13 June 2008

China: Balancing Wealth, Poverty, and Authority

By historic standards, China is well situated to play a powerful role in global affairs. China is secure militarily, due to geographical isolation and due to its domination over Tibet, Xinjiang, and Mongolia, as well as current cooperation with Kazakhstan, North Korea, and Russia. China has no current enemies pounding at its gates. China is economically secure due to heavy foreign investment and commerce through its gateway harbour cities on the Eastern seaboard. International trade routes are secured by the world hegemon, the United States--saving China (just like Europe) a great deal of expense maintaining the security of its own trade.

China's population is crowded to the east of the 15" annual rainfall line (see above graphic). China's wealth is crowded even farther to the east, along the coastal cities. One of the biggest problems facing China's authoritarian government is balancing the needs of the wealthy east, with the needs and demands of the impoverished center and west of China.

China is providing many trade and labour opportunities for poor inlanders to transplant to Africa and other third world regions. There, these transplanted inland Chinese can save goodly sums of money and later move back to China relatively well off, compared to their initial situation. Large numbers of inland Chinese are also moving toward the coastal cities, where income opportunities are more numerous and lucrative.

China's great balancing act--economic, military, sociopolitical--hinges upon the wealth being generated in international trade by the coastal cities. As long as it is profitable for European, North American, and wealthy Asian countries to build their factories in China and to use Chinese factories as suppliers, China will continue to generate high growth and income, and maintain a favourable trade balance.
...as energy prices rise, the cost of production rises and the relative importance of the wage differential decreases. At a certain point, as China's trading partners see it, the value of Chinese imports relative to the political cost of closing down their factories will shift.

And all of this is outside of China's control. China cannot control the world price of oil. It can cut into its cash reserves to subsidize those prices for manufacturers but that would essentially be transferring money back to consuming nations. It can control rising wages by imposing price controls, but that would cause internal instability. The center of gravity of China is that it has become the industrial workshop of the world and, as such, it is totally dependent on the world to keep buying its goods rather than someone else's goods. __Source
Much of China's farmland is being taken out of play by mismanagement, loss of labour to the cities, poisoning by industry, erosion, and the caprice of weather and climate. China's food and water supplies are so unsafe, that many Olympic teams heading to Beijing would like to bring their own food and water--but are being denied that option by the Chinese authorities.

Corruption in Chinese construction and finance is rampant, as the need for ever faster and greater growth is drilled into Chinese officials at all levels from above and below. Bridges, buildings, and high voltage power lines crumble as a result, and stock markets--the repository of much of the hard-earned wealth of the Chinese labourer--teeter.

They said that at least Hitler made the trains run on time--until he tried to defeat the entire world in battle. And at least the Chinese government has made the country secure from foreign invasion, and economically prosperous--if only in a very spotty way. China cannot afford to take on the entire world--no matter how large the discontent grows within the country, between regions of wealth and poverty.

So long as China stays safely at home, the largest challenge to its government will be containing the ever-present centripetal forces that perpetually strive to pull China apart into rival factions. As long as the costs of transport of goods remains low enough to make Chinese manufacturing economical for N. America and Europe, China's government should succeed at that containment.

But should the price of oil ever shoot through the roof, or should automated manufacturing methods become widely adopted in the more developed world, the advantages of low wages and trainable labour force would be lost to China. At that point, the first in a long line of dominoes would begin to topple, with China's future very much in question.


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Blogger CarlBrannen said...

Did you read Zubrin's "Energy Victory"? He has a chapter on Germany's oil woes during WW2.

Friday, 13 June, 2008  
Blogger al fin said...

No, I haven't read it. I enjoyed Zubrin's "Case for Mars" and "Entering Space".

Looking at China's geographical situation, supply lines for fuel in a war could get tricky. The Chinese are probably working on their coal to liquids program.

Saturday, 14 June, 2008  

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