China Business

Why China Will Remain Stable

China lawyers

Though I studiously (okay, somewhat studiously) try to avoid big think questions on this blog, I am getting really tired of the media litany on how an economic downturn in China essentially guarantees political instability. I am getting tired of it because I disagree with it.

I actually never thought of this until a few weeks ago when I was on a panel at the Kellogg School of Management’s “Greater China Business Conference.” It was nearing the end of the day and a student posed this question: Do you see China’s economic downturn leading to political instability?

My first thought was why ask this of me? My second thought was why ask this at all? I eventually answered essentially/somewhat as follows:

No. I think that so long as the Chinese people believe Beijing is doing what it can to ameliorate the impact of the downturn, there will be no political insurrection against Beijing. I think the perception of how Beijing is acting is a more important element in determining discontent against Beijing generally credited. If the people perceive Beijing as getting rich off the economic problems of the Chinese citizenry, there will no doubt be anger with Beijing. But if the people see Beijing as doing whatever it can to solve the problems, I do not think the downturn itself will necessarily lead to a big increase in discontent towards Beijing.

What do you think?

39 responses to “Why China Will Remain Stable”

  1. I agree very much with your assessment Dan. As the English philosopher John Gray (a value-pluralist like me I might add) said in an article he wrote for The Guardian, what these China doomsters “fear most is not that the Chinese experiment will fail. It is that China will succeed.” That’s why they’re always looking (and seeing) signs of an impending collapse.
    The existence of a successful alternative model of political economy is ideologically very threatening to Enlightenment fundamentalists of the liberal variety, as Hong Kong’s former Governor, Chris Patten, happily and very openly admits. This is why so many of them, like Will Hutton, Minxin Pei, John Pomfret and Jason Lee – to name but a few – keep looking for signs of a collapse – wish fulfillment! One minute it’s China’s environmental “crisis” that is expected to bring the central government down, the next minute it’s rural discontent. Now it’s the global economic crisis that they all hope will be the catalyst.

  2. I agree with you Sir. Not only in fighting the economic downturn, but also in anti-corruption, Chinese government is doing what he can to relieve the anger of the poeple. As the living standard keeps improving for most of the Chinese especially peasants, there seems nothing to worry about the stability.

  3. I think that the biggest thing going for the Chinese government right now is that as bad as thing have gotten no one has come up with a better alternative. Suppose you have an mass popular uprising, overthrow the Communist Party, and then what?

  4. @Dan.
    Local or national?
    Why do you find yourself disagreeing with the comments?
    What signs would you look for before lending more attention to the worst cases scenarios you believe false now?
    @Twofish
    It has been proven in nature and cyberspace that herds fail to see beyond the object directly in front of them, and little thought to “what next” is given until the
    R

  5. I agree with you, the problem is I am not sure you actually answered their question.
    “I think that so long as the Chinese people believe Beijing is doing what it can to ameliorate the impact of the downturn, there will be no political insurrection against Beijing” This begs the question: will this perception of the people change?
    So to answer: “what do you think?”
    I think you are very diplomatic.

  6. MAJ,
    Good to hear from you. I think I am looking at it without any political constructs. I simply think it is wrong to assume a downturn equals a revolt. I think one needs both a downturn and a dissatisfaction with the government’s handling of the downturn and a belief that there is some better other government that should be in power. I am NOT saying this could never happen, I am just saying it will take a long long time and we are not close to being there yet.
    What’s interesting is that many are now talking of riots/revolt/social breakdown in the US also and I don’t see that either. Comments like that sell papers (to the extent anything sells papers these days), but, at least with the US, they completely ignore our history and the fact that people right now are less angry with “the Government” than at many other points in our history. If one looks at the US using a 250 year time line, one becomes quickly quite confident that this too shall pass…. and it will. Not minimizing the problems, just emphasizing our abilities to solve them.

  7. shenlawyer,
    Right, the perception of corruption is important. Right now, my sense is that Beijing is still relatively immune.

  8. AllRoads,
    Great questions.
    — Local or national? There have been and no doubt will be an increase in local problems. I am talking Beijing.
    Why do you find yourself disagreeing with the comments? Mostly because I think they just assume that bad economy equals instability. Things don’t usually work that way. In fact, revolutions rarely spring from the starving. One thing about China that has always fascinated me and that makes it different from most other countries is the role of the peasants. I think most governments can ignore the peasants without much trouble, but not true in China.
    What signs would you look for before lending more attention to the worst cases scenarios you believe false now? First off, I think we would need a much more sustained downturn. Will we have that? I have no clue? Secondly, we will need to have the downturn impact a much wider swath of people. Will we have that? I have no clue. Thirdly, we will have to see perceptions changing regarding Beijing, such that Beijing starts getting more blame for the economy. Will that happen? I have no clue. I am of the view that whether it is Beijing’s fault or not, the longer the downturn goes, the more Beijing will be faulted for it.

  9. Will the perception of the Chinese people towards their government change? I don’t know. At this point, I don’t see it, but certainly things could change. I would like to be more definitive on this, but I can’t be because I truly have no clue. I think it will depend on how bad things get economically and I am not going to venture any guesses on that because I have no clue and I am mighty suspicious of those who claim to know.

  10. In addition to the ideological bias by some pundits as mentioned by MAJ, I would also blame these simplistic predictions on the intellectual laziness of many journalists and analysts – they essentially parrot each other without doing their own homework or investigation.
    Today’s China is completely different from Mao’s China and is very different from the China of Tian’anmen Square twenty years ago. There isn’t a rallying cause against the central government nationally. There are more diverse and different interest groups; the society in general is much more prosperous and the freedom in people’s personal and social lives has expanded significantly.
    Almost all of the incidents or public unrest today are local, isolated and economics-related, such as land compensation, municipal taxi fees, uncollected wages or specific incidents of local government corruptions. With the wealth and resources the government controls, these incidents can be relatively easily dealt with or “bribed” away. Likewise, large-scale natural disasters, which so often triggered the eventual downfalls of many dynasties in the past, are handled much more effectively. This latter point is extremely important to the psyche of the Chinese populace who historically associate the government’s incompetency in dealing with large-scale natural disaster ominously with the collapse of the dynasties.
    Ironically, I think the relative transparencies and free information flow in today’s China also have the stabilizing effect. People realizes that China’s many ills are much more deep-seated and can not be solved in short-term. Plus, the government is perceived to be dealing with the problems and crisis actively and forcefully. Besides, how can you blame the government for the disappearing of export orders and the closing of the plants by foreign investors?
    The current generation of the government officials are also more educated and learning to address the various incidents and public sentiments in a more open and confident manner, instead of always relying on oppression and cover-ups.
    For example, late last year when the taxi drivers in Chongqing went on a strike in protest of what they believed to be high management fees collected by the local taxi companies, Chongqing’s Party Secretary Mr. Bo Xilai intervened and mediated between the taxi drivers and taxi companies to renegotiate the fees and personally discussed and debated with the representatives of the taxi drivers. The debate was broadcast live on local television. The issue was resolved successfully as a result. The way Mr. Bo handled the incident in China was unprecedented and highly risky to a local official.
    Last Friday, the Chinese Premier Wen Jiabao conducted a two-hour on-line chat with Chinese netizens (http://blogs.wsj.com/chinajournal/2009/03/02/wired-wen-chinas-premier-holds-his-first-online-chat/). This is a pretty subtle PR move by Chinese government before the important upcoming annual legislature meeting this week when the government will be scrutinized and questioned on a host of issues, particularly economic ones. This is the way the government is saying “we understand, we care and we’re doing everything we can.”
    Undoubtedly, the Chinese government is improving its governing skills; long-term, the country’s stability still depends on whether the communist party can continue to bring prosperity, security and a fair and justice political system.

  11. Dan wrote: “What’s interesting is that many are now talking of riots/revolt/social breakdown in the US also and I don’t see that either.”
    Yes, again I agree with you.
    Also, downturns, even sharp ones, as you say, do not causally result in revolutions or even revolts. The majority of Chinese do not see any real alternative to the status quo, and are understandably generally satisfied with it.

  12. I agree with Allroads that we mustn’t ask the question “Do the Chinese people want to overturn Beijing?” Instead we need to consider shorter term grievances that might cause people to demonstrate/protest/etc.
    There is already unrest inside China, aimed at some local governments. We don’t know the full extent of these, due to the tight control of the media. It is possible that this unrest may grow during these economic problems.
    If it reached the point that a local government became destabilized, what actions would Beijing take? It is inconceivable that Beijing could stand by while a local government was in trouble. Would it be possible for Beijing to appear to be both punishing those who disturbed the peace, and punish the corrupt local government?
    I think the scenario of a localized uprising to be more credible. Beijing’s reaction to that could be quite important to Beijing’s image.

  13. “No. I think that so long as the people of the United States believe Washington is doing what it can to ameliorate the impact of the downturn, there will be no political insurrection against the American political class. I think that perception of how Washington is acting is a far more important element in determining discontent against Washington than is generally credited. If the people perceive Washington/Wall Street as getting rich off the econimic problems of the United States citizenry, there will no doubt be anger with Washington/Wall Street. But if the people see Washington as doing whatever it can to solve the problems, I do not think the downturn itself will necessarily lead to a big increase in discontent towards Washington.”
    I would only add that my sense is that net freedom; greater freedom to express discontent, actually mollifies the population. they are satisfied when corrupt officials are found out and thrown under the bus. As long as people believe that good faith efforts are being made they are content to “stand and wait” and weather the storm they see as still offshore though threatening. but I have a very limited view from riding the bus and walking around changsha and talking to students and their parents. I sense concern about the future, a certain healthy level of cynicism about individuals in government but not towards government over all which responds more quickly than similar american governments [at the local and municipal level. Local american governments are stunningly corrupt and inefficient]

  14. I believe that China will remain stable for several reasons:
    1) The Chinese people know how to do WAY MORE with WAY LESS and they are rightfully proud of that fact.
    2) As you point out in your post, as long as Beijing is not seen as the source of the problems,but rather the solution, the people will not revolt against it.
    3)China has a long history and always has a long-term plan. It has not squandered its promise for short-term gain as America has.

  15. I think you may have made too rosy a response based on a too restrictive interpretation of the question.
    I agree a national revolt here is highly unlikely.
    However, widespread incidents of local unrest are not.
    China, to a huge extent, is not a single nation. It’s a huge patchwork quilt of localities with different circumstances and different leadership.
    All it takes to get a local riot lasting a few days is a few local factories to go under without paying severance pay and a hamhanded official response by local officials.
    That isn’t a revolt, but adding up over dozens or even hundreds of towns over a year or two and it is still pretty debilitating and disturbing.
    Needless to say, there are worse possibilities.
    For example, say this problem isn’t over by CNY and a relatively large number of factory owners (especially foreigners) takes advantage of the holiday to leave themselves without taking care of their obligations? Even if the government does decide to compensate workers could it decide to do so quickly enough to prevent widescale riots?

  16. I always go back to Lucian Pye’s comment (1990): “China is a civilization pretending to be a state.” I have not seen anything that substantively contradicts this insight, despite Beijing’s best attempts to keep everything under rein of a perceived single hat. This is what the center has always attempted to do, for as long as the Chinese have records. But despite this central front, there are still local power bases that operate independently of an internationally perceived center. Though there may be some general sense of national cooperation and unified vision – the central promotional campaign – I am not convinced that it will hold up under growing local abuses and a widening, strong-armed military presence throughout the entire country.
    There are powerfully good reasons for China NOT to degenerate into social instability, but reason doesn’t always dictate how things go. Case in point: the current tensions on the Q/T Plateau. When a man like Zhang Qingli – who could very well have stepped directly from the bloody pages of a Warring States record – commands such a large part of the ‘empire,’ there are very legitimate reasons to think that things could, indeed, come apart. How the center handles this one will show us how far they are willing to go in order to ‘maintain’ stability, not just in the west, but also throughout the rest of the country, and especially in the countryside where more migrants and college grads are finding themselves stuck.
    I think the CCTV fire is an apt metaphor for what is possible on a national social level: someone stupid hurling a match into the tinderbox, and realizing, too late, that they built a perfect furnace, not a good hotel. It’s not as if it has not happened before. I genuinely hope that it won’t go jittery, but no one has yet convinced me that that historical path has been abandoned for something more thoughtful and productive.

  17. Two quick points:
    1) This is a very common question — outside of China. I have just never heard ordinary Chinese express much discontent with Beijing’s leadership. (Granted, I live in Shanghai where people are pretty happy with the status quo.) It seems to me that the Chinese gov does not really face a ‘legitimacy’ issue. Overseas visitors often ask me about dissent, protests and discontent among ordinary Chinese, and seem disappointed (or incredulous) when I tell them I have not encountered anything significant in my 6+ years here. Locals complain about corruption — but they want the Beijing government to put a stop to it. They don’t want to put a stop to the Bj gov.
    2 – What do the ‘instability’ people think is waiting in the wings? Is there some viable alternative to Beijing that I haven’t heard about? This isn’t like Taiwan in the late 80s where a second party emerged to articulate the grievances of a disenfranchised middle class. Many of the economic and social problems that pundits claim will destabilize China actually reinforce the incumbents. Widespread unemployment in the countryside and a contracting economy will probably be spun as a ‘foreign’ problem that can only be combated with traditional Chinese methods & leadership. If anything, I think the trend will be towards greater nationalism and a stronger central govt.

  18. Mark Anthony Jones – I agree with you that China’s naysayers are sometimes guilty of wishful thinking, but are you saying that its apologists are immune from such methodological blunders?
    I agree with others here that the economic downturn is extremely unlikely to cause regime-threatening upheaval. For “armageddon” to happen, there would need to be an intractable rift at top levels in the party. I can’t see that happening as things stand now.

  19. The global crisis has already lead to a certain degree of political instability across many countries. The prospect for protests and discontent is growing.
    Why would China be any different? It’s more rigid political system could present a facade of stability. Rigidity, however, does little to hide underlying fragility.
    Instability which encourages flexibility should be welcomed. Rigidity threatens to bring calamity. Not worth the risk

  20. NT – in answer to your question: No, I’m certainly not saying that apologists for China’s model of political economy are somehow immune from methodological blunders. I didn’t suggest otherwise, nor did I wish to imply as such.

  21. Dan,
    1) What does instability mean for you?
    Lot’s of talk about overturn, upheaval, and Armageddon, but those are all very different from “instability”… size, scale, scope, and duration are all very different.
    2) Could the “instability” occur as a single event, or would it need to be something larger and more sustain?
    3) Which population do you view as the most unstable, and which is the most dangerous were it to become unstable?
    i.e are the peasants more likely to go on a walk from the field to Beijing … or the middle class who were recently lost their stock portfolio, and already reside in Beijing?
    4)Is the real risk not in the single “event”, but in the reaction to the “event”?
    r

  22. 5. In recent years, signs of societal breakdown have become more apparent. The core problem is the loss of control over power. During the past 30 years of reform, despite the establishment of a basic framework for a market economy, power remains the backbone of our society. Because societal breakdown first appears as the loss of control over power, corruption is but the surface manifestation. By loss of control over power I mean that power becomes a force unconstrained not only externally, but also internally. Before this, although it lacked external constraints, internal constraints had been relatively effective. The power base is weakening; several years ago we had already heard the saying “commands don’t reach outside of Zhongnanhai [the headquarters of the CCP and China’s Central Government].” Local power and sector power have become unconstrained from above and unmonitored from below, at the same time lacking any check or balance from the left or right. This is to say, state power is fragmented, and officials are unable to work responsibly. To preserve their positions they don’t balk at sacrificing system benefits (not to mention societal interest). With this background, corruption has gotten beyond control and become untreatable.
    -from the blog: inside-out china

  23. Couple of brief points:
    – The China unrest story has great traction outside the country where a number of governments and people still don’t buy the “economic development without democracy story”. They don’t see the subtle changes, and basically are still looking for the China collapse thesis to come about. Media sell to prejudices, so stories on this line quite often get pushed through by editorial boards out of China.
    – Comments above on low risk of national unrest and low level of anti-Beijing feeling are on target, although I wouldn’t underestimate the level of mistrust of “government” full stop whether it be local or national (dear Uncle Wen being an honourable exception)
    – Given that local unrest is clearly likely to step up a level though, you have to recognise the potential for things to spin out of control. The vast majority may not want to change government, but sometimes it’s extreme minorities that start directing policy.
    – Low risks of regime change are not the only thing worth considering. Just consider for example what would happen if a riot between migrant workers from (say) Anhui and police in some city near Shanghai got completely out of hand and left 20-40 people dead. Would foreign governments react? Would other Anhui workers in other provinces/Shanghai react? Would migrant workers in general react? How would the mainland press handle it? Frankly anyone willing to make bets in such a scenario is bolder than I am…

  24. In the end, this preoccupation with political unrest may say more about us than it says about the situation in China. I, for one, agree with those who predict that the CCP will remain in NOMINAL control for decades to come – economic upheaval or no. Prof. Sun Liping’s recent essay regarding the relative likelihood of societal breakdown offers an interesting alternative to all this talk of uprising. In fact, speak to the average Chinese man-in-the-street and you’ll find that most believe societal breakdown is well under way. In any case, is there any real doubt that the next 30 years will be much rougher than the last 30?
    For those of you who read Chinese, here is a link to Prof. Sun’s essay. Take a look at the comments section – the vast majority are sympathetic.
    http://news.163.com/09/0228/09/537R7NFN00012Q9L.html
    (I see that Mark Anthony Jones has posted parts of Prof. Sun’s essay, in English translation, above.)

  25. Totally agree with 2fish&JD ( Are you a fan of Mr.Chen,I have read his autobiography,detail oriented)
    Dan’s answer is diplomatic.Are we supposed to see Dan say no?
    Most Chinese do not like communist bullshit,but own interesting, so if life can not be improved as expected,it will be dangerous.
    But in the foreseeable future ,it will remain stable.

  26. Natural disasters, combined with corruption and overpopulation lead to social unrest, leading to chaos, then to separate states, until one side gains the mandate of heaven. Or at least that is one theory on political change in China.
    I wonder how many in power are concerned about Dynastic Cycles; after all it is a seamless part of transition in Chinese history.
    I personally don’t believe that instability leading to upheaval is determined simply by faith in Beijing. China is far too complex than for GDP growth, central government mediocrity, or corruption themselves to lead to upheaval. You would have to have a confluence of extraordinary events to occur to bring about that kind of change and usually it is not predictable. After all, the last two that have occurred, the Wuchang uprising and the fall of the Goumingdong, took many Chundits by surprise when they occurred as well.
    Mandates of heaven don’t come easily and they’ve not been given up quickly or peacefully either.

  27. More strikes/riots/protests? Certainly, but that’s true of every country that undergoes a recession. An actual widespread anti-government movement? Well, I did do a post on this a while back:
    http://foarp.blogspot.com/2009/01/reality-calling-daniel-drezhner.html
    Short version: people who think the Chinese government is going to collapse or face serious opposition any time in the next 5 years are either engaging in wishful thinking or just don’t know what they are talking about. The Chinese government has amazingly deep pockets, and could easily make up for several years of low growth with government spending. Even if this did not suffice, however, the Chinese government has already weathered crushing economic disasters in the past which were entirely created by its own policies. Do not under-estimate the power of the instuments of control that the CCP has at its disposal, or the influence it has over the Chinese people.

  28. As in most great past imperial dynasties of China, the cause of problems mostly lies on external factor instead of internal factor. Ancient China wasted too much resources and monetary loss building high walls to protect proper China itself. The collapse of China normally came aftermath of the invasions from the barbarians of the north (Mongolians), West (Tibetans) and East (Japanese). With constant watch on the Japanese (with the US behind), China is in no danger of external attack. With hugh surplus fund available, China needs to watch how to spend the money efficiently. No, the Japanese and US are relatively weaker to take on China at this particular moment.
    So in conclusion, don’t worry too much about China’s stability…it will last another 400 years (maybe before we decide what next).

  29. Dan, you may have framed the issue too narrowly by speaking solely in terms of government stability and “mass incidents”. Ordinary crime is on the upswing and will continue to rise. This creates a different dimension of instability that the government is more worried about.
    Victor Shih has a good post contrasting the situation with SOE workers laid off in the late 90s with the current situation:
    I don’t agree with a lot of his conclusions, but he makes some good points, esp in relation to housing and other benefits that the SOE workers enjoyed, but which current workers do not. One thing he leaves out is what my wife feels is an important social restraint: under the old hukou system, families were much more bound up in their danwei. Now, with workers migrating to coastal jobs, they have no attachment to the locality where they’re working and they no longer feel constrained by the effects that their actions will have on their family’s reputations back in their hometown. Sichuan workers are much more likely to get money by commiting crime in Guangdong than they are back home.

  30. “Ma Bole – I have not posted a translation of Professor Sun’s essay here or anywhere else, either in full or in part. I have never even heard of Professor Sun, until now.”
    Mark Anthony Jones – I beg to differ. The paragraphs from Inside-Out China that you posted above are, in fact, from Prof. Sun Liping’s essay. They were translated from the original Chinese by Xujun Eberlein. In fact, it’s worth revisiting her blog now that she’s posted additional translations from the same essay.

  31. Apologies to Mark Anthony Jones. Excerpts from Sun Liping’s essay were posted by qingdao, not Mark Antony Jones. My bad.

  32. I was in China throughout Tian-nmen. Then, people told me they had lived their lives for that moment, the final reckoning with the CPC. I saw people choked with hope, joy and finally despair.
    Last year, when I toured China asking all sorts of people all sorts of political questions, it was clear that the public mood is now very different. Then, educated people were ashamed of China and now they are proud. Most people still retain the old grievances against the CPC. But they also respect it and many feel it is simply a necessity for China at the moment. There is no source of resistance now, no Solidarity, and it is hard to see where one could emerge in the near future.

  33. No worries Ma Bole! – you did have me confused though….
    Thanks for alerting me to the Sun Liping article. I shall try to locate an English translation, as I’m interested in giving it a read.

  34. I agree. “Chinese instability” has become a knee-jerk response to any crisis of those fed by the milque-toast media in the USA.
    Perhaps instead it is the USA entering an era of great instability, in which China will appear as the rock of ages

  35. On the local vs. national issue, Beijing will not be secure with insecure localities; many local disturbances in the past few hundred years have became provincial, regional, and even national problems.
    Given potential local instability, the problem for businesses is managing risk given the length of supply chains in China itself. The various product scares taught us this in an abstract sense (When a secondary supplier is not up to snuff, you have a problem), while the geographic length of supply chains now expose a lot of businesses to disruptions in supply given potential local instability.

  36. How much do you know about the extensive drought in Northern China and the likely decimated wheat harvest? How peaceful will people be when they can’t get enough to eat?

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