The Great China Bubblebath: Regional/ Local Bubbles

Tuesday, April 3, 2007 10:37
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China Bubbles

Income Disparity Gap:
Outside of the recent stock exchange fluctuations, there are few topics more discussed than the gap between rich and poor in China. It is a topic highlighted in numerous newspaper articles, in numerous speeches by politicians, and is addressed in/ by economic policies.

With such regionalization though, it is unlikely that this gap will result in nation-wide economic change or upheaval, however on a regional/ city level is does on a daily basis
For more read: Brookings Report, Asia Times, Tom Paine

Corruption:
Recently, corruption is a topic that has been covered well in the international press. The scandals surrounding real estate, pensions, and the pharmaceutical industry have only been the most recent, and the issue of corruption is one that senior members of the central party have been forced to address.

The danger of corruption, is that those who have been taken advantage of for so long are now starting to fight back, in legal and illegal ways. sometimes, it leads to farmers protesting unfair land taxes, where in other cases it leads to the death of those prescribed fake pharmaceuticals.

For more read: U.N Report , High Corruption Income in Ming and Qing China , Reform at the Crossroads

Migrant Labor:

Migrant Labor has made China what it is today. Were it not for the hundreds of millions of workers willing to uproot themselves (often times splitting up families) to work in the big cities on the east coast and in the factories that are exporting record numbers of goods, the China dream jut would not exist.

As has been reported in a number of media pieces though, there are now signs that this labor pool are tired of not getting what they feel is their share. Conflicts are on the rise, and tensions can reach the levels where unrest will occur.

At the same time for companies operating in China and utilizing migrant labor, it could become harder to find qualified migrant labor as many are choosing to stay within their own provinces to work within the capital cities.

For more read: Labor as Political Force , Cambridge Report , Rural-Urban Migrant Workers in China

Real Estate / Stock Exchange:
As seen in the last year, both the real estate market and stock exchanges have gone through some ups and downs. For many, the ups have provided liquidity and wealth never thought possible.

In one article I read while researching real estate investment, there was a cab driver in Beijing who owned 35 properties, and for 18 months the real estate market was the centerpiece of conversation for anyone in Shanghai. Eventually though, the government took action to rein in prices and speculation to let some air out of the bubble. then, the Shanghai real estate market which was the only loser 10 years running during a period of negative GDO growth took off, and netted some 350% positive return in the last 18 months.

As recognized by the central government, these phenomenon are a risk, and regulations are needed to prevent an implosion. AFter all, if the 400 million members of the middle class lose their all their life’s work in a day trade, then the word instability will become the centerpiece of dinner conversation.

For more read: China Development Institute , Wharton, China Leadership Monitor

Wrap-up:

I hope you enjoyed the series. I know that many of these topics were not fully explored, and it was not my intention to. In fact, at this point, these posts were really to highlight the issues, and provide a framing for future posts.

If you are in need to immediate information, I have done my best to include relevant articles, and as time allows (and news breaks) I will continue to write on the topics above and how they related to business operations.

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