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I often start my mornings with egg, cheese and turkey sandwich at Panera Bread.  This morning was no different.  While reading newspapers on my Kindle, sipping hazelnut coffee (I know I just lost respect of the true coffee drinkers), I started with yesterday’s FT, an article on China piqued my interest.  China plays a very important role in the global economy and thus I pay close attention to it. 

I started reading: 

“The benchmark one-year lending rate was cut by 27 basis points to 5.31 per cent, while the one-year deposit rate was lowered by the same amount to 2.25 per cent.”

This is not surprising news, but shows originality - China doesn’t want to be like the US, thus it cuts interest rates in multiple of 27 basis points, not boring 25 basis points. 

“The government estimates more than 10m migrant workers have lost their jobs so far, while 6.5m university students will enter the workforce next year.”

China is unlikely to escape the fate of developed countries, it faces rising unemployment.  This raises a question – will it lead to political unrest?  High unemployment in China is very different than high unemployment in the US or Europe.  Unlike in the developed world, there is not much of a social net in China.  In the US if you lose a job, you may be forced to shop at Wal-Mart instead of Target and you have to downgrade to basic cable – only 50 channels, sorry. 

I am oversimplifying, but we have unemployment benefits and many other government programs that will not allow one to starve.  That is not the case in China; its safety net is in infancy, and therefore high unemployment may mean hunger for many and political unrest.  The Chinese government knows this well.  Unless it comes up with a social net very quickly, it will need an additional stimulus package to stave off poverty and prevent unrest.   (I hear that the previously announced stimulus was just a reshuffling of normal government spending.)  The next news makes things even more difficult:

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