Politics begin at home

Among the many stories emerging from China, one that has captured less of the global eye is the swine fever epidemic sweeping the country for the past year or more.

Swine fever is a highly contagious virus that can kill within a fortnight. So far, it has wiped out around half of China’s pig population and the price of pork, a staple element of the Chinese diet, has been rocketing.In August, prices peaked to almost double what they had been a year ago.

A sudden rise in commodity prices, be they pork, fuel or crops, has a history of stirring dissent. It exposesflawed government at the rawest grass roots level,impacting on household budgets and the day-to-day needs of citizens. The role of high food costsin triggering the 2011 Arab Spring and the recent unrest in Iran over fuel are cases in point.

In China the government’s failure to contain the swine flu epidemic adds to the argument that Beijing may be losing its grip and taking on more than it can handle.

Chinese citizens are already facing rising inflation and slowing growth, putting at risk the economic dream that is the ballast of the Communist Party’s legitimacy. A more powerful America is buffeting it in the trade war, while fearless Hong Kong protestors are rejecting its right to rule.

Against all this comes a breathtaking debt that in the first quarter of this year reached more than 300 per cent of Gross Domestic Product, according to the Washington-based Institution of International Finance. The total is more than $40 trillion, some 15 per cent of global debt.

The US Peterson Institute of International Economics estimates that a one percentage point lowering of Chinese growth could take as much as 0.2 percentage points off overall global growth.  Beijing has already conceded it will be difficult to sustain its six per cent growth target, with some provinces reaching far lower levels.

China is an autocracy. It does not contain the safety valves of a democracy and is, therefore, more vulnerable. Its system is a labyrinth of shadow banks and financial institutions, part market forces, part dictatorial paralysis. Once knocked, it could collapse like a house of cards with far-reaching consequences.

Efforts to rein in risky lending have been curtailed because of the trade war with the United States and there has now been a resurgence in borrowing.

Inward foreign investment has not been helped by the trade war. Some companies are moving elsewhere in Asia to countries such as Vietnam, Thailand and Bangladesh, where they judge the atmosphere to be more predictable.

A slow-down in China means unemployment and dissatisfaction that could quickly translate into anti-government unrest, taking a lead from Hong Kong that used to exemplify drive, imagination and forward-looking pragmatism.

The semi-autonomous territory has shown that, once beyond a tipping point, the dream of higher living standards takes second place to a sense of lost dignity and freedom. Hong Kong is now in recession

All this is testing to the extremes China’s reputation as an unassailable juggernaut of economic strength, and it is incumbent on Beijing, the US and other strong economies to guide the situation to a smooth landing.

China was a pivotal ally to Western democracies during the 2008 financial crisis.  The West should prepare itself to return the favour, should the need arise.

To achieve this, it should examine more closely how to manage this critical relationship and to define within its own political arc exactly what China is. No longer can it one day be a strategic enemy and the next a bottomless treasure chest.

Nor should it exploit a Chinese economic downturn for its own political gain, however tempting it might be to argue that democracy, rather than autocracy, is the real path to prosperity and stability. The West’s wounds from the Lehman Brothers collapse and austerity remain unhealed.

Beijing, too, should take steps by drawing back from the uncompromising global expansion it has been using to mould its international reputation and, in Hong Kong’s case, showing that it understands the aspirations of this particular Chinese community.

Whether democratic or autocratic, all politics begin at home.

Chinese citizens will think little of South China Sea military bases, the Belt and Road Initiative and Communist Party slogans if the leadership is unable to keep the books balanced, its citizens in work and the pigs healthy.

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