A Partial SWOT Analysis of China for 2012 - Threats
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A Partial SWOT Analysis of China for 2012 - Threats

This is a short list of threats to the Chinese economy. This is the threat section of a SWOT analysis for China.

This is a short list of potential threats to the Chinese economy.  Each of the threats can also provide new areas of development for the Chinese economy if preventative actions are taken.

Threats

1. Japan – The greatest threat to China in 2012 and beyond will be the same threat that they have faced over the last one hundred years or so. That would be Japan. Right now, Japan is on the ropes and China is feeling pretty good. It is a good time for China to apply as much financial pressure on Japan as it can. We can already see a retreat by the Japanese from the last financial crisis, when they bought the vast majority of Treasury Bills from the US during one of the US spending sprees that ended in giving Japan a nice piece of change for loans during the previous recession. China was on the sidelines for that maneuver by Japan, but it learned its lesson. During the recent Global Financial Crisis, China was the one to step forward and eat the majority of the US treasury bond debt and Japan was forced to watch from the sidelines because of its own current economic woes. It would be unwise of the Chinese, however, to underestimate Japan. Japan has always had, and still has, the best Navy in the East and a Merchant Marine force to match. The current problems of the South China Sea issues are just tips of the future icebergs between the two nations.

2. India – The threat from India comes from India’s advantages in tech. They have more tech work force than any other country in the world. When you phone your tech company for support, you will most likely hear an Indian accent on the other end. They have the best-educated, highest productivity-oriented, and lowest-priced workforce in the tech field. Despite this advantage, they are currently getting buried by China economically in many other areas, but tech is a force that will be reckoned with in the future at some point and China must develop its own tech force by increasing its intellectual property protection and keeping talented young Chinese tech professionals in China.

3. Real Estate Meltdown – Nothing can crush an economy as badly or as quickly as a real estate meltdown. If one observed the United States Real Estate Meltdown in the last few years, one could easily see how adversely it affected the economy. Not only that, but it gutted the economy in almost record time. It only took a few months for the real estate meltdown in the US to practically decimate the entire US economy. Unfortunately, the same process could take place in China in the not too distant future unless strong measures are taken to prevent rampant speculation in the Chinese urban real estate market. Apartments in Beijing and Shanghai are already selling for four and five times that of a comparable apartment in places like New York, London and Paris. This is not a good sign for this market or the Chinese economy in general. When the crash comes, it will be loud and clear and the Chinese public will have to foot the bill (or at the very least, that large nest egg of a trade surplus will practically disappear).

4. Economic Disparity Between the Countryside and the Cities – If the current trends continue, migrants from the countryside will continue to inundate the cities and drive up real estate costs. So indirectly, this current problem of excessive migration from the countryside can hasten the predicted real estate meltdown mentioned above. Aside from the real estate issue, the per capita issue is also a serious problem. People performing the same jobs in the countryside are paid half or less than their counterparts in the cities. Why, then, would they want to continue to live in the countryside? The government has stepped in with various subsidies, but that solution is far from enough to stem the larger problem. Salaries and benefits must be roughly equal or no more than 20 or 30% apart in order for countryside workers to stay where they are. Otherwise, social unrest may occur in addition to real estate problems.

5. Unrest Among Non-Han Groups – There are a number of non-native or non-Han groups within China. Usually, they co-exist very well and are treated fairly by the Chinese government. However, there have been outbreaks recently among the Uighurs and Han Chinese in the Xinjiang region, which have been quickly and effectively diffused by the CCP. Despite the current calm, there is a substantial Muslim population within China; and wherever there is a substantial Muslim population, there seems to be a certain amount of potential unrest if that group is not included in prosperous economic endeavors in most other countries. China, fortunately, has not seen too much of the unrest and it would be unfair to stereotype all Muslims as potential troublemakers, but the potential is there if China does not continue to include the Muslim population in all facets of Chinese prosperity. The same can be said of the Tibetans and Mongolian in both of their autonomous regions. There could be unrest in either of those two areas if the native populations are not included in the current Chinese era of prosperity.

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