Anybody who watches the news is probably aware of which country is the new global powerhouse. Whilst most modern economies struggle with minimal growth, the Chinese economy continues to grow. Economists are starting to worry about what lies in the future for China. One of the worries is that the huge growth has been largely fueled by credit and goevrnment debt. People are beginning to suspect that this situation is looking increasingly unsustainable.
The IMF for instance has suggested that the Chinese economy needs to restructure and quickly. The problem is that the economic growth is reliant on consumer and industrial exports, that simply can’t continue to support that level of growth particularly with recession biting in many of it’s target markets.
The distribution of wealth is also a concern, very little is in the hands of ordinary families and smaller private businesses. These are the people who are able to support longer term sustainable growth – by developing domestic demand, Nobody is suggesting that China’s growth will stall in the short term, but there are worrying signs all across the economy.
The manipulation of interest rates, kept artificially low in order to boost growth has had an impact on financial services. Many new financial products have been developed in order to attract new investors and depositors. These show a worrying similarity to some of the mortgage products that caused the American financial crisis.
China has other issues as well which may impact it’s ability to grow in the future. Current growth has come at the cost of some serious externalities – pollutions levels are incredibly high in many cities. The costs of solving these environmental problems may turn out to be much higher than the original growth earned in cauisng them. China also has some serious issues regarding digital infrastructure with the heavily censored communications network.
Getting IT systems to work across China can be hugely challenging due to the Great firewall of china and the heavily filtered internet feeds. It can be a difficult task to get a US Feed of Netflix working like this – http://www.theninjaproxy.org/ninja/american-netflix/, never mind trying to incorporate a companys document management system to be accessible in Beijing for example.
The new Chinese government knows it needs to change, however whether it is able to is another question.
Throughout revolutions and uprisings there’s normally one very common fundamental cause – economics. A dictator or government with an agenda can get away with a lot with a background of prosperity. Many of the Middle East countries have virtual dictatorships but money buys acceptance at least to a certain degree. But any poor or dictatorial ruler had better watch out if poverty, unemployment are rising. All the other problems are magnified when people have trouble feeding their families – and things are pretty bleak in Egypt at the moment.
As we stand now, Mursi has sufferred the cost of the failing economy as much as any other issue. There is lots of talk about Islamisation, lack of freedom and the poor record of the security in the last year but ultimately the economy is nearly always the tipping point. In a country like Egypt with many factions not least the religious and secularists – the economy effects them all.
The sad fact is that in the 12 months of the Muslin Brotherhood’s rule – unemployment, poverty and debt have all risen. To an outsider there seems to have been little effort to solve these problems and too much focus on creating an Islamic state. One things for sure, political unrest has only one economic consequence and it’s not a good one.
Any continued unrest and political instability is going to hit Egypt hard, any ruler wherever he is found is going to have a very difficult time if the fighting and discord continues. Egypt is a country that relies heavily on it’s tourist industry and people don’t visit political hotspots for their holidays.
If you walk down the streets of Luxor and round the Valley of the KIngs you’ll see the problems. There are simply no tourists in a town almost entirely dependent on them, Egyptians are sitting around with nothing to do except perhaps blame their leaders.
But it’s not all bad news, in some senses Egypt was not really recovering under the current rulers. They seemed to lack both experience and the will to tackle Egypts real economic problems instead appearing to focus on their religious agendas. Incredibly stock markets in Egypt have actually started to rally in the face of political change, the market seems to want it. As long as an experienced and less divisive leader can be found then perhaps there is some hope. There are some great articles and reports on the crisis from the BBC from their foreign correspondents if you want to get an impartial view. For those living outside the UK you can access these reports on the BBC Iplayer and other UK Television shows by shielding your real IP address – more information here.