Posted by Joseph Y. Calhoun, III

Factory workers thrown out of work in the cities are causing problems in China (via the WSJ):

China’s roaring industrial economy has been abruptly quieted by the effects of the global financial crisis. Rural provinces that supplied much of China’s factory manpower are watching the beginnings of a wave of reverse migration that has the potential to shake the stability of the world’s most populous nation.

Fast-rising unemployment has led to an unusual series of strikes and protests. Normally cautious government officials have offered quick concessions and talk openly of their worries about social unrest. Laid-off factory workers in Dongguan overturned patrol cars and clashed with police last Tuesday, and hundreds of taxis parked in front of a government office in nearby Chaozhou over the weekend, one of a series of driver protests.

On Wednesday, workers let go from a liquor factory in northern China mounted a protest in Beijing, at the parent company’s headquarters. In the latest sign of economic stress, China’s currency fell Monday by its single largest margin on record against the dollar, on expectations the central bank might devalue it to prop up sagging growth.

As the government tries to calm tensions in the cities, it also fears that newly unemployed migrants returning home could upend the already-strained social system in the countryside.

The greatest challenge facing China’s rulers has always been holding the country together. There has always been a tension between the poor rural interior and the rich coastal cities. China has always seen the interior as a buffer against aggression from their land borders and the coasts as less vulnerable. The peasants who have tasted a bit of the city life will not be happy back on the farm. That’s why high rates of economic growth are critical to the leadership. Many have said that capitalism would be the end of communism in China - that may turn out to be right for the wrong reasons.