- - Sunday, January 22, 2012


Old friend and columnist Joseph Alsop once told me of arriving in China with a clanking sword he had hassled across the Pacific, given him by his cousin, FDR, along with an instant “inside-the-Beltway” Navy commission. President Roosevelt sent him immediately after Pearl Harbor to Chongqing as a “political adviser” to Gen. Claire Lee Chennault and his volunteer Flying Tigers. Assiduously building his brief, Joe got horrendous details from the Chinese Nationalist refugee capital’s best-informed correspondent about the outrageous corruption of Generalissimo Chiang Kai-shek’s Kuomintang. When Joe asked our mutual friend why he wasn’t writing it for his newspaper, the Old China Hand smiled knowingly and said: “Nobody tells on China.”

America’s romance - and conflict - with China are as old as the republic. Yale’s original endowment reputedly came from a cargo of Indian opium shipped to China. Coolies helped build the transcontinental railroads, then got expelled or denied citizenship. Long before “multiculturalism,” even American cities in the boonies had their Chinese restaurants. For those old enough to remember, a Chinese hand-wash laundry was a landmark in every neighborhood.

But exotic legend often obscured mundane reality. Most of America’s China academics were for decades apologists for Mao Zedong’s atrocities, vilifying their few critical colleagues who dared to speak up. Some, alas, without confession much less apology, still hold high places in American-Asian nongovernmental organizations. Even now, it takes a certain temerity to publish tomes about Mao’s “secret” famines. (A Hong Kong friend recalls, “Only 3 1/2 million here were trying desperately to get food packets to mainland relatives.”)

Now history repeats itself as stories begin to proliferate about the coming Chinese economic crisis. A minority of us have watched, stupefied, over the years as writer after writer and economist after economist without caveat spelled out the glories of the “Chinese model.”

Hold up - you mean there hasn’t been incredible Chinese economic development? Yes, of course, there has. And no one who has lived with the Chinese entrepreneurial spirit wherever it flowered among overseas Chinese or in Taiwan - or recalls the prosperity of China’s pre-World War II’s coastal cities even under Japanese assault - was surprised when that spirit took off again after Maximum Leader Deng Xiaoping opened the floodgates to foreign capital and technology.

But those Shanghai office towers across the river in Pudong were already standing empty a decade ago - not that you would know from any contemporary reporting. As prime minister, Zhu Rongji publicly pleaded with provincial bureaucrats to stop fabricating figures because it made it impossible for him to know what was going on. Only a year ago, provincial gross domestic product figures didn’t jibe with the national totals. But, never mind, our academics - and most of the financial media - kept right on, grinding out incredible gobbledygook about economics “with Chinese characteristics,” how China’s GDP growth made it No. 2 in the world (despite subsistence living standards for the majority of its people), how Chinese growth would save the world, etc.

Now even the Financial Times, among the loudest and most indiscriminate propagandists for China straight-line projections, has taken a deep breath, predicting coming problems, perhaps even disaster. The Chinese boom has depended on export markets that are now drying up in the U.S. and Europe. It has relied on unlimited infrastructure expansion, but government “stimulus” is leading to inflation. Virtually zero rural investment and protectionist trading practices are driving up food prices where most Chinese live. Banks’ newly created debt dumps are being used for loans to party favorites, so there just might be a credit problem. The government is shifting to subsidized housing (still beyond the reach of wage-earners) to deflate a real estate bubble, the only place “hot money” could go with government “planned” investment.

Oh yes, and it’s now “clear” Chinese growth isn’t going to “save” the world economy. In fact, some commodity-dependent economies are going to be in little trouble. Hello!

But there is always room for new wishful thinking: Beijing will use its depreciating dollar hoard (already backing local currency) to expand the “money stock,” as measured by meaningless M2 and M3 Western econometrics. Or it will try to buy Western equities, scaring the wits out of security-minded politicians, or get at technologies (such as natural gas shale fracking) to reduce its growing reliance on imported energy. And, of course, Chinese planners somehow will manage a “soft landing.”

After almost every disaster - natural or man-made - there is the inevitable cry: “Why didn’t we see this coming? It was so obvious.”

Sol Sanders, a veteran international correspondent, writes weekly on the intersection of politics, business and economics. He can be reached at solsanders@cox.net and blogs at www.yeoldecrabb.wordpress.com.



Click to Read More

Click to Hide