China's Changing Economy And The Great Global "Hangover"

A garment factory in Jiaxing
A garment factory in Jiaxing
Marcelo Cantelmi


BUENOS AIRES â€" We're now very much in the "hangover" stage, the proverbial "morning after," as countries all over the world face painful adjustments now that the party years â€" when China's booming economy fed a seemingly insatiable appetite for outside products â€" are finally over.

While the pain may not be as intense in every country, all are in the same predicament. The mood spreading across the globe is ominous, particularly in countries such as Argentina and neighboring Brazil, which depend heavily on commodity exports.

In some countries the hangover could be doubly uncomfortable. Not only are they seeing an end to the vigorous demand that fueled their growth of recent years, but they also risk sliding back to where they were years ago â€" going from bonanza to budget shortfalls, with possible social consequences.

China is the immediate source of concern, though the changes taking place are also the product of eight years of global recession that have reshaped and redirected the capitalist economy.

The modern-day Chinese empire has begun its own transition, from being an export and investment economy to one relying much more on its own, enormous domestic market. It is moving away from the South Korean and German model and instead trying to emulate the United States, whose consumption to GDP rate is double China's.

This change will require modifications, some radical, in some of China's social structures and distribution systems, and enhance the role of the middle class and groups that have prospered recently. These are sectors that see any movement toward the free market model as a qualitative leap toward their own aspirations â€" at the cost of increasing inequalities in China.

We have already seen signs of the transition in the recent losses incurred by Chinese investors, and in the blow dealt to lower-income groups with the devaluation of the yuan, an adjustment that is set to continue given the resolve to make the yuan a reserve currency alongside the dollar and euro. The sharp readjustment of stock market values there has, for now, brutally ended private investors' hopes of multiplying their savings in a dizzy market.

The painful cascade of pragmatic steps is a response to a world that is not as profitable as it once was. Europe, as China's premier trading partner, is practically static. Japan, another crucial partner, is struggling to attain a 1.6% annual growth rate, amid strong doubts regarding the future of its government. Only the United States seems to hover above the abyss through moderate but solid economic growth, though there is no verdict yet on how it will react to global adjustments.

In our deeply interconnected world, changes in China will inevitably have global effects. The country generates 15% of all products and its booming economy was behind at least a third of the global economic growth in the past couple of years.

With that in mind, the International Monetary Fund (IMF) has already cut worldwide growth estimates from 3.5% to 3.3%, which may actually be optimistic given predictions that Chinese growth could drop from its current 7% rate to 3%. Should that come to pass, Europe could see its growth rate sliced by 2% over the next five years.

The picture may be even worse for countries that depend on raw materials exports, especially if and when the United States raises interest rates, either in a month or, at the latest, next year. That would soak up vast amounts of cash that have nourished exporter countries' burgeoning economies in past years.

Chinese leaders agree they will maintain an open economic model while boosting the domestic consumer market, even if the changes to be made provoke social tensions. President Xi Jinping, with solid pro-market convictions, is putting his leadership â€" along with the prestige of the Communist Party â€" at stake. Part of that has come from the spectacular economic returns Deng Xiaoping's reforms have yielded.

Frictions have already emerged in the purges that have combed the Chinese power structure since Xi assumed leadership in early 2013. They have included very senior Party members and personalities associated with the last president, Jiang Zemin. Many were jailed for their purported corruption, but the purges have a markedly political basis.

One of those jailed for corruption at the start of the Xi presidency was Bo Xilai, a leading critic of privatizations and market-set interest rates, as envisaged in the 2012 China 2030 Report. The report encapsulates the president's objectives. Xi Jinping is the son of Xi Zhongxun, a close ally of the late premier Deng and creator of China's first free trade zone in 1980. Xi Zhongxun was governor at the time of Guangdong province.

The country's present conditions aren't likely to have much effect on a leader already committed to a liberalizing tradition, even as critics demand interventionism to boost the economy and prevent social tensions.

How will he respond? We can get an idea in a recent People's Daily editorial accusing old Party barons of hampering the government and undermining Party unity.

Still, the concerns of critics may be pertinent if we recall the tensions â€" and later the Tiananmen protests â€" caused by another, more conservative and less aspirational set of reforms, in the 1980s. Could the same thing happen again? Perhaps.

The hangover, it appears, has taken root in China as well.

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Migrant Lives

The Other Scandal At The Poland-Belarus Border: Where's The UN?

The United Nations, UNICEF, Red Cross and other international humanitarian organizations seems to be trying to reach the Polish-Belarusian border, where Belarus leader Alexander Lukashenko is creating a refugee crisis on purpose.

Migrants in Michalowo, Belarus, next to the border with Poland.

Wojciech Czuchnowski

WARSAW — There is no doubt that the refugees crossing the Belarusian border with Poland — and by extension reaching the European Union — were shepherded through by the regime of Alexander Lukashenko. There is more than enough evidence that this is an organized action of the dictator using a network of intermediaries stretching from Africa and the Middle East. But that is not all.

The Belarusian regime has made no secret that its services are guiding refugees to the Polish border, literally pushing them onto (and often, through) the wires.

It can be seen in films made available to the media by... Belarusian border guards and Lukashenko's official information agencies.

Tactics of a strongman

Refugees are not led to the border by "pretend soldiers" in uniforms from a military collectibles store. These are regular formations commanded by state authorities. Their actions violate all rules of peaceful coexistence and humanitarianism to which Belarus has committed itself as a state.

Belarus is dismissed by the "rest of the world" as a hopeless case of a bizarre (although, in the last year, increasingly brutal) dictatorship. But it still formally belongs to a whole range of organizations whose principles it violates every day on the border with Poland.

Indeed, Belarus is a part of the United Nations (it is even listed as a founding state in its declaration), it belongs to the UNICEF, to the International Committee of the Red Cross, and even to the Organization for Security and Cooperation in Europe (OSCE).

Photo of Polish soldiers setting up a barbed wire fence in the Border Zone near Krynki, Belarus

Polish soldiers set up a barbed wire fence in the Border Zone near Krynki, Belarus

Maciej Luczniewski/ZUMA

Lukashenko would never challenge the Red Cross

Each of these entities has specialized bureaus whose task is to intervene wherever conventions and human rights are violated. Each of these organizations should have sent their observers and representatives to the conflict area long ago — and without asking Belarus for permission. They should be operating on both sides of the border, as their presence would certainly make it more difficult to break the law.

An incomprehensible absence

Neither the leader of Poland's ruling party Jaroslaw Kaczyński nor even Lukashenko would dare to keep the UN, UNICEF, OSCE or the Red Cross out of their countries.

In recent weeks, the services of one UN state (Belarus) have been regularly violating the border of another UN state (Poland). In the nearby forests, children are being pushed around and people are dying. Despite all of this, none of the international organizations seems to be trying to reach the border nor taking any kind of action required by their responsibilities.

Their absence in such a critical time and place is completely incomprehensible, and their lack of action raises questions about the use of international treaties and organizations created to protect them.

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