BLACK FLAGGED AT THE START LINE:

Fearing Social Unrest, China Tries to Rein in Unbridled Capitalism: With a fast-graying population, increasing pollution and environmental damage and the absence of a real social system, Beijing is now seeking to check unbridled capitalism and quell flaring social tensions. (Der Spiegel, 1/18/06)

Under massive pressure from Beijing, Shanghai's city fathers have levied a new tax on properties that are resold within a year of purchase.

Central government planners are worried. They want to steady the economy in the bellwether city at all costs -- for fear of an impending crash. Such a meltdown could spark unforeseen consequences, and deal a crushing blow to state banks that have amassed billions in distressed debt.

To ward off the apocalypse, Beijing has been curbing loans for steel, cement and, of course, real estate during the past twelve months. According to Cao Yushu, a spokesperson for China's National Development and Reform Commission (NDRC), the escalating investments are a "tumor in China's economic body." The economy has nonetheless continued at a rolling boil, growing by more than 9 percent. Provincial officials and managers customarily ignore edicts issued by the planners in Beijing.

So China continues to boom, using a quarter of the world's cement and steel, and almost a third of its coal. The country has long succeeded Japan as the world's second-largest consumer of oil.

And maintaining growth remains its only option. Compared with industrialized countries, private consumer spending comprises a relatively low share of its GDP -- arguably too low to cushion a major slump.

They're hitting the brakes when their per capita GDP is still just one/seventh of ours and people think they'll be a legitimate rival?

MORE (via Kevin Whited):
Public unrest increasing in China (BBC, 1/19/06)

China has announced another rise in public disturbances in 2005, as rapid economic growth continued to spark social unrest.

The Public Security Ministry said it handled 87,000 public disturbances last year, a rise of more than 6% on 2004.

The figures come amid growing anger at official corruption and several high-profile land disputes between authorities and villagers. [...]

China's official statistics are unreliable.

Posted by Orrin Judd at January 19, 2006 10:57 AM