25 January 2011

Megacities in China: A Further Prelude to China's Collapse?


We recently learned about the connection between the "skyscraper index" and an impending financial/economic crisis. China is currently testing the skyscraper index with its massive building projects. But a massive project to merge several Chinese cities containing multi-million person populations may introduce an entirely new index: The Megacities Index.
The "Turn The Pearl River Delta Into One" scheme will create a 16,000 sq mile urban area that is 26 times larger geographically than Greater London, or twice the size of Wales.

The new mega-city will cover a large part of China's manufacturing heartland, stretching from Guangzhou to Shenzhen and including Foshan, Dongguan, Zhongshan, Zhuhai, Jiangmen, Huizhou and Zhaoqing. Together, they account for nearly a tenth of the Chinese economy.

Over the next six years, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion). An express rail line will also connect the hub with nearby Hong Kong. _Telegraph_via_NextBigFuture


China is already exhibiting some early, subtle signs of significant problems on multiple levels -- similar to signs present in the USSR a decade or so prior to collapse.
In 1975, while I was in Siberia on a two-month trip through the U.S.S.R., the illusion of the Soviet Union’s rise became self-evident. In the major cities, the downtowns seemed modern, comparable to what you might see in a North American city. But a 20-minute walk from the centre of downtown revealed another world — people filling water buckets at communal pumps at street corners. The U.S.S.R. could put a man in space and dazzle the world with scores of other accomplishments yet it could not satisfy the basic needs of its citizens. That economic system, though it would largely fool the West until its final collapse 15 years later, was bankrupt, and obviously so to anyone who saw the contradictions in Soviet society.

The Chinese economy today parallels that of the latter-day Soviet Union — immense accomplishments co-existing with immense failures. In some ways, China’s stability today is more precarious than was the Soviet Union’s before its fall. China’s poor are poorer than the Soviet Union’s poor, and they are much more numerous — about one billion in a country of 1.3 billion. Moreover, in the Soviet Union there was no sizeable middle class — just about everyone was poor and shared in the same hardships, avoiding resentments that might otherwise have arisen.

...The corruption extends to the enforcement of regulatory standards for health and safety, which few in China trust. In recent years China has endured a tainted milk scandal and a tainted blood scandal, each of which implicated corrupt officials in widespread death and debilitation. In a devastating 2008 earthquake, some 90,000 perished, one-third of them children buried alive in 7,000 shoddily built “tofu schools” that skimped on materials. Nearby buildings for the elites that met building standards, including a school for the children of the rich, were largely unscathed.

The government tries to tamp down the outrage over the abuses inflicted on the public by banning demonstrations and censoring the Internet. But it is failing. Year by year, the number of demonstrations increases. Last year alone saw 100,000 such protests across the county, directly involving tens and indirectly perhaps hundreds of millions of protesters.

China is a powder keg that could explode at any moment. And if it does explode, chaos could ensue — as the Chinese are only too well aware, the country has a brutal history of carnage at the hands of unruly mobs. For this reason, corrupt officials inside China, likely by the tens of thousands, have made contingency plans, obtaining foreign passports, buying second homes abroad, establishing their families and businesses abroad, or otherwise planning their escapes. Also for this reason, much of the middle class supports the government’s increasingly repressive efforts. _Solomon
China has a long history of empires alternating with chaotic internecine wars carried out from warlord-led strongholds.

The rise of regional mega-cities could well presage the breakup of modern CCP-ruled China into warring factions and (mega) city-states. Joseph Tainter's Collapse of Complex Societies dissects the rise and fall of multiple cultures and civilisations throughout history -- and points out the tendency for the complexity of a society to outgrow the society's ability to cope with complexity.

Certainly the sheer size of the Chinese society lends to vast complexities, which can push the ruling powers to their limits of coping. It appears that the leadership of the CCP is determined to press ahead at warp speed, in the direction of rapidly increasing complexity.

China's rapid ascendancy in the global economic and technological hierarchy was achieved via huge outside investment, cheap labour manufacturing and export, an ambitious, highly intelligent and educated workforce, highly talented industrial spies, counterfeiters, etc. Some of those strengths are still operating at high levels. But the core of China's rise -- massive export wealth -- is hampered by a global economic downturn, and a sustained recession led by Luddite and left-reactionary policies implemented by the current US administration.

China is attempting to compensate for the significant decline of its export market by ambitious construction projects inside China. This megacities project is only one of many huge spending and stimulus programs operating -- virtually all of them teeming with corruption, mis-allocation of resources, and shoddiness.

Only a few persons anticipated the fall of the USSR years and decades before its collapse. Will the same be true for China?


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Blogger Hell_Is_Like_Newark said...

So what will be the trigger? The proverbial straw the breaks the Chinese Dragon's back?

Massive earthquake in a major city, with widespread collapse of poorly built modern skyscrapers?

Failure of the Three Gorges Dam?

An environmental crisis of some sort (i.e. major water shortages and crop failure in China's northern provinces)?

Banking sector collapse?

Tuesday, 25 January, 2011  
Blogger Tom Craver said...

Complexity isn't the cause of collapse. Just the opposite - complexity adds stability against "ordinary" crises. In itself, complexity does NOT make a system less stable (providing it is reasonably well designed, of course, as is commonly the case).

It's the mistaken belief that the increased stability against ordinary crises yielded by complexity justifies shaving the net margin of error, combined with the inter-dependent linking of systems inherent in complexity, that leads to disasters.

Unfortunately, that false assumption seems to follow almost inevitably from any increased safety granted by any increase in complexity. Large margins of safety appear to go to waste year in and year out, as only ordinary crises hit and are easily handled. The temptation to shave them and increase profits or cut taxes or whatever, becomes irresistable.

And if a minor disaster slightly overwhelms the current complex system (after we shave margins too close), more complexity is the obvious answer - to restore margins of error. (E.g. we'll create a "smart grid" to reduce regional power grid instabilities.)

So in the end, yes, complexity leads toward disaster - unless a society can resist temptation, which would be very unusual.

So the real question is - is there any sign that Chinese officials are unusually resistent to the temptation to shave margins, whether to benefit the public or to line their own pockets?
It appears the answer is "no", except maybe at the very top level of government, where there's less pressure to compete for advancement within the CCP and less temptation to take "alternative" rewards to make up for career stagnation.

China looks more stable than the US, which has a tidal wave of demographically induced economic crises glacially sweeping down on it. But China has become too dependent on the value of their foreign debt holdings - putting them at risk if the value of those holdings should collapse.

Still, to me the emphasis on internal building in China appears to be a rational response - however inefficiently done it may be - to reducing the risks of foreign dependency.

Whether it will work is a separate question.

Tuesday, 25 January, 2011  
Blogger al fin said...

HILN: Solomon speculated a bit over that question in his article. Looking back in time for the USSR, it is not completely obvious that any one particular weakness or defect caused its collapse.

Looking back on CCP China's collapse, it may be just as hard to tease the primary cause out of all the inter-locking causes.

Tom: Most analysts felt the same about the USSR vs the US back in the 1970s and 1980s as you seem to feel about China vs the US today.

China may well look more stable to you. That seems to be the mainstream attitude so you are not alone in that viewpoint.

Tuesday, 25 January, 2011  
Blogger kurt9 said...

The Soviet Union collapsed because it was bankrupt. The Soviet Union never competed in the international marketplace and never had significant foreign reserves. China is a successful competitor in the international marketplace and has huge foreign reserves. The Soviet Union never allowed private company formation. China is full of private companies. The analogy between the Former Soviet Union and China is way off base.

China has many problems and will probably enter a multi-year recession for a while. However, complete collapse is unlikely.

Tuesday, 25 January, 2011  
Blogger al fin said...

Kurt: Very easy to say in hindsight, 20:20 retro-vision. How many were predicting the USSR's downfall well ahead of the fact? About as many as are predicting the CCP's fall.

China has a cyclic history of empires breaking up and re-forming. Modern China is difficult to understand without a historical perspective of both China and the hidden fragility of political systems in general.

Wednesday, 26 January, 2011  

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