It is hay fever season again. I know it is because my eyes are streaming. I look at my son and see that I have passed on the nasty hay-fever gene to him too as he struggles with puffy eyes, itchy throat and constant sneezing and wheezing. For the next while, we’ll be watching the pollen count like hawks, but the hay-fever season will pass. It always does.

The horrible blocked-up feeling we hay-fever sufferers have to endure comes in without warning, stays right through the Leaving Cert and hangs around for most of the summer. At least we can comfort ourselves that it is seasonal.

A few years ago on a visit to China, I suffered the same allergic-type symptoms. But there was no pollen. It was pure industrial pollution. This type of pollution is not seasonal and as the Chinese economy slows down rapidly, one of the permanent legacies of the 30-year boom is mass environmental degradation.

China has had the mother of all booms, which lifted incomes dramatically but left behind debt, political corruption and massive environmental mess. Like Ireland, when the economy falters, China will have to a deal with a huge debt burden and the Communist Party will face a significant battle for political legitimacy as the dodgy deals of the past 10 years come into view. Writing from China in 2010, I suggested that even though America then was on its knees suffering from a huge post-boom hangover, which people compared to the 1930s, it was China that might come to reflect Steinbeck’s ‘Grapes of Wrath’.

In 2010, China was booming like the “Roaring Twenties” in the US; clubs were opening in Shanghai, people were borrowing for flashy cars, luxury goods and high-end apartment developments. All the while, millions of poor workers flooded into the cities looking for work.

Yesterday, I hopped into a taxi and the driver was a polite young man from Shanghai. We got chatting and I asked him why he was here.

He laughed and stated bluntly: “China is over”. His friends back home were up to their gills in debt and the prices of their apartments – which they had paid small fortunes for – were falling. Does this all sound familiar?

It should sound like a similar playlist to ours, because China is about to experience a massive credit contraction, leaving not ghost estates but ghost cities and millions, not thousands, in negative equity. This development will have significant ramifications for the entire globe. It will not reverse the big trend of more and more of the world’s economic activity moving to Asia. Nor will it change the fact that China will overtake America as the world’s biggest economy within a generation; but it will make the ride bumpier for all of us. After three decades of annual economic growth averaging around 10pc, growth has slowed to 7.7pc. In China, retail sales growth last month slid to 12.6pc from 15.2pc at the end of 2012.

This does not sound too bad, but as we saw in Ireland, economies where there is a lot of debt, can move from rude health to extreme fragility very quickly.

China continues to have one of the world’s fastest-expanding economies, but annual growth rates are now half of the 14.2pc in 2007. Demand for Chinese goods abroad and breakneck investment at home have since slowed. Like Ireland, China could be facing an investment-led slump, where the massive and reckless investment of the boom ends up not being used.

Politically, this change is having significant impacts. The Chinese top brass are altering their behaviour as they look forward to a post-boom world.

In a recent official visit, President Xi Jinping stayed at a small hotel in Hubei Province. His humility is contagious. After all, mimicking the boss is the best way to keep your job in one-party dictatorships. Reports from China indicate that to avoid appearing flash, lower-ranking officials are suddenly shunning five-star hotels. The new austerity is deflating luxury markets for art, entertainment and clothing.

According to a recent ‘Wall Street Journal’ account, Louis Vuitton and Hermes products are being sold second-hand by people who need cash quickly to pay huge debts.

The mainstream press in the West (and many of the mainstream economists) have not picked up on the transformation and are still raving about China.

They have not twigged – even after everything that has happened – that a country with the world’s largest foreign reserves can actually experience a debt crisis. So even though China holds $3 trillion in foreign reserves (largely in US Treasuries) its internal debts are estimated at a menacing 20pc to 40pc of its economy. This is an enormous range and could be anywhere from $1.6 trillion to $3.2 trillion!

Apart from possibly more Chinese taxi drivers in Dublin, what would a sharp slowdown in China mean for the world? First, the Chinese property market would slump, and then the banking system would implode. This will force the Chinese government to divert enormous resources into propping up the banking system.

The prices for commodities all over the world will continue to fall because, without Chinese demand, who will want all the world’s commodities? In addition, those countries that supplied China with technological know-how and capital goods, such as Germany, will see its export growth slow sharply. Likewise, international trade will slow down around the world, leading to fewer industrial orders.

This will imply that the growth forecast of the EU, which has always been hopefully optimistic, will slip from here. On the plus side, this implies that the austerity agenda, which is already in retreat, will be knocked back further, not just here, but all over Europe.

Politically it remains to be seen whether the Chinese Communist Party will survive a slowdown in growth. Having replaced the Maoist slogan of “equality for all” with “prosperity for all”, if they don’t deliver on the latter can they fall back on the former?

Expect lots of change coming from the East – possibly before the next hay fever season is upon us.

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