The waves from the subprime disaster have reached China, where the bottom has dropped out of the packing-case industry. Americans, in particular, no longer want cheap goods made by migrant peasant women in the southern Chinese sweatshops. What is also plain is the folly of Beijing's deliberate destruction of the once-prosperous rural economy. Peasant uprisings, the nightmare that has kept Chinese rulers awake since the second century BC, are already causing panic in Beijing, where the official press reports hundreds of rural demonstrations against corrupt, land-grabbing officials.
Now the riots have spread to the cities. About 67,000 factories have shut down across the country. As the owners do midnight flits, sometimes to Taiwan, thousands of rioting wageless workers have been beaten up by the police outside the closed factory gates. In Dongguan, a city of perhaps 10 million in the southern Pearl River delta, 3,000 toy manufacturers, half the total, have shut down, as have 2,000 shoe factories. South China's railway stations are usually jammed before the Chinese New Year as city workers return to their villages, but now hundreds of thousands are leaving early for the rural homes they so eagerly fled during the past decade.
Why the toy factories in particular? Chinese toys have been found to be coated with deadly lead paint, leaving Mattel, the US toy giant, facing lawsuits and possible ruin. A similar scandal struck contaminated pet food and toothpaste. More recently and worse, Chinese powdered milk was found to be tainted with melamine, a plastic that makes the liquid thicker. This has poisoned 290,000 Chinese children, according to official admissions, and killed six. Nestlé is only one of the foreign companies that has used this milk powder in Asia.
President Hu Jintao recently warned the politburo about the economic crisis. His words, carried in the party's People's Daily, could not have been starker, especially in an organ which tends to blur bad news: "In this coming period, we will starkly confront the effects of the sustained deepening of the international financial crisis and pressure as global economic growth clearly slows." He noted that the crisis would "steadily weaken our country's traditional competitive advantage."
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