Tuesday, July 12, 2005

Some Interesting China Pieces

First off, an interesting article about China's economy from the Washington Post. Like many Asian countries, China has essentially nothing that could be called a "safety net" for the poor - ironically, given it's nominal Communism. This lack of any safety net for the elderly, combined with the one-child policy, has led to massive savings by the Chinese people. The Chinese savings rate is something like 20-30%, compared with the US's average of something close to zero. The article discusses some of the effects of this - China has been unable to tap it's own consumption, so all of it's production goes to exports (cough cough Walmart.) However, this is one of those things that can't go on forever.

Secondly, and staying with the economy, Reuters is reporting that China's GDP is likely to slow relative to last year's 9.5%. The article attributes this to the Party's efforts to build a more sustainable economy. The reason this is interesting is that the party has always had to deal with more domestic unrest in economic down-times. Tiananmen itself took place after a bad year of low growth and high unemployment. If China's GDP growth is slowing, it's hard to see how this won't result in more domestic problems, unless part of the "sustainability" efforts find ways to help the underclass.

Thirdly, an interesting editorial from my hometown paper about the increasing integration of south and east asian countries under an American banner. The article discusses the US's increasing drive to build a strategic relationship with India, most certainly as a counterweight to China in Asia. This is a process that started under Clinton, showing once more that when it comes to serious foreign policy, call a Democrat. I'll have to remember to do more research on what aid India is getting from the US. India recently announced the construction of it's first aircraft carrier. I wonder if they're getting US help.

Finally, Russia is announcing that it will prioritize China over Japan when it comes to oil purchases through the far east pipeline. Unless this statement is quickly retracted, this could get messy. The Japanese have offered billions of dollars - real money, as they say - to build the far east pipeline, and I doubt they've done it to take second place in the line for Russian oil. China, to my knowledge, hasn't offered anything like that much money - China might not be capable of offering that much money. On the other hand, Russia and China don't have territorial disputes the way Russia and Japan do, so it's possible that Putin has written off the Japanese. It would be a stupid thing to do over the Kuril islands, but that's Russia for you.


Eluminate said...

the reality is the pipeline to the pacific will be built sooner or later and and Russia being the regional hub can get paid by both parties in various ways. You also have to bear in mind the possibilities of having a pipeline go to China. Think of the amount of control Russia would gain in relations and general policies. Its not like it couldn't be shut off if need be 'hint hint'. Granted that would be drastic but not impossible remember the shut off to Belarussia and Poland a bit earlier? China might be a behemoth but if you dont feed it with oil the people become unemployed and the whole social structure could rip apart...

john said...

"the pipeline will be built sooner or later..."

Maybe. The problem remains: Who will build it? If the Russians piss off the Japanese, the largest probable investor walks away from the table. China might be able to build it - in time. But for the moment, China can ill afford a billion-dollar investment. And Russia needs money soon, not in the medium-term.

Russia's oil production is already in decline, and Russia is likely to be an oil importer sometime in the 2010-2015 range. If the pipeline doesn't get built soon, it might not get built at all.

I do agree with that last sentence, though - China's appetite is voracious, and an oil shortage could cause serious problems.