Having lived in Singapore for the past year, where China is the theme of nearly every business article, I can attest to the fact that Friedman is exactly right:
Here’s what I learned in Tokyo: If you’re the leader of Japan, America, Australia, Taiwan, Malaysia, Russia, Thailand, Indonesia, Singapore, the Philippines or the European Union and you’re not going to bed each night saying the following prayer for China, then you’re not paying attention:
“Dear Heavenly Father, please keep the leader of China, President Hu Jintao, healthy and on an even keel. Please see to it that he moves steadily and carefully toward restructuring the Chinese banking system and ridding it of its huge overhang of bad loans and corruption, before there is a real meltdown that would be felt around the world. Give him the wisdom to cool the overheated Chinese economy without creating a recession that would prompt China to stop importing like crazy and start just exporting like crazy. And Father, forgive us for all the bad words we used in recent years to describe China’s leaders — terms like `Butchers of Beijing.’ We did not mean it. We meant to say `Bankers of Beijing,’ because their economy is now fueling growth all over Asia, bolstering Japan and sucking up imports from everywhere. May China’s leaders live to 120, and may they enjoy 9 percent G.D.P. growth every year of their lives. Thank you, Father. Amen.”
….If the China bubble bursts, it will be the mother of all burst bubbles. Which is why we need to pray that China’s leaders will have the skill to cool things down, just enough but not too much, without some wheels falling off.
The overheating Chinese economy and whether the country can finesse a soft landing as opposed to a spectacular crash is now the hottest topic in town. The fate of Asia, at least in the short term, depends on the answer. Friedman looks at just how difficult China’s problem is, mainly because it’s trapped in the tentaclces of its own system (SOEs, free-wheeling banks, reliance on foreign investment) and it really doesn’t have many options.
Everyone’s got a different opinion about whether or not China can come out of this relatively unscathed, so I’m steering clear of making predictions. So is Friedman:
One can only say three things: 1. They’ve done a pretty good job so far. 2. The job gets harder every day. 3. No one will be immune to the fallout. The relationship of the world to China right now reminds me of that old banker’s rule: If a client owes you $1,000, that’s his problem. If a client owes you $1 million, that’s your problem. China’s stability is our problem.
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By boy
I would like to add that every article about Singapore I’ve ever read is about business.
May 2, 2004 @ 6:23 pm | Comment
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By preetam
Thanks for pointing out the story –
Yes, it is indeed hard for local governors to stop incoming investment and new projects, even if Beijing wants to slow things down. With such a large population, anything that guarantees jobs and prosperity in the short term is welcome.
PS. as for boy’s suggestion, you may try writing about the lovely durians in Singapore.
May 2, 2004 @ 9:12 pm | Comment
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By richard
you may try writing about the lovely durians in Singapore
Please! Don’t remind me….
May 2, 2004 @ 10:25 pm | Comment
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By Hui Mao
But one of the ways that China has grown so rapidly in the last decade has been by decentralizing authority to regions and letting governors or mayors attract whatever investment they can. It is not clear anymore how much the center can slow things down.
That’s the scariest part. No matter how well-intentioned and skilled Hu Jintao and Wen Jiabao are, the whole thing may be beyond their control.
May 2, 2004 @ 11:02 pm | Comment
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By boy
there is an infestation of durians outside my apartment. I gag, and I swoon. I love and I hate.
someone told me recently that I should try eating durian when I smell too much durian, because the durian eater, she says, does not smell the durian so much.
right.
May 3, 2004 @ 5:20 am | Comment
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By richard
No matter how well-intentioned and skilled Hu Jintao and Wen Jiabao are, the whole thing may be beyond their control.
That’s really scary. The one hope everyone keeps holding up is that the leaders in China are too savvy to allow a meltdown that would take them down with it. If they really have no power to slow things down, what hope is there?
It’s so interesting to observe how this conundrum is affecting every aspect of life in China. It’s the same with the Three Gorges Dam pollution: the central government insists that the polluting businesses be closed, but it’s not in the short-term interest of local party leaders, so they do nothing. (Although I do believe that if the central government wanted it badly enough, they could force the closings.)
This underscores just how fragile things are in China, and how easily the system could come toppling down under the right circumstances, like a run on the banks or a tidal wave of unemployment — both of which are strong probabilities if there’s a hard landing. Will the CCP just stand idly by and let this happen? They’re already taking some measures to control bank loans and slow frivolous construction. But some say it’s too little too late.
As I said, I can’t predict the outcome, but I do have a gut feeling, which is that they’ll slow things down enough to retain control, although there’ll be a lot of pain in the process.
May 3, 2004 @ 10:00 am | Comment
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By Simon World
Enemablog
Yes, the weekly blog round-up has been christened by no other than my Da. Sort of. I’ve taken the liberty of changing Enemalogue into Enemablog because that’s my perogative and it gets me out of giving out a prize. I like to look at this as a way of pu…
May 7, 2004 @ 1:52 am | Comment