a large amount of legacy debt (i.e. unfunded liabilities from the old pension system).
The second is that decentralization of economic planning has led to fragmentation and a lack of transparency; and the third is that China's "immature capital markets make it difficult to find suitable investments with high returns."
Fixing that last bit will mean fixing a whole lot of things. Many of which are intrinsic to the kind of state China is. Which leads to an unenviable dilemma:
- In order to continue advancing economically, China will have to change.
- As part of that process, the Communist Party is going to have to loosen its grip and make the Rule of Law mean something.
- But serious rural unrest makes that a dangerous thing to do; the natural impulse will be toward more control and centralization of power.
- But if that tight grip means China's economy is hobbled by a poor investment environment because of corollary effects, and growth begins to choke, that will cause unrest among the displaced rural population.
And round and round the merry-go-round we go....