Opinion

Ian Bremmer

Will China’s slowing growth lead to unrest?

Ian Bremmer
Jul 19, 2013 19:04 UTC

Recently, it seems no developing country is safe from sudden, unexpected protests. In Brazil and Turkey, empowered middle classes pushed back against perceived governmental injustice; protests erupted, and leaders’ approval ratings dropped precipitously. In Egypt, the economic picture was as ugly as the political one, and the military’s ouster of President Mursi has fomented conflict and instability.

China may look like a candidate for the type of protests currently sweeping the developing world. Not only is a newly empowered middle class demanding better services and more accountability from government — growth has also tapered off in recent quarters. Don’t hold your breath. At least for the time being, China is well-positioned to navigate such challenges far better than its emerging market competitors.

Let’s start with the economy. For years pundits, and many Chinese government officials, thought that if China’s GDP growth rate ever fell below 8 percent, it would set off an unemployment crisis that would raise the risk of social and political instability in the country. Well, China’s finance minister was in Washington last week and said that the Chinese economy could handle 7 percent or even 6.5 percent growth — a lower rate than China has experienced in 23 years.

But unlike many other emerging markets, China views slower growth as a manageable challenge. The government actually recognizes that a slowdown is necessary to meet its reform and rebalancing goals, and is working now to score political points among the population by arguing that it’s doing so. In particular, Beijing hopes that the slowdown will force industrial consolidation and less resource consumption, which could slow environmental degradation — which has been a major point of political vulnerability for the government. Slower growth should also calm the real estate sector, where rising prices have been a major sore point for urban Chinese. China’s new leadership is betting that progress on these fronts will outweigh the downside risks they’ll face as job losses tick up in the face of slower growth.

From a global perspective, there is a strong case to be made that China’s slowing growth rate is actually a good sign. The fact that Beijing hasn’t just reflexively pumped capital into the system to keep growth rates up shows that it is willing to begin undertaking modest economic reforms; it is, in effect, letting bubbles shrink rather than grow until they pop. This approach is characteristic of the new leadership that took charge in March of this year: they are less risk averse and they have a more long-sighted handle on the necessary economic changes that China will have to undertake.

Emerging, maturing, protesting markets

Ian Bremmer
Jun 27, 2013 19:28 UTC

At the beginning of this year, Eurasia Group, the political risk firm I lead, released its top 10 risks of 2013. We forgot to put Pepsi-guzzling whistleblowers on the list, but we did give our top slot to increasing turmoil in “emerging markets.” In a global economy that has become more reliant on countries whose economies are vulnerable to political shocks, emerging markets are our new economic fulcrums. What is causing this growing uncertainty in emerging markets? How much stress can they take without upsetting the balance for everyone else.

The protests in countries like Brazil and Turkey are not Arab Spring-style uprisings: they’re the anger and frustration of newly empowered middle and lower-middle classes, the same consumers who were the catalysts and beneficiaries of this growth in the first place. In emerging markets, politics have at least as big an impact on market outcomes as the underlying economics — that’s why these kinds of protests can strike seemingly out of the blue, and bring business-as-usual to a halt. Compare the impact of protests (and leaders’ responses) in Brazil and Turkey to the Occupy Wall Street movement. In a developed country like the United States, the political system is consolidated in a manner that forces fringe movements to choose one of two paths: go mainstream or lose steam. In emerging markets that have experienced dramatic and rapid changes, governments can’t keep up with citizens’ evolving demands. Protests are far more likely to swell, with severe economic ramifications.

Why are the protests in Turkey and Brazil happening? There are immediate triggers. In Brazil, it was a small raise in bus fares; in Turkey, it was the imminent demolition of sycamore trees in Gezi Park. But these triggers are the narrow manifestations of larger, systemic grievances playing out on a country level, and trends in the global economy at large. So what are the larger factors that make even model emerging markets more ripe for unrest?

Too much of a good thing: the risks of information

Ian Bremmer
Jan 23, 2013 17:53 UTC

Another year, another Davos. Last year’s World Economic Forum was overwhelmingly about Europe’s existential crisis. But Europe has quieted down, at least for now, and so we’re entering the first non-crisis Davos in years. But that doesn’t mean things have settled into, as Mohamed El-Erian puts it, a ‘new normal.’ It remains difficult to find markets with good risk/return, or an area of the world without serious geopolitical tensions. 

Faced with this ‘new abnormal,’ where the only certainty is that shocks will arise from unexpected places, what is this year’s Davos about? 

Everything and nothing. The United States, the Middle East, emerging markets, Japan – all of these are on the agenda, but they’re not all necessarily connected. The emissaries at Davos are in the midst of their own locavore movement – their agendas are remarkably domestic.

2013′s top 10 political risks

Ian Bremmer
Jan 8, 2013 16:18 UTC

It was a close call at times, but we made it through 2012. Now we’re set to encounter a new set of risks ‑ but not in the world’s advanced industrialized democracies, which are much more resilient than feared. This year, with the global recession on the wane, attention shifts back to emerging markets, the economies that are usually the ones that pose the most political risk. You can read the whole report from my political risk firm, Eurasia Group, here, but an executive summary of this year’s top 10 risks, in video and text, is below:

10.) South Africa: Africa overall looks like it will continue its recent growth. But South Africa, one of the continent’s most complex and important economies, is floundering. Its dominant political party, the African National Congress, is resorting to populism to maintain its base among the urban and rural poor. That means more state intervention, more labor unrest and more assertive unions. We’re not predicting a fundamental political crisis, but the country is moving along a path that offers little reason for optimism.

9.) India: We’ve all read the predictions that India is poised to become the world’s next infinite-growth country. Not so fast. Despite initial optimism, the 2009 election hasn’t freed Prime Minister Manmohan Singh to reform the country as anticipated, with the tough choices continually being kicked to the next parliamentary session. (Americans should find this familiar.) Corruption continues to reign, and as we’ve seen in the rape protests of the past few weeks, there are fundamental cultural issues that India has yet to resolve. As general elections draw closer, the government’s ability to execute robust economic policies will decline even further.

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