I am a skeptic by nature. Having been a journalist since the ripe old age of 20, it's something that has become ingrained in me. I try to see things objectively. I would occasionally get a couple of chuckles when, in Canada, when asked to introduce myself at a news event, I would announce my presence as 'fly on the wall.' So when I see the government in this country trying to give me a 'sunshine colonic,' the organ grinder in my brain starts whippin' that monkey for all it's worth. The latest white-wash is the economic stability of this country.
I'm no business expert. I understand the pure basis of economics, but when it comes to understanding cyclical activity, I am at a bit of a loss. However, though I'm not Kreskin, I like to consider myself a forward thinker. And that's why I'm going on record now as saying that this country is headed for the economic equivalent of a Turkish prison shower scene.
I love doing stories on my program about the economics of China on my program. It's the one area I can touch on here in China that is highly unlikely to get me slapped in a 6-foot-square tiger cage and shipped back to 'the home and native land.' And for months I have been -- in a somewhat backhanded way -- putting out a warning over the airwaves that there is an inflation problem in this country that the government, and its economists, are refusing to acknowledge publicly.
The latest stats released by the People's Bank of China show that the Consumer Price Index has risen 3.2-percent this year. Now, on the surface, this doesn't seem that bad, particularly in a country where the economic development is screaming along at 11.5-percent for the first half of the year. However, if you look at where the inflation is rising from, it becomes a bit more interesting. Thanks to some genius in some ministry, farmers last year in China were discouraged from raising pigs. Well, surprise, surprise, now China has a shortage of pigs, and Premier Wen Jiabao has encouraged his people to 'leave no stone unturned' when it comes to raising up pigs. Pigs, and now wheat, are driving up the overall inflation rate. Food is the staple of life here in China, and a good portion of the 900 million or so folks hunkered down in the rural parts of this country barely make enough to get by as it is. Now some will say that the rising prices will benefit the farmers in the poorer regions, because they'll get more for their products. No going to happen. I can guarantee that the pork and wheat producers are not going to be passing off their increased profits to the farmers. That's just not going to happen. So what's the result? When food gets more expensive, the farmers are going to have to find gigs that earn them more money. Where are they going to get those jobs? In the areas of the country that rely on migrant workers -- the urban centers. As such, you are going to see more migrant workers doing manual labor, which generally involves construction. That, in turn, is going to flood the market with guys who are willing to work cheaper than the guy already on the job, which is going to encourage developers to continue expanding and creating more projects, because their labor costs are on the decline. And the housing construction center in this country is the one area of the economy the government is really worried about. As more and more homes are built, more and more people are getting into real estate speculation. As such, you're going to have thousands upon thousands of people dumping their cash into developments that -- for one reason or another -- may fail. As such, you're going to see bankruptcy rates rise, leading to greater instability.
On top of all this, you've got people in this country -- mainly the poor -- who are throwing their money at the mainland's stock markets in record proportions. Every economist knows that markets rise and fall. It's the economic principles involved that make this inevitable. And this is another area that people are going to start taking a bath on. Investing in the markets is an extremely new concept here in China. And what you've got today is a vast collection of uneducated investors, who are throwing in money into companies that have to do a bare minimum of financial reporting, which is generally inaccessible to the public anyway. So when the markets go through a correction, a lot of people are going to be left fenless.
I truly believe both of these scenarios are coming. And the frustrating part is that the government continues to be sunshine and roses. And if you are conspiracy theorist, (which I can be from time to time -- within reason, of course) you could argue that the government is pouring so much hype into the Olympics because it wants us to ignore the underlying problems that this country is facing.
How long until these things happen? That I have no educated guess on. I guess we'll just have to wait until the next bout of SARS, bird flu, or other unforeseeable incident (re: Taiwan) hits to figure out what is going to shake this country's economy to its foundation. But mark my words, it is coming.
