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Social Instability, Mass Unrest in China: Not Anytime Soon

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In China, exports have hit a wall, with tens of thousands of small manufacturing companies closing their doors in Guangzhou and Fujian provinces, throwing millions of migrant workers out of work. In cities, property values are slumping and stock market investors are still looking for the bottom. The World Bank and International Monetary Fund are predicting 2009 growth well below the religiously-chanted 8% required to absorb new employees into the labor force. Western pundits fear massive social unrest due to a breach between a Communist party and the people, the former having relinquished ideological legitimacy found in iron rice bowls. Is China ready to explode? Is the miracle over?

A Double-Barreled Threat

The pessimists are right that the days and months (and years?) ahead will be, to say the least, disorienting. China is now being challenged by a double-pronged threat, one in the hinterland and another in the cities. For the first time, the livelihoods of: a) migrant workers -- tens of millions of whom will return unemployed to small villages -- and b) a newly-empowered, newly-scaled, politically-unrepresented middle class that has never experienced recession, have been called into question.

But, at least short-term, China will not melt down or erupt in protest. Six, twelve or eighteen months of 5% growth is not the stuff of anarchy. Today's demonstrations, increasing in frequency, are decentralized, a function of discrete local grievances, unfair land appropriation and unpaid wages. Taxi strikes notwithstanding, urban centers remain calm.

Fear of Chaos

In fact, the Chinese are petrified of the chaos mass protests would unleash. (A clichéd expression of ill will: "May you live in interesting times.") Culturally, both Confucianism and Daoism reinforce the primacy of stability as a prerequisite to progress. On societal and cosmological levels, everything is interconnected, an exquisite balance of opposing forces. "Happiness" occurs only when this equilibrium is maintained, when heaven is aligned with earth, when Everyman achieves harmony with the forces surrounding him. (The nation's largest insurance company is Ping An 平安, or "balanced safey.") Denizens of the Middle Kingdom instinctively grasp that time moves in cycles with good times followed by bad; they know the stock market goes both up and down. That's why the middle class still boasts savings rates of more than 25% despite being, by historical standards, flush with cash.

Furthermore, everyone recognizes the past thirty years of economic development have been rooted in non-impulsive rationalism - in Deng Xiao Ping's words, seeking truth from facts. The mob-fueled extremism of the Cultural Revolution has been thoroughly rejected by peasant and plutocrat, alike despite propagandistic soft-pedaling in official media. The Chinese are pragmatists. They will look right, then left, then over their shoulders and realize hell breaking loose is counter productive.

Of course, bets are off if an arrogant, incompetent central government botches its response but, to date, there are no signs of this happening.

This begs the question of what the Chinese expect from their leadership.

What Chinese Want: Efficient Governance

It's not democracy. Yes, complaints against the government are grumbled and protection of property is demanded. Yes, thoughtful people grasp the abstract yet critical link between efficient allocation of resources and political structure which must, one day, exist. However, few are clamoring for representative, Jeffersonian government. (Reform will be triggered from within the existing power structure, not a new generation that releases frustration on the Internet.) Chinese respect the hierarchical framework constructed across millennia and re-interpreted, but not quite reconstructed, in accord with the imperatives of a global economy.

The Chinese, consistent with Confucian imperatives, expect a benign government to pragmatically protect the peoples' interests and, at the same time, project empathy for the plight of the disadvantaged. China's Standing Committee knows, in 2009, a harmonious society will be maintained with equal doses of economic stimulus and humanity, preferably heartfelt.

The Party, for the time being, is managing affairs reasonably well. (An added cushion: the majority of Chinese blame the financial crisis on Western policy makers, not Communist mandarins.) Tax rates have been lowered, commercial loan regulations have been loosened and infrastructure projects, designed to reduce the burden of the poor, have been initiated. Labor and land transfer laws are being reformed to protect, respectively, part-time employees and peasants. Growth will lurch, but not nose-dive.

To boot, propaganda organs are skillful in broadcasting officials' competence. Media coverage of the recent economic stimulus package has been meticulously choreographed. Editors maintain a quintessentially Chinese balance of "realistic optimism," one that remains hard-nosed, chock-a-block with the macro-economic analysis and the nuts and bolts of policy, yet recitative in calls for unity. Drops in industrial production and exports have been covered in a forthright manner. Bad news is accompanied by proposals to keep economic growth "relatively" fast and unemployment under control.

Importantly, "fourth generation" leadership has developed a "patriarchic common touch." During last winter's ice storms, leaders made a bee line to southern railway stations where thousands were stranded. For the first time in memory, they apologized for chaos, literally reaching out to touch migrant workers separated from families during Chinese New Year. The day after the earthquake, Prime Minister Wen Jiabao was televised in Wenchuan, hugging survivors. While no similar gesture of compassion has been recorded during recent economic turmoil, surely one is coming. (Newspapers have reported "public concern" over job security and the pay gap between rural and urban salaries.)

Down the Road: Some Question Marks

So far, then, the government is getting it right. The public is braced for unfamiliar challenges. The Party is (credibly) positioned as the protector of the people. Over the longer-term, however, continued stability will require a deeper reservoir of confidence. It will require a comprehensive safety net and welfare system, a new generation alternative to the Iron Rice Bowl. This, the mother of all structural challenges, will demand the courageous leadership inherent in political reform. Time will tell if today's crisis will catalyze a pragmatical yet cautious Politburo to accept that order is not incompatible with an independent judiciary and enforceable checks and balances.