More On China's Economy

Paul Krugman, in a rare post that I mostly agree with (I disagree with his assertion that we are doing worse than Japan did in terms of handling our crisis) thinks China is on the brink: Will China Break?

Another interesting article:

These point out two things I have been thinking about China: The End of the Chinese Dream

1) Corruption - The central government is extremely corrupt, and corruption leads to misallocation of capital and inefficiency. This kind of corruption means the central government cannot be nearly as "efficient" and "orderly" in their handling of affairs as they can appear to be from the outside (as some commentators have remarked about the Chinese dictatorship in comparison to America with our chaotic democracy where it appears that we can never get anything done, as opposed to the "efficient" Chinese---Thomas Friedman for example has remarked aobut the "benefits" of dictatorship).

2) Rising anger - One of the things pointed out over the last few years is how many Chinese don't care about what the central government is doing, that they don't mind it being a dictatorship. To myself, this is only because the economy was roaring (or appeared to be roaring anyhow) and when the economy seems to be doing great, most people don't care much about the government's actions. But when the economy tanks, then people do start caring. Right now, the rising inflation in China (likely due in part to their massive stimulus), along with the sheer corruption, is creating a swell of anger amongst those struggling badly. Combine this with when/if the bottom falls out of the economy, and massive unemployment occurs, in a country with no social safety nets of any kind, with the ethnic unrest that exists in China, and well it won't be pretty.

I in particular find it interesting how Krugman remarks about those who say that the bureaucrats controlling the economy in China are very brilliant and will do whatever is needed to stop the economy from tanking, but yet, this is exactly what he was told in the 1980s regarding the Japanese economy as well.