While we as a nation retreat into our own economic misery, confronting a meltdown that can only be made worse by the collective and continued mismanagement of our leaders, spare a thought for China – not least because what is happening there cannot but help impact on us, in diverse but as yet unknown ways.

According to The Times and other sources, between 130-230 million migrant workers are poised to go back to their rural homes. As the manufacturing economy collapses, they are deserting the cities and returning to their roots, in a huge exodus that is set to dwarf even the scale of the "Down to the Countryside Movement" of Mao's Cultural Revolution.

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If China is under increasing stress, and it is, that great pile of foreign currency is less and less a weapon. Beijing will need it.

Shows how little the west understands China. Times get tough, folks go back to the village and farm

Not directly relevant to this post but I see, from the Times, a VAT reduction is being touted as part of Brown's stimulus package. No mention in the article or in the comments of the EU dimension. All very odd.

The rapid and alarming unraveling of the Chinese economy is being reflected in the value of many resource exporters in Australia, not least Fortescue. The share price of this company briefly made its largest shareholder the richest man in Australia at around AUD13 billion net worth. Only months later there has been a 80% crash in market value.

BHP, the leading resource company in Australia, isnt doing much better...

China will do what Japan did: initiate a major programme of public works. Unlike Japan and South Korea, China's infrastructure is relatively undeveloped. China now has the funds, the technical expertise and the manufacturing base to support such a program.

The economic crisis in China might actually lead to a more democratic government. The government's legitimacy is wholly linked to creation of jobs. The only way for the government to let off steam will be to devolve more power to local governments, which in turn will come under pressure to allow greater participation. The alternative, large-scale repression, will ultimately lead to regime change. The powers that be are wise enough to understand that democratization rather than brutalization is the only workable way forward.

On the other hand, it could lead to a bloodbath.

Of course it has been pointed out that the 'Return to the countryside' during this economic downturn dwarfs Mao's 'Return to the countryside' ! That means that Capitalism and the 'market model' has been more successful than Communism !! Of course this only applies if your National Govt target is to get loads of workers to return to the countryside where they originally came from. What is the Chinese regimes actual objective ?

On a related subject this news will further reduce the stress on world food resources. There are two reasons for this. Firstly the exiled workers have little or no income and in many cases are moving inland from coastal regions. With their reduced income they are more likely to revert to traditional Chinese rural diets ie locally produced grain/rice/pulses rather than the diets of chicken/fish/meat they gorged themselves on when living in cities and earning relatively high incomes.

Secondly the Chinese rural economy was often not supplying foodstuffs to the industrial centres. The two reasons for this were often that the transport infrastructure did not link rural small producers to markets in the industrial centres and 'labour shortages'. Now there are hundreds of millions of skint former industrial workers moving back to the countryside. The transport problem is solved - they are living on the farms ! The labour shortage is solved - they are happy to harvest food for themselves at little or no wages (ie. payment in kind).

I would expect to see Chinese food production figures soar over the next few years and Chinese food imports which have been affecting world markets decline sharply.