The collapse of the China’s bubble economy has already started.

If the banks hold massive bad debts, the government would print Yuan notes. Then, a heavy fall in the value of the Yuan and inflation would occur.

The Chinese government previously reported that property prices in China were increasing by 15 to 16 % per year. However, in September, for the first time, they officially acknowledged that property prices had fallen by 10%. It means the prices have dropped by as much as 30% in reality. In the same manner, the inflation rate was announced to have risen by 6 % last month, the real figure would be 20%.

I visit China almost every month. My actual impression is that the collapse of China’s bubble economy has already started. A year ago, I paid 5 yuan for a glass of beer at a restaurant in Beijing but now it costs me 15 yuan. Although food prices are the same, the portions have become smaller. The Chinese government has been trying very hard to keep the Consumer Prices Index low by avoiding the increase of public transportation fares and utility bills such as electricity. Vegetable prices have increased by 40 to 60%.

Potential military coup

There would be no possibility of China’s democratization because they have the world’s largest armed forces.

China has the People’s Liberation Army (PLA) with 2.3 million members, the People’s Armed Police (PAP) with 1.2 million members, the Ministry of Public Security with 1.0 million police officers and 0.3 million internet surveillance agents and the Xinjiang Production and Construction Corps with 1.0 million members in Xinjiang Uighur Autonomous Region. There are neither organizations nor leaders who can lead systematic public campaigns against the Communist Party.

However, China’s one-party regime could possibly collapse. Looking back on the history of China, preceding the overthrow of dynasties, new religious movements often arose and triggered widespread riots and rebellions. For instance, the Yellow Turban Rebellion contributed to the fall of the Han dynasty, and the White Lotus Rebellion and the Taiping Rebellion led to the downfall of the Qing Dynasty. The Xinhai Revolution, too, could be seen as a religious movement.

Another possibility is a military coup taking advantage of a public disturbance. The Chinese civilian leaders do not have complete commanding authority over the military. When China fails to maintain the power balance among three factions, the military might start to run alone. With the support of the command and officers of the Beijing or Shenyang Military Regions, the Party malcontents might betray the Party leaders.

Whichever happens in the future, China would not be democratized but in “chaos”. At that time, Beijing would turn complaints caused by these chaos to the threat to Japan. They might do anything, such as landing on the Senkaku Islands.