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2 Denial also flows through
China By
Peter Lee
Denial is not, as they say,
just a river in the land of the great Arab
awakening.
China is tempted to overlook
the profound and dangerous contradictions in its
society and polity and rely on economic growth as
the magic elixir.
The United States is not
immune, either.
In fact, America's response
to the calamities it has experienced and inflicted
over the last decade appears to owe more to fear
and befuddlement than clarity and determination.
The US has been markedly
unwilling to confront its failures and
provide a successful example
for - and alternative to - China.
United States financial and
fiscal policy has been neglected as the
Republicans have ignored the recession - and the
need for stimulus - to pursue the destruction of
President Barack Obama's administration by
reframing the debate on the politically useful but
deflationary and economically ruinous terms of an
attack on the size of the government and its
deficit and debt.
For better or worse, China
does not look to the United States anymore as the
model of a successful superpower.
America's ability to lead,
persuade, cajole, or coerce China has suffered
accordingly.
The Chinese government is
making a show of its confidence and determination
- and willingness to rely on its own questionable
judgment in making some big and risky geopolitical
and economic bets.
China's economic strategists,
stalwart Keynesians all, presided over an orthodox
stimulus campaign that not only kept the national
economy on an even keel - it was even credited
with pulling the global economy out of recession.
From a Chinese perspective,
there was once even a hope that common sense would
break out in Washington and the Obama
administration might recognize the value of China
as an economic partner and global linchpin perhaps
even affirm the validity - if not universal
applicability - of its political and economic
model.
However, the attractions to
American pride, politics and interest of treating
China as a competitor proved irresistible and the
United States reverted to type - economic and
political dysfunction masked by
self-congratulatory foreign policy bombast.
On
one level, China might just shrug its shoulders
philosophically and chalk up the kerfuffle to the
same alchemy of Western principle, jealousy, and
malice that turned China's titanic Olympic effort
into a public relations nightmare instead of
triumph in 2008.
After all, political gridlock
in America does hold opportunities for China.
As
2011 dawned, China was poised to reap the benefits
of its prudence and foresight with an investment
and acquisition binge that would fast track
China's emergence as a First World technical and
economic power while the West floundered in a mire
of its own making.
However, it's not just a
question of the Beijing looking on with bemusement
as America drives its political and economic
Hoovermobile off a cliff while simultaneously
flipping off China with the twin middle fingers of
Freedom and Democracy.
The
revolutions in the Middle East have not only
diverted world focus away from China's strengths -
stability and economic growth - to its glaring
weaknesses - freedom and democracy.
They
have also set in motion forces that have
threatened to derail China's march toward
international leadership, threatened to undermine
the stability and prosperity upon which the
Communist Party's claim to legitimacy rests, and
challenge the assumptions of China's cherished
national development model.
In
response, China is displaying a dangerous
combination of anxiety, stubbornness ... and
denial.
With its usual questionable
timing, Global Times publicized a statement of
China's statist economic doctrine - this year's
iteration of the Chinese Academy of Social
Sciences' annual Yellow Paper of World Socialism -
just as Chinese police were wrestling New York
Times reporter to the ground for trying to report
on a Jasmine non-demonstration in front of
McDonald's on Wangfujing in Beijing.
"China's
success in the past 60 years, especially after
the opening-up, has surpassed the achievements
of Britain during the Industrial Revolution and
the US' progress in the 19th century," the
report said, adding that Beijing will not force
others to accept the Chinese model.
It
said the current global financial depression,
ignited by a US credit crisis in 2008, provides
opportunities for the development of socialism
around the world.
"As long as we stick to the path
of socialism with Chinese characteristics, we
can avoid catastrophic financial crises and
economic downturns and help the world economy as
a whole," the report added.
It
quoted several foreign experts to support its
theory that Western democracy is not ideal for
every country. [1]
As China powered
out of the great recession, its leaders apparently
regarded the financial and political disarray in
the West as a leapfrogging opportunity too good to
pass up.
Eager to escape the ''middle
income trap'' that awaits developing countries
that prosper enough to price themselves out of
labor-intensive export industries - but not enough
to achieve First World levels of wealth - in 2010
the Chinese leadership reportedly decided to
execute its ''16 Mega-Projects'' concurrently,
instead of the originally planned staged sequence.
The 16 Mega-Projects as
described in an in-depth examination by James
McGregor, once of the Wall Street Journal and now
a principal of the consultancy APCO International,
are noteworthy not only as an example of massive,
directed multi-billion-dollar government
investment and economic stimulus focusing on high
tech, big pharma, green industries, defense, and
the space program, and enriching the state-owned
enterprises executing the effort. [2]
The
Mega-Projects also reflected a desire to direct
China's investment focus and development into
high-technology sectors that would beat the
''middle income trap'': they were intended to
sustain high growth, deliver attractive wages to
workers and healthy profits to shareholders, and
also provide suitable and satisfying employment
for China's emerging armies of college graduates.
On a tactical level,
fast-tracking the 16 Mega-Projects also reflected
a calculation that Western multinationals, eager
to repair their bottom lines during the recession
and thirsting for the growth rates and sales
volumes represented by the Chinese market, would
partner with China and midwife the emergence of a
world-class high tech sector at the expense of
weaker economies in their home countries.
It
would also help China continue to sidestep the
global economic difficulties and deliver a
healthy, growing economy to the next generation of
China's leaders after President Hu Jintao and his
cohort step down in 2013.
In
furtherance of these goals, the Chinese was
willing to accept the inflationary consequences
and attendant political risks of pumping billions
of yuan into the domestic economy, on top of the
inflationary pressures occasioned by the
undervalued yuan and the trade surplus, and some
unwelcome US piling on in the form of qualitative
easing (money printing to drive down the dollar
and create inflationary expectations for the
purpose of reigniting loan and investment activity
in the West).
However, unwelcome reality
intruded into this meticulously constructed
strategy.
Inflation risk became
unpleasantly and closely coupled with political
risk as revolution swept the Arab world in the
early months of 2011.
As the revolutionary
contagion spread from Tunisia to Egypt to Bahrain
to Yemen to Libya, it was clear that any
assumptions concerning the Chinese public's
tolerance for inflation, even in the high-growth
context of the Chinese economy, would have to be
carefully examined.
When a dissident website
issued a call for Jasmine-walkbys at New China's
greatest monuments, such as the McDonald's at
Wangfujing, the government displayed its anxiety
with a spectacular overreaction, dispatching
hundreds of policemen to scuffle with onlookers
and journalists - and no demonstrators.
Government concerns over political
instability were accentuated by the inflation
bogeyman - historically the hammer of empires in
modern China.
Inflation attributable to the
usual suspects - loose money policy and the high
trade surplus - has been exacerbated by a severe
drought that has spiked food prices over 10% in
the last year, and may well be supplemented by
imported inflation in the form of higher energy
and material prices as the Arab revolutions
disrupt global commodity markets.
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