Unemployment: the missing Link

Written by Julen Madariaga on December 4th, 2008

Now that inflation seems under control, unemployment has been identified by most as the real threat to Chinese stability in 2009. The risk of massive layoffs and social unrest is so obvious that you hardly need an economist to identify it. My blue taxi driver was telling me about it only a minute ago.

In the media and the specialized blogosphere we’ve seen many articles lately discussing the problem of closing factories. Mostly wondering how bad the situation really is, or how the government will be able to deal with it. Interestingly, opinions come in waves, one week exaggerating the damage, the week after dismissing it as seasonal closings.

Which just comes to show that, in times of crisis, bloggers and economists are all equally clueless.

The World Bank, Economists and Chinese Characteristics

The other day I commented the latest World Bank Quarterly Report, and I raised the issue that it does not take into account some obvious non-economic factors. Today, after reading the latest post on All Roads I went back to the WB report and performed a search for “unemployment”.

The number of results for this search in the 23 pages report is: 0.

Fair enough, there are 5 instances of “employment” (think positive), but most of them are explaining how the Magic Stimulus Plan is going to solve all the problems. The more I read it, the more I see this Report as loaded with Chinese Characteristics. It has been done in Beijing, by a mostly Chinese team… and like I said, it carries a highly suspicious 7.5% projection.

In spite of this, the WB report is an informative read, and one can hardly be surprised that an international institution tries to avoid conflict with one of its member governments. But what I did find quite surprising is that econoblogger Brad Setser’s analysis of the report doesn’t even mention unemployment either.

This is what made me think that we are going to need something more than economists if we want to see clear in the China 2009 scene.

Recommended Reads for the Fall

So, with all due respect, I have to desagree with Mr. Setser’s advice: If you only read one thing on China this Autumn, do NOT read the World Bank Report.

But then, what to read? Who knows really what’s going on in China?

Let’s analyze the root of the problem: China is not a transparent System. Even worse, unlike other non-transparent countries that we are used to deal with, China is a highly influential country. And it is in a position to not only hide the facts behind a painted veil, but also actively manipulate information and have hundreds of experts around the world scratching their heads.

So the answer to the question “Who knows China?” is:  A bunch of old men that are sitting in Zhongnanhai.

Now, forget your google, you will not find the Politburo Standing Comitee Blog, they will not take your phone calls to arrange an interview or explain their actions.

But what they actually DO every day is leave lots of traces, from the articles on the Chinese press to their announcements in economic policy. And these traces we can track down to the real intentions and the real information that they’re handling.  So it is by reading between the lines of People’s Daily, Xinhua and the likes that you can get a clue of what is going on here.

In conclusion, to understand China, economics is not enough: we also need politics.

Political Economics

So if you are only going to read one thing on China, I suggest you look for a political economist.  For example the blog of Victor Sish, which I discovered recently. He is a professor of political science at Northwestern University specializing in Chinese politics, and he also writes on Nourini’s monitor. He has a keen eye for interpreting the news from a Chinese government perspective. Don’t miss his last post on unemployment. For my part, I’m adding him to my Roll.

In fact, I am opening a new section on my Blogroll for Chinese politics and economy, and I would be grateful if you can recommend some other Crisis Watching sites, in English or Chinese. I am looking for sites that focus on making sense of the Chinese government’s moves.

Any more missing Links? Tips welcome. Thanks.

Picture credit: The shade of Zhongnanhai by Zhongnanhai 10毫克.

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Comments so far ↓

  1. Dec

    Very interesting, but you have completely abandoned all your spanish readers!!!

    [Reply to this comment]

  2. Dec

    Haha, Fab old boy, good to see you here again!

    I’m sorry for that, Crisis watching is addictive. I promise I will update the Spanish chinayouren over the weekend!

    [Reply to this comment]

  3. Dec

    Hope so. Mondays are very boring when you have nothing to read at ULN.

    [Reply to this comment]

  4. Dec

    Hi ULN,

    I think you put the finger in a very important point … everything is linked in PRC. Politics/Economy are somewhat the same thing (BTW, Hu’s and Wen’s family are very successful in biz … ).
    As a Chinese friend of mine would say, ‘you can spend your life tea-leaf reading about Zhongnanhai’. The best we can do is to try to follow the footprints …

    ‘“Who knows China?” is: A bunch of old men that are sitting in Zhongnanhai.’
    … Do they have all the information? I mean, it’s in the interest of a lot of people to hide some information to the super big bosses of the Politburo. Add the political fights (I think it’s really fierce) above it …
    They have the power to decide, but do they really have the information to take the best decisions (for the country)?

    [Reply to this comment]

  5. Dec

    Good point, BT. There are surely some people outside of the Politburo that know China well, plus like you say there is a lot of info from the provincial level that doesn’t make its way to the capital.

    So ZNH’s knowledge is far from perfect. But I still think they have the best advisors and the most accurate overall picture. And what is more important: they are the only ones to know their own intentions. For example, they are the only ones to know what they really intend to do about the Stimulus Plan. Supposing they actually know…

    [Reply to this comment]

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