Is China headed for a social 'red
alert'? By Francesco Sisci
BEIJING - Economic inequality and social
protests in China have become a frequent topic in
the Western press. The startling figure of 74,000
protests across China in 2004, up from 58,000 the
previous year, has popped up in many newspapers,
as has China's most recent Gini coefficient of
0.45, suggesting that economic inequality in China
has in fact surpassed that of the US and UK with
their allegedly cold-blooded "Anglo-Saxon" model
of capitalism. (The Gini coefficient, a measure of
inequality developed by the Italian statistician
Corrado Gini, is a measure of income inequality
ranging between 0 and 1, where 0 corresponds to a
society where everyone has exactly the same
income, and 1 corresponds to a society where one
person has all the income and everyone else has
none.)
Eyeing such statistics, one might
be tempted to think that Chinese society is
falling apart, and indeed, various books and
articles have
appeared suggesting
exactly that. However, as with many things in
China, first impressions can be misleading. The
0.45 figure was published by the official People's
Daily, which described it as a "yellow alert", and
asserted that if things go on like this China will
reach the "red alert" level in five years. [1]
Using similar logic, one might extrapolate the
protest figures to suggest that if social protests
grow as rapidly as the Gini coefficient has, there
could be over 80,000 this year, more than 100,000
in a year or two, and so
on, endangering the social fabric of China within
the next five years, when the Gini coefficient
will have reached and passed the "red alert"
level.
The aforementioned figures seem to
find confirmation in other numbers more readily
available: 66% of all total bank deposits belong
to 10% of the population, with 20% of the
population holding 80% of total deposits.
Peasants, the majority of China's population, make
under US$300 a year, while people in Shanghai, the richest
city in China, earn over $4,000 a year. [2]
China's coastal region, home to some 300 million
people, produces about 70% of China's GDP. If we
compare these numbers, it becomes clear that we
are talking about the same group: 20% of the
population amounts to about 260 million people,
roughly the population of the coastal region, and
the ten percent holding 66% of total deposits are
the 130 million affluent people living in eastern
coastal cities. The rest of the country has been
left behind.
The Asian Wall Street
Journal, in a recent editorial, warned against
curtailing economic reforms based on these
numbers. [3] "It is almost axiomatic that during
periods of high growth, some will improve their
lots at a higher rate than others," said the
Journal, which underscored that China's reform
process has already achieved the greatest
sustained poverty reduction in the recorded
history of the world. By World Bank estimates,
China had 29 million absolute poor in 2001,
compared to 80 million in 1993 and 250 million in
1979, when the economic reforms started. This feat
dwarfed the growth of the Gini coefficient in the
same period. In 1980, after one year of reforms,
it was 0.33; in 1992, when the late Communist
Party leader Deng Xiaoping again promoted reforms
after his famed "southern trip" in the wake of the
Tiananmen crackdown, it was 0.37, and in 2003,
when further reform measures were introduced
according to China's WTO commitments, it was 0.4.
Therefore, it would be misguided to say
that protests and the income gap are simply going
to push China over the edge, that the days of the
Chinese boom are numbered and will be followed by
a 1920s-China sequel - renewed civil war and
warlordism, with the next dynasty struggling to
establish itself from the wreckage of the old
regime.
It is important to note that the
Chinese leadership is indeed concerned by these
facts - we know them because official Chinese
media, toeing the party line, published them;
otherwise we would never have known. So the
question we should be asking is: why does the
regime want people to know about the inequality
problem? It is not that the figures would have
been available anyway, or that social instability
has grown so much that it can no longer be hidden:
in the universe of China, much occurs that goes
unnoticed by the rest of the world.
Even
the best foreign intelligence might manage to
gather a burst of sporadic events, but it could
never authoritatively draw a vast picture of tens
of thousands of protests all over the country, let
alone then authoritatively feed it to the
international press and make them believe it. If
the Chinese didn't tell us we would never know of
so many protests. But the publication of the data
is hardly an indication that Chinese leaders have
grown more transparent overnight. The actual
message is different. The Chinese regime is
telling us there are more protests and a higher
wealth gap because it is confident it has the
situation under control, and it believes that
these events cannot rock the boat, either now or
in the coming five years.
There are
several reasons to interpret the protest figures
cautiously. For one, the 74,000 figure is only for
demonstrations involving over 100 people; the
innumerable small gatherings of a handful of
people outside the local government office are not
included. If the government, at any level, had to
confront and repress violently these protests,
there would not be enough police in China to rein
in the riots, which would spawn other, bigger
riots.
In reality, protesters are usually
bought off easily: money is spread around,
requests are granted, and people are appeased.
These tactics create a virtuous circle (or a
vicious one according to the viewpoint): protests
yield money and thus yield more protests. Of
course a peaceful result is not guaranteed; in
some cases, police are called in, they break some
heads, and organizers are spotted and arrested. In
early October, the state-run media noted that so
far this year some 1,826 police had been harmed,
and 23 killed, trying to handle riots. By official
accounting, then, the total number of police
casualties was about 1 for every 35 protests. If
this reasoning is valid, we can infer that a
violent outcome, with a fierce confrontation, is
not the rule. In other words China has learned
that protests can be handled peacefully - this
might be one major reason why the government feels
confident in handing out the figures.
The
other reason for telling China and the world these
stories is to create the consensus needed to
promote the idea of a "harmonious society", a new
political slogan of the new leadership.
"Harmonious society" is not a simple political
slogan dusted off from Confucian times; it in fact
underlies the economic effort to spread wealth to
the interior and boost domestic consumption, two
crucial challenges for China in the next few
years. Mr Wang Jian, from the State Development
and Reform Commission (SDRC), China's main
economic planning body, points out that the
eastern regions of China are in a conundrum: they
need more land to build houses and factories, yet
this is prime fertile land, used to produce grain.
[4] Less land for agriculture in China will
create, in the long run, pressure on the world
grain market.
The same was true also in
Japan at the time of rapid industrialization,
explains Wang Jian, yet the size of the Chinese
population is much bigger than that of Japan.
"There is not enough grain in the world market to
feed the Chinese population," concludes Wang. This
may actually not be true - important grain
exporters like the US, Canada, Australia and
Argentina have plenty of slack capacity at the
moment, in fact, the US and EU are literally
paying farmers to underproduce - but Wang's
comment does reveal a deep sense that China should
handle grain differently from the way it has
handled, say, oil, where it has a growing
dependency on imports.
Incidentally, the
issue of land requisition for industrial purposes
and disagreements about compensation are the most
important reasons for the recent protests. The
issue is very complicated because if industry pays
too much, it would reduce the incentive for
industrial development, and local governments have
no money to make up the difference to the peasants
whose land has been taken. "Local governments have
few sources of revenue to finance physical
infrastructure and social expenditure," writes
World Bank economist David Dollar, explaining some
of the reasons why Chinese peasants have low
compensation for their land requisition. [5]
Opening the west as a
solution The problem of limited fertile
land has been made more acute by fast-growing
pollution, which wastes both water and land. Wang
Jian, who in the mid-1980s was the first advocate
of economic development along the coasts, now
urges a more careful use of land. It is also
important to try to open up the western and
central areas, where there is plenty of land and
almost 1 billion people. Unfortunately, the idea
of developing the west has been around for almost
a decade but so far has produced little. But the
effort goes on. China is said to be considering
the creation of new cities along the Yangtze
river, and possibly even along the canals that
will soon criss-cross the country bringing water
from southern to northern China for the gigantic
South-North water diversion project. This process
could go further west; for example, the government
might attempt to move population and industries to
Qinghai, a province as
large as Western Europe with a population of just
5 million. However, there are many problems
associated with this kind of large-scale shift,
and political sensitivities are not last on the
list. The government is worried about how the
international community would regard what could be
viewed as a massive invasion of Qinghai - once
part of historic Tibet - by Han Chinese.
Unquestionably, bringing wealth,
development, production, and cities to the western
regions is one of China's biggest long-term
challenges. Success could create a kind of 'west
coast' of China, a shore for trade and development
with Central Asian states that could help bring
stability and welfare to that region, where
Islamic fundamentalism could otherwise become
dominant. To achieve this goal, China must learn
to cope better with the international community,
suspicious of the Han invasion of areas inhabited
by ethnic minorities; the ethnic minorities
themselves, resentful of the Han settlers; and
Muslims and local central Asian people, fearful of
Chinese domination of Central Asia.
These
are large, long-term issues that any government of
China, democratic or not, will have to confront.
But if the Chinese government were democratic -
one head one vote - it could well be more
difficult than it is today to hold the hundreds of
millions of peasants crowded in Henan, Hebei, Hunan and Hubei from storming the
deserted west, just as American pioneers swarmed
through the thinly populated prairies of the
American West in the 19th century.
In a
time of fast growth with many poor people fighting
for their chance to wealth and climbing up the
ladder of success, it would seem axiomatic to lend
a hand to signor Gini and his coefficient of
economic equality and social stability by quickly
opening up the west to fast "colonization" from
the east. This move could immediately relieve
social pressure by providing a chance and a "go
west" dream for millions of peasants.
on, endangering the social fabric of China within
the next five years, when the Gini coefficient
will have reached and passed the "red alert"
level. 
after his famed "southern trip" in the wake of the
Tiananmen crackdown, it was 0.37, and in 2003,
when further reform measures were introduced
according to China's WTO commitments, it was 0.4.
