The Times – The Year of the Ox will bring little prosperity for the Chinese<br/> Beijing’s “authoritarian capitalist” model has gone as far as it can. Chaos, corruption and indecision have been ignored, by John Lee (foreign policy fellow at the Centre for Independent Studies in Sydney)

The American model of free markets may be on trial, but so is the Chinese model of “authoritarian capitalism”. Today is officially Chinese new year. It will usher in the Year of the Ox, symbolising prosperity through fortitude and hard work. But prosperity is increasingly hard to come by. The Shanghai Exchange has seen its index decline by two thirds. The Chinese export sector, responsible for 40 per cent of Chinese growth over the past decade, is tanking. Some estimate that 20 per cent of factories in the Pearl River delta area have already closed down and half will be gone by the end of the year.

Overall economic growth is likely to dip below the 8 per cent mark – the point at which unemployment (and therefore unrest) begins to rise dramatically. If we look at informal but probably more accurate indicators, such as power consumption, the Chinese economy is close to stagnating and even contracting. Power use in China fell 9.4 per cent in November 2008. December figures have not been released. …

Even before the global financial crisis, those in absolute poverty (earning less than US$1 a day) doubled in China over the past decade. More than 400 million had seen their net incomes decline over the same period despite record GDP growth. It is no wonder that domestic consumption growth has been slow and will not be able to take up the slack as the export sector suffers. Instead China must rely on state-led fixed investment to keep growth at 8 per cent, despite acknowledging that this strategy is becoming more inefficient and wasteful, and therefore increasingly unsustainable. The general economic outlook is so dire that the Chinese President, Hu Jintao, has increasingly issued warnings about the possibility of political and social collapse.

Well, at least we won’t have to listen to all the Free-Tibeters droning on about their children’s Mandarin lessons this year.