The China house of cards - Part II

Despite the symbols of aggrandisement in Beijing, Shanghai, and across the country, China would be a poor choice for such a position. It is a country close to running on empty when offsetting the huge levels of the country's real "national debt" and "special national debt" against its foreign exchange and gold reserves. This is evident in China's wealth distribution where the top 0.4 per cent of China's population comprising government officials, ex-officials in businesses associated with the government, and "favoured sons and daughters" continues to amass and hold control of more than 70 per cent of China's wealth at the expense of the disenfranchised and rural sector.

The CCP's approach to boosting consumer spending by the rural sector is callous, cynical and out of touch. It has dumped the responsibility of helping to revitalise China's economy on the heads of those who can ill afford non-essential spending - China's more than 800 million peasants. Beijing wants them to spend their hard won insurance against illness and old age on household appliances for which many have no suitable electricity supply, and vehicles for which they have no use, or cannot afford to run.

The 0.4 per cent of the population who controls 70 per cent of China's wealth appear to have been over looked. A pro rata level of spending from this sector with that of the rural sector would solve China's economic problems.

While one may envisage the disenfranchised rural sector rising up, the trigger may in fact, be also related to the effects of China's single child policy reflected in the new rapidly rising middle class. These are the confident, ambitious, under 35, educated consumer generations comprising 80 per cent of the urban sector. They have only experienced increasing prosperity and the growing dominance of China on the world stage and are impatient to grasp the mantle of fuqiang.

The highly leveraged good life came to an abrupt end as September 2008 reverberated around the world. They lack the memories of the horrors of the Great Leap Forward, the Cultural Revolution and reliance on the bicycle. Their memories are debt, the credit card, and mianzi. There is rising outrage in this technology savvy sector as their dreams shatter. The urban children of the single child policy are now joining China's rural and disenfranchised to demand change.

China had a chance and missed the boat.

Those nations leaders who believe China will contribute to the recovery of the global economy are chasing rainbows.

China is about numbers, big numbers, and those willing to look deeper into those numbers will see the real problems facing China's unsustainable dream to become a major global economic, industrial and military power.

Beneath the surface lies growing turmoil that has the potential to collapse the China house of cards, unseat the CCP, and trigger a new global crisis.

We may yet witness the fear expressed in a People’s Liberation Army document referring to the possibility of another “Peoples war fought on Chinese soil ...”.