Saturday, January 07, 2006

The Coming China Meltdown

Add to your list of things to worry about: China's banks may be close to collapse.
am concerned by the consequences of a Chinese economic collapse, and these concerns reach far beyond any short to medium term economic pain. I fear a worldwide economic slump prompted by the collapse of China and its supposedly free market will provoke a popular backlash against globalisation and the liberal market reforms carried out in the 80s in the most successful economies of the West. Capitalism and liberalism will be blamed if people create a nexus between China's collapse, its market reforms and its intertwining with the greater world economy. There is no shortage of people who will quickly jump to the fallacious conclusion that the free market sunk China - those who protested in Hong Kong and other places would grab plenty of (misguided) ammunition from such a catastrophic event. Ask any one of those economic curmudgeons about post communist Russia's economy, and I will bet you penny to a pound that their standard response would be "capitalism failed Russia". This is about as sensible as saying that modesty failed Paris Hilton, for anyone who knows anything about post-Soviet "free market reforms" will know that they were in fact nothing of the sort.