World commodity prices increase as Chinese and Indian factories hum. 480,000 US tax returns were prepared in India this year. Venezuela signs an oil deal with China. China moves towards buying Noranda, Canada’s largest mining company. Anti-Japanese riots spread through Chinese cities, probably instigated by the Chinese government, only to be suppressed by the same. China passes an “anti-secession law” aimed at Taiwan. Altogether each is, in and of itself, not a cause for alarm. Put together, they create a case for concern.

China’s experiment is obviously very successful, for now. However, it carries with it the dangers inherent in any enterprise where everything must go perfectly. The Chinese experiment is notably un-Chinese in its approach. It is not cautious, it is a massive exercise in unchecked creative destruction. That’s all well and good, but, given the methods by which it has been carried out, it also carries with it certain dangers.

The more I study the subject the more I am convinced that the position of China’s rulers is a lot more fragile than it would seem before the world. Consider: China has at least 1.3 Billion people. How many of those people are enjoying the fruits of China’s new prosperity?

How many truly “middle class” people are there in China? How many are there likely to be in a few years? A hundred million? Two hundred million?

The United States is a country of economic inequality, yes. Some inequality is good. But China is increasingly a country of gross economic inequality. China is a country divided between a small number of wealthy people and a significantly larger number of much poorer people.

Is China’s boom sustainable? The Chinese boom is premised, in essence, upon the exploitation of ultra-cheap and hard-working laborers who move from the country-side into the cities. Some may talk about China’s increasing levels of education and so on but, at its core, it remains based upon that inexorable fact.

In this China’s boom differs from the Indian boom. India’s boom, while it also features the use of low-wage labour, also features the export of knowledge and innovation jobs to India – something which, upon reflection, probably makes the Indians are more dangerous long-term economic competitor than the Chinese.

However, the flaws of the Chinese boom pose dangers which we haven’t talked about very much. Let’s look at what’s really going on for a moment.

China has an economic boom which has exacerbated domestic political tensions at a time when modern communications result in a situation where dissent and protest can be more easily organized. The Chinese government is fully aware that, were they forced to put down protests by violence, it would destroy the international image that they’ve been working hard to foster. More importantly, it could well destroy major parts of their trade, especially as other competitors in the Developing World work to usurp their competitive advantage.

The Party seeks to redirect dissent against certain convenient targets: Japan and the United States. The Party seeks to sublimate dissenting urges into a form of hyper-nationalism.

In discussing high commodity prices, we don’t consider a key point: they’re likely to hurt the Chinese just as much as they’re hurting us. The Chinese are, in proportion to their population and their production, short on resources: and they don’t have much choice but to buy them where they can.

That’s the point of China seeking to make deals with Venezuela and trying to buy Noranda. They need to secure access to resources which they might conceivably, though various means, have steady access to at preferential prices.

It is here that the dangers truly develop. We have a China which is dependent upon the massive import of commodities abroad in order to keep its economy expanding at the rate that it has to in order to accommodate the surging tides of humanity streaming from the farms to the cities. It has a population whose rebellious tendencies have been diverted into hyper-nationalism.

The Chinese experiment appears to be running in a fail-deadly mode. It takes only one thing to go truly wrong for everything to go wrong. A surge in world commodity prices (above the one we’ve already seen), particularly fuel prices, could make home production more economical than production abroad. An economic slowdown could lead to massive dissent, which could lead to violence, which would massively disrupt the world economy.

Of course, there’s a worse danger. If China can’t get resources, they might just decide to take them. For all that I wish the United States would, if necessary, do the same, I much doubt if the American people could, under any but the most extreme of circumstances, be convinced to accept the doctrines which I have earlier advocated. But the Chinese people, in their hyper-nationalist frenzy? Who knows?

I can easily envision a scenario whereby the Chinese, under increasing political pressure, with worsening economic conditions, and with a hyper-nationalist population, decide to roll the dice on the recovery of their “lost territories.”

We’ll just have to wait and see, I suppose.