The Flight of Chinese Capital
It’s clear that the Chinese economy is in a cyclical downturn. Growth is weak, and markets are volatile. But is it clear that the downturn will turn into a meltdown? Many Chinese are not hanging around to find out
In fact, capital has started to flee China. Nearly $1 trillion is believed to have left the country in 2015, with the rate of outflow accelerating in the final quarters. Much of that money has found its way to foreign real estate markets. In one stark anecdote, the National Bank of Canada says buyers from China accounted for one-third of all purchases in Vancouver’s housing market in 2015.
Whether you’re reading this article on a smartphone, tablet or laptop, chances are the device in front of you contains components from at least six countries spanning three or more continents. Its sleek exterior belies the complicated and intricate set of internal parts that only a global supply chain can provide. Over the past century, finished products made in a single country have become increasingly hard to find as globalization — weighted a term as it is — has stretched supply chains to the ends of the Earth. Now, anything from planes, trains and automobiles to computers, cellphones and appliances can trace its hundreds of pieces to nearly as many companies around the world. And its assembly might take place in a different country still.
In the 18th century after a passing breeze caused him to lose his place in a book, a Chinese scholar named Xu Jun wrote this short poem: “The clear breeze is illiterate, so why does it insist on rummaging through the pages of a book?” Though this couplet was seemingly harmless, the Manchu-ruled Qing Dynasty (1645-1911) executed Xu in 1730 for seditious thought. The Qing, invaders from the Manchurian steppe whose dynastic name meant “clear” or “pure,” were acutely sensitive to the insinuation that they were illiterate barbarians despite adopting the trappings of Chinese civilization. Countless other poets shared Xu’s fate during the dynasty’s infamous literary inquisitions. While this paranoia appears excessive, it was a reflection of a very real problem for the Manchus.
The Qing, like all other Chinese central governments, struggled to contain dissent across a continent-sized empire. This proved doubly difficult because a small number of ethnic Manchus ruled over a far larger population of resentful Han Chinese. Han rebellion, which often coalesced around the purported superiority of Han culture, was a constant threat, shaking the foundations of the empire from the mid-19th century. Eventually, Han-led revolution swept away the Qing — and the entire imperial Chinese system — in 1911, leading to the formation of the Republic of China. This, in turn, quickly split along factional lines into warlord cliques. Truly effective central rule did not return until the Communists seized power in 1949.
Occasionally history throws up an era where massive and substantive change occurs. It appears that we are in such an era. The forces of aggregation of nation states into large multi-state blocs appears to be in retreat as does the attendant forces of globalisation in manufacture and trade. There are exceptions however in such efforts to forge the TPP (Trans Pacific Partnership) trading and regulatory bloc. The success of that effort are however now increasingly in question especially if Donald Trump’s Republicans win the US Presidential elections.
The demographic decline of the major Western European states and the associated flood of economic and political refugees is driving a strengthening Nationalist movement. As the cultural underpinnings of the EU come under increasing cultural and political pressure from new arrivals. Europe’s new Muslim immigrants are now emboldened to declare that they are a ‘cultural invasion’ that intends to dominate and destroy the current European cultural underpinnings, for Reli0-cultural reasons. This has sparked a robust push back from nation states within the EU and the rise of nationalist parties.
Financial, political and social uncertainty has forced Greece’s ruling Syriza party to cut a deal with the European Union — despite its campaign promises against it — to keep the economy afloat. Additional measures will generate more political discord, if not violence, throughout the country. The influx of migrants has only aggravated the problem. Below is a routinely updated chronicle of the most recent developments. The following piece provides updates to this crisis in real time.
The Greek crisis has been a saga of lengthy EU summits that end in difficult compromises. The latest of these meetings, which came to a close early May 25 after over 11 hours of talks among eurozone finance ministers, was no exception. Greece and its creditors reached an understanding that will temporarily forestall a Greek default, providing Athens with the money it needs to function for the next few months. More important, though, Athens’ lenders promised it debt relief, a success for the ruling Syriza party. However, parts of the agreement are vague, and several of its most critical elements will not be implemented any time soon.