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China economy cools, unrest builds

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The communist regime has struggled with honest production numbers throughout its history, with deadly results decades ago as food production figures were falsified and mass starvation claimed lives. (Fellow regional communist regimes struggled with similar problems with the worst case being Cambodia.) Whether the economic growth numbers are real today - many say they are inflated - remains to be seen. I wouldn't bet against the 6.8% numbers being bloated but even so, this is well below the required 8% growth needed to break even. As the west has discovered during our own bubble, bubbles burst and lies eventually are exposed. Whether the Chinese workers respond as passively as European and American workers is the question.

Officials announced this week that growth fell to 6.8% in the last quarter of 2008. Enviable as that sounds to countries in recession, it follows five years of double-digit growth and rising expectations. Just as crucially, experts believe that China needs 8% growth to provide enough jobs for new entrants to the labour force. But economists predict that the rate could fall as low as 5% this year.

It is figures like these that prompted the state-run magazine Outlook to issue a remarkably stark warning of the dangers posed by rising unemployment.

"Without doubt, now we're entering a peak period for mass incidents ... In 2009, Chinese society may face even more conflicts and clashes that will test even more the governing abilities of the party and government at all levels," said a senior Xinhua agency reporter, Huang Huo.

"The key is going to be what happens in a week or two. How many people are going to come back? And are there going to be jobs for them?" asked Geoffrey Crothall of China Labour Bulletin, a Hong Kong-based organisation defending mainland workers' rights. "The most likely thing is that it will get heated after the new year. The government pulls out all the stops beforehand to make sure people have enough money to put in the red envelopes [traditional gifts] when they go home. It puts a false gloss on the real situation."

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