by NOAH SMITH/ pic by AFP
2019 will be remembered as a year of protests. Unrest erupted in Hong Kong, India, Chile, Iran, Spain and many other countries.
But at least one country has conspicuously refused to join in the fray: Mainland China. There is always some background level of mass demonstration in the People’s Republic, and there have been a few reports of minor incidents, such as a demonstration against a construction project in Guangdong province in November. But overall, domestic Opposition to the government of President Xi Jinping remains muted.
The Edelman Trust Barometer, which measures the public’s trust in various institutions, ranked China the most trusting among all nations surveyed. The Hong Kong protests have evoked little sympathy on the mainland, at least overtly. And surveys find that most Chinese are optimistic about their country’s future.
Perhaps China’s citizenry is simply convinced it’s best to stay quiet and make money. There has certainly been plenty of money to go around.
China’s per capita income is over 10 times what it was in 1990. Although the regime is often repressive, that might be seen as a small price to pay for taking the country from indigence to middle-income status in just two generations. Many see China’s system as an implicit bargain — material wealth in exchange for political quiescence.
But this bargain might be reaching its limits. The first reason is slowing growth. As of 2011, China was still barrelling ahead at 10% growth a year, but that fell to around 7% over the next half-decade.
Now, a confluence of factors — the trade war, a crackdown on shadow banking and an ageing population — are pushing growth even lower: The actual growth rate might be slower still, given China’s tendency to inflate its numbers.
Industrial output growth has fallen even more sharply than GDP, as have other growth indicators.
Morningstar’s China economics team believes China is only growing at 3%.
Slower growth means fewer employment opportunities for China’s youth. It means that a populace that took rampant growth for granted will know their first taste of disappointment. It will mean a wave of defaults, wiping out savings for investors used to getting guaranteed returns. And it means that the houses into which many families have poured their life’s savings will appreciate less than expected.
This sets the stage for a phenomenon known as a revolution of rising expectations. Where a populace mired in long-term stagnation might accept its fate as normal, one that has never known anything but rapid growth may feel enraged when that growth slows. When they suddenly see their imagined future snatched away, people can become enraged. Slowing growth may have exacerbated the unrest in Chile, India, and elsewhere.
The second potential catalyst for Chinese unrest is inequality.
Economists Thomas Piketty, Li Yang and Gabriel Zucman estimate that the shares of national income and wealth taken in by China’s top 1% have soared since the turn of the century. Just two decades ago, China was a very egalitarian country, on par with France; now, its inequality levels are closer to that of the US.
By some estimates, China minted two billionaires a week in 2017. The children of the nouveau rich flaunt their wealth online.
When the rising tide of 10% or even 7% annual growth was lifting all boats, this might not have bothered China’s middle class. But once the masses are watching their dreams evaporate, the vast fortunes of the country’s titans of industry may start to rankle.
To this, add the increasingly authoritarian tenor of the Chinese government. In the province of Xinjiang, the Muslim Uighur minority is living under a state of siege, rounded into detention camps and monitored constantly by the authorities.
Christianity and Judaism are being repressed as well. Facial recognition has become ubiquitous, enabling new forms of social control.
The suppression of online speech has only gotten more severe.
So China’s grand bargain — growth in exchange for popular quiescence — may now be looking a bit less grand. With growth slowing, inequality rising and the government becoming more repressive, pressure might be slowly building for China’s youth — who have no memory of the Cultural Revolution or Tiananmen Square — to emulate their counterparts across the globe and take to the streets. All it might take is a spark. — Bloomberg This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.