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Chinese Military,Political and Social Superthread

News on the economic front in this report which is reproduced under the Fair Dealing provisions of the Copyright Act from the The Telegraph:

http://www.telegraph.co.uk/finance/economics/9860518/China-trade-now-bigger-than-US.html
China trade now bigger than US
China is now the largest trading nation in the world in terms of imports and exports, after overtaking the US last year.

By Garry White

10 Feb 2013

China has leapfrogged the US to become the world’s biggest trading nation, bringing an end to the US’s post-war dominance of global commerce.

The total value of US exports and imports in 2012 was $3.82 trillion (£2.4 trillion), the US Commerce Department has revealed. China’s customs administration has already announced that the country’s total trade last year was worth $3.87 trillion.

“It is remarkable that an economy that is only a fraction of the size of the US economy has a larger trading volume,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, told Bloomberg. “The surpassing of the US is not because of a substantially undervalued currency that has led to an export boom,” Mr Lardy said, pointing out that Chinese imports have grown at a faster rate than exports since 2007.

Not only has China managed to post a larger total trading figure, but the breakdown of imports compared with exports also makes for favourable reading in Beijing. China had a full-year trade surplus of $231.1bn with the US posting a total 2012 trade deficit of $727.9bn.

Indeed, the Asian powerhouse looks set to table an even better performance in 2013, as trade accelerated substantially last month. Exports jumped 25pc on a year-on-year basis and imports were up 29pc in January, beating analysts’ expectations. However, the data is distorted by the timing of the Chinese New Year festivities.

Last year's Lunar New Year shutdown began in January, leaving fewer work days and boosting this year's figures by comparison.

However, activity across the Chinese economy was impressive, with sales of passenger cars over the month soared to their highest ever. China's auto sales jumped 46.4pc compared with January 2012 to a record monthly high of 2.03m units, the China Association of Automobile Manufacturers (CAAM) said. Vehicle output also hit a new monthly high, surging 51.17pc to 1.96m units.

The data is helping to ease fears that China could face a slump. These worries remain despite an acceleration of growth in the country.

French bank Société Générale said last month there still is a chance of a "hard landing," with growth dropping below 6pc, which would be dangerously low for China.

"A deceleration is likely by the end of the year if further stimulus measures are not forthcoming, which they probably won't because of latent inflation pressures," Alaistair Chan, an economist at Moody’s said last week. “Exports are expected to record moderate growth as the global economy recovers.”

However, the data has reassured some.

"Overall this says there is no need to worry about the strength of China's recovery," Sun Junwei, China economist at HSBC in Beijing, said.
 
This isn't good. Global inflation as everyone devalues their currency (or the flow of "hot" money into places that have not devalues their currency yet) will destabilize the global economy further:

http://www.forbes.com/sites/gordonchang/2013/02/10/asian-currencies-tumble-yes-this-is-a-global-currency-war/

Asian Currencies Tumble. Yes, This Is A Global Currency War.

The renminbi fell slightly against the dollar in China on Friday.  The yuan, as the currency is informally known, began the day up over the greenback but weakened as trading progressed.

The reason for the afternoon decline?  Chinese enterprises entered the market and bought the American currency in large amounts late in the day.  “It just seems so odd that companies would choose this particular time to buy such big amounts of dollars,” an unnamed Shanghai trader in a local bank told the Wall Street Journal.

Who Will Win The Currency Wars? James Gruber James Gruber Contributor
The Abe/Aso Government "Three Arrows" Agenda for Economic Revival Stephen Harner Stephen Harner Contributor

Market participants naturally suspect that the People’s Bank of China, the central bank, was behind the surprising accumulation of greenbacks.  Traders also believe that recent dollar purchases by China’s state banks are really on behalf of the central bank.

Since early December, the meddling of the People’s Bank in the currency market has been evident but not, in the words of Reuters, “overwhelming.”  Stephen Green, the well-known analyst from Standard Chartered, estimates that the intervention last quarter was “to the net tune of $34 billion.”

Central bank operations do not have to be large to be effective, however.  Traders, despite strong corporate demand for the renminbi, saw the signals from Beijing and have reined themselves in.

China’s dollar-buying is understandable in the context of the downward movement of the yen, which has fallen against every major currency in recent months.  It has, this year, lost 7.09% of its value against the dollar and fallen 8.57% against the euro.  Newly installed Prime Minister Shinzo Abe has made the depreciation of the currency one of the centerpieces of his controversial economic program, so there are expectations of aggressive tactics from the Bank of Japan, especially now that Masaaki Shirakawa announced on Tuesday his intention to step down early as its governor.

“I can’t recall a move in currencies that has been so deliberate and so linear without any apparent real change in fundamentals,” said ANZ’s Richard Yetsenga on CNBC Asia’s “Squawk Box.”  “The yen’s move has largely been on the basis of an apparent move in government policy and the market is front-running that.”

Of course, everyone has noticed Tokyo’s new currency policy.  Europe and South Korea in particular have complained, but China by and large has not.

Why complain when you can engineer the value of your currency?  Beijing has been manipulating the yuan downward, and Seoul has been fiddling with the won.  The South Korean currency is down 2.53% against the dollar since the end of December.  At the same time, the Taiwan dollar is off 2.37% against the greenback.  From all outward appearances, countries in Asia are now engaged in competitive devaluations.

So far, Beijing has escaped blame for starting the race to the bottom.  “Has China Quietly Joined the Currency War?” CNBC asked on Thursday.  That is not the right question because it is not possible for China to join the conflict.  China, unfortunately, started it, at least a decade ago in fact.

For years, policymakers thought it was not worth trying to get Beijing to stop manipulating the renminbi, yet that view was mistaken.  They ignored the fact that the Chinese were undermining the consensus that the market should determine currency values.

Now it seems it is too late to rescue the system of free-floating currencies.  Abe’s plan to cheapen the yen, otherwise inexcusable, is a defense against the fixed yuan and the falling greenback.  Ben Bernanke’s dollar-weakening moves, which hurt America, are in retaliation against Beijing.  Beijing will not relax its grip on the renminbi even though it claims the currency is “pretty much close to the equilibrium level.”  Of course the yuan is not, because the Chinese central bank is continuing to determine exchange rates.

We are, in fact, seeing the beginning of a currency war, which will not be confined to Asia.  Governments see short-term advantage in intervening in the market, but in the end everyone will be hurt.

Follow me on Twitter @GordonGChang
 
Here is an interesting and slightly alarmist article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Sydney Morning Post:

http://www.smh.com.au/world/day-will-come-when-we-must-choose-us-or-china-20130215-2eijr.html
[size=14ptDay will come when we must choose US or China[/size]

February 16, 2013

John Garnaut
China correspondent for Fairfax Media

BEIJING: Within two decades the US will be forced out of the western Pacific, says a high-ranking Chinese military officer, amid concerns that increasingly militarised great power rivalry could lead to war.

Senior Colonel Liu Mingfu, at the People's Liberation Army's National Defence University, told Fairfax Media this week that American strategic influence would be confined ''east of the Pacific midline'' as it is displaced by Chinese power throughout East Asia, including Australia.

Colonel Liu's interpretation of one facet of what the new Chinese leader, Xi Jinping, calls ''a new type of great power relationship'' adds to the uncertainty and anxiety surrounding China's strategic ambitions.

art-china-620x349.jpg

Senior Col Liu Mingfu - supplied photo

It clashes with comments days earlier by his university colleague General Zhu Chenghu. ''We have no intention of driving the US out of east Asia or the western Pacific,'' General Zhu told a conference in Atlanta. ''But I don't think most Americans believe what the Chinese are saying.''

On January 31 James Fanell, intelligence chief for the US Pacific Fleet, which commands six aircraft carrier groups, told a San Diego conference that China's ''expansion into blue waters is largely about countering the Pacific Fleet''.
Even China's civilian maritime surveillance agency ''has no other mission but to harass other nations into submitting to China's expansive claims'', he said.

''And I can tell you, as the Fleet Intelligence Officer, the PLA Navy is going to sea to learn how to do naval warfare,'' said Captain Fanell. ''Make no mistake, the PLA Navy is focused on war at sea and about sinking an opposing fleet.''

Anxieties about China's strategic ambitions have grown since it occupied islands administered by the Philippines in the South China Sea last year and, particularly, China's ongoing brinkmanship with Japan and its security guarantor, the US, in the East China Sea.

Japanese leaders have accused China of locking weapons-guiding radars on Japanese targets - which China denies - while Western military sources say Chinese planes, ships and submarines have challenged Japan-

controlled waters and airspace around the Senkaku Islands, known as Diaoyu in Chinese.

Some security analysts say Australian political leaders are in public denial about the stakes involved and invidious choices the nation may have to face.

''It's the most dangerous strategic crisis that the US has faced, that the world has faced, since the end of the Cold War,'' said Hugh White, former deputy secretary of the Department of Defence, saying China and Japan were drifting closer to a war that could draw in the US.

''This makes rather a nonsense of the mantra we hear both from Gillard and Abbott that 'we don't have to choose between the US and China','' he said.

An assertive, rising China has also triggered the formation of a regional latticework of security structures, partly pioneered by Australia and now championed by the new Japanese Prime Minister, Shinzo Abe, who proposes a ''democratic security diamond'' involving India, the US and Australia.

Ely Ratner, fresh from a stint at the China desk of the US State Department, said Australia should speak louder in favour of international laws, norms and institutions given its dependence on the flow of goods in east Asia.

As much as 57 per cent of Australian exports passes through sea lanes in the South China Sea, Australian government estimates show.

''The overriding question is whether China is interested in a region based on rules and institutions that seek co-operative, non-coercive ways to deal with disagreements,'' said Mr Ratner, a fellow at the Centre for a New American Security, which was founded by the State Department's recently retired assistant secretary for east Asia, Kurt Campbell.

''Or is it going to deal with disagreements by using military, non-military and economic coercion, as we saw against the Philippines and Japan, and diplomatic coercion as we saw at the East Asia Summit?'' he said, referring to China's intervention to block discussion of maritime security issues.

Colonel Liu, who has warned Australia not to support the Japanese ''wolf'' or American ''tiger'' in a military showdown, does not hold the rank of general or act as an official spokesman.

But his views have been taken more seriously since his fiercely nationalistic book, The China Dream, was allowed back onto the shelves after Mr Xi's elevation in November, when Mr Xi began talking about his own nationalistic ''China Dream''.

And they reflect a common assertion in some quarters of Beijing, and particularly the army, that the Obama administration's ''pivot'' to Asia is an aberration in a long story that will see the US Pacific Fleet eventually give up on its allies in the region.


Senior Col Liu's views are well known and have been discussed at some length over the recent months.

It is important to understand that the Chinese government encourages robust public debates - often in the foreign language press - about contentious issues as a way of testing public opinion (something which is difficult in a totalitarian state) so dueling papers by Sr Col Liu and General Zhu Chenghu quite possible represent two points of view within the Central Committee . But, by empowering Sr Col Liu to speak out in this way, and by allowing his book to be republished, the Chinese government is also trying to influence Asian public opinion. The preferred Chinese narrative is that China will, peacefully, displace the USA as the East Asian/Western Pacific hegemon at some unspecified time in the foreseeable future. But there is always an iron fist under China's velvet glove.



 
The preferred Chinese narrative is that China will, peacefully, displace the USA as the East Asian/Western Pacific hegemon at some unspecified time in the foreseeable future. But there is always an iron fist under China's velvet glove.

And the west's politicians, military, et al, have got their heads in the sand. They don't believe it and are make zero plans to thwart it.... because it does not fit into a 4 year election cycle....it's someone else's problem    ::)
 
There is a pretty strong lobby in the USA that advocates more and more and more defence spending based on the fact - and it is a fact - that China is rising towards peer status. But that lobby is countered by a) those who believe that China's rise is, ultimately, benign and need not be countered militarily and b) those who say that, threat or no, the USA cannot afford to keep spending at current rates.

I understand the Chinese strategic imperative to displace the USA in East Asia/the Western Pacific but I cannot find, on the Chinese part, any strategic rationale for conflict with the USA; that would seem to fly in the face of logic and history.
 
Here is an interesting talk (CTO Institute) about the inherent contradictions in the US "Asian Pivot" strategy.

It is important to remember that China has its own versions of the DC think tanks and institutes and smart guys there are giving similar lectures about "Shall we engage or contain America?" From China's perspective America is an aggressor nation that has projected its power into a region (East Aia) where it has no proper business and China's legitimate concern is to push them back into their own back yard.

What's sauce for the goose is sauce for the gander, etc ...
 
Interesting version of cause and effect. Some questions arise; do these workaholic men competing for women change their habits once they are successful? What happens to men who are still unsuccessful in getting a wife? Where will this pent up energy and ambition be channeled to?

http://finance.fortune.cnn.com/2013/02/15/china-gender-economy/

How China's lonely bachelors are helping its economy grow
By Nin-Hai Tseng, Writer February 15, 2013: 11:26 AM ET

China's gender imbalance may have contributed as much as 2% to its annual GDP growth. Can it continue?
FORTUNE  -- They say a good man is hard to find, but that's not the case in China, where men overwhelmingly outnumber women. The ratio of men of marriageable/dating age (15-30 years old) to every woman is 1.15 -- an unusual imbalance that's created a rat race of bachelors vying for the affections of a limited pool of young women. Many may want to marry, but never will.

Oddly enough, China's lonely bachelors have actually helped the country experience extraordinary growth. And in the coming years, the trend will likely continue as the ratio gets progressively out of balance, said Columbia University professor Shang-Jin Wei recently at a symposium.

Because of the imbalance, many women can cherry-pick their life partners. There's of course an ugly side, too: The shortage of young women has also driven prostitution and human trafficking in some parts of the country. Nonetheless, since men started outnumbering women in 2002, it has become almost an unspoken prerequisite for bachelors to have enough for a down payment on a home before attracting a wife. Which, in turn, has bred fierce competition among the male population.

MORE: If you could put China's problems in a bottle - Maotai

"Acquiring wealth becomes far more important," says Wei, director of the Jerome A. Chazen Institute of International Business at Columbia. In fact, China's bachelors helped drive its growing housing market. Last year, Wei and other experts published a study that showed up to 48% or ($8 trillion worth) of the rise in property values across 35 major cities is linked to the country's gender imbalance.

Over the past 10 years, China's economy has grown about 10% annually. Wei estimates the gender imbalance, on average, contributed 2 percentage points annually during that period. Investors often speculate how long China can grow at such a fast pace, and whether it's in for a hard landing.

History suggests the growth has to slow. Typically when income per capita reaches about $17,000, growth on average starts declining about 2% a year. In China, income per capita in 2011 stood at $5,445. It will be some time before it reaches its peak, but growth has already started decelerating. In 2012, GDP growth slowed to 7.8% from 9.3% in 2011 and 10.4% in 2010.

Yet the country's demographic kink could offset future slowdown, Wein says. Over the next 10 years, the male-to-female ratio will rise to 1.2 men per woman, in part, one of the many unintended consequences of China's three-decade-old policy limiting couples to one child in a culture where parents overwhelmingly favor males over females.

To be sure, China has many other demographic challenges. It also has a rapidly aging population, which has contributed to the shortage of working-age people. And it remains to be seen how these obstacles will help or hurt its economy.
 
A very interesting question: "Why wasn't there a Chinese Spring?". This article may be a good starting point to think about the question, but I am not sure that this covers all the reasons the Chinese "Red Dynasty" has remained in power:

http://thediplomat.com/2013/02/22/why-wasnt-there-a-chinese-spring/?all=true

Why Wasn’t There a Chinese Spring?

February 22, 2013
By Steve Hess
 
Although sharing many of the same problems as Arab societies, the Arab Spring never arrived in Beijing. Why?

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It has now been two years since the self-immolation of the Tunisian street vendor, Mohamed Bouazizi, provided the spark that set the Arab world aflame. A wave of protests spread throughout the region in quick succession and led to the overthrow of long ruling autocrats in Egypt, Tunisia, Yemen, Libya, and possibly Syria.

The collapse of regimes like Hosni Mubarak’s in Egypt, which many considered “an exemplar of…durable authoritarianism” was a salient reminder to many that such revolutions are “inherently unpredictable.” Before long some began to speculate that the protest movements might spread to authoritarian states outside the Arab world, including China. Indeed, the Chinese government was among those that feared the unrest would spread to China because, as one observer noted, China faced the same kind of “social and political tensions caused by rising inequality, injustice, and corruption” that plagued much of the Arab world on the eve of the uprisings.

Alas it was not to be as the Chinese government has proven far more durable than many of its counterparts in the Arab world. This inevitably raises the question of what factors differentiated the Chinese government from its Arab counterparts in places like Egypt?

Fortunately,in the more than two years since Mubarak fell, a number of theories have been advanced to explain the Arab Spring.

One set of explanations has centered on social and economic drivers. According to this reasoning, unrest in the region was driven by a highly discontented and mobilized society. Youth unemployment and official corruption enraged citizens throughout much of the Arab world and the diffusion of new communications technologies, particularly social media sites such as Facebook and Twitter, enabled these individuals to channel these grievances into effective anti-regime collective action.

One shortcoming of this explanation is that the same sources of discontent and social media websites are available throughout the developing world, but successful revolutions are rare. In China, for example, official statistics suggest youth unemployment is low, but independent research has found that the problem may be large and growing, particularly among the type of young, urban and highly educated groups who have spearheaded many revolutions historically. Meanwhile, cross-national measures of corruption place China squarely between Tunisia and Egypt. Finally, Internet penetration rates also place China shoulder-to-shoulder with Tunisia and Egypt, and social media has increasingly appeared as a critical tool for mobilizing Chinese protestors in frequent “mass incidents,” and spreading news of sensitive topics, such as official corruption and public health threats posed by environmental pollution.

Many academics have made the case that the quality of authoritarian rule in Egypt, Tunisia and other toppled dictatorships has lagged behind that in China, causing a breakdown in the former but not the latter. Beijing has developed crack internal security forces for dispersing crowds and constructed its regime around a hegemonic, well-established political party. While these explanations have merit, researchers had identified similar authoritarian support in the Arab world immediately before the turbulent year of 2011. One key to the resilience of regimes in Tunisia and Egypt were their “robust” security forces, which were well-trained and armed – thanks in part to generous American support – and supposedly fiercely loyal to the regime.

Meanwhile, Mubarak and Ben Ali were carefully institutionalizing their regimes by constructing hegemonic political parties and skillfully using nominally democratic elections and legislatures to maintain regime cohesion and co-opt potential challengers. Meanwhile, in China, presumed to be bolstered by more effective institutions, public scandals surrounding high-ranking leaders, such as the wealth of Wen Jiabao’s family or the dramatic fall of Bo Xilai, and the malfeasance and corruption of middle and low-ranking officials, reveal that politics within the CCP may not be as orderly, managed and predictable as once imagined.

But, of course, the Chinese regime has not collapsed and does not seem to be in its death throes. This is puzzling in some respects, because the country experiences annual protests that reportedly topped 180,000 as recently as 2010. Clearly popular discontent is high and Chinese citizens participate in contentious politics in large numbers, but these remain mostly localized affairs targeted at local issues, such as corrupt, low-ranking officials who engage in land grabs. Aside from the June 4 incident of 1989, they have not transformed into protest movements coordinated on a national scale and positioned against the central government itself, as appeared rapidly in Tunis and Egypt’s Tahrir square.

So why have Chinese citizens trended towards localized protests rather than the national protest movements seen in the Arab spring? As discussed in an important body of research, one source of this difference is linked to the structure of the state itself. In China, unlike most autocracies – including Mubarak’s Egypt and Ben Ali’s Tunisia—the state is highly decentralized. Local governments are given a substantial level of autonomy over development policies as well as social management – decisions related to dealing with popular challengers through repression or alternatively, the extension of concessions.

Since local authorities make decisions over the carrots and sticks used to address the demands of citizens with a high degree of autonomy, these officials rather than the national leadership or the regime itself are the primary target of most protest actions. In fact, it is a common phenomenon in China that aggrieved locals will appeal to the Center for assistance against corrupt local officials, even making reference to local officials’ poor enforcement of central directives and policies.Thus, the struggles faced by everyday Chinese are often directed at particular local officials and local issues, limiting the desire of protestors to take the dangerous leap of coordinating their actions across local communities to challenge the regime itself.

As a consequence, much like the Middle East, the years 2011 and 2012 have been ones characterized by very high levels of protest activities in China. However, because of the decentralized nature of the Chinese state, these battles have been ones won and lost by claimants contesting local officials rather than challenging the regime itself.

Steve Hess is an Assistant Professor of Political Science and East Asian & Pacific Rim Studies at the University of Bridgeport’s College of Public and International Affairs. He is a specialist on contentious politics in authoritarian regimes with particular emphasis on China. He is the author, most recently, of the forthcoming article in the International Political Science Review, “From the Arab Spring to the Chinese Winter,” from which this piece was adapted.
 
One might begin to answer Steven Hess' question with another one: why are the Chinese so very, very different from Arabs and Americans and Australians, and, and, and ..?

China's history and culture give it unique characteristics and limitations. The Arabs have different histories and different cultures, ditto the Americans and Brazilians and Canadians. But: Why on earth would anyone have expected a "Chinese Spring?"

An "American Spring" is both more likely and, I would argue, more necessary.
 
More cue ominous music time. I have seen many different articles from many different sources which all suggest that the Chinese statistics are not adding up, and this is another piece of evidence. If this article is true, then it suggests that a huge credit bubble (the sort that F.A. Hayek warned us about) exists in the Chinese economy, fueling malinvestment and leading to a crash of epic proportions. The checksum of this proposition is the results of deflating or artificially inflated credit bubbles in Japan in the 1990's and the global meltdown of 2008 (which also suggests we are not out of the woods by a very long shot, given *we* collectively refuse to pay our debts and insist on governments trying to keep the bubble(s) inflated. What cannot go on will not, so we are going to either have a long psinful recession or a short sharp depression when the markets seek equilibrium). Since many people have an almost religious faith that China can pull us out of the current recession, they will be in for a huge shock if things go the other way:

http://online.wsj.com/article/SB10001424127887324338604578325962705788582.html?mod=WSJ_Opinion_LEADTop

China Has Its Own Debt Bomb
Not unlike the U.S. in 2008, China is at the end of a credit binge that won't end well.
Article

By RUCHIR SHARMA

Six years ago, Chinese Premier Wen Jiabao cautioned that China's economy is "unstable, unbalanced, uncoordinated and unsustainable." China has since doubled down on the economic model that prompted his concern.

Mr. Wen spoke out in an attempt to change the course of an economy dangerously dependent on one lever to generate growth: heavy investment in the roads, factories and other infrastructure that have helped make China a manufacturing superpower. Then along came the 2008 global financial crisis. To keep China's economy growing, panicked officials launched a half-trillion-dollar stimulus and ordered banks to fund a new wave of investment. Investment has risen as a share of gross domestic product to 48%—a record for any large country—from 43%.

Even more staggering is the amount of credit that China unleashed to finance this investment boom. Since 2007, the amount of new credit generated annually has more than quadrupled to $2.75 trillion in the 12 months through January this year. Last year, roughly half of the new loans came from the "shadow banking system," private lenders and credit suppliers outside formal lending channels. These outfits lend to borrowers—often local governments pushing increasingly low-quality infrastructure projects—who have run into trouble paying their bank loans.

Since 2008, China's total public and private debt has exploded to more than 200% of GDP—an unprecedented level for any developing country. Yet the overwhelming consensus still sees little risk to the financial system or to economic growth in China.

That view ignores the strong evidence of studies launched since 2008 in a belated attempt by the major global financial institutions to understand the origin of financial crises. The key, more than the level of debt, is the rate of increase in debt—particularly private debt. (Private debt in China includes all kinds of quasi-state borrowers, such as local governments and state-owned corporations.)

On the most important measures of this rate, China is now in the flashing-red zone. The first measure comes from the Bank of International Settlements, which found that if private debt as a share of GDP accelerates to a level 6% higher than its trend over the previous decade, the acceleration is an early warning of serious financial distress. In China, private debt as a share of GDP is now 12% above its previous trend, and above the peak levels seen before credit crises hit Japan in 1989, Korea in 1997, the U.S. in 2007 and Spain in 2008.

The second measure comes from the International Monetary Fund, which found that if private credit grows faster than the economy for three to five years, the increasing ratio of private credit to GDP usually signals financial distress. In China, private credit has been growing much faster than the economy since 2008, and the ratio of private credit to GDP has risen by 50 percentage points to 180%, an increase similar to what the U.S. and Japan witnessed before their most recent financial woes.

The bullish consensus seems to think these laws of financial gravity don't apply to China. The bulls say that bank crises typically begin when foreign creditors start to demand their money, and China owes very little to foreigners. Yet in an August 2012 National Bureau of Economic Research paper titled "The Great Leveraging," University of Virginia economist Alan Taylor examined the 79 major financial crises in advanced economies over the past 140 years and found that they are just as likely in countries that rely on domestic savings and owe little to foreign creditors.

The bulls also argue that China can afford to write off bad debts because it sits on more than $3 trillion in foreign-exchange reserves as well as huge domestic savings. However, while some other Asian nations with high savings and few foreign liabilities did avoid bank crises following credit booms, they nonetheless saw economic growth slow sharply.

Following credit booms in the early 1970s and the late 1980s, Japan used its vast financial resources to put troubled lenders on life support. Debt clogged the system and productivity declined. Once the increase in credit peaked, growth fell sharply over the next five years: to 3% from 8% in the 1970s and to 1% from 4% in the 1980s. In Taiwan, following a similar cycle in the early 1990s, the average annual growth rate fell to 6%.

Even if China dodges a financial crisis, then, it is not likely to dodge a slowdown in its increasingly debt-clogged economy. Through 2007, creating a dollar of economic growth in China required just over a dollar of debt. Since then it has taken three dollars of debt to generate a dollar of growth. This is what you normally see in the late stages of a credit binge, as more debt goes to increasingly less productive investments. In China, exports and manufacturing are slowing as more money flows into real-estate speculation. About a third of the bank loans in China are now for real estate, or are backed by real estate, roughly similar to U.S. levels in 2007.

For China to find a more stable growth model, most experts agree that the country needs to balance its investments by promoting greater consumption. The catch is that consumption has been growing at 8% a year for the past decade—faster than in previous miracle economies like Japan's and as fast as it can grow without triggering inflation. Yet consumption is still falling as a share of GDP because investment has been growing even faster.

So rebalancing requires China to cut back on investment and on the rate of increase in debt, which would mean accepting a rate of growth as low as 5% to 6%, well below the current official rate of 8%. In other investment-led, high-growth nations, from Brazil in the 1970s to Malaysia in the 1990s, economic growth typically fell by half in the decade after investment peaked. The alternative is that China tries to sustain an unrealistic growth target, by piling more debt on an already powerful debt bomb.

Mr. Sharma is head of emerging markets at Morgan Stanley Investment Management and author of "Breakout Nations: In Pursuit of the Next Economic Miracles" (Norton, 2012).

A version of this article appeared February 26, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: China Has Its Own Debt Bomb.
 
Some Chinese think that the way they are going to both preserve the dominance of the CCP and maintain a prosperous economy is by adopting the Singapore Model. This article which is reproduced under the Fair Dealing provisions of the Copyright Act from The Diplomat explores that possibility:

http://thediplomat.com/pacific-money/2012/11/12/is-singapore-worth-emulating/
Is Singapore Worth Emulating?

By Anthony Fensom

November 12, 2012

Singapore has attracted admirers for its success in transforming from one of Asia’s less developed countries into an international economic powerhouse. Now, with China seeking to do the same for itself and double per capita income by 2020, could the tightly controlled but economically vibrant city-state help show Beijing’s communist leaders how to maintain their grip on power?

According to an article in China’s Study Times, published by the Communist Party’s Central Party School, China’s incoming president Xi Jinping has for several years “led a team investigating the Singapore model and how it might be applied to China”.

'[Singapore’s] People’s Action Party [PAP] has won consecutive elections and held state power for a long time, while ensuring that the party's high efficiency, incorruptibility and vitality leads Singapore in attaining an economic leap forward,'' wrote Song Xiongwei, a lecturer at the Chinese Academy of Governance.

Despite the differences between the two countries, not least including China’s 1.3 billion people, Singapore’s city-state of 5.3 million has much worth emulating.

The island nation already reportedly leads the world in GDP per capita, as well as boasting one of the most competitive international economies in global rankings.

A report released in August 2012 by Knight Frank and Citi Private Wealth estimated the country’s GDP per capita in purchasing power parity terms at U.S. $56,532 in 2010, ahead of Norway, the United States and Hong Kong. Singapore is expected to maintain its high ranking through 2050, followed by neighbors Hong Kong, Taiwan and South Korea.

Singapore’s wealth is undoubtedly inflated by the world’s highest concentration of millionaires, with the ultra-rich including Facebook co-founder Eduardo Saverin, part of a class which is expected to increase another 67 percent over the next four years.

The Southeast Asian trading center was rated this year as the easiest place in the world for small and medium-sized enterprises to do business, according to a World Bank and International Finance Corporation report.

Measuring such factors as the complexity of procedures needed in starting a business, enforcing contracts and registering property, Singapore came in first ahead of its neighbor Hong Kong, with the United States ranking fourth.

In addition, Singapore ranked second behind Switzerland in the World Economic Forum’s 2012 Global Competitiveness Index, which compared nearly 150 economies across a wide variety of criteria including infrastructure, education, innovation and efficiency.

Ruled by the PAP since attaining self-governance in 1959, the former British colony has earned plaudits from the IMF for its “prudent macroeconomic and financial policies,” including persistent fiscal surpluses and a large stock of public sector external assets, along with “political stability and an effective rule of law.”

In an email interview with The Diplomat, ANZ economist Aninda Mitra said Singapore had set a good example for other regional countries to follow.

"Singapore is often viewed as a role model for other multi-ethnic, post-colonial small or island states which have failed to live up to their full potential, such as Fiji or Sri Lanka,” Mitra said.

“It is also seen as a model for urban planning and bureaucratic efficiency by larger states across the region.”

‘Middle income trap’

However, if Beijing’s policymakers see in Singapore a future path to follow, they may have to look carefully, according to a recent World Bank report.

Named “China 2030: Building a Modern, Harmonious, and Creative High-Income Society,” the report by the World Bank and Beijing’s Development Research Center found that just 13 of 101 economies identified in 1960 as middle income made the transition to high-income economies.

Described as the “middle income trap,” countries are said to remain stuck when the factors that contributed to strong early growth, such as low-cost labor and early technology use, reach their limits and economic momentum slows.

Among those that broke free of the trap, including Hong Kong, Israel, Japan, Singapore, South Korea and Taiwan, less governmental intervention in both the economic and political spheres has been seen as a significant factor.

China’s outgoing Premier Wen Jiabao has argued in favor of political reform, warning his Communist Party comrades that “without successful political structural reform, it is impossible for us to fully institute economic structural reform and the gains we have made in this area may be lost. The new problems that have cropped up in China’s society will not be fundamentally resolved, and such historical tragedies as the Cultural Revolution may happen again.”

The World Bank report called for structural reforms in a number of politically challenging areas, including “redefining the role of government, reforming and restructuring state enterprises and banks, developing the private sector, promoting competition, and deepening reforms in the land, labor and financial markets.”

While seemingly on track to supplant the United States as the world’s biggest economy, China faces the risk of growing old before it gets rich, with its working age population set to peak in 2015 as reported by The Diplomat.

Democracy flight?

Singapore’s exclusive residential enclaves, luxury boutiques and multi-million dollar properties along with low taxes have helped attract the super-rich.

According to the Wall Street Journal Asia, a survey of wealthy individuals ranking cities in terms of “economic activity, political power, quality of life, knowledge and influence” found Singapore was the fifth-most popular behind London, New York, Hong Kong and Paris.

Yet even respondents in Asia put Western cities ahead of Singapore and Hong Kong – “an indication that economic growth may not be the most important factor when a high-net worth individual chooses his city of residence.”

The report by Knight Frank and Citi noted that Chinese cities “performed significantly less well for freedom of expression and human rights – something that may hinder any future ascent to the top of the overall ranking”.

Singapore has efficiently addressed two of the key domestic development issues in East Asia, comprising an excellent education system to train future leaders as well as making corruption unattractive. But can it attract and retain top global talent?

According to one recent U.S. visitor, the country’s push to “convince the global elite that Singapore is the best place to live” may be a challenge.

“In Singapore and in other parts of Asia, I heard several anecdotes of people expressing frustration with Singapore’s tightly controlled society. For how long can elites put up with partial freedom?

“I heard several people saying that the best and brightest in Asia prefer to move to freer societies with the U.S. as the top destination, then Europe, and then Australia,” said Devin T. Stewart, Senior Fellow at Carnegie Council.

According to Peter Hartcher, the Sydney Morning Herald’s international editor, the political, media and housing controls implemented by Singapore have shown China “a potential halfway house between authoritarianism and liberal democracy”.

Economic challenges

Meanwhile, Singapore’s push to restructure itself toward a productivity-based economy less reliant on foreign workers is seen affecting its growth prospects.

Growing income inequality, rising living costs and house prices were prominent issues in the May 2011 general elections which saw the PAP secure its lowest ever share of the popular vote.

Non-resident foreign workers make up around a third of Singapore’s labor force – one of the highest proportions in the world, with the exception of some countries in the Middle East. The high number has been blamed for low productivity growth and strains on public infrastructure, fueling anti-foreigner sentiment.

“Singapore has taken on a tough task in trying to restructure itself toward a more innovation-driven model,” said ANZ’s Mitra.

“This will likely result in greater economic integration with its neighbours, and shifts in economic activity toward higher value-added sectors. But it also implies slower growth than in the past, with stronger efforts to enabling and equalizing opportunities for all its residents.”

While forecasting 4.5 percent GDP growth in 2013, ANZ’s economists note “growing downside risks” including weak labor productivity coupled with tight monetary policy, producing a “tough growth-inflation trade-off”.

Singapore narrowly avoided recession this year through a revision of its second-quarter GDP figures to growth of 0.2 percent. Its third-quarter GDP shrank an annualized 1.5 percent from the previous quarter, worse than economists’ forecasts of a 1 percent decline.

With trade amounting to four times its GDP, Singapore remains susceptible to any further weakening in global demand. Yet for China’s leaders, its success in escaping the middle income trap while maintaining political control is the real lesson to be studied.


The Chinese intelligentia is not interested in Western liberal democracy; most educated Chinese reject liberalism as a social value ~ they are, in the main, Confucians and accept those very conservative socio-political values as most acceptable.

The key problem with the Singapore Model is that Singapore is one of the least corrupt nations on earth; far less corrupt than China or e.g. the USA or even Canada. China will need a cultural revolution to make the necessary changes. Zhou Enlai demonstrated that such revolutions are possible, but they require real, popular leadership.
 
So...

Here is a question for the Sinophiles among us.

How does the current Chinese political and economic system come to an end?

Does it gradually fade away and morph into a system more closely aligned to Capitalism?

Does it eventually collapse under it's own weight as it uses up it's available resources?

Does the extreme disparity between the small rich class and huge poor classes create conditions where the poor rise up knowing they have little to lose  and everything to gain?

Or does it ever come to an end?

(Seems I had way too much time to kill driving to Philadelphia last week, and was listening to a discussion on the shrinking US Economy, and the growing demand on world resources from China and India)
 
One might want to consider that for 2,000+ years, since the Spring and Autumn period, Chinese governance has been remarkably consistent and resilient: a centralized, hereditary monarchy with strong provincial governments. Each dynasty lasts for decades or even centuries and the interregnums, between dynasties, are used to test the "mandate" of the next dynasty.

The system, such as it is, seems to work for the Chinese: some dynasties were stellar, others were failures; some were domestic, others were led by Sinified foreigners, even barbarians; through it all China remained stable and, largely, united. At least three or perhaps four times, for periods of a century or more, in the past 2,500 years China accounted for more than 35% of the world's GDP, maybe, in one period (Song Dynasty) it produced as much as 80% of the world's GDP!

China has a consistent cultural history - unlike say the English, French, Greeks or Italians the Chinese read, write and speak the same language today as they did 2,000 years ago. Arguably, during a single century (6th BCE) there was more intelectual activity in China (including Confucius, Lao-tze and Sun Tzu) than anywhere else in the entire world in any comparable period, including the Enlightenment, and what they said and wrote 2,500 years ago is still accessible, in the original language, to modern Chinese students.

I don't know what's in China's future but, based on its past, more of the same seems like a safe bet. China's historical and cultural consistency should not be taken lightly.
 
I largely agree with Edward, with the proviso that if the various stressors such as economic disparity, environmental degradation, credit bubbles, social disruptions due to corruption etc. become too much, modern China might "shed" some of the outlying regions such as Tibet or Xinjiang, reasoning the cost to keep them outweighs any benefits they might obtain. To the outside world, this would look like a nation disintegrating, but the "core" of China would remain, and that core will remain secure behind the Gobi Desert, the Himalaya Mountains and the sea. Like Ancient Egypt, China has few prctical approaches to its frontiers, which allows for the long term stability we see.
 
I fall in that same group as well. In the past I've thought that due to the shear size of the population that the only real form of government that would work is a strong centralized authoritarian system, be it hereditary monarchy or centrally planned socialist / communist system.
 
Let's hope the communicatin is clearly understood, or WRM's worst case scenario will be the one to pass. Sadly, Instapundit (where I discovered this post) seems to believe that, based on past performance, this Administration will indeed "unpivot", leave their (and our) allies hanging in the wind and generally destabilizing the region. This is quite bad for us, since as a trading nation, we depend a great deal for the US Navy to provide protection and "freedom of the seas" for both their and our benefit. While Pacific Rim nations may be able to band together and create an alternative fleet in being (with the Japanese fleet perhaps being the core element), there are plenty of reasosn this would be a marginal solution (the combined "Western" fleet of Japanese, Canadian and Australian ships would be far smaller than the US Pacific fleet, have far les capability, and have political issues with, for example, Korea).

http://blogs.the-american-interest.com/wrm/2013/02/28/the-unpivot-to-asia/

The Unpivot to Asia?
Walter Russell Mead

The Washington Post headline blares: “China is happy with John Kerry because it thinks he’ll drop the ‘pivot to Asia’”. The Post article itself gets its ammunition from this Liz Economy post over at CFR which rounds up some of the reactions to the new security team from around China. The mood is upbeat.

China Institute of International Studies’ Ruan Zongze: “Compared with Clinton’s tough diplomatic approach, Kerry as a moderate democrat is expected to stress the role of bilateral or multilateral dialogues”;

Chinese Academy of Social Sciences’ Ni Feng: Kerry’s “diplomatic measures” will “greatly embody Obama’s concepts.”
In reviewing Secretary Kerry’s congressional voting record, Chinese observers also noted that he “generally voted in favor of bills conducive to promoting the development China-U.S. relations and generally voted against or expressed different opinions for bills not conducive to China-U.S. relations.” Overall, as People’s Daily observed, “Kerry stresses more on coordination rather than confrontation in foreign relations.”

What are the Chinese so happy about? One possible clue: during his confirmation hearings, John Kerry seemed to indicate that a further military buildup in Asia is not in the immediate future.

I’m not convinced that increased military ramp-up is critical yet. I’m not convinced of that. That’s something I’d want to look at very carefully when and if you folks confirm me and I can get in there and sort of dig into this a little deeper. But we have a lot more bases out there than any other nation in the world, including China today. We have a lot more forces out there than any other nation in the world, including China today. And we’ve just augmented the president’s announcement in Australia with additional Marines. You know, the Chinese take a look at that and say, what’s the United States doing? They trying to circle us? What’s going on? And so, you know, every action has its reaction. It’s the old — you know, it’s not just the law of physics; it’s the law of politics and diplomacy. I think we have to be thoughtful about, you know, sort of how we go forward.

Though the Chinese may be misunderstanding Secretary Kerry somewhat—he seems to have been been offering his assessment that our current force posture in the Pacific is adequate for the task at hand—there is an unmistakeable change of tone in his remarks.

Three possible things could be going on; one is excellent, one is OK but could bring trouble down the road, and one is catastrophic. Let’s start with the rosy scenario: the Obama administration hasn’t changed its Asia policy beyond changing the mood music and China, aware that it can’t change America’s basic approach to the region and lacks the strength to challenge us, has decided not to make a fuss about something it can’t change. It is taking the change in American tone as an opportunity to back down from a confrontation it can’t win without losing face.

That would be smart on China’s part: whining ineffectively about how much you hate something you can’t do anything about is an excellent way to look like a weakling and a fool (sort of like complaining about how much you hate Butcher Assad without doing anything about it).
If that’s what’s happening, look for things to quiet down in Asia.

Another, less hopeful possibility is that while US policy hasn’t changed in Asia, China thinks that it has. It has mistaken Secretary Kerry’s softer tone for a softer policy and is being nice because it thinks it has won the showdown. Chinese resolve and America’s Middle East and budget troubles have convinced the Americans that they can’t sustain the pivot, China thinks. In that case, we should expect some problems down the road as Chinese assertiveness runs into American resistance.

The third and worst possibility is that the Chinese are right and the Obama administration is ratting out on its own pivot and getting ready to betray our Asian allies who trusted the promises the administration made in its first term. In that case we can expect a crescendo of instability and crises that could escalate to include military conflicts and could well see South Korea, Japan and Taiwan going nuclear as China bids to establish a sphere of influence in the region.

It would be a tragic mistake for the Obama administration to shortchange the pivot by failing to devote the adequate amount of resources to the region—an enormous folly that would permanently undermine American credibility around the world. If your goal was to weaken the United States and alienate Washington’s closest allies, announcing a pivot to Asia with great fanfare and boldness, lots of parades and marches, and then slink ingloriously away would be about the best possible way to do it.

That said, the Obama administration has a big problem. Last year it seems to have believed it was on a winning streak in the Middle East that would allow it to continue withdrawing and moving toward a low-cost approach to a high-maintenance region. But that fell apart as the Syrian civil war, the mess in Libya and beyond, and the rising disquietude about Egyptian stability darkened the horizon. (Oh, and there’s that unfinished bit of business with Iran.) The pivot to Asia came when the administration felt bullish on its prospects for Middle East disengagement; that hope turned out to be misguided, and now the administration has got to deal both with a chaotic Middle East and an aroused China—when all it really wants to do is cut the defense budget and spend the money at home.

Backing away from Asia might seem like the easiest solution, but we hope and believe that the White House is smart enough to understand that this would be a mistake of historic proportions, one that historians would be shaking their heads over 100 years from now. Backing off from Asia might temporarily soothe US-Chinese relations, but at the cost of increasing the propensity among some Chinese to think the US is in such rapid decline that it can be bullied and pushed aside.

The White House, like most Americans, wants a calm international environment so that the US can concentrate on its problems at home. As we’ve said before, there’s nothing wrong with that, but unfortunately a calm overseas still depends on foreign perceptions that the US is willing to do what it takes to maintain its geopolitical position. If that confidence is lost, the international scene will become very tumultuous very quickly as other powers begin to plot the Wars of the American Succession. The cheapest and least risky foreign policy in the long run involves doing what it takes in both the Middle East AND Asia.

This is not as hard as some in the White House appear to think. President Obama would gain political capital and stature, not lose it, by stepping up to the plate overseas, and by explaining the international situation and our interests in it to the American people.

- See more at: http://blogs.the-american-interest.com/wrm/2013/02/28/the-unpivot-to-asia/#sthash.4YMMK1gQ.dpuf
 
Interesting article. The author is honest in his assessment that the differences between China and the United States is large enough to make the answer "who knows?", but students of history know that "bubbles" being deflated or popped always have a bad end:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2131402

Is China's Housing Market Heading Toward a US-Style Crash?

Gregory M. Stein

University of Tennessee College of Law

2012

Arizona Journal of International and Comparative Law, Vol. 29, No. 1, 2012
University of Tennessee Legal Studies Research Paper No. 198

Abstract:   
This article aims to determine whether China is heading toward a U.S.-style market crash in its housing market. Rather than attempting to maintain any suspense, I will disclose here that my conclusion is, “Who knows?” China and the United States have dramatically different histories, cultures, governments, economies, and legal systems. Anyone who claims to have a definitive answer to this question is overly confident.

My more modest goals in this article are to examine the available evidence and see which way it seems to point. The article begins by listing and describing several different ways in which the American housing market failed. It then evaluates the consequences of these failures for the U.S. housing market. Next, the article demonstrates some of the key respects in which the Chinese market differs from the market in the United States. This central portion of the article emphasizes just how difficult it is to make predictions about what might happen in one nation’s housing market based on the experiences of another nation that differs in so many significant ways. Finally, the article provides a description of some of the worrisome similarities between the Chinese and American housing markets. To the extent the previous analysis may have comforted the reader into believing that the Chinese market is unlikely to experience a downturn anytime soon, this last discussion will create some apprehension by highlighting some of the ways in which China might, in fact, be heading down the same path as the United States.

Number of Pages in PDF File: 43

Keywords: real estate, property, mortgages, housing, Chinese real estate, market crash, US-China comparisons
Accepted Paper Series
 
The strange state of Chinese matchmaking and marriage. How much of this is out of the ordinary even for China is not something that I know enogh to comment on; perhaps arranged marriages of this sort are part of the cultural pattern (although from the tone of the article I'm not so sure) Long article:

http://www.nytimes.com/2013/03/10/business/in-a-changing-china-new-matchmaking-markets.html?pagewanted=all&_r=1&

The Price of Marriage in China

By BROOK LARMER
Published: March 9, 2013

FROM her stakeout near the entrance of an H & M store in Joy City, a Beijing shopping mall, Yang Jing seemed lost in thought, twirling a strand of her auburn-tinted hair, tapping her nails on an aquamarine iPhone 4S. But her eyes kept moving. They tracked the clusters of young women zigzagging from Zara to Calvin Klein Jeans. They lingered on a face, a gesture, and then moved on, darting across the atrium, searching.

“This is a good place to hunt,” she told me. “I always have good luck here.”

For Ms. Yang, Joy City is not so much a consumer mecca as an urban Serengeti that she prowls for potential wives for some of China’s richest bachelors. Ms. Yang, 28, is one of China’s premier love hunters, a new breed of matchmaker that has proliferated in the country’s economic boom. The company she works for, Diamond Love and Marriage, caters to China’s nouveaux riches: men, and occasionally women, willing to pay tens and even hundreds of thousands of dollars to outsource the search for their ideal spouse.

In Joy City, Ms. Yang gave instructions to her eight-scout team, one of six squads the company was deploying in three cities for one Shanghai millionaire. This client had provided a list of requirements for his future wife, including her age (22 to 26), skin color (“white as porcelain”) and sexual history (yes, a virgin).

“These millionaires are very picky, you know?” Ms. Yang said. “Nobody can ever be perfect enough.” Still, the potential reward for Ms. Yang is huge: The love hunter who finds the client’s eventual choice will receive a bonus of more than $30,000, around five times the average annual salary in this line of work.

Suddenly, a signal came.

From across the atrium, a co-worker of Ms. Yang caught her eye and nodded at a woman in a blue dress, walking alone. Ms. Yang had shaken off her colleague’s suggestions several times that day, but this time she circled behind the woman in question.

“Perfect skin,” she whispered. “Elegant face.” When the woman walked into H & M, Ms. Yang intercepted her in the sweater aisle. “I’m so sorry to bother you,” she said with a honeyed smile. “I’m a love hunter. Are you looking for love?”

Three miles away, in a Beijing park near the Temple of Heaven, a woman named Yu Jia jostled for space under a grove of elms. A widowed 67-year-old pensioner, she was clearing a spot on the ground for a sign she had scrawled for her son. “Seeking Marriage,” read the wrinkled sheet of paper, which Ms. Yu held in place with a few fragments of brick and stone. “Male. Single. Born 1972. Height 172 cm. High school education. Job in Beijing.”

Ms. Yu is another kind of love hunter: a parent seeking a spouse for an adult child in the so-called marriage markets that have popped up in parks across the city. Long rows of graying men and women sat in front of signs listing their children’s qualifications. Hundreds of others trudged by, stopping occasionally to make an inquiry.

Ms. Yu’s crude sign had no flourishes: no photograph, no blood type, no zodiac sign, no line about income or assets. Unlike the millionaire’s wish list, the sign didn’t even specify what sort of wife her son wanted. “We don’t have much choice,” she explained. “At this point, we can’t rule anybody out.”

In the four years she has been seeking a wife for her son, Zhao Yong, there have been only a handful of prospects. Even so, when a woman in a green plastic visor paused to scan her sign that day, Ms. Yu put on a bright smile and told of her son’s fine character and good looks. The woman asked: “Does he own an apartment in Beijing?” Ms. Yu’s smile wilted, and the woman moved on.

The New Matchmaking

Three decades of combustive economic growth have reshaped the landscape of marriage in China. A generation ago, China was one of the world’s most equal nations, in both gender and wealth. Most people were poor, and tight controls over housing, employment, travel and family life simplified the search for a suitable match — what the Chinese call mendang hudui, meaning roughly “family doors of equal size.”

Like many Chinese who came of age in the 1960s and ’70s, Ms. Yu married a man from her factory work unit, with their local Communist Party boss as informal matchmaker. As recently as 1990, researchers found that a vast majority of residents in two of China’s largest cities dated just one person before marriage: their prospective spouse.

China’s transition to a market economy has swept away many restrictions in people’s lives. But of all the new freedoms the Chinese enjoy today — making money, owning a house, choosing a career — there is one that has become an unexpected burden: seeking a spouse. This may be a time of sexual and romantic liberation in China, but the solemn task of finding a husband or wife is proving to be a vexing proposition for rich and poor alike.

“The old family and social networks that people used to rely on for finding a husband or wife have fallen apart,” said James Farrer, an American sociologist whose book, “Opening Up,” looks at sex, dating and marriage in contemporary China. “There’s a huge sense of dislocation in China, and young people don’t know where to turn.”

The confusion surrounding marriage in China reflects a country in frenzied transition. Sharp inequalities of wealth have created new fault lines in society, while the largest rural-to-urban migration in history has blurred many of the old ones. As many as 300 million rural Chinese have moved to cities in the last three decades. Uprooted and without nearby relatives to help arrange meetings with potential partners, these migrants are often lost in the swell of the big city.

Demographic changes, too, are creating complications. Not only are many more Chinese women postponing marriage to pursue careers, but China’s gender gap — 118 boys are born for every 100 girls — has become one of the world’s widest, fueled in large part by the government’s restrictive one-child policy. By the end of this decade, Chinese researchers estimate, the country will have a surplus of 24 million unmarried men.

Without traditional family or social networks, many men and women have taken their searches online, where thousands of dating and marriage Web sites have sprung up in an industry that analysts predict will soon surpass $300 million annually. These sites cater mainly to China’s millions of white-collar workers. But intense competition, along with mistrust of potential mates’ online claims, has spurred a growing number of singles — rich and poor — to turn to more hands-on matchmaking services.

China’s matchmaking tradition stretches back more than 2,000 years, to the first imperial marriage broker in the late Zhou dynasty. The goal of matchmakers ever since has usually been to pair families of equal stature for the greater social good. Today, however, matchmaking has warped into a commercial free-for-all in which marriage is often viewed as an opportunity to leap up the social ladder or to proclaim one’s arrival at the top.

Single men have a hard time making the list if they don’t own a house or an apartment, which in cities like Beijing are extremely expensive. And despite the gender imbalance, Chinese women face intense pressure to be married before the age of 28, lest they be rejected and stigmatized as “leftover women.”

Dozens of high-end matchmaking services have sprung up in China in the last five years, charging big fees to find and to vet prospective spouses for wealthy clients. Their methods can turn into gaudy spectacle. One firm transported 200 would-be trophy wives to a resort town in southwestern China for the perusal of one powerful magnate. Another organized a caravan of BMWs for rich businessmen to find young wives in Sichuan Province. Diamond Love, among the largest love-hunting services, sponsored a matchmaking event in 2009 where 21 men each paid a $15,000 entrance fee.

Over the last year, I tracked the progress of two matchmaking efforts at the opposite extremes of wealth. Together, they help illuminate the forces reshaping marriage in China.

In one case, Ms. Yu’s migrant son reluctantly agreed to allow his aging mother to make the search for his future wife her all-consuming mission. In the other, Ms. Yang’s richest client at Diamond Love deployed dozens of love hunters to find the most exquisite fair-skinned beauty in the land, even as he fretted about being conned by a bai jin nu, or gold digger.

Between the two extremes is Ms. Yang herself, whose very success as a love hunter has made her the breadwinner in her own family. Despite her growing discomfort with the sexism that permeates the love-hunting business, she has sympathy for her superrich clients.

“These men are lost souls,” she said. “They worked hard, made a lot of money, and left their old world behind. Now they don’t have time to find a wife, and they don’t know whom to trust. So they come to us.”

A Very Particular Client

When I first visited the Beijing office of Diamond Love last year, Ms. Yang was fretting over a love-hunting campaign for a potential client: a divorced 42-year-old property mogul who was prepared to spend the equivalent of more than a half-million dollars.

This wouldn’t be the biggest case in company history; two years ago, a man paid $1.5 million for a successful 12-city hunt. But the pressure felt more intense this time. It wasn’t just that Ms. Yang would vie with hundreds of other love hunters for a possible winner’s bonus of $32,000. Her boss had entrusted her with a central role in this campaign — the firm’s biggest of the year — with a client who was known to be an imperious perfectionist. Failure was a real possibility.

Ms. Yang started part-time work as a love hunter while a university student eight years ago. After a brief stint as a hospital nurse, she joined Diamond Love full time and is now its most seasoned Beijing scout. Despite a recent promotion to a consulting job, in which she deals directly with clients and their delicate egos, she is often tapped to lead the highest-stakes campaigns.

Her hit rate is astonishing. In three large-scale campaigns over the last three years, the firm’s top clients ended up choosing candidates whom Ms. Yang personally discovered. Her success has earned her huge bonuses — in one case, $27,000 — and a reputation as one of China’s most accomplished love hunters.

Still, she told me that this new case was “nearly impossible.”

Mr. Big, as I’ll call him — he insisted that Diamond Love not reveal his name — is a member of China’s fuyidai, the “first-generation rich” who have leapt from poverty to extreme wealth in a single bound, often jettisoning their first wives in the process. Diamond Love’s clientele also includes many fuerdai, or “second-generation-rich,” men and women in their 20s and 30s whose search is often bankrolled by wealthy parents keen on exerting control over their marital choices as well as the family inheritance.

But fuyidai like Mr. Big are accustomed to being the boss and can be the most uncompromising clients.

Mr. Big had an excruciatingly specific requirement for his second wife. The ideal woman, he said, would look like a younger replica of Zhou Tao, a famous Chinese television host: slim with pure white skin, slightly pointed chin, perfect teeth, double eyelids and long silken hair. To ensure her good character and fortune, he insisted that her wuguan — a feng shui-like reading of the sense organs on the face — show perfect harmony.

“When clients start out, all they want is beauty — how tall, how white, how thin,” Ms. Yang said. “Sometimes the person they’re looking for doesn’t exist in nature. Even if we find her, these clients often have no idea whether that would make their hearts feel settled. It’s our job to try to move them from fantasy toward reality.”

Fantasy, of course, is precisely what Diamond Love sells. Ms. Yang’s boss, Fei Yang, is a smoky-voiced woman in a black leather jacket who used to trade in electronic goods. Inviting me to sit on a bright pink couch in her lushly carpeted office, she explained how the firm has “spread the culture of the relationship” since 2005, when it opened in Shanghai. It now has six branches, with 200 consultants, 200 full-time love hunters and hundreds more part-time scouts, virtually all of them women.

Teacher Fei, as her employees call her, runs a series of “how to be a better wife” workshops that coach women on the finer points of managing a wealthy household, reading their husbands’ moods and “understanding the importance of sexual relations.” The fee for two, 14-day courses is $16,000.

But Diamond Love’s chief target is men, the wealthier the better. The company’s four million members are mostly men who pay from a few dollars a month for basic searches to more than $15,000 for access to exclusive databases with customized assistance from a professional love consultant.

The company’s wealthiest, highest-paying clients — 90 percent of whom are men — show little interest in lectures or databases. They want exclusive access to what Ms. Fei coolly refers to as “fresh resources”: young women who haven’t yet been exposed to other suitors online. It’s the love hunters’ job to find them.

Besides giving clients a vastly expanded pool of marriage prospects, these campaigns offer a sense of security. Rigorous background checks screen out what Ms. Fei calls “gold diggers, liars and people of loose morals.” Depending on a campaign’s size, Diamond Love charges from $50,000 to more than $1 million. Ms. Fei makes no apologies for the high fees.

“Why shouldn’t they pay more to find the perfect wife?” she asked me. “This is the most important investment in their lives.”

Even before Mr. Big signed a contract, Ms. Yang sensed trouble brewing. She and a colleague culled the company’s exclusive databases to find women to serve as templates for the love hunters’ search. Together with Mr. Big, they looked at the files and pictures of their top 3,000 women. He rejected them all.

“Even if the girl’s eyebrow was just a half-millimeter too high, he would toss the photo out and say, ‘No good!’ ” Ms. Yang said. “He always found something to complain about.”

With more than a half-million dollars on the line, Ms. Yang was beginning to doubt her ability to deliver. And not just for Mr. Big. One afternoon when we met, the normally animated Ms. Yang slumped onto the sofa, exhausted. She had just spent an hour with a rich Chinese businesswoman in her late 30s. The woman proposed spending $100,000 on a campaign to find a husband who matched her status.

“I had to tell her we couldn’t take her case,” Ms. Yang said. “No wealthy Chinese man would ever marry her. They always want somebody younger, with less power.”

We sat in silence a minute before Ms. Yang spoke again. “It’s depressing to think about these ‘leftover women,’ ” she said. “Do you have them in America, too?”
 
2/2

http://www.nytimes.com/2013/03/10/business/in-a-changing-china-new-matchmaking-markets.html?pagewanted=all&_r=1&

A Mother’s Search

Yu Jia kept her search a secret at first. She didn’t want to risk upsetting her son so soon after a trying time for the family. Ms. Yu and her husband, who was sick with lung cancer, had left the northern city of Harbin in the hope of finding better treatment for his cancer in Beijing, where two of their sons already lived. The husband hung on for a year before he died in 2009 — not long, but long enough to wipe out the last of the family’s $25,000 in savings.

Devastated, Ms. Yu stayed in an apartment on the outskirts of Beijing with her sons — one married; the other, Zhao Yong, still single at 36. But one day, Ms. Yu came upon a crowd swarming under the elm trees near the Temple of Heaven.

Her life suddenly had a new purpose. “I decided that I will not go home until I find a wife for my son,” she told me. “It’s the only thing left unfinished in my life.”

Plunging into a crowd of strangers with her sign made Ms. Yu feel awkward at first. Her elder two sons had found wives in traditional ways, one through a matchmaker, the other through a friend. But Mr. Zhao, her youngest, had not. After losing his job in an electronics factory in Harbin, he followed his hometown sweetheart to Beijing. They were in love and planned to marry. But her family demanded a bride price — a sort of dowry used in rural China — of $15,000. His family could not afford it, and the relationship ended.

Mr. Zhao threw himself into his work as a driver and salesman. His former girlfriend married and had a baby. He told his mother he had little time to think about marriage.

The strangers in the park, uprooted from their traditional family and hometown networks, shared similar stories, and Ms. Yu found comfort there. Many other parents, she realized, were even more frantic; they had only one child because of China’s policy. (Ms. Yu, as a rural mother, was permitted to have multiple offspring.)

The marriage candidates on offer in the parks, she discovered, were often a mismatch of shengnu (“leftover women”) and shengnan (“leftover men”), two groups from opposite ends of the social scale. Shengnan, like her son, are mostly poor rural men left behind as female counterparts marry up in age and social status. The phenomenon is exacerbated by China’s warped demographics, as the bubble of excess men starts to reach marrying age.

Finding a Chinese spouse can be even more challenging for so-called leftover women, even if they often have precisely what the shengnan lack: money, education and social and professional standing. One day in the Temple of Heaven park, I met a 70-year-old pensioner from Anhui Province who was seeking a husband for his eldest daughter, a 36-year-old economics professor in Beijing.

“My daughter is an outstanding girl,” he said, pulling from his satchel an academic book she had published. “She’s been introduced to about 15 men over the past two years, but they all rejected her because her degree is too high.”

The failure compelled him to forbid his youngest daughter from going to graduate school. “No man will want you,” he told her. That daughter is now married in Anhui, with an infant son whom the pensioner, so busy seeking a spouse for her older sister in Beijing, rarely sees.

Ms. Yu’s son, Mr. Zhao, was angry when he found out that she had been searching for a wife for him. He didn’t want to rely on anybody else’s marketing, especially his mother’s. But he has since relented.

“I see how hard she works, so I can’t refuse,” he told me.

Ms. Yu doesn’t tell her son about the parents who scoff when they find out he has no property and no Beijing residency permit. But the handful of young women she’s persuaded to meet him never made it to a second date.

One afternoon last summer, however, there was a glimmer of hope. Ms. Yu traded information with a mother who didn’t dismiss her son out of hand. The woman’s daughter was 35, with a good education, a substantial income and a Beijing residency permit. She was, in some eyes, a leftover woman. Ms. Yu e-mailed Mr. Zhao’s picture to her that evening. The daughter declined to meet at first. A week later, she called back: “Yes, maybe.”

Ms. Yu was thrilled. It was her first solid lead in months.

High Fees and Secrecy

The second time I dropped by Diamond Love’s offices last year, Yang Jing took me by the arm and whispered: “We’ve had a spy!”

A few days earlier, just as Mr. Big was set to sign the contract and begin paying his $600,000 fee, a woman from a competing agency contacted him. Displaying inside knowledge of his contract with Diamond Love, she offered to carry out an even more comprehensive search. Mr. Big called Diamond Love in a rage that his confidential information had been leaked.

Within hours, according to Ms. Yang, the office’s management team ferreted out and dismissed the office mole — a secretary whom the competitor had recruited as a spy. But it took a full week of apologies and vows of enhanced security to coax Mr. Big to finally sign the contract. The terms stipulated that his file would be destroyed, “Mission Impossible”-style, once he had found a wife.

“We always sign confidentiality agreements,” Ms. Yang said, “but now we’re operating like a secret organization.”

The day Mr. Big signed, Ms. Yang took a flight to Chengdu, capital of Sichuan Province, where she would kick-start the campaign. During her 20-day search there, she had recurring nightmares. “I always feel unsettled during a campaign,” she said, “but this time, the stress was crazy.”

Her team of 10 love hunters scoured university campuses and shopping malls for three weeks, trying to meet a daily quota of 20 high-quality women, or two per person. Ms. Yang offered a bonus, about $16, for every candidate above the quota and set a personal goal of finding 10 “Class A” women a day herself.

Ms. Yang wasn’t just haunted by a fear of letting the ideal candidate — and the bonus — slip out of her grasp. The office leak had also made her worry about security. One more false step and Mr. Big would bolt.

One afternoon in Chengdu, after slurping down a bowl of beef noodles at Master Kong’s Chef’s Table, Ms. Yang noticed a young woman sweeping past her into the restaurant, chatting on a cellphone. Long black hair hid most of the woman’s face, but there was something captivating about her laugh and easy gait.

“She seemed open, warm, happy,” Ms. Yang said. After a moment of indecision, Ms. Yang followed her inside, apologized for the intrusion and switched on her charm. Linking arms with the woman — one of her patented moves — Ms. Yang came away with her phone number, photograph and a few pertinent details: she was 24, a graduate student and a near-ringer for the TV hostess Zhou Tao.

A Proposal Rejected

One Friday last fall, I met with Yu Jia and her son Zhao Yong at a McDonald’s in western Beijing. Now 39, Mr. Zhao has a youthful, unlined face. Still, he worries that time is passing him by. To save money and to enhance his marriage prospects, he works two jobs simultaneously — one selling microwaves, the other cosmetics — crisscrossing the city on his electric bike. He earns about $1,000 a month, and sometimes adds $80 more by working weekends as a film extra.

It is a respectable income, but hardly enough to attract a bride in Beijing.  Even in the countryside, where men’s families pay bride prices, inflation is rampant. Ms. Yu’s family paid about $3,500 when Mr. Zhao’s older brother married 10 years ago in rural Heilongjiang. Today, she said, brides’ families ask for $30,000, even $50,000. An apartment, the urban equivalent of the bride price, is even further out of reach. At Mr. Zhao’s current income, it would take a decade or two before he could  afford a small Beijing apartment, which he said would start at about $100,000. “I’ll be an old man by then,” he said with a rueful smile.

Mr. Zhao has met several women on online dating sites, but he lost faith in the Internet when several women lied to him about their marital status and family backgrounds. His mother, however, had come through, arranging a meeting between him and the daughter of the woman she had met in the marriage market.

Not long after our conversation in McDonald’s, Mr. Zhao met the woman at a coffee shop. It was, he told me later, even more awkward than most first dates. A rural migrant and door-to-door salesman, he struggled to find a shared topic of interest with the woman, a 35-year-old entrepreneur and Beijing native who had arrived driving a BMW sedan.

The lack of chemistry didn’t seem to bother the woman, who told him about her profitable photo business and the three Beijing apartments she owned. Mr. Zhao didn’t find her unattractive, but how was he supposed to respond? Then, even before broaching the possibility of a second date, he said, the woman made a proposition: if they married, he wouldn’t have to work again.

“She said she made enough money for the two of us,” he said. “I could have anything I want.”

The marriage proposal stunned him. He had never heard a woman talk in such blunt, pragmatic terms. A life of wealth and leisure sounded tempting. Still, in the end, he couldn’t imagine being subordinate to a woman. “If I accepted that situation,” he asked me, “what kind of man would I be?”

It took Mr. Zhao several days before he worked up the nerve to tell his mother he had rejected the offer. He knew how hard she had worked, how much she had been counting on this. The news frustrated Ms. Yu. “Kids these days are way too picky,” she said.

Even with this setback, Ms. Yu has continued her daily pilgrimage to the marriage markets. When I last spoke to her early this month, she was arranging dates for her son with three new marriage candidates she had found. “I’m optimistic,” she said. After all these years, hope is what keeps her going.

Culling the Prospects

The love-hunting campaign for Mr. Big yielded more than 1,100 fresh prospects who met his general specifications, including 200 in Chengdu. “The cruel process of culling,” as Ms. Yang called it, whittled that number to 100, then 20, and finally to a list of eight. (For Diamond Love, a fringe benefit of love-hunting campaigns is that the hundreds of rejected potential mates can be cycled into its databases — a process of replenishment paid for by its richest clients.)

The firm subjected the finalists to another round of interviews and psychological evaluations. Barely two months after the search began, Mr. Big received thick dossiers on each of the eight, with detailed information about their families and finances, habits and hobbies, and physical and mental conditions.

Finally, a series of grainy videos landed in his e-mail in-box. The first showed the top three prospects from Chengdu, sitting and standing, walking and talking, smiling and laughing. One of them, a demure 24-year-old with long black hair and black hot pants who seemed poised in front of the camera, was the graduate student whom Ms. Yang had pursued on a hunch at Master Kong Chef’s Table.

Ms. Yang’s hunting skills and tenacity had paid off again, giving her two of the eight finalists, and a 25 percent chance of winning the bonus of $32,000. (For finding two of the top 20, she had already earned a share of a smaller bonus.) When I asked about the reward, Ms. Yang demurred at first. “My aim is just to find a match that makes both people happy,” she said, before adding: “Inside my heart, I want my girls to win.”

Ms. Yang has worked hard for the chance. She heads to her job early in the morning and returns after 8 p.m., leaving her 5-year-old son in her mother-in-law’s care. She is often gone for weeks at a time on love-hunting trips. Her husband, whom she married at 22, when he was 35, ran a trucking logistics company that folded in 2009. Since then, he hasn’t worked much. With one large bonus, Ms. Yang bought him a Mitsubishi car that he tinkers with. Her occupation has given her a rather jaded view of the prospects for career women like herself. Once she told me half-jokingly: “It’s a good thing I’m already married. I would never stand a chance.”

Mr. Big’s Choice

In June, Mr. Big flew to Chengdu for meetings with the three local finalists. Riding an elevator to the lobby of the Shangri-La Hotel, he fidgeted nervously with the part in his moussed hair. He had invested more than a half-million dollars in the search, and was about to see if the money was well spent.

His final date in Chengdu was with the Zhou Tao look-alike whom Ms. Yang had approached at the noodle restaurant. At first, it seemed a mismatch, and not just because of the 18-year age gap. He knew nearly everything about her — her dating history, her recent acceptance to a graduate school, her father’s lofty government post — while she knew little more than his height and weight. She didn’t even know his name. Diamond Love had told her only that his net worth exceeded $800,000.

The young woman tried to keep things casual by taking him to a local Sichuanese restaurant. But Mr. Big insisted on bringing along a female consultant from Diamond Love and sitting awkwardly off to one side during the meal. According to the consultant, Li Minmin, he sat in this position “to better evaluate her profile, her skin, and her teeth.”

The two barely spoke without the consultant’s prodding. Still, Mr. Big seemed pleased by the woman’s sense of privacy when he inquired about her father’s job. “He’s a civil servant,” she said. What level? “Management.” It took several minutes — and a blunt question about his title — before she acknowledged that her father was, in fact, the boss of an influential government office. “From childhood,” she told him, “my father taught me to keep a low profile.”

Suddenly, this seemed like a suitable match in the Chinese tradition of family doors of equal size. Here were two discreet people of similar social status, a wealthy entrepreneur and the daughter of a high-ranking official.

After dinner, Mr. Big called off all other dates with finalists and dispatched his consultant to buy a Gucci handbag for the woman, as a token of affection. Barely a week later, in early July, he flew her to Hainan Island for a vacation at a luxury beachside resort. The two stayed in separate hotel rooms. When they returned, Ms. Li assured me that “the relationship is still pure.”

Ms. Yang was pleased that her love-hunting had hit the mark, but she wished that the courtship would move faster: a $32,000 bonus could make a big difference to her family. After texting and phoning, the couple met again in Beijing and then took a holiday in a mountainous area of western Sichuan Province. In Chengdu, though, he declined to meet the woman’s parents, and instead of joining her at a wedding of her friends, stayed in the hotel.

The couple has not yet decided to marry. But they are still dating exclusively, and Ms. Yang says Mr. Big is serious about marriage. Nobody pays a half-million dollars “just to play around,” she says. “He just needs a little more time.”
 
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