Widgetized Section

Go to Admin » Appearance » Widgets » and move Gabfire Widget: Social into that MastheadOverlay zone

STRATFOR on China and Japan Economy

Posted by on 2010/03/05. Filed under International. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

By Peter Zeihan
Mar 5, 2010 – 6:38:46 AM

Peter Zeihan, vice-director of research at STRATFOR:

“In the short run China’s economy will grow, but apart from that we disagree with the many who predict that China’s economy will be dominant over the next 100 years–on the contrary, it won’t!”

Last year’s book from Stratfor “The Next 100 years” predicts a large economic meltdown for China. And now, a year later, Peter Zeihan has been even more confirmed in his pessimistic predictions. “China will begin to rattle political and economic sabres, but they will be quickly overwhelmed by large internal problems, and fairly burst apart at the seams.”
According to STRATFOR China’s economy will crash within five to ten years time, and then Japan will reconquer its position as the leading country in Asia. “We predict that the economic development of China will come to a sudden and dramatic halt. After that, the Chinese market will collapse, perhaps in 2015. Many people forget that the powerholders in Beijing couldn’t care less about the market. They are more interested in social stability than in economic stability. That is why there will be deflation in the market, when China overproduces and floods the market. In the first round this creates a challenge for European and US enterprises, but further on the Chinese market is completely unable to bear the pressure.”

Zeihan also points to the often overlooked fact that China really is not one big unified nation. “In spite of a system that resembles dictatorship, one must remember that it is only over the last 60 years that China has been unified. And one can be really worried over whether China can hold together, when the economy begins to come under pressure. Then we will see that the large coal-cities in the south of China and the north, will begin to stir. Those areas have always done business and deals without the Center and are generally very autonomous. All in all, China is not a country which traditionally has held together for long.”

One might imagine that 1.3 bn people would guarantee an explosive economic development with rising wealth. But this is far from the case, STRATFOR predicts. “Most people don’t think about it, but the actual internal market in China is in fact not very large. Most Chinese live in households that have an income of less than 1500 euro per year, and that will not change much. So just because there are over a billion people does not mean there is automatically a market. 650 million live in households with an annual income under 750 euro, and 400 million under 1500 euro. Of the remaining 300 million, not very many have a consumption resembling a western standard.” Zeihan has much larger confidence in Brazil and Eastern Europe, than in China’s economy. [1 euro is 1.3 US$]

Zeihan’s boss , George Friedman, is also quoted: “When the US sneezes, China gets pneumonia. It is important to recognize that China does not have an economy which can be supported by internal demand. The Chinese economy is overwhelmingly export-oriented, and thus China is held to ransom by the consumers.”

comments powered by Disqus