Over the past year many have been focusing on the collapse in commodity prices and speculating how this will impact China’s rapidly slowing economy (and reflexively, how much of this is driven by China’s rapidly slowing economy). They may be focusing on the wrong thing.
Because while it is now a virtual certainly that China’s commodity sector will undergo a wave on unprecedented business failures, which should (but may not) be accompanied by a default wave unlike anything China has seen before (quite literally: until last year, China had never seen an actual corporate default, as the government would always step in and bail out the debtor) a scarier prospect emerges when looking at what has been the biggest risk factor for China since day one, and the reason why China’s economy has to keep growing at 7% every year just to absorb the millions of new workers every year: an angry population, and millions of workers who suddenly see their wages plunge – or are left without a job – and turn violent on short notice.
We got a taste of this in September when we reported that as part of China’s coal industry collapse, a company in northern China had just engaged in the biggest mass layoff in China’s history when it fired 100,000 overnight, 40% of its entire workforce. Then, a month ago, we reported that “Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier.”
This post was published at Zero Hedge on 11/12/2015.
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