Sunday, 12 June 2011

Will the Boat sink the Water: Yes, but for very different reasons.

This was a 2003 investigation of the conditions of the peasantry written by Chen Guido and Wu Chuntao, a husband and wife team of writers which you can read about HERE. Chen and Wu's study of social conditions has a long and illustrious tradition beginning with that bon vivant and financial supporter of Karl Marx, Friedrich Engels with his The Condition of the Working Class in England in 1844. Most 18th gentlemen with time on their hands investigated this or that aspect of the working class, after a hard day in the family firm's counting house.

Now, do a China google news scroll any day of the week, and Wu and Chen's findings of general pissed-offness in rural communities barely raises an eye brow eight years later. I think I counted two this morning and thats just ones picked up by the media. Beijing no longer publishes the statistics on 'mass incidents' of social disharmony. Try this LINK for a contemporary snapshot.

We know that the poor and the rural poor in particular are getting it in the craw, so let's look at the condition of the fithy, mega-rich in the PRC.

World Crunch reports "that China’s richest dream of one thing: packing up and heading for other countries, especially the West", namely Canada, US and Canada.

According to a new study, a majority of Chinese who have more than 10 million Yuan ($1.53 million) worth of individual assets find the idea of real-estate investment a lot less tempting than so-called “investment emigration.” Nearly 60% of people interviewed claim they are either considering emigration through investment overseas, or have already completed the process, according to the 2011 Private Wealth Report on China published by China Merchants Bank and a business consulting firm Bain & Company. The richer you are, the study suggests, the likelier it is that you resort to emigration. And among those who possess more than 100 million yuan, 27 % have already emigrated while 47% are considering leaving.

You can pick through the Report for the practical reasons behind this desire to emmigrate. I want to focus on the class dimensions, "the original sin of wealth" and the hatred and envy directed at the mega-wealthy. This spotlights the widening rich-poor divide, China's Gini coefficient and low-level war of attrition directed at the Ferrari class on China's social media.

Another take on the same report HERE also emphasises this class hatred dimension:
It’s true that many of China's rich amassed their wealth in the early years of the country's opening-up during the 1980s, when monitoring systems and regulations were lax, if non-existent. Many now fear they may face hefty fines or even confiscation of their assets if the source of their wealth is uncovered. And so they stash their money abroad.

You can read the China Daily's reponse to this issue HERE..

However, as soon as you look at the amount of money sluicing around the grey economy in China, you also have to question Beijings bragging rights about the foreign reserves held by its financial institutions and wonder just how much wealth is decamping overseas.

Forbes reports that the Chinese have $1.5 trillion in hidden income. By way of perspective, the US deficit is around $13 or $14 trillion. More important, the figures crunched by Professor Wang Xiaolu came up with these astounding numbers:

Almost Rmb10 tn in hidden income, or 30% of GDP. Based on a creative survey technique focusing on the correlation between income and spending patterns, and with over 4,000 samples across 19 provinces in China, Prof. Wang estimates that the per-capita disposable income of urban Chinese households in 2008 should be Rmb32,154, 90% above the official data. Total hidden income could total Rmb9.3 tn, 30% of GDP, with about 63% of hidden income in the hands of the top 10% of urban households.

Victor Shih, my favourite analyst, also looks at Professor Wangs figures within a larger contextHERE.

Okay, enough of this hagiography and think about this. What if the Bo Xilai and the Left Song and Dance crew were forced by changing economic circumstances to take their rhetoric seriously, and decided that some major league wealth redistribution was just what social harmony called for. ie willing to surf the wave of class hatred and envy.

Politicians are pretty well the same the world over, pragmatic, opportunistic and attached to the power and perks of office.

Every farmer would be given a Chery and lamp posts would become multi-purpose utilities.

1 comment:

  1. Wondering if full convertibility of the Yuan RMB can't wait for another thirty years...