China's Failing Economy Triggers Social Unrest

On Saturday, the official Xinhua News Agency published remarks by Zhou Yongkang on social unrest caused by China’s faltering economic picture. “Faced with the negative impact of the market economy, we still have not established a complete social management system,” said the Communist Party’s leader in charge of internal security. As he noted, establishing such a mechanism “is the most pressing task we face today.”

Especially since September, the signs of economic contraction in China are unmistakable: falling car sales, construction, electricity consumption, industrial output, property prices, you name it. It seems the wheels are coming off the Chinese economy.

As a result, there has been an upsurge of strikes at foreign-owned enterprises in recent weeks. The most notable labor action took place this month in Shanghai at Hi-P International, a Singapore supplier to Motorola and Hewlett-Packard. There have also been demonstrations in the hard-hit export belt in southern China and once-prosperous Wenzhou, south of Shanghai.

None of these scattered protests has threatened the regime in Beijing, but they are all part of a rising tide of discontent that does. By one count, there were 280,000 “mass incidents” in China in 2010, and all indications point to even more of them this year. In the past, the Communists have essentially shrugged off disturbances outside the minority areas of Tibet and Xinjiang. This year, however, a fundamentally insecure regime has evidenced a harder attitude, especially since the “Jasmine” protests beginning in February.

The Communist Party, as we all know by now, has based its legitimacy on the continual delivery of prosperity. During a 35-year period of virtually continuous economic growth—Beijing claims the last downturn occurred in 1976—that was a safe bet. Yet China has now reached an inflection point, and the conditions for this multi-decade upward cycle either no longer exist or are disappearing fast. Therefore, shocks to the Chinese economy, like the continuing problems in Europe, have the potential to cause a prolonged contraction.

Up to now, factory workers have faced the brunt of the downward cycle that has just begun. Soon, others—especially property owners—will feel the pain as well. In fact, purchasers of new apartments have already taken to the streets in Shanghai, Beijing, and other eastern cities to complain about steep discounts offered by hard-pressed developers to more recent purchasers. At least one of these protests turned violent.

China is perhaps the most volatile society on earth, where even traffic accidents, like the one in Xian on Friday, cause rampages and riots with unmistakable political overtones. Therefore, top leaders, such as the hated Zhou Yongkang, know what is at stake now that the economy has begun to stumble. The Communist Party is at greater risk as each new indicator points to harder times—which is when people get desperate and stop fearing the government.

“I happen to think Communist China is destined for the ash heap of history because they are not a country of virtues,” said Rick Perry, sounding like a Confucian scholar, last month. He’s not a scholar, of course, but the Texas governor is nonetheless right. The protests in China are about to become even larger, more violent, and more numerous. One of them will get out of control and spread from village to village and province to province. That one will be the event history remembers.

And there will be nothing that Zhou Yongkang, supported by all his minders, police, and troops, will be able to do about it.


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