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China slump sparks street protests
The Sunday Times - February 2, 2009
Michael Sheridan, Hong Kong – Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.
The research was conducted for The Sunday Times over the past two months in three provinces vital to Chinese trade – Guangdong, Zhejiang and Jiangsu. It finds the global economic crisis has scythed through exports and set off dozens of protests that are never mentioned by the state media.
While troubling for the Chinese Government, this should strengthen the argument of Premier Wen Jiabao, who will say on a visit to London this week that his country faces enormous problems and cannot let its currency rise in response to US demands.
The new US Treasury Secretary, Timothy Geithner, has alarmed Beijing and raised fears of a trade war by stating that China manipulates the yuan to promote exports.
However, a growing number of economists say the unrest proves that it is not the exchange rate but years of sweatshop wages and income inequality in China that have distorted global competition and stifled domestic demand. The influential Far Eastern Economic Review headlined its latest issue "The coming crack-up of the China Model".
Yasheng Huang, a professor at the Massachusetts Institute of Technology, says corruption and a deeply flawed model of economic reform have led to a collapse in personal income growth and a wealth gap that could leave China looking like a Latin American economy.
Richard Duncan, a partner at Blackhorse Asset Management in Singapore, has argued that the only way to create consumers is to raise wages to a legal minimum of $US5 ($7.80) a day across Asia – a "trickle up" theory.
The instability may peak when millions of migrant workers flood back from celebrating the Chinese New Year to find they no longer have jobs. That spells political trouble and there are already signs that the Government's $US585 billion stimulus package will not be enough to achieve its goal of 8 per cent growth this year.
The American economist Nouriel Roubini says growth figures of 6.8 per cent in the fourth quarter of 2008 mask the reality that China is already in recession – a view privately shared by many Chinese financial analysts who dare not say so in public.
Even security guards and teachers have staged protests as disorder sweeps through the industrial zones that were built on cheap manufacturing for multinational companies. Worker dormitory suburbs already resemble ghost towns.
In the southern province of Guangdong, three jobless men detonated a bomb in a business travellers' hotel in the commercial city of Foshan to extort money from the management.
The Communist Party is so concerned to buy off trouble that in one case, confirmed by a local government official in Foshan, armed police forced a factory owner to withdraw cash from the bank to pay his workers.
On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards. The next day, about 100 auxiliary security officers staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.
About 1000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.
In one sample week in late December, 2000 workers at a Singapore-owned firm in Shanghai held a wage protest, and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.
All along the coast, angry workers besieged labour offices and government buildings after dozens of factories closed their doors without paying wages and their owners went back to Hong Kong, Taiwan or South Korea.
In southern China, hundreds of workers blocked a highway to protest against pay cuts imposed by managers. At several factories, there were scenes of chaos as police were called to stop creditors breaking in to seize equipment in lieu of debts.
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