Unrest in China
A dangerous year

Economic conditions and social media are making protests
more common in China--at a delicate time for the country's
rulers

Jan 28th 2012
CHENGDU, DONGGUAN AND WUKAN VILLAGE 
http://www.economist.com/node/21543477

IN AN industrial zone near Chengdu, the capital of Sichuan
province in south-west China, a sign colourfully proclaims
the sprawl of factories to be a "delightful, harmonious
and happy district". Angry steelworkers must have winced
as they marched past the slogan in their thousands in
early January, demanding higher wages. Their three-day
strike was unusually large for an enterprise owned by the
central government. But, as China's economy begins to grow
more sedately, more such unrest is looming.

China's state-controlled media kept quiet about the
protest that began on January 4th in Qingbaijiang
District, a 40-minute drive north-east of Chengdu on an
expressway that crosses a patchwork of vegetable fields
and bamboo thickets. But news of the strike quickly broke
on the internet. Photographs circulated on microblogs of a
large crowd of workers from Pangang Group Chengdu Steel
and Vanadium being kept away from a slip road to the
expressway by a phalanx of police. Word spread that police
had tried to disperse the workers with tear gas. In the
end, as they tend to--and undoubtedly acting on government
orders--factory officials backed down, partially at least.
The workers got a raise, albeit a smaller one than they
wanted. Managers' wages were frozen.


Strikes have become increasingly frequent at privately
owned factories in recent years, often involving workers
demanding higher wages or better conditions. Private
firms, like state ones, are usually strong-armed by
officials into buying off strikers. The thinking is that
capitulating keeps a lid on news coverage and helps to
prevent unrest from spreading. Yet the explosive growth in
the use of home-grown versions of Twitter has made it easy
for protesters to convey instant reports and images to
huge audiences. The Communist Party's capacity to stop
ripples of unease from widening is waning--just as economic
conditions are making trouble more likely.

Anger at the bottom

At a cheap restaurant in Qingbaijiang, opposite a
dormitory compound for Pangang employees, grimy
steelworkers complain that the government's promise of an
extra 260 yuan ($41) a month is hardly enough. Many of the
lowest-paid earn as little as $190 monthly. But the
workers know that the steel industry is struggling--and
that vengeance on persistent troublemakers can be fierce.
A police notice warns of legal action, including
imprisonment, against any strikers who continue
"disrupting public order". Security agents follow your
correspondent in an unmarked car.

All this is partly a result of the curb on China's
stimulus spending and carefree (reckless, many would say)
bank lending in the wake of the global financial crisis of
2008. There are fewer new construction projects; demand
for steel has flattened. Pangang's plant in Qingbaijiang
is running at a loss. The number of steel firms in the red
rose from nine in September to 25 a month later. Even
though the government is less worried about inflation now
than it was a few months ago, and is releasing the
economic brakes a little, the steel industry is expecting
a lean period. Some firms might have to close.

Overall economic growth is still looking robust. In the
final three months of 2011 China's economy grew by 8.9%
compared with the same period a year earlier--enviable by
almost anyone else's standards, though still the slowest
since the second quarter of 2009. The slowdown has so far
been gentle, and in line with government efforts to
prevent overheating. But this does not stop officials
worrying that the coming year could be unusually
difficult.


Europe is the biggest buyer of Chinese products--and the
euro zone's travails have plunged many manufacturers into
despair. Depressed demand in both Europe and America has
taken its toll on factories. The steelworkers' strike was
one of many in recent months, most of them in China's
export-manufacturing heartlands near the coast (see map).

Chinese exporters do not face as big a shock now as they
did in late 2008, when the financial crisis caused a
sudden collapse in demand and the loss of as many as 20m
migrant-labour jobs. But that time China's recovery was
rapid, helped by stimulus spending of 4 trillion yuan
(more than $630 billion at today's exchange rate), as well
as developed economies' own stimulus projects. The impact
on migrant workers was further mitigated by the
coincidence of the worst of the downturn with the lunar
new-year holiday, when most migrants go home for lengthy
periods.

This time exporters face protracted slow growth in
developed economies, and the risk that the euro zone's
difficulties might worsen. China's policymakers do not
want another lending spree that might burden the financial
system with more bad debt, on top of the borrowing
accumulated during the previous binge. The country's
relatively low budget deficit (about 2.5% of GDP in 2010)
gives it room to spend more on social housing, social
security, tax cuts for small firms and consumer subsidies.
These could help promote private consumption--eventually.

Nerves at the top

The long-term plan is for China to wean itself off its
reliance on exports and investment projects such as roads,
railways and overpriced property developments, and for
domestic consumption of goods and services to play a much
bigger role in fuelling growth. But this rebalancing will
be a long, hard slog. Officials do not want shock therapy
because it could threaten the jobs of many of the 160m
migrants who come from the countryside to provide the
cheap labour behind China's exports.

This economic quandary has become more acute at what is a
delicate political moment for the Communist Party. Later
this year (probably in October or November), the party
will hold its five-yearly Congress, the 18th since its
founding in 1921, at which sweeping changes in the
country's top leadership will begin to unfold.

The Congress will "elect" a new 300-member central
committee (in fact it will be hand-picked by senior
leaders). This will immediately meet to rubber-stamp the
appointment of a new Politburo, a body that currently has
25 members. All but two of the Politburo's nine-member
inner circle, the Politburo Standing Committee, will be
replaced. Two appointments are all but certain:
Vice-president Xi Jinping to take over from President Hu
Jintao (as party chief after the Congress and as president
next March); and Li Keqiang to replace his boss, the prime
minister, Wen Jiabao, also next March. There will be much
jockeying for the other slots.

It is a decade since China experienced a leadership
changeover on this scale--and the first time since the late
1980s that the advent of a new generation of leaders has
coincided with such a troubled patch for the economy. The
previous time, in 1988, an outbreak of inflation threw
Deng Xiaoping's succession plans into disarray, giving
conservatives ammunition with which to attack his liberal
proteges. The party's strife erupted into the open the
following year as students demanding greater freedom
gathered in Tiananmen Square.

The threats to the party today are very different, but
fear of large-scale unrest still haunts the leadership.
The past decade has seen the emergence of a big middle
class--nearly 40% of the urban population, as some Chinese
scholars define it--and a huge migration from the
countryside into the cities. The party takes no chances.
Large numbers of plainclothes police are on permanent
watch in and around Tiananmen Square. (Since 2008,
visitors to the vast plaza have had to undergo
airport-type scanning and searches.) Early last year, when
anonymous calls began circulating on the internet for
citizens to gather in central Beijing in sympathy with the
uprisings that were breaking out in the Arab world, the
location specified was not Tiananmen but Wangfujing, a
shopping street nearby. The police responded by flooding
that area with officers too.

In the Pearl River Delta, which produces about a third of
China's exports, there are plenty of signs of malaise.
Outside a Taiwanese-owned factory in Dongguan, a dozen or
so police officers wearing helmets and carrying clubs
watch a small group of angry workers complain that the
owner has run away. The factory (which makes massage
seats) is unable to pay its debts. They are afraid that,
this time, after the lunar new year break they will have
no jobs to come back to. A plainclothes policeman tries to
silence them. Then a uniformed officer moves in with a
video camera, and most of the workers retreat, keeping a
prudent silence.

Others in the delta have been less reticent. In November
thousands of employees at a Taiwanese shoe factory in
Dongguan took to the streets in protest against salary
cuts and sackings, purportedly caused by declining orders.
Protesters overturned cars and clashed with police.
Photographs of bloodied workers circulated on the
internet. There have been further protests in recent
weeks.

Guangdong province also saw a wave of strikes in 2010. At
that time workers--mainly in factories supplying the car
industry--were demanding only higher pay and improved
conditions. Most of those disputes were quickly and
peacefully settled, and rarely involved action on the
streets. The latest spate of confrontations looks
different. The steelworkers at the state-owned factory
near Chengdu wanted a raise; but, these days, rather than
bidding to improve their lots, workers are mostly
complaining about wages and jobs being cut. The strikers
seem more militant.

A report published this month by the Chinese Academy of
Social Sciences (CASS) says that, compared with those in
2010, the strikes of 2011 were better organised, more
confrontational and more likely to trigger copycat action.
"Workers are not willing this time to accept that they
have to make sacrifices for the national good because
firstly they have already made enough sacrifices, and
secondly, fewer are willing to just pack up and go home,"
says Geoff Crothall of China Labour Bulletin, an NGO in
nearby Hong Kong.

Where the heart is

The government hopes that jobless migrants will return to
their home villages, where they or their families still
enjoy a tiny land entitlement on which they can subsist,
or find work closer to their hometowns. Many will: job
opportunities in the interior have grown in the past few
years, thanks to a surge of government investment in
central and western areas, aimed at evening out economic
growth.

Last year Chongqing, a region in south-west China which
had long exported large numbers of workers to the coast,
for the first time employed more of its surplus rural
workforce locally than it sent to other areas. Chongqing's
party chief, Bo Xilai, is believed to be a contender for
the Politburo Standing Committee. He has been trying to
turn Chongqing into a model for the absorption of rural
labour into cities, a project that has involved vast
spending on low-cost housing to accommodate the region's
migrants.

But rising numbers of migrant workers in big cities--more
than 60% according to the National Bureau of Statistics in
2010--are themselves the offspring of migrants and have no
experience of agricultural life. They regard themselves as
urbanites, even if they are excluded from many of the
welfare benefits to which city-dwellers are entitled. They
are better educated than their parents' generation, and
more assertive. A riot by migrants last June in Dadun,
another factory town in Guangdong where many of the
country's jeans are produced, hinted at the problems China
could face if second-generation migrants lose hope. The
manhandling of a pregnant woman by security guards
prompted two days of violence, with thousands of migrants
setting fire to vehicles and government buildings. Strikes
in coastal factories now mainly involve second-generation
migrants, according to the report by CASS.

Such unrest is not about to topple the party. As Chinese
officials nervously digest the implications of unrest in
the Arab world, demonstrations in Russia and an easing of
repression in Myanmar, they draw comfort from the
consistency of Chinese opinion polls. These appear to show
high levels of trust in the central leadership and of
optimism about the future under party rule. Many ordinary
Chinese are contemptuous of local authorities, but still
believe that leaders in Beijing are benign.

The power of weibo

But according to Victor Yuan of Horizon, a polling company
in Beijing, citizens' satisfaction with their own lives
and confidence in the government, though high, experienced
a "big drop" in 2010 and didn't recover last year.
Confidence in the government has fallen by about 10
percentage points, to around 60%.


Mr Yuan says the rapid spread of microblogs has
contributed to this decline. By the end of last year,
weibo, as Chinese versions of Twitter (itself blocked in
China) are known, were used by nearly half of the 513m
Chinese who had accessed the internet in the previous six
months (see chart). This was slightly more than the number
who used e-mail and a rise of nearly fourfold over the
year before, according to the government-affiliated China
Internet Network Information Centre. Li Chunling of CASS
estimates that 90% of urban internet users under 30 are
microbloggers.

Weibo have transformed public discourse in China. News
that three or four years ago would have been relatively
easy for local officials to suppress, downplay or ignore
is now instantly transmitted across the nation. Local
protests or scandals to which few would once have paid
attention are now avidly discussed by weibo users. The
government tries hard, but largely ineffectively, to
control this debate by blocking key words and cancelling
the accounts of muckraking users. Circumventions are
easily found. Since December the government has been
rolling out a new rule that people must use their real
names to open accounts. So far, users seem undeterred.

In the build-up to the 18th Congress, China's leaders will
become especially anxious to prevent embarrassment to the
party. Weibo are likely to make their lives a lot more
difficult--at least that was the lesson from a ten-day
stand-off in December between police and residents of the
coastal village of Wukan in Guangdong.

The villagers' protest was typical of thousands that roil
the Chinese countryside every year: a complaint about the
seizure of agricultural land by local officials for
private redevelopment. Unusually, however, in Wukan
citizens took control of their village and drove out party
hacks and police. Officials were alarmed by images that
circulated on weibo of triumphant residents rallying in
the centre of their village, like students in Tiananmen
Square 22 years ago (see the picture at the start of this
piece). They tried, unsuccessfully, to stop news spreading
by ordering a block on the village's name and location.

The villagers gave up their protest on December 21st after
a rare, high-profile intervention by the Guangdong party
leadership, which promised to look into their complaints.
Remarkably, on January 15th the protest leader, Lin
Zuluan, was appointed as the village's new party chief
(the previous one having disappeared, it is thought into
custody). Even the party's main mouthpiece in Beijing
broke its silence on the issue, saying it showed that
local officials should stop treating citizens as
adversaries. Wang Yang, Guangdong's party chief, who is
believed to be a contender for a senior Politburo position
this year, said the incident demonstrated how people's
"democratic consciousness" was getting stronger. He called
on officials not to ignore citizens' concerns.

Few regard the Wukan episode as a turning point for the
party. At least one protester on Tiananmen Square has
since been seen being dragged away by police in the usual
fashion. But it has stirred debate, online at least, about
how the party should respond to protests and other forms
of public pressure. And villagers in Wukan warn that they
will not be satisfied until they have reclaimed their
land. One protest leader says there could be another,
"even bigger" uprising.

Not everyone has a home to go to
The new leadership that will take over after the upcoming
Congress will quickly face tests of its ability to handle
social unrest. Even if the country does not appear on the
brink of an Arab-style upheaval, many Chinese academics
say the next few years could see burgeoning instability,
exacerbated by slower economic growth and a widening gap
between rich and poor. China's outgoing leaders have tried
to suppress debate about ways of reforming the political
system to allow the public to voice their grievances more
freely. But many analysts believe there is a pressing need
for such reform. Today's "China model", as some in China
and abroad were tempted to call it after Western economies
fell into disarray three years ago, appears increasingly
unsustainable.

Chinese roulette

An intriguing glimpse of how at least some in the party
elite might see things was offered last April when Zhang
Musheng, a prominent intellectual, published a book
calling for a revival of the one-time Maoist goal of
building a "new democracy". General Liu Yuan, the son of
Liu Shaoqi who was China's president during the Mao era,
openly backed the idea. Mr Zhang (himself the son of a
late senior official, as are several of the new
leaders-to-be) said a new democracy would involve
continued party rule but with much greater freedom.

Few of China's liberals believe there is much chance of
any leader pursuing this idea in the near future. But Mr
Zhang's description of China today has struck a chord (and
has been circulated widely by weibo users). A well-known
economist, Wu Jinglian, picked up a phrase of Mr Zhang's
in an essay in Caijing, a Beijing magazine, in which he
attacked the notion of a "China model" and called for
political reform. The phrase of Mr Zhang's that made an
impression was one describing China as "playing pass the
parcel with a time bomb."

___________________________________________

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