In the words of shameless rent-a-quote Mr. Andy Xie, ‘the pessimists predict China’s imminent collapse and the optimists hail China’s unstoppable rise, but in the end, China tends to muddle on through somewhere in between the two extremes.’

Recently words such as ‘collapse’ have been replaced with, for instance, ‘unsustainable’ and speculation that China’s stunningly successful economic formula of massive domestic investment, cheap money, use of existing technology, export-led growth, cunningly hidden protectionist policies, the hard-selling of the mythical ‘China market’ and huge amounts of FDI cannot last forever and is consequently starting to show cracks. After all, what goes up, must come down, or so says this *must read* article.

Despite “insatiable” domestic demand and government measures to curtail investment in overheating sectors, China now has an overproduction of, for example, steel, cement and cotton – all this during the biggest building boom in history. Likewise, China’s factories are churning out too many finished consumer goods like cars, mobile phones, textiles and clothes. Adding to the gloom includes higher manufacturing costs, sluggish domestic demand, anti-dumping quotas, razor thin profit margins, fierce competition, rampant intellectual-property theft and a weak legal system. Furthermore, fixed-asset investment (infrastructure projects, factories, apartment blocks, office towers etc.) will likely top a staggering 54% of GDP this year. Comparisons with the investment frenzy that led to the 1997 Asian Crisis are inevitable.

It’s no wonder that foreign companies are starting to look to cheaper Asian locations and disversify their investments (the World Economic Forum recently ranked China a disappointing 47th out of 116 countries for business competitiveness). South Korean companies follow a “Chindia” strategy, Japan’s a “China-plus-one” formula and Taiwanese firms are increasingly investing in Vietnam. During the first 8 months of this year, Taiwanese investment in China/Mainland dropped 18%.

The result of all this? An economic slowdown. This might cause a few sharp intakes of breath but Jim Walker, chief economist for investment bank CLSA, predicts China’s GDP growth at 5% in 2006 and only 3% in 2007. Harvard Business School’s Michael Porter adds “The bloom is starting to come off the rose in terms of China being this mecca for business“. I myself still need to see a bit more hard evidence before I’m completely convinced. After all, I’ve read hundreds of similar articles over the years. It’s also possible that any economic slowdown could be handled by the government. Still, with China’s already considerable amount of domestic problems and challenges, any drop in economic growth would have a wide-ranging impact right across society. At the end of the day, however, it’s a bit too soon for doomsday scenarios just yet.

I don’t have the time or the strength to write about this today, but luckily another blogger has done it for me. This is one of the most distressing of all China-related topics, as it amounts to nothing short of murder. When we know something is out there that can kill our people…when we know that knowledge and information can save their lives…and when we make a conscious choice to remain silent and do nothing (except lie)…and when, as a direct result, people suffer unimaginable misery and certain death…isn’t it murder?

From Jerome Keating:

To all,

Just a reminder that the Breakfast Club will be having its monthly meeting to share fellowship and discussion on topics that interest us all. (Side note, everyone pays for their own breakfast–there is no free lunch, nor is there a free breakfast!))

The Place is at Jukes (the name may be changed to Al’s Resataurant but the location is the same.) #48–6 HoPing East Rd. Sec. 3. Phone # is 8732–3667 That is 3 doors west of the Burger King at the Southwest corner of Tun Hua S. Rd and HoPing East Rd. (Easily accessible from the Liu Changli MRT station) or 285, 235, and numerous other buses.

Time: 9:30 AM.

Topic: Open, however since we have such a diverse group, Robin made an excellent suggestion last time–everyone bring a list of the five books that have most influenced your life and be prepared to expound on such.

Also to give everyone a chance to network and meet and find out each’s diverse interests etc. , switching places throughout breakfast is encouraged.

Some thoughts to ponder:

“Speech is civilization itself. The word . . . preserves contact–it is silence which isolates.” (Thomas Mann) Join us.

“Every man becomes, to a certain degree, what the people he generally converses with are.” (Philip Stanhope) That’s why we aim at diversity.

“Too much agreement kills a chat.” (Eldridge Cleaver) However leave your weapons at home.

“The right to be heard does not automatically include the right to be taken seriously.” (Hubert Humphrey)

“Hanging is too good for a man who makes puns; he should be drawn and quoted.” (Fred Allen)

“Practically anything you say will seem amusing if you’re on all fours.” (P.J. O’Rourke)

Having said that we hope to see you there; invite any friends you want and pass this on.

Jerome Keating

The Harbin water crisis is far from over, according to this article from the AP:

A top Russian environmental official tried to reassure the population Tuesday by drinking a glass of water on television. But a spokesman for the World Wide Fund for Nature said the river faced “ecological catastrophe” from the 50-mile-long slick of chemicals floating toward the Russian border from China.

“There will be an effect on nature plants and fish will die and economic damage,” said Ilya Mitasov, a Moscow-based spokesman for the global environmental organization.

The pollution will result in massive fish deaths and force city residents and industries to search for alternative sources of water, he told The Associated Press in a telephone interview.

The only way to get rid of the toxic chemicals including cancer-causing benzene is evaporation, but the water temperature would have to be 68 to start that process, Mitasov said. Currently it’s about 50 and there is ice on some stretches of the river, which ultimately feeds into the Sea of Okhotsk.

“The benzene will remain in the ice until spring, and the (situation) will be dragged out,” Mitasov said.

Meanwhile, Der Spiegel (via the invaluable Salon.com) features this grim summary of the evironmental costs of China’s economic miracle:

Even if water began flowing once again to the city’s residents on Tuesday, the horrific environmental catastrophe reveals the flipside of the socialist economic miracle. Secretiveness and sluggish crisis management highlight the price the Chinese are paying for their boom. And even as Westerners envy the half-communist, half-capitalist country for its impressive growth figures and endless backyard market, China is no longer merely the world’s factory. It is also the world’s toxic waste dump.

China’s rise as a global power, achieved with high economic growth rates, is reminiscent of the conditions in the era of early capitalism. Everything that drives production is good, and everything that slows it down — safety technology, for example, that prevents industrial accidents from leading to massive factory explosions — is harmful. The result is exploding tanks, burning factories, collapsing mine pits and all manner of toxic leaks. According to official statistics, 350 Chinese die each day in industrial accidents, but the unofficial figure is likely to be much higher. “Occupational safety is a serious problem, because the number of accidents and deaths remains high,” said Wang Dexue, deputy director of the State Office of Occupational Safety, commenting on the horrifying figures from the country’s manufacturing industries.

Adding to the problems are economic reforms that have made many businessmen greedy. China’s laissez-faire brand of socialism doesn’t prevent executives from spending their money on cars and villas instead of investing it in worker safety and environmental protection. Although the government is constantly vowing to monitor manufacturers more closely, local officials and party leaders are often in bed with the captains of industry in China. This Mafia-like alliance between the politically and economically ambitious is known as “local protectionism.”

Chen Bangzhu, an environmental expert on Beijing’s Parliamentary Council, says he recognizes an “irrational development” in his country. In an interview earlier this year, Pan Yue, the deputy minister of the government environmental agency, SEPA, predicted a bitter end to the economic miracle. “This boom will soon come to an end,” he said in an interview with Der Spiegel, “because the environment isn’t cooperating anymore.” The negative consequences of the boom are devastating. Five of the world’s 10 most polluted cities are in China. More than two-thirds of all Chinese rivers and lakes are turning into sewers — even before the recent accident, the Songhua River was hardly a model of cleanliness — and more than 360 million people have no access to clean drinking water. A toxic soup splashes through the country’s waterways, while people living along the banks die from cancer at above-average rates. Nowadays, the then 72-year-old former party chairman Mao Zedong’s legendary swimming outing in the Yangtze River in 1966 would no longer be seen as evidence of his strength, but more as a suicide attempt…

…The People’s Republic, which could soon surpass the United States as the world’s largest producer of greenhouse gases, has lost its ecological balance and is paying a heavy price as a result. About 400,000 people die prematurely each year because of the polluted air they breathe. Experts estimate the annual loss at 8 to 15 percent of the gross domestic product — or up to $250 billion — a figure that does not include the costs of treating cancer, skin conditions and bronchitis.

The Chinese leadership has become increasingly concerned about the possibility that environmental damage could jeopardize China’s industrial ascent. After the Harbin incident, even Prime Minister Wen Jiabao admitted that the environmental situation is “bleak” and called for “sustainable growth.” But many other party leaders see this kind of talk as nothing but Western social nonsense. They prefer to follow the lead of Mao, who summed up his take on the environment in 1958 when he said, “Make the high mountain bow its head; make the river yield its way.” Today’s comrades, profiting handsomely from industrial growth, believe it is cheaper to clean up in the distant future than to invest in protecting the environment today.

Of course, such attitudes aren’t unique to China. I could cite our current Administration in the US, with its disbelief in global warming and its infinite faith in the power of more drilling (and foreign wars) to solve our energy issues. Or, going back a couple of administrations, I could mention former Secretary of the Interior James Watt, who did not think we needed to concern ourselves overmuch with conserving resources for future generations, because in his words, “I do not know how many future generations we can count on before the Lord returns.” Such faith is touching, in a way, as is the faith of the Chinese Communist Party’s materialists, who believe we can innovate our way out of any crisis we create, or at least can leave the mess for our children to take care of – as opposed to the faith of the Bush Administration, which preaches that the mess simply does not exist. But the grownups in the room, in China, America and elsewhere, realize that the longer we wait, the greater the reckoning. Whether the grownups can take charge from the greedy, selfish children who all too often seem to be treating the world as their playpen, before that playpen collapses under the weight of its own filth, remains to be seen.