Stephen Roach, the Chairman of Morgan Stanley Asia wrote a very bullish article on China today due to the growth of social media. This is not the first time, as we noted here, Roach has been bullish on China for quite some time. While many people have become China bears as Jim Chanos is, Roach takes the exact opposite approach. Roach talks about the sheer explosion of internet users in China. This is causing the Chinese economy to become more efficient and interconnected.
Below is a partial post from Project Syndicate
Long the most fragmented nation on earth, China is being brought together like never before by a new connectivity. Its Internet community is expanding at hyper speed, with profound implications for the Chinese economy, to say nothing of the country’s social norms and political system. This genie cannot be stuffed back in the bottle. Once connected, there is no turning back.
The pace of transformation is breathtaking. According to Internet World Stats, the number of Internet users in China has more than tripled since 2006, soaring to 485 million in mid-2011 – more than three times that in 2006. Moreover, China’s rush to connectivity is far from over. As of mid-2011, only 36% of its 1.3 billion people were connected – far short of the nearly 80% penetration rates seen in South Korea, Japan, and the United States.
Indeed, with the cost of connectivity falling sharply – China’s mobile users are expected to surpass PC users by 2013 – and, with urbanization and per capita incomes also rising sharply, it is not unreasonable to expect China’s Internet penetration rate to cross the 50% threshold by 2015. That would be the functional equivalent of adding about three-fourths of all existing Internet users in the US.
Roach also mentions:
Finally, there is the Internet’s potential as an instrument of political change. That is hardly an inconsequential consideration for any country in the aftermath of last year’s Arab Spring, which was facilitated in many countries (especially Tunisia and Egypt) by network-enabled mobilization.
He further writes:
As the Arab Spring demonstrated, the Internet can quickly transform local incidents into national flashpoints – turning the new connectivity into a potential source of political instability and turmoil. But that has been the case only in countries ruled by highly unpopular autocratic regimes.
We disagree with his conclusion. While social media does help angry citizens connect and plan revolutions it cannot always succeed. Iran’s massive protests in 2009 are an example, as is the recent protest in Syria. If there is a revolution in China, there is a zero percent change of a “no fly zone” in China as there was in Libya. Unless the increasingly powerful Chinese army joins in a potential revolution, the internet only can only be the first step of the process.