Twist in the dragon tale
It’s no surprise that China’s export-driven economy is facing job losses as the world economy slows down.india Updated: Feb 04, 2009 22:18 IST
It’s no surprise that China’s export-driven economy is facing job losses as the world economy slows down. But the recent official admission that unemployment among rural migrants is 20 million, about three times more than earlier figures, indicates that China is in worse shape than was expected. Chinese official numbers also list about 15 million registered urban jobless and nearly 2 million unemployed college graduates. And the Chinese economy is forecast to face even stormier times next year.
This should worry the whole world because China has a tendency to export its internal economic tensions. The legitimacy of the ruling Chinese Communist Party is intertwined with its ability to deliver prosperity to its people. Chinese bellicosity during the 1962 war was partly fed by the impoverishing Great Leap Forward. Runaway urban inflation lay behind Tiananmen, both demonstration and massacre. Thus the new unemployment figures were accompanied by a call by President Hu Jintao and his generals for the military to be ready to obey the party’s orders “at any time, under any circumstances”. India may already be feeling the consequences. It has not escaped New Delhi’s notice that over the past few months the Chinese state media and its government think tanks have repeatedly made references to the 1962 war — and in one instance have talked about reconquering Arunachal Pradesh. This is very Chinese: at times of national weakness, indirectly warn potential enemies against any cross-border funny business. A more tangible fallout of China’s problems is on the trade front.
Determined to save export sector jobs, there are signs that Beijing is subsidising the dumping of products. While the commerce ministry’s anti-dumping cases should normally be taken with a pinch of salt, this time talk of a Chinese invasion of the cheap seems valid.
However, India’s recent six-month ban on all Chinese toys is not a long-term solution. China was probably India’s number one trading partner this past year and many thousands of Indian jobs depend on keeping this trade relationship healthy. New Delhi needs to launch a comprehensive dialogue with China to seek a modus vivendi about these and other issues. The dragon is ailing and his mood will become uglier in the months to come.