Tencent’s share-price meltdown caught many SA investors off guard. As they scurry around, trying to reorganise their portfolios, they will hopefully realise that this is a reflection of what is happening at the very heart of government in China. The Chinese “economic miracle” that began in 1979 is unwinding rapidly, and China’s rulers don’t know how to confront it. Investors in Chinese stocks need to strap themselves in. This could be a long and bumpy ride.

Deng Xiaoping was the architect of China’s massive leap forward in the late 1970s. Pivotal to the success of Deng’s change was the movement of vast numbers of people from rural to urban China to operate the productive capacity of the emerging industrial giant. But that has largely dried up now.  China is facing what is in economics termed the Lewis Turning Point. Put crudely, there are no longer enough people to man the machines in China.  This has led to serious wage spirals in parts of the country and provoked the ruling ...

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