This blog had predicted ad nauseam about China’s economy imploding. Till July 2015, it had been met with incredulous humour and disbelief. However, just as this blog had predicted the crash of the Indian real estate market as far back as 2005 and been vindicated repeatedly; so does it stand vindicated about China’s economy.
An economy is run on business activity. Business activity on the other hand thrives on only one thing: customer delight. The Chinese economy is run by the central command of a few hundred people and ignores the concept of a customer and his or her needs.
The inevitable has happened. Now whatever China does to correct itself will only lead to the way South. China cannot redeem itself. If it hems and if it haws, it will only provoke the fates ever further. There is nothing that China can say or do to salvage itself now. It is too late.
Any economy, which concentrates on creating ghost cities to boost the economy with the sale of cement and concrete without bringing the purchasing power of the domestic buyer into the picture always ends up with sticky rice on its face. Oops! Wrong analogy. That is Japanese cuisine. Isn’t it?
Anyway, you know what I mean.
China manufactured knicks and knacks at a fraction of the cost of manufacturing the same items in their country of sale. They relied on lower cost of manufacturing when all of it was being made at one place in the world. For instance, hub cabs for 13 inch radial tyres were being made in not more than 10 factories in China for the whole wide world. That meant, the design of hub cab being bought in Italy, Greece, India and Canada were just the same.
How long do you think can that work?
Will a Punjabi, a Malayalee, A Sicilian, A Montana farmer, A Texas cowboy, a Russian like the same hub cab or steering cover for long?
There is something called cultural affinity and very soon that would weigh heavier can cost control.
On the other side of the spectrum, none of the cities that the government of China created attracted any buyers. The reason: the apartments in those cities were too expensive for resident Chinese.
Where did they expect this one handed clapping to end?
Again, the economy is based on a handshake between the buyer and the seller. If both the buyer and the seller do not have a consensus ad idem or a meeting of minds, then the economy has taken its first step towards a slide into oblivion. In China, it began a long time ago. Today, we only see the irreversible stage – the point of no return.
Now impoverished Chinese nationals will consider moving to economies with a stronger democratic foundation. Nations where there is an established dispute redressal mechanism and government notifications are not wholly arbitrary and pro-citizens. They may consider India and Australia. The last option may be Aksai Chin, that frozen chunk of Himalayas they have occupied for long.
For a long time, wealthy Chinese nationals have been buying land and other real estate in Australia – chiefly North West Australia. The instances of Chinese buying assets in that region and seeking citizenship is going to increase manifold soon and may turn into a flood.
In the next 20 years, we may witness the creation of either a huge China town near Darwin or Kakadu city or even a free port / city state such as Hong Kong or Singapore.
Or more appropriately, the migrant Chinese may set up residence around Lake Disappointment in Western Australia.
Similar migration may happen through Sikkim to North East India’s Arunachal and Assam. Very soon, we may find Bangladeshi illegal immigrants and Chinese illegal immigrants sharing huts in the Kaziranga forests. This is not unlikely. National Security Advisor to India, Ajit Doval may have his hands full.
Another wave of migration may happen to South America. However, this will require much more planning and contacts in those lands. Bolivia, Columbia and Chile Chinese origin citizens may welcome their kin over there. The migrants may arrive in boat loads just as they did in the Mayflower and who knows they may even erect a Statue of Stir Fried Liberty.
DISCLAIMER : Views expressed above are the author’s own.