China's economic downturn & regional security By Roilo Golez

China's economic downturn & regional security

By Roilo Golez

Former Philippine National Security Adviser

The 7% drop in China's stock market yesterday is watched closely not only by economists but also by security analysts. A New York based blog expressed fears that what is happening in China at the start of 2016 may be as bad as the 2008 mortgage crisis in the US. It will be recalled that the China market already went down last year by 30-40% representing a loss of around $4 Trillion. A 7% drop is equivalent to around $700 B.

An economic downturn for China may mean a slowdown in their territorial aggressiveness in both the East China Sea (Japan area) and the South China Sea (Philippines-Vietnam area) with the leadership focusing on repairing their economy and preventing further loss of jobs. 

It must be emphasized that China has become more assertive under its incumbent President Xi Jinping, with its defense budget soaring above $130 Billion. However, it must also be emphasized that China did not have any serious economic problems under President Xi's predecessors Jiang Zemin and Hu Jintao. In fact China rose through sustained growth of around 10% per annum under the two previous leaders and it is only now under Xi where China is facing a crisis.

That can mean a complicated political situation for President Xi who may be facing questions on his ability to manage China's economy.

As I said, it may mean a more moderate foreign policy. However, it may also make the current leadership more aggressive and trigger an international crisis to divert the people's attention from their economic woes. This is called "wagging the dog." I am sure both the US and Japanese security groups are closely monitoring the situation. China's alarming test flight in one of the artificial islands may be part of this scenario. Already, both the US and Japan have reacted strongly against the test flight.