The China house of cards - a 2009 scenario

The massive expansion programs to provide the jobs for the millions of new urban workers will push output beyond global demand. The flow-on effect of such massive expansion will dramatically increase pollution and greenhouse gas emissions that, in turn, will destroy the efforts of the developed nations' global warming reversal commitments.

China must accept that the unrestrained and unsustainable credit practices and consumer-spending splurge of the developed nations that had driven its double-digit growth, is no longer.

While nations' banks received lifelines, financial managers learned the harsh lessons of September 2008 and prepared for falling demand to trigger ongoing defaults, failures, and rising global unemployment.

Oversupply in key sectors, greater equity, unemployment, and a decimated credit worthy client base will restrain the global lending environment. Post crisis recovery requires strong credit growth and that will not happen overnight.

Kyoto and greenhouse gas emissions are not on China's radar, except for the increasing revenues from exploitation of CDMs.

By the third quarter of 2009, China could mutate from an export driven economic powerhouse to a polluted and water starved import-reliant nation With natural resources restricted to massive coalmines. The residues of China's once vast natural resources and fertile land are already incapable of sustaining its population let alone rapid economic and industrial expansion.

Even the planned exploitation of Tibet's water, minerals, and fragile environment will not sustain China's increasing demands.

The ripple effect

Beyond China, the ripple effect flows south into the sub continent and adjoining south Asian nations, west into central Asia, the Middle East, and north into Russia.

Beyond the continent, the ripples will cross the oceans where rumours of an economically weakened China could create chaos and rising unrest in countries governed by regimes allied to China and reliant on its financial largesse and protection from UN sanctions.

Many regimes, reliant on oil exports to repay China's huge debt in loans, aid and infrastructure projects are experiencing unsustainable cuts in oil prices and a second hit from falling demand from China and other consumers. This will jeopardise many regime leaders' grand plans, fuelling internal unrest as populations see their governments failing to deliver on promises. In these countries, regime change from within is always close to the surface.

China may yet face the real possibility of a new round of nationalisation by panicked regimes to protect and salvage what they can and seek channels to negotiate with alternative partners and defer their China debt.