The Economist (June 25th, 2011) is running a “Special Report” on China. Excerpts:
1. “The government has been reviving a Maoist system of neighbourhood surveillance by civilian volunteers. In the past few months the police have launched an all-out assault on civil society, arresting dozens of lawyers, NGO activists, bloggers and even artists. The Arab revolutions have spooked the leadership. From its perspective, the system looks vulnerable.”
2. “Late next year, probably in October, the party will hold a national congress, the 18th since its founding 90 years ago. This meeting, a smaller one of the party’s central committee immediately afterwards and a session of the legislature in March 2013 will endorse the biggest shuffle in China’s leadership for a decade. The president, Hu Jintao, and Mr Wen will step down from the pinnacle of power, the nine-member standing committee of the Politburo. A younger generation will begin to take over.”
3. “China’s demographic advantage—an abundant supply of labour in the countryside—is beginning to wane. In a few years the working-age population will peak. Without huge and politically risky policy changes it will become increasingly difficult to maintain the rapid rate of urbanisation that has been one of the main drivers of growth.”
4. “China’s leaders will find it enormously difficult to rebalance China’s economy so that growth is led by consumption rather than by exports and investment. Their efforts will be hampered by the growing clout of state-owned businesses.”
5. “China is likely to disappoint those who believed that the country’s embrace of globalisation would usher in greater political freedoms over the next few years.”
6. “For all its problems, China in the coming 10-15 years is still likely to reach several symbolic milestones. The IMF predicts that in 2016 it will become the world’s largest economy on a purchasing-power-parity basis.”
7. “Despite Mr Wen’s calls for more evenly shared prosperity, the gap between rich and poor and between cities and countryside has continued to widen. Since he took office in 2003, absolute poverty has dropped markedly. But the number of people in relative poverty (with 50% or less of the median income) grew from 12.2% of the population to 14.6% between 2002 and 2007, according to research by Terry Sicular of the University of Western Ontario and Li Shi and Luo Chuliang of Beijing Normal University.”
8. “Among the bears is Michael Pettis of Peking University, who believes that investments are becoming increasingly inefficient and that China is heading towards a “brick wall” of government debt. Growth, he says, will remain high in the early half of the decade but could drop off sharply thereafter as loans turn sour. Even in the best case, he says, growth will fall below 5%.”