The coming China crisis
BREAKTHROUGH - Elfren S. Cruz (The Philippine Star) - March 14, 2019 - 12:00am

The accepted worldview of China is that it is destined to be the next superpower and may even replace the United States as the greatest power in the world. This country’s phenomenal economic growth is touted to be unmatched by any other country. Actually, this is not true. Japan’s rise from the ashes of destruction, including nuclear destruction, from the Second World War to become the economic powerhouse in the 1960s and 1970s was also unprecedented. It was feared that Japan would buy all the most valuable assets in the United States and the rest of the world. Then came a period of economic stagnation. Although Japan remained as the world’s third largest economy, it has never lived up to the threat of buying the world.  Japan was able to handle this problem of low growth because it is a highly disciplined homogeneous society. It had the political and social discipline to weather this slowdown without unrest. 

Countries like South Korea and Taiwan were also able to weather economic storms even though they imposed painful measures on their people. However, Indonesia and the Philippines went through brutal dictatorships as a result of economic slowdown leading to political unrest. The Marcos dictatorship made the situation worst in the Philippines. Perhaps the most painful inheritance from the Marcos years was a culture of corruption and cronyism which continued to persist. 

China’s story is still unfolding. With an economic slowdown in China, the next question is how will this nation go through this difficult period. 

The optimist will point to China’s phenomenal growth and infrastructure development in the past  three decades. They assume that this will continue for a few more decades and lead China to greater economic heights.  However, there  are definite signs that the economic “miracle’ is ending. In a recent national congress, China’s leaders surprisingly publicly warned that there will be “hard times” ahead for the nation. 

China’s exports have dramatically slowed and even domestic consumption has not replaced the export sector. Its biggest companies  have to resort to foreign markets to remain profitable.  There are definite indicators that the world economy is in danger of going toward an economic recession. The European Central Bank has announced plans for another stimulus package, which proves that Europe is on the verge of a recession. In the United States, the recent employment figures are also seen as an indicator of a slowdown. In times of economic slowdown and increase in unemployment, countries normally resort to protectionism. If all of these come to fruition – recession and protectionism – China’s economy, heavily dependent on exports, will definitely suffer.

It should also be noted that the idea of sustaining China’s very high economic growth rates indefinitely or even permanently violates the principles of economics. At some point, economic cycles must occur. Even the United States has had to undergo economic and financial crisis of which the last one was in 2008. 

The question is not when China will go through an economic downturn because it will, sooner or later; but, how will it address the problem of slow growth. Will it be as successful as Japan and the United States? During  the Obama years, the United States took painful measures to revitalize the economy. However, the political result was the election of Trump. The change  in power came without  resorting to social unrest or revolutions. Since the United States remains a vibrant democracy, it has been able to survive political changes.

The most critical problem for China is political. Geopolitical expert George Friedman believes that China is held together by money, not ideology. He says: “When there is an economic downturn and the money stops rolling in, not only will the banking system spasm but the entire fabric of Chinese society will shudder. Loyalty in China is either bought or coerced. Without available money, only coercion remains.” 

He adds that the present regime rests on two pillars. The first is the vast bureaucracy that operates China. The second is the military-security complex that enforces the will of the state and the Communist Party. The third pillar, the ideological principles of Communism, has now largely disappeared. 

If there is a serious economic crisis, the central government will have to find a substitute for communism. If the people are going to be asked to sacrifice during the coming “hard times,” it must be for something they believe in. If they cannot believe in communism, they can believe in China. Friedman says: “The Chinese government will attempt to limit disintegration by increasing nationalism and the natural companion of nationalism, xenophobia – the fear and distrust of foreigners.”  

Historically, from the Boxer Rebellion to the Maoist era, China has had a deep distrust of foreigners. The Chinese people believe in their manifest destiny and think that other countries, principally the United States and Japan, are trying to prevent them from their rightful place as the “Middle Kingdom” or the center of the world. 

From the present vantage point, it would seem China has three possible future paths. The first is that it would continue to grow at its present rate indefinitely. No country has ever done this and China is not likely to be an exception. The second is that following an economic slowdown, a strong central government will impose order and exploit nationalism and xenophobia as an excuse. The third is that under the stress of an economic slowdown, China will fragment along traditional regional lines and become a federal union. 

For the sake of stability in Southeast Asia, we can only hope that China will weather the coming economic crisis without again infecting the rest of Asia. 

 Creative writing classes for kids and teens

Young Writers’ Hangout on March 16 (1:30 pm-3pm; stand-alone sessions) and an Adult Series session on Creative Nonfiction on March 30 (1:30-4:30 pm)  with Susan Lara at Fully Booked BGC.  For details and registration,  email


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