China’s Lehman Moment
|You would be living under a rock if you’re not aware of recent concerns about the potential collapse of Evergrande, one of China’s largest property developers, which has been described in the financial media as China’s ‘Lehman moment’, referring to the collapse of Lehman Brothers in the US which triggered the Global Financial Crisis (‘GFC’) in September 2008.|
As it happens, the GFC of 2008 was something of a turning point for China. After 20 years of opening up, involving rapid economic growth and a slow but steady move towards greater privatisation, the near total collapse of the US banking system (involving massive State intervention to avoid a major economic crisis) provided a strong case for the Chinese Government to reverse course, retaining tight control over their banking sector and the economy overall. This provides them with a lot more flexibility and ammunition to respond to this latest financial crisis and a stronger hand in preventing it from happening again.
It turns out that the risk of financial and economic disasters is not the only aspect of American culture that China wants to keep away from its own population. The recent crackdown on the tech sector (to prevent any one company or entrepreneur becoming too powerful) a move towards ‘common prosperity’ (calling for more people to share in the opportunity to be wealthy) and even the rationing of time spent playing online games for their youth (under 18s are now limited to just one hour of game time over the weekends) are the latest examples of China setting their own rules, maintaining strong State control and building a nation that reflects their own values. Whilst western commentators refer to some of this as ‘Orwellian’, surveys conducted by both local and western researchers suggest that over 95% of Chinese people are either ‘relatively satisfied’ or ‘highly satisfied’ with their Government.
Whilst it’s OK for us to believe that our own system of government is better, and that we cherish (what’s left of) our personal freedoms, we also need to accept that it’s not perfect either.