China On the Verge of a Great Crash and Its Impact on Crude Oil Price

By: Submissions

Dr. Raju M. Mathew writes: China is always a mystery. Nobody knows the depth and complexity of the problems of the Chinese Economy and Society, including the scholars and bureaucrats in China. Their words or expressions are confusing and self contradictory. The Chinese mind has been shaped by Confucius, then a series of wars, defeats and external dominances; then Mao and Chinese Communism and finally the Market Economy and Globalization. Globalization made a small group in China as super-rich who want to have all the pleasures enjoyed by the western billionaires.

According to the official report, China attained 9.6 per cent growth in 2008 and is poised to make a 10 per cent growth soon. China is in boom with regard to the lavish and uncontrolled credits offered by the Chinese banks, a situation very much similar to pre-crisis situations in the West, especially of the USA. No bail out plan can save the Chinese banks for the intensity and complexity of the emerging crisis.

China from Boom to Crash

China is in on the verge of not mere a financial melting down or a credit crisis but on a great crash, throwing away over 70 per cent of its population below poverty line. It is high time for the world community to prepare for the Chinese Crash that will happen at any time, within three to four months. Its impacts will be severe and long lasting. It will take more than ten years for China to recover.

Built upon Export

China was quick in reaping the benefits of globalization and liberalization. China flooded the world markets with its cheap textile and garments, toys, including sex toys and electronic gadgets and even household items. It was a virtual dumping. The Chinese workers and their family members worked round the clock, that too with a very low wages, to flood the world market with their products such a surprisingly low prices.

The Chinese Boom made several thriving business men and big farmers super rich, however, keeping billions below poverty line, affecting the very health of the economy. Its rural sector has almost collapsed. However, a group of farmers has emerged super rich to enter into massive speculation of buying of copper and other precious metals or even garlic in terms of several billions.

China has been eager to convince the world of its economic might and miracle. Olympic was the golden opportunity for China to mesmerize the world with its pomp and spectacular shows. China has more internet connections than that of the USA. Further, the newly rich in China stormed the shopping centers and big cities of the world with their lavish spending and life style.

Wall and Mall

China has surprised the world by building up the Greatest Shopping Mall on earth and several high star hotels, just like its world wonder, The Great Wall. History tells us that because of the Great Wall, the common people in China had remained poor for at least two hundred years as they had forced to part with their entire savings and even major wealth for its construction.

China has emerged as the biggest importer of oil and the biggest market for cars. China has been building up big cities and super high ways and importing the latest model cars to run though its streets without bothering the overall health of the entire economy, especially its rural sector.

History Repeated?

Probably, the leaders and policy makers of China may not have much idea about the plight of Nigeria which had built up Lagos City with its new found oil money and precious metals. Once upon a time, in 60s, Lagos had more cars than Tokyo. Its hotels and night clubs were full and lively. But now we know the tragedy of Nigeria. Cities, skyscrapers, super high ways, cars and colorful night lives cannot survive without the backing of a sound economy, especially the rural sector as they do not reflect the actual strength of an economy. People are more important than cars, cities and skyscrapers or even the pride of nations. Mao had even once said that people were more important than anything else.

Gloom and Deserted Looks

China too has become a victim of the global economic crisis. China is more integrated with the global economy several times higher than India. The latest reports show that most of the malls, streets and hotels in China have a deserted look. More and more people in China are getting poor and poor. The real estate bubble has blown up. Almost all major development works are nearing to a stand still. The purchasing power of the common people has become very weak. China is re-exporting copper at a very low price to the extent of half the price that it had originally imported. The return of the overseas investments of China is disappointing for its miscalculations.

OPEC and Oil Price

The price of oil reaches to the level of $ 75 mainly because of the speculation based on high energy consumption during the severe winter cold in the west and the increasing Chinese demand for oil. After the winter there must of course a major fall for demand for oil in the west, especially in the USA as its unemployment rate still remains high and the overall economy is weak though there is some improvement for demand for new houses. China is forced to cut its oil import to the extent of 40% or above. It will be reflected in the oil market very clearly by the end of February 2010. Because of the set back in the agriculture sector, India too will be forced to cut its oil import. As a result, oil price will fall to the extent of $ 45 to $ 50 by March 2010, affecting the economies of OPEC members.

Global Strategies

The Chinese Crash will be a very great human catastrophe and of course it will aggravate and prolong the global economic crisis, making the life of millions miserable, especially weaker sections, women and children. Urgent global strategies must be taken to tackle these problems so as to minimize human sufferings. People and nations must think and act for the collective well being over and above their own narrow interests. Hunger, poverty and state of hopelessness will bring war, terror and religious fundamentalism so as to add more miseries and sufferings of the humanity, that too in the name of religion.

There is an urgent need for effective collaborations between India and China to build up their rural sectors and minimize the hardship of the rural population. In the coming age of food crisis, India and China can feed the world by producing and exporting sufficient amount of food products. The prosperity of China and India will have direct bearings on Pakistan, Afghanistan, Iran, Bangla Desh and the entire Gulf countries and also even the African countries.

About the Author

Dr. Raju M. Mathew is an economist and a strategic thinker. He has strong backgrounds in Education, Information Technology and Knowledge Society. Now he works with Al Ain University of Science & Technology, Abu Dhabi, UAE. Besides formulating two basic theories on Knowledge in 1985, he propounded Knowmatics , a new science and engineering of Knowledge in 2005. He has contributed several works on the present global economic crisis that are available in the net. His e-mail ID: rajoocyber@yahoo.com

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