This morning I was lucky to hear a presentation in New York by Guy Sorman, a French writer, economist, and sociologist who has recently published a book on the "real" China called Empire of Lies: The Truth about China in the Twenty-first Century.  The emergence of China as a major player in the world economy is clearly the most important global economic development of the past decade. With global protests surrounding the Olympic torch run and questions about whether China’s growth will hit a speed bump, this is a good time to look at what is really going on in China and what we might expect looking forward a year or two.  

Sorman first made the point that there is very little difference between conditions in Tibet and anywhere else in rural China.  Virtually all poor Chinese citizens - in Tibet and everywhere else - have limited freedoms, are completely under the control of the Communist Party. and are subject to a homogenization campaign that is making Mandarin the common  language and subverting religion.  This repression causes about about 1,000 peasant protests of one sort or another every day in China, but such demonstrations are quickly extinguished and rarely reported. 

There are really two Chinas .  The vast bulk of China is made up of poor rural peasants who are kept so by state policies.  The key policy is the identity card that ties every Chinese person to the village of her birth.  That means nobody from the poor rural areas can legally move to a city to work.  Of course they do that all the time.  But they are unable to gain housing, bring their family, or even be there legally.  That means the employer has leverage and control over the migrant worker.  If an employee is not happy with her wages, she can just…go home.  There is no possibility of labor unions or strikes.

In addition there is effectively no safety net in either health care or education.  Chinese peasants may go to a hospital or a school, but they must pay up front to do so.  Most do not have the money to do so.  Thus upward mobility is greatly limited.  The upshot is that wages will remain low in China for a very long time.  They will trend up, but only very slowly. 

On the other hand, the Communist Party , an elite group of about 100 million, includes much of the middle and upper class and controls all matters.  It is almost entirely male, urban, and wealthy.  Party members can travel, educate their children abroad, have multiple wives, enjoy fairly good health care, and access information rather freely.  They also must participate in annual "re-education" classes that bring them up to date on the Party’s views on various matters.

So Communist rule works very well for members of the Party.  Why would they institute reforms?  One reason is that all violent changes in Chinese leadership over the centuries has been preceded by a peasant revolt.  So the Party does have an interest in containing the level of peasant dissatisfaction.

Another factor is that social and environmental problems are creating limits to the amount of growth that China can achieve.  China’s air quality, water quality and health problems are so bad  that they are impacting all  people including Party members.  Thus social spending to improve quality of life issues is picking up.

What comes next in China seems to be more of the same.  It seems likely that Chinese growth will slow down a bit but still remain high - perhaps not in double digits, but probably not far below that.  And what about a revolution of the peasantry?  Sorman’s book is available in China and has been read by members of the Party.  Their attitude is that the problems Sorman points out are real but they are well known to the Party and the Party is working on their solution.  Sorman’s problem, they say, is that he simply lacks faith in the ability of the Communist Party to continue to be effective in solving China’s problems.  

A recent news release in China indicated they anticipate growth in oil use at a slower pace after 2010, although there was no official attribution to the report:

China’s demand for oil is expected to slow

Reuters

April 8, 2008 at 6:27 AM EDT

BEIJING — China’s total oil demand is projected to rise at a modest annual rate of 3.3 per cent between 2010 and 2020, easing from 4.5 per cent in the 2007-2010 period, Chinese media said on Tuesday.

By 2010, China will use 407 million tonnes of oil a year, or 8.14 million barrels per day, expandable to 11.26 million bpd in 2020, China Securities Journal said, citing an energy report published by the Chinese Academy of Social Science.

The report gave no reasons for the projected dip in growth.

The figures represent an average of just over 300,000 bpd annual increase during the decade, a rate slower than the 400,000 bpd annual growth seen in the past few years in the world’s second-largest oil user.

Tags: energy investments

This entry was posted on Wednesday, April 9th, 2008 at 2:41 pm and is filed under China, India and the Pacific Rim, oil demand. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.