	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 26-Jan-06
China reports 2005 economy still overheated at 9.9% growth

Web Log - January, 2006

China reports 2005 economy still overheated at 9.9% growth

Like a railroad train careening down the track out of control, China's economy grew at an unexpectedly high 9.9% last year.

Analysts expressed suspicion that the 9.9% is actually an understatement. "One could say that 9.9 percent is a very convenient number," he said. "It's not 10 percent. Ten percent might scare people, and might create more trade friction with the U.S."

You might think that such a high growth rate is a good thing, but the problem is that China's economy has had this kind of growth rate for over 20 years, and has become highly dependent on it. China has 100-150 million migrant workers, mostly peasants who can't make much money on the farm. They go to cities like Shangai to get whatever work they can, and send money back to their families. This works because of the overheated 10% growth rate, but whenever a recession occurs, these millions of migrant workers in the cities will be unable to find work, causing even more social instability.

The Chinese themselves are aware of this danger, and for several years they've been trying to slow the economy down to a "soft landing." It was just a couple of days ago that China's Prime Minister warned that the country was already becoming unstable, thanks to a "historic error" caused by corruption in local governments. A recession which caused massive unemployment might well be the trigger leading to a massive rebellion -- growing out of the tens of thousands of regional rebellions already occurring each year.

From the point of view of Generational Dynamics, China is experiencing a bubble economy similar in many ways to America's bubble economy in its "generational unraveling" era in the late 1990s.

There is a debate today whether Alan Greenspan did enough to try to prevent the 1990s bubble, but I've argued that the bubble was caused by a generational change and could not have been stopped, no matter what Greenspan and Fed did.

Similarly, China's attempt at a "soft landing" for its economy has been failing dramatically for several years, as it transitions from a "generational unraveling" to "generational crisis" era.

There are already a number of signs that China's bubble is bursting. The Shanghai real estate bubble has been bursting since March, with some properties falling in value by 50% since then.

And China is suffering overcapacity in cement, aluminum, textiles and other goods, and is also constructing too many factories, buildings and resorts. This has led to very low inflation in China, because the oversupply of these goods is pushing prices down.

As I've described before, China is becoming increasingly unstable and is approaching a massive civil war as its bubble economy unravels. America's economy is also in a precarious situation, because of the astronomically high and exponentially increasing public debt, and because of the vastly overpriced stock market.

Conflict risk level for next 6-12 months as of: 30-May-2005

W. Europe 1 Arab Israeli 2

Russia Caucasus 2 Kashmir 1

China 2 North Korea 3

Financial 3 Bird flu 3

Key: 1=green 1=Low risk 2=yellow 2=Med 3=red 3=High 4=black 4=Active

A financial crisis in either China or America or, for that matter, in Europe or Japan will cause a "domino effect" that will precipitate financial crises around the world, and trigger a civil war in China, which will lead to war crises around the world. Generational Dynamics predicts that we're at a unique time in history, 60 years after the end of World War II, and that we'll soon have a new "clash of civilizations" world war. (26-Jan-06) Permanent Link
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Generational Dynamics Web Log for 26-Jan-06 China reports 2005 economy still overheated at 9.9% growth

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Generational Dynamics Web Log for 26-Jan-06
China reports 2005 economy still overheated at 9.9% growth