Thursday, March 27, 2014

Watching China slide toward the brink

The unravelling of the Chinese financial knot is going to have some bizarre twists and turns. (See 

China's Credit Pipeline Slams Shut: Companies Scramble For The Last Drops Of Liquidity,

Wikipedia reports the Communist Party of China as having 86 million people.  Wikipedia in recent years has become a field of struggle over information and truth, but let's take this as correct.  Now we learn that 2.1 million families own most of the land in China, and these families no doubt are leaders in a mass-based party which consolidated its power roughly between 1935 and 1960 by organizing the peasants to overthrow the old landlord class in the countryside (See Fanshen, by William Hinton, for a powerful and moving close-up look at this process.)  I've seen no direct evidence, but this party surely must have a lot of members who are outraged at the corruption, and at odds with the leadership over letting their power slip away into the hands of the new landlord class.  
We know millions of Chinese, not just the super rich but the medium rich as well, and no doubt among them many of these 2.1 million landlord families, are smuggling their wealth out of China, and we can deduce that they're of doubtful loyalty to their country.  Are they sending a signal of what they think is coming for them?  (I kind of hope so!)
Wikipedia lists 167 million Chinese migrant workers.  The new industrial working class draws heavily from them.  From stories in the media - for example the NYT stories on the Foxconn workers - it's hard to imagine that the CPC has any base at all among this oppressed and angry population.  
And then there have been frequent reports of local strikes and demonstrations, with estimates that these occur thousands of times a year throughout China.  Does the rank and file in the CPC sometimes participate in them?  Is there a basis anywhere for a restoration of its original role as a party of the people?
The CIA's specialty in recent years, the Color Revolution, involves penetrating a society, planting agents and client organizations (NGO's) throughout its society, and then at an opportune moment using them to detonate the society's internal contradictions and sieze power in a controlled popular uprising - to the great detriment of the masses they enroll.  Is China open enough for them to have laid this groundwork?  
China seems ripe for such an event, and the collapse of the financial system would certainly be the moment for the CIA to strike.  The Chinese people and leaders have had 25 years of watching CIA-organized or hijacked revolutions in other countries.  Their leaders' reluctance to come to Putin's defense around Ukraine perhaps suggests they may not have absorbed this lesson - or are too corrupt or frightened to care.  And what lessons have the Chinese people learned from years of reflecting on the lessons of Tieneman Square?  
The investors who comment in ZeroHedge seem to be trying to dope out how China's financial system will collapse, who the winners and losers will be, how far it will spread and how to profit from it, as though this is just an extraordinarily large "normal" financial meltdown and collapse.  Not surprising; that's what investors do.  
But they should know the situation of China is anything but normal.  With the whole world financial system going unstable, with Russia being virtually forced to bring down the petrodollar to survive, with the Empire making its moves on Russia and perhaps instigating wars and new color revolutions all along its borders, with the Empire militarily provoking China and organizing unrest in its minority regions, with China politically starting to go critically unstable due to it's internal conflicts over land, wages, corruption and pollution, the unfolding crisis in Chaina is certainly not normal.  Not even high normal.  Predictable for a little bit yet, but easily able to go chaotic.
Add to this another huge unknown: could the leadership of the Chinese government and Party propose and impose radical solutions as the system fails and collapses?  Could they take the opportunity offered by Putin's Russia to break with the Petrodollar, rein in their kleptocrats, sweep away the bubbles and bankrupt enterprises and restart the economy on a new basis? 
Or is China's leadership so bound up with the kleptocrats that it can only ride the collapse down into the abyss, until an uprising from below overthrows them?  And what kind of revolution would that be?  There are competing alternative revolutions waiting to happen. Will they merge into one big one?  Can they dodge the color revolution the US doubtlessly has planned for them?
And what role could the 86 million members of the Communist Party play?   Can China collapse back into its old communist core, or is that door closed behind them forever?  This may hinge on how much of China's old command economy, which was organically linked to that huge mass-based party, still survives. With their new and extravagant and utterly reckless capitalist system collapsing and people getting frightened and desperate, will this or a new government be able to revive the command economy through the efforts of that communist party?  
If a restoration of real Communist Party power proves impossible, because the transition to capitalism is too far gone, because the leadership is too discredited or because its member have no will to try, what story will they tell each other about it?  Will there be a great mass revulsion at the outcome of their experiment with capitalism?  Will they blame their Communist Party for the collapse of their new capitalism, turn on it and destroy it in the hope that this will cause their new system to revive?
Or could history's answer to that question be something close to a 50-50 split between pro-capitalist  and pro-CPC, pro-statist forces, with regional advantages allowing each side to consolidate a power base - in a context of mass desperation, anger and recrimination in a nuclear-armed country? 
We could talk about who we're rooting for, but here in the US all we can really do is try to keep our government and military from getting any more deeply entangled in it.
My but we live in interesting times!