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Slowdown could help China open up

David Frum

TEXT OF COMMENTARY

Kai Ryssdal: Two days before the Olympics officially start, so have the protests.

Today, police tore down a couple of "Free Tibet" banners that had been hung near the Bird's Nest stadium. That's where the Opening Ceremony's going to be held on Friday.

The official explanation was that the stadium's not an approved protest zone. The four foreigners -- two Brits, two Americans -- who hung the flags have been told they have to leave the country, but that leaves open the question of what Beijing's going to do with domestic dissidents during the games.

Commentator David Frum wonders whether a slumping Chinese economy might be just the ticket for a more open society.


David Frum: According to the official figures, China's pace of economic growth dropped by two percentage points in the first six months of 2008. Chinese economic statistics always have to be taken with a bag of salt, but the trend seems clear: The slowdown in the rest of the world is beginning to squeeze the Chinese economy, too.

China depends on international trade for up to 80 percent of its GDP. The United States is China's largest customer. As American demand for Chinese products declines, China's costs are rising. Higher fuel prices have pushed the cost of shipping a standard 40-foot container across the Pacific to $8,000, up from $3,000 at the beginning of the decade. Shippers are adapting by slowing their travel speeds -- bad news for Chinese suppliers in a just-in-time world economy.

Raw materials costs are rising too. China imports the iron for its steel, the fertilizer for its crops, the coal for its electricity. China is a low-value-added economy. One famous study found that of the $299 cost of an assembled-in-China iPod, only $4 was retained in China. This is not a country with a lot of margin for error.

When the U.S. economy slows, Americans can respond politically. We blame the incumbent president and on Election Day, we replace him with a new one. Long before we lose confidence in the replacement, the economy has almost certainly turned around. The average length of post-World War II recessions in the United States is only 11 months.

China lacks that safety valve. Leaders are unelected. Dissent is strictly limited. Since the Tienanmen Square massacre of 1989, China's leaders have offered their people growth and prosperity instead of freedom and accountability. That bargain has endured for almost two decades, but if the leaders can no longer deliver, will the people continue to submit?


Ryssdal: David Frum is a resident fellow at the American Enterprise Institute. His latest book is called "Comeback: Conservatism That Can Win Again."

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