One of the things I like to keep an eye on is the situation of China’s economy.

Not that I think anything is  wrong  with it. On the contrary, the country is resisting well the international crisis, and China has one of the best governments in the World when it comes to managing the economy. The results of the last 30 years speak for themselves. The Chinese have a strong confidence in their leaders, and this confidence seems to be spreading to the rest of the world, where some are already starting to believe that the Wall of the Han is going to save us all.

That is exactly why I am a bit worried.

Wall at Gansu

The Great Wall of China has always functioned better as a national myth than as a defense system. This picture of the Wall bordering the Gobi desert can give an idea of what remains of the great myths once the barbarians have passed. The basis of my spectacular and sensationalistic theory of  the Great Wall of China are all explained here.  More entries on the topic in the category Crisis Watch, and in my blog in Spanish.

Following that entry, I have received quite a few comments saying that it is idle to issue predictions at this point (which is true), and that anyway the Wall is down and the crisis has already arrived to China (which, at the time of writing, is definitely false). Of course, we are seeing some impact on the exports and the GDP growth statistics have already been reviewed for 2008. Most probably growth will go further down in 09, perhaps around the area of GDP 7.5% per year, which is what Prime Mr. Wen considers sustainable anyway.

But that is not what I mean by the Collapse of the Wall.

Unstable equilibrium

What I have noted from my observations in China is that there are inefficiencies, structural, social, political problems, and too many people living off the fat of the system. Many of these problems come from the prolonged single-party authoritarian regime, and others simply from the fact that the engine has been running for the last 30 years without a stop for repairs. Downcycles also have their function in economy, after all.

All these problems that I am seeing, which I will try to post here once in a while, make me suspect that China is still not the stong, cohesive economy that many want to see in it. And that much of that stability that is attributed to China is but mere illusion, just like the one of the Red Ball on this illustration.