CHINA as a country has experienced a hard life in the last 100 years.
In the late 1800s China was like an all-you-can-eat buffet being carved up and shared by a mixed set of would-be colonizers that include Britain, Germany, Russia, France and Japan. Britain, for example, was able through force of arms to get China to give up the critical seaport of Hong Kong and required China to import opium from British colony India.
In large measure because of its weakness in dealing with the foreigners, the Qing Dynasty fell after more than 250 years.
During World War I, China joined the allies against Germany to fend off Japan, which decided to help the war effort by invading China to capture the German naval base at the Shantung Peninsula, violating Chinese sovereignty and neutrality. After the war, German concessions in Shandong were given to Japan, not back to China.
While Sun Yat-sen, founder and first president of the Republic of China, tried to unify the nation, the newly established Soviet Union was supporting the uprising of the Chinese communist party. Britain and its allies responded with a declaration of war two days after Germany invaded Poland in 1939, but were all but totally silent in 1931, when Japan invaded China.
China was a founding member of the United Nations (UN), but when the Chinese civil war winner Mao Zedong took over the government, its UN seat was given to Chiang Kai-shek’s government in Taiwan. China sent a million troops into Korea during that civil war, only to be fought to a stalemate by the American-led UN forces. The US militarily intervened in 1954 to prevent the mainland Chinese government from recapturing its self-proclaimed territory of what was then commonly called Formosa. While wanting to be a full partner in the ideological war of communism against capitalism, China was treated like an unwanted relative by the Union of Soviet Socialist Republic.
If China was a person, its psychological evaluation would probably show someone who is paranoid, has low self-esteem, and whose inappropriate public behavior tries to compensate for lack of confidence.
Chinese economic policy-makers are not foolish, but they are ignorant. Having lived through decades of totalitarian economic control, there is a genetic belief that the central government has the power to successfully move the economy in any direction that it wishes. That works when the economy is agrarian-based and the government owns all the land and means of production. But successful industrialization requires the freedom of creativity and entrepreneurship.
China has known for a decade that its export-based economy was not sustainable and that it needed to move to a consumer-based economy. The economic geniuses in Beijing, not unlike their counterparts in Washington, London, Berlin and elsewhere, began pumping tens of billions into construction to create consumer home ownership not unlike the West in the early 21st century. The results have been exactly the same—boom and bust.
The Chinese government’s next effort was almost the same as the US stock-market boom and bust of the 1990s. There is nothing that makes the average person feel rich and being a big-time capitalist as owning shares of stock that doubles in price. China’s problem is this: Because of its immense government control, they were able to compress three decades of Western boom-and-bust into just a few years.
The Chinese government wants to be viewed as an equal in the world stage; but it has always been treated as the guy at the fancy party wearing a tuxedo with the zipper open. China has spent billions building up its navy, but everyone knows that it has limited military capabilities beyond a few hundred miles from its own shores. To compensate for its global inadequacies, China bullies the Philippines.
The global market meltdown is being blamed on the Chinese stock- market collapse, its devaluation of the renminbi and its slowing economy. Everything is true, but all those are the results of Chinese boom-bust economic-policy failure, a necessity that the government must do to bolster its exports, and a wasted effort trying to keep a smile on the faces of the average Chinese. Still, do not blame China.
Look westward: The Western stock markets are almost totally disconnected from ordinary retail- investor participation, which is the lowest in 50 years. The financial institutions have made countless billions from government and central bank “stimulus” programs that nearly destroyed the middle class in the US, Europe and Japan. They now realize that the party for them is coming to an end as the central banks lose control of the markets.
Confidence in the government is evaporating and with it, the markets. China, for all its major faults and foolishness, is a convenient scapegoat for the greater foolishness in the West.
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter
@mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
3 comments
You have forgotten that most of the economic data of China are probably doctored. Until now, it’s hard to believe they are no. 2 in economic power. Compare Japan- and Chinese-made products. The Chinese rose economically because of the large volume of low-quality products they export, but many of the citizens (and consumers) are still poor. Japanese exports,such as cars, tvs, etc., and the Japanese consumer are far better off. I think the West gave too much credence to the economic might of China. In a few years Japan will claim its no. 2 spot.
Unfortunately, not only 3rd world countries like the Philippines are buying China’s inferior products but also the USA. We can’t blame the Philippines for doing so but the US who’s used to superior products and with money to boot are buying China’s products like there is no tomorrow, resulting to a large yearly deficit in the balance of trade. Hey US, will you please stop exporting dollars to China, they’re using it to bully weak countries in Asia!
“To compensate for its global inadequacies, China bullies the Philippines.” In this, we can and we should blame China.