China: Is it really our economic saviour? – by David Olive (Toronto Star – August 7, 2012)

The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

It might seem that for Canada, the commercial stakes in China have never been higher. Same goes for our European and American peers, all eager to crack a Chinese market of burgeoning affluence.

The Tangier Lobster Co. of Nova Scotia, whose seasonal workforce ranges from 14 to 22 employees, is determined to boost Chinese exports to compensate for a drop in sales to a U.S. mired in economic malaise.
And Stephen Harper seeks a greater degree of Canadian economic sovereignty with his relentless promotion of the proposed Northern Gateway pipeline, connecting Athabasca’s tar sands with booming markets in Asia. Oil sales to China would help break our dependence on the U.S. as sole buyer of our petroleum exports.
Yet, while it’s difficult not to marvel at a rapid industrial revolution in the world’s largest country, I fear we exaggerate China’s potential.
 • After a decade of double-digit GDP growth, China’s economy will grow by just 6 per cent to 8 per cent this year. Eventually, China’s leadership will have to deflate a property bubble and prop up household income lost in the Great Recession without unleashing ruinous inflation. And the world will not indefinitely tolerate China’s manipulation of its currency, kept artificially low and a thief of jobs in Southern Ontario and the U.S. Midwest. Economically speaking, China presents one of the most difficult of management challenges.

 • China is hurtling toward demographic disaster. A consequence of the 33-year-old “One Child” policy, says the U.N., is that the ratio of working people to dependents will almost halve between now and 2065, to a mere 1.0. What that means, says economist Leith van Onselen of Australian investment letter Macro Investor, is that “China will get old before it gets rich.”

 • Social unrest is an everyday fact of life. The annual number of riots, strikes and protests – what the Politburo euphemizes as “mass incidents” – have doubled in the past five years, to 180,000, or almost 500 a day.

 • A leading cause of unrest is a growing gap between rich and poor, which already exceeds that of the Philippines and Russia. The top 10 per cent of Chinese income earners collect about 23 times what the poorest 10 per cent earn. Also, China lacks social supports, spending just 5 per cent of GDP on unemployment insurance, pensions and other protections. (Canada spends 12 per cent, Germany 22 per cent.)
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