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This is my somewhat sceptical view on China and other things connected with the world financial crysis. In Russian language I do not publish such things as these are “out of the fashion” at present in my country as we are trying to maintan “strategic partnership” with China.

I graduated in International Law from Moscow State Institute ( now University) of International Relations, attached to the Russian Ministry of Foreign Affaires and later , after many years in India, I worked as a Fellow Researcher. I wrote my thesis on the constitutional mechanism of power structure in … not in India, but in Sri lanka/ That was when I was a fellow researcher at the Institute of State and Law of the Academy of Science of the USSR and later of Russia. So whatever I wrote now on economics of China is a view of a lay man. In a way, of course, as I studied economics as well in the University.

Yet it has some advantage of seeing the problem with “a fresh eye” of a non professional economist and a little “from aside”. Sometimes it has its own advantages….
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Chinese ” explosive economic growth” has nearly come to its natural end.

The Chinese went by an easy way, supported by the western ( American) money, as an EXPORT oriented economy, provided that the USA was ready to consume cheap Chinese goods, paying for these with US Dollars, emitted by the USA, or later, by the USA “treasures”. One side consumed, in many ways, largerly in debt, the other side had the possibility to develop its industrial potential, initially with foreign investors money.

Besides it all started at times of the Cold War of 70-s and the split of a “Communist ” world by economic means was a very effective strategy in keeping the USSR isolated from the largest country in the world with the similar political system in too many ways .

One may applaud to such a wise US stategy against the USSR. But was this “wise strategy” enevitably leading to the strengthening of a potential ” communist” Chinese giant ? Yes. But with some well hidden inbult ” safety device” to keep it under inderect control.

The trick was that a “market economy” model ( a “capitalist ” model) was offered and accepted by a country with a ” communist” political system. Under this model any country in the world is only a part of a global ( non “communist”) market and any country becomes dependant on fluctuations on this market. Ups and downs in the world economy as a whole can be arranged, if needed, by the “world big money”.

Besides, the financial and technological cooperation with China was based on a tacit agreement that China will be ( and still is) mainly an export oriented economy, which for its growth, as a “normal capitalist economy”, needs PERMANENT EXPANSION. For many years the USA provided this space for expansion to Chinese CONSUMER goods to America itself and to many dependant countries and to political-economic union like the European Union and to dependant countries like Russia. ( There was even a joke in Western Europe about 20 years ago : “Who is a Russian man ? How does he look like ? The answer is – It is the man who looks in face as a European man, but he is clad in clothes like a Chinese” ))

Yet, Western economy and ” market econimy” as such were sinking in debts more and more and today there is no more space for the expansion of Chinese products. The best chance is to sustain the present Chinese export level that means enevitable slowing down of the whole Chinese economy which consumes a lot of raw materials and energy.

This inevitably slows down the growth of virtually all natural resourses export oriented economies, the largest and most dependant on this today is Russia and Brazil. Both had in 2015 the same 3.4% “negative rise” of GNP. According to a recent Citigroup analysis only 10% of the slow down of Russian economy in 2014-2015 was due to Western sanctions aganst Russia. 90% are caused by a sharp decline in oil price. We, Russians, suspected that much earler than Citigroup informed us. Yet it was the best economic model for oil and gas exporters in Russia.

The only way out of crisys is to restructure the whole economic system in our country and the financial system in the world , as a whole, as nobody will be saved from the financial and economic crysis under the present economic ” liberal-monetary” system.

According to a prominent Indian economist from Morgan Stanley Investment Management – Ruchir Sharma – the slow down of Chinese economy may lead to the “rise” of the whole global economy under 2% per annum. It is almost a zero “rise”. And this prognosis is based on the assumption that the American economy will definitly rise. But will it rise ? Is it guaranteed ? It is a big question…. And all this happens while, according to Morgan Stanley, 38% of ALL global economic rise in 2015 was a Chinese one. It means that global economic rise is mainly dependant on the USA and China growth.

Will the development of Internal Chinese market help ? As the way out of crysis. Yes. It may help to a certain degree and the Chinese governmet will try to use this way. It is already using it. But it is a much more difficult task in a country with hundreds of millions of rather poor consumers in comparison with export oriented model with huge open markets for the influx of Chinese goods into rich America…. But we again should not forget that Chinese “communists” adopted “capitalist methods” and now they have many internal financial problems as the main capitalist country – the USA has. I will mention here only two problems that are quite similar to the USA financial problems , though there are much more Chinese internal financial problems and more may be coming.

Chinese economy as an American one is over-credited too much. Evereyone has large debts beginning from the giant State corporations to ordinary small householders. And like in America, China has many financial “investment bubles” – a lot of fictitious finance with no real assets supporting these finance… The stock market is unstable. In case of some negative development it falls down fast and deep below. In short, China got in a trap and we do not know where from a new wave of the global financial crisys will start – from the USA, as many people think, or it will come from China ???

The latest developoments in Chinese finance proved that ” traditional” methods do not help. China devalued its currency and immediatly lost from 25 to 30 per cent of their stock exchange index. Which is even today overheated too much. By administrative means Chinese authorities “cooled off” some passions of the investors, mostly local ones. But for how long ? We know that in 1929 in America too many people also beleived that the governmet suppot will save their invested money and buisneses. As we know it did not save. Only the New Deal, combined with the World War II saved those who managed to stay alive in the early 30-s. Some data indicate that millions died of hunger in rich America at that time.

As the economic model did not change substantially since those years of the Great Depression we could expect something similar to the past greem experiances in foreseeable future. May be it is the main reason that the WAR zone widens every year ?

With the USA, Israel, France and Russia with their combat planes, China which sent an aircraft carrier ( without aircrfat on board) to the shores of Syria, Iran with its soldiers already fighting on the Syryan soil, Turkey, Saudi Arabia and smaller petrol monarchies which helped in creation of a monster – ISIS – there are too many actors for a small land of Syria. And all of them are already acting as a military force or in another way. All of them are present there and they are very active in the Midle East petrol region.

Yes…. Too many military actors for a small Syria . May be it is just the beginning ?

Caused by compelling economic reasons ? May be the question “where from the crysis will come ” should not be interpreted in two possible answers only – ” from the USA or from China” ? May be the crysis will come from the Middle East? Starting from Syrian soil and spreading to the whole Middle East region as a minimum. The maximum expansion of the war zone is hard to foresee today. And therefore maybe the correct question about the forthcoming crysis should not be “where from it will come” but instead of it a more greem question may arise soon – “WHAT KIND OF CRYSIS” we may expect in the near future” ? Today it seems more and more that it could be a military crysis. God, save !

It sounds very alarmistic but there is a solid ground for such a queston.

On the photo: Turkish Air Forse jets striking , allegidly, at ISIS jihadists. Or may be the planes are striking at Kurdish separatists in Syria ? Or at Syrian government army ? God knows… Too many different interests have collided in a small country -Syria- these days.

Сергей Всеволодович Строев.

2016 г.

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