Here Is The Biggest, And Most Underreported, Risk Facing China

Tyler Durden's picture

When it comes to the laundry list of China "hard-landing" risk factors, after many years, even the mainstream media has finally gotten it mostly right:

  • a slowing economy crippled by soaring debt, now over 300% of GDP
  • an economy which is overly reliant on fixed investment
  • an artificially high exchange rate which is adversely impacting exports and impairing trade, in a "beggar thy neighbor" world everyone is rapidly devaluing their own currency
  • the feedback loop of plunging commodity prices and highly levered domestic corporation which can not pay their annual interest expense payments at current prices of industrial commodities, leading to surging business failures and defaults
  • a burst housing bubble which recently popped (although slowly growing again)
  • a burst stock market bubble which recently popped (although slowly growing again)
  • Non-performing loans, as high as 20%, and metastssizing across the Chinese banking sector

And much more.

However one risk, perhaps the biggest one, which has so far flown deep under the radar, is also the biggest one - which may explain why so few have noticed it - namely social discontent, resulting from a breakdown in recent "agreeable" labor conditions, wage cuts and rising unemployment, leading to labor strikes and in some cases, violence.

Over the past few months we have chronicled several such incident which suggest that the labor market is rapidly becoming China's biggest risk factor, such as:

But the best confirmation just how serious the employment situation in China is getting comes courtesy of the China Labour Bulletin website, which tracks the number of largely unreported labor protests and strikes across China.

Presenting exhibit A demonstrating how, quietly, deteriorating employment conditions have become a gaping risk for China's politburo: the total number of strikes over the past 5 years:

 

And for those who prefer a hands on experience, here is an interactive tracker of every single reported strike that has been caught by the website over the past 5 years:

We wonder: just how much "more exponential" will China's "strike chart" have to get before everyone else finally notices?