Carlos Barria / Courtesy Reuters Members of the new Politburo Standing Committee wave to the press in Beijing, November 2012.

China's Risky Reforms

Why Beijing Has Reason to Worry

Almost three months after the Third Plenum of China’s 18th Party Congress, the world is still trying to divine the country’s political future. The plenum communiqué, a road map for planned reforms over the next few years, raised as many questions as it answered. Chief among them: How will China’s economy, its political system, and its society interact in the wake of new reforms -- in harmony or with increasing friction?

As many commentators have pointed out, one major outcome of the meeting was the Chinese Communist Party’s decision to make market mechanisms “decisive” in the economy. The primary aim of such reforms, of course, is to prolong party rule. Since crushing the citizen and student movements of the 1980s -- culminating in the 1989 crackdown in Tiananmen Square -- the CCP has depended on economic growth to ensure stability. To guarantee the party’s continued staying power, its leaders must have realized that it was time for a new growth model. But they must surely have also understood how much is at stake: The reform could dislocate large swaths of society, including migrant laborers, university graduates, and disgruntled civil servants. Government control of the economy has been a central pillar of its political authority; liberalizing China’s volatile market will require the party to walk a thin and perilous line.

Accordingly, the decision to free up China’s economy came alongside the announcement of a new “state security committee” -- a domestic and foreign security organization that will coordinate and oversee China’s national security affairs in ways comparable to the U.S. National Security Council. Headed by General Secretary Xi Jinping, the committee represents a further consolidation of power in the hands of China’s security sector and Xi himself. The move can only mean that Beijing is planning for a host of possible crises related to potential socioeconomic ills and ethnic tensions by bolstering its power to crack down on popular dissent.

That comes on top of other efforts to assert greater control over society. Last year, for example, Beijing tightened the noose around microbloggers with large followings on the Twitter-like Sina Weibo platform. Well-known bloggers such as Kai-Fu Lee (a venture capitalist) and Pan Shiyi (a business magnate) have recently had their accounts suspended or rebuked for irresponsible comments about air pollution, corruption, and government censorship. And this year, the trials of civil rights lawyer Xu Zhiyong and members of his New Citizens Movement also indicated that, although the party is intent on liberating the economy, it envisages no such liberalization for China’s restless civil society.

The party and its backers, moreover, continue to trumpet a neo-authoritarian model of governance. Last January, the Communist Party’s nationalistic mouthpiece, the Global Times, published an op-ed by the scholar Wang Zhanyang that praised Xi by counting China as “historically lucky to have a strongman during a nation’s transformation era.” He was referring to Deng Xiaoping, who paved the way for China’s economic opening in the 1980s. Yet the ideas for neo-authoritarian governance originally came from Zhao Ziyang, the former CCP general secretary who was put under house arrest in 1989 for his progressive reform ideas and sympathies toward the Tiananmen Square protesters. Zhao and his aides had looked to the developing East Asian markets -- among them South Korea and Singapore -- as models for a modern China. They even envisaged democratization after a period of strongman rule. But for three years after Tiananmen, Deng stepped in to perform the role of the neo-authoritarian, embracing economic reforms while dismissing political ones. 

Now Xi plans to rebalance the economy while keeping tight control over society. It thus looks unlikely that he will usher in more inclusive politics at a later stage; the Third Plenum effectively erased any remaining hopes that he might undertake meaningful political reforms. As his hardball diplomacy with Japan and the Philippines suggests, Xi’s politics are of a bolder breed than that of his meeker predecessors, Hu Jintao and Jiang Zemin. Yet that style may come back to haunt him: His neo-authoritarianism is severely out of step with the social and technological transformations that are sweeping China today.

MONETIZING HAPPINESS

Many Chinese leaders believe that soaring economic growth is what allowed the CCP to regain the legitimacy it lost after the political repression of the 1980s. That is why the government has so successfully encouraged (if not compelled) the people to stay out of politics and focus on making money. Today, a market-oriented party dominates China’s formal political process and has been able to defeat the political challenges that occasionally pop up from civil society.

Yet a number of trends suggest that this political order could soon unravel. Popular perceptions of the party’s legitimacy say nothing about people’s actual quality of life. Are the Chinese happier today than they were before? In theory, rising living standards should generate more life satisfaction. The evidence, however, suggests that has not been the case. According to the World Values Survey, the percentage of Chinese who describe themselves as very happy plummeted from 28 percent in 1990 to 12 percent in 2000. And China ranked 93 on the 2013 UN World Happiness Report, despite economically outperforming many of the countries ahead of it. When the German political scientist Christian Welzel and a team of researchers recently attempted to explain why, they pinpointed what they called the government’s “monetization of happiness” -- in essence, its efforts to peg popular satisfaction to income levels. Although China’s average living standards rose over the past decades, most citizens emerged from sustained periods of economic growth as poorer relative to those above them, creating masses of “frustrated achievers.” That is, even China’s middle and top earners felt slightly less satisfied with their lives over time; although their absolute wealth increased, their relative wealth diminished.

The new package of economic reforms is thus a huge risk. If the property market implodes in the absence of government controls, which is quite likely, the collective losses would be massive. And China’s Gini coefficient, a key measure of inequality, is already at an all-time high. Taken together, rising inequality, declining levels of happiness, and the continued suppression of social activism could translate into a major political challenge for Beijing. And there is much to suggest that the Chinese would not be shy about making known their dissatisfaction; in just 2011 alone, the country saw a staggering 180,000 protests. 

With the rapid modernization of Chinese society and the increasing use of digital communications, government crackdowns are likely to prove counterproductive. Many Chinese now communicate and monitor government activity using online networks beyond the state’s control. And despite continued government surveillance and censorship, social media use in China has continued to grow. Experts, including Google Chairman Eric Schmidt, see this trend continuing. And in the event of economic decline, such technologies could surely mobilize people to take part in large-scale demonstrations.

Meanwhile, the country’s civil society is only growing stronger; according to official statistics, the number of registered Chinese nongovernmental organizations has increased from a mere 4,446 in 1989 to more than 490,000 at the end of 2012. According to the Hong Kong-based scholar Wang Shaoguang, there were already eight million underground social organizations back in 2004. 

If Xi makes the market materially more decisive in Chinese society, then, he will be playing with a combustible mix of absolute losers and frustrated achievers. If large numbers of non-registered associations and urban advocacy leaders go offline in order to avoid state surveillance, the state would, in effect, be driving a phenomenon it desperately wants to prevent: the growth of a shadow civil society. In Taiwan during the 1980s, a similar phenomenon occurred. Underground social and religious associations then suddenly came out into the open -- following years on the margins of official society.

Instead of preparing the state for a potential confrontation with society, Beijing should contemplate an alternative route. To placate the public, the government must draw its critics out from the shadows and into a public debate about rebalancing the economy and the role of monetary success in Chinese society. Ultimately, this path may prove more successful in securing a stable, prosperous, and harmonious Chinese society than Xi’s neo-authoritarianism ever could.

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