China's security services have managed for now to curb social unrest in the southern manufacturing city of Zengcheng after migrant workers set fire to government buildings over the weekend. But one economist says the discord is more worrying for markets than the nation’s widely-telegraphed soaring inflation.
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Str | AFP | Getty Images Armed riot police gathering along a street in Zengcheng, China. |
"I think that any amount of cracking down is going to be a little bit like in Syria," Enzio Von Pfeil, CEO of the Economic Time Bond Fund told CNBC on Thursday. "You've put out the flame in one section of the kitchen but then another flame erupts in another section of the kitchen."
The latest protests were sparked after a pregnant woman was reportedly pushed to the ground by security guards who tried to remove her food stall in Zengcheng, located in Guangdong province.
"Normally [this] would not give rise to the scale of violence that we have witnessed," Von Pfeil said in emailed notes.
He added that unresolved problems such as endemic corruption and the lack of rule of law were heightening concerns over rising prices, bringing things to a head.
Von Pfeil, who previously worked for firms such as ABN Amro, Clarion Capitol and S.G. Warburg, said the unrest was snowballing because of coverage over the internet.
"People are seeing people riot in one little city so they decide to go and riot in their own cities," he said.
The latest protests were sparked after a pregnant woman was reportedly pushed to the ground by security guards who tried to remove her food stall in Zengcheng, located in Guangdong province.
"Normally [this] would not give rise to the scale of violence that we have witnessed," Von Pfeil said in emailed notes.
He added that unresolved problems such as endemic corruption and the lack of rule of law were heightening concerns over rising prices, bringing things to a head.
Von Pfeil, who previously worked for firms such as ABN Amro, Clarion Capitol and S.G. Warburg, said the unrest was snowballing because of coverage over the internet.
"People are seeing people riot in one little city so they decide to go and riot in their own cities," he said.
Von Pfeil believes the problems are also aggravated by the household registration system, known as Hukou, which provides social benefits only to registered residents of a city and discriminates against migrant workers. "People are getting caught between having migrated to a new job, not getting the job, and then not having the social benefits."
Ironically enough, when it comes to inflation itself, Von Pfeil says the pressures are likely to abate.
"The outlook for inflation, crazily, is not bad. This is because the Central Bank has been guiding away from excess supply of money to excess demand for money," he wrote in emailed notes. "That excess demand for money, in turn, is creating an excess supply of goods, so we reckon that the "demand pull" engine of inflation will abate."
Ironically enough, when it comes to inflation itself, Von Pfeil says the pressures are likely to abate.
"The outlook for inflation, crazily, is not bad. This is because the Central Bank has been guiding away from excess supply of money to excess demand for money," he wrote in emailed notes. "That excess demand for money, in turn, is creating an excess supply of goods, so we reckon that the "demand pull" engine of inflation will abate."
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