FEER's Daniel Lynch assesses the reality of the Chinese government's expectations for economic recovery, and indicates the possibility of political upheaval in the near future.
Today marks the 60th anniversary of the People's Republic of China. There will be massive military parades and many speeches by the leaders of the Communist Party. But no one will mention the very real possibility of political upheaval in the near future, or the economic inequality, job losses and slowdown in economic growth the country is currently experiencing.
Imagine that U.S. gross domestic product is growing at an annual rate of 4% when suddenly it drops to 2% because important trading partners are hit by a severe recession. An alarmed president pushes through Congress a $2 trillion fiscal stimulus package, while a frantic Federal Reserve dramatically expands credit and increases the money supply by a whopping 25%. Would a decline in the growth rate from 4% to 2% justify such extreme policy measures?
Most economists would say "no way" because heavy stimulation of a generally healthy economy could lead to an inflationary doomsday. Yet the Chinese Communist Party has implemented an equivalent level of stimulation in combating what it insists is a very mild economic downturn. Something isn't right with this Chinese picture.