Open markets are loosely coupled with open politics

An interesting point. From China: Balance of Terror by Austin Bay.

Ignoring the official optimism of the Chinese government, a growing number of Chinese government and business leaders believe China is headed for the same fate as Japan in the 1990s, when a real estate bubble triggered a violent and continuing halt in economic growth. The Japanese had allowed a huge real estate bubble to develop and, when economic growth stalled for a bit, a lot of the real estate loans became bad debt and that created an economic crisis Japan is still dealing with. Japanese were angry and being a democracy they elected new politicians. China is not a democracy and a banking crisis like the Japanese went through in the 1990s will create a lot of angry Chinese who cannot, as the saying goes, “vote the rascals out (of office)”. In China that degree of public anger means revolution, or at least a lot more disorder. China also has a huge real estate bubble, very inefficient (compared to most Western nations) government spending policies and rapidly escalating labor shortages plus deficits in social spending (like taking care of the impoverished elderly). Chinese problems, in addition to being similar to those of Japan, are also considerably worse because of greater corruption, pollution and political oppression. Japan is a democracy while China is still a communist police state and that means the crises in China will not be handled peacefully as it was in Japan.

I have long argued that at some point there would be a reckoning on China's approach to development. They chose to liberalize their market system before they liberalized their political system. The hope of outsiders was that the prosperity arising from liberalized markets would make it easier to later loosen up controls over the political system.

For a variety of reasons, it now appears that China wants all the benefits of open markets without any of the costs of open politics. That is likely unsustainable and Bay's observation is pertinent to the timing of the reckoning.