Over the last week your correspondent has written a half dozen pieces on China and what appear to be its impending economic problems. One interesting question that we don’t know the answer to is this: how concentrated is Chinese wealth and how highly leveraged is it? We have seen a disturbing cycle of speculation in, for example, apartments in Shanghai, that looks an awful lot like musical chairs or tulip-mania. One of our theses is that the greater the concentration and leverage of the wealth from China’s hypergrowth, the more dangerous the downturn. This Economist profile is not encouraging:

IN A country where 800m people, about 60% of the population, live in the countryside on an average income of less than a dollar a day, rural backwardness weighs heavily on the minds of China’s leaders as they dream of joining the ranks of the world’s leading economies. And in a country whose Communist Party came to power on the back of a peasant rebellion, distant memories of the vehemence of rural discontent arouse fears that unless something is done to make peasants happier, China will be plunged into turmoil. To assess China’s future, it is crucial to understand the countryside. But it is not easy.

Despite China’s increasing openness to prying foreign eyes, the dynamics of village life remain hidden away…..Your correspondent originally asked the government of Shandong province for permission to stay in a village he had visited with official approval in the 1980s, but was turned down. Instead, the authorities selected the village of Beihe in Zouping, a prosperous county that was designated by China in the late 1980s as an area (then almost the only one) open to American researchers to do fieldwork. It still delights in its propaganda role. Zouping’s brochure calls the county “a window for the US and the whole world to get an understanding” of the countryside. Yan Shengqin, Beihe’s party chief at the time, still proudly displays a framed picture of Jimmy Carter with an arm around Mr Yan’s shoulders during a visit in 1997.

Beihe’s 1,000 villagers enjoy a net income per head of around 5,000 yuan ($600) a year—about 70% more than the national average and 40% more than the average for Zouping. It has more than 30 privately owned factories in activities from iron forging to furniture making.

It is not encouraging that this sad town was the showcase the authorities wanted the reporter to see. We can only wonder what the town he wanted to visit was like.

This entry was posted on Thursday, April 7th, 2005 at 2:00 pm and is filed under business, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.