Global Implications of China’s Challenges – Part II

STOCKHOLM: During the last few weeks of December, the Guangdong village of Wukan, located some 200 miles northeast of Hong Kong, earned a place in the history books. Outraged by the death of a local leader in police custody following angry protests against land grabbing and corruption, villagers drove out Communist Party and government officials, refusing to yield unless their demands were met.

In a sense, there is nothing unique about the Wukan event – one of the tens of thousands taking place in China – but it catches in a microcosm multiple elements of China’s evolving drama and is a serious reminder of the widening gap between the CCP and the people. As the protests spread to other towns and with the whole world watching, the party had no choice but to negotiate a compromise and Guangdong’s reform-minded Party Secretary Wang Yang, dispatched his immediate deputy to reach an agreement with elected protest leaders.

After a deal was reached, Prime Minister Wen Jiabao in Beijing declared: “We can no longer sacrifice farmers’ land ownership right to reduce urbanization and industrialization costs.” The prime minister was touching a raw nerve in the system. According to recent estimates, land grabbing may generate 40 percent of local government incomes, in addition to being a major source of corruption. The problem has grown more serious as construction has expanded to levels rarely seen anywhere in the world. Recent estimates put China’s property construction at 13 percent of GDP.

As a consequence, land prices have been rocketing, as developers have acquired ever more land for investments, creating their own land banks. However, during the last few months the bubble has begun to burst as housing and land prices have fallen, leaving land auctions without bids. For local government, a major source of income is threatening to dry up.

In sum, the Wukan incident and the ad hoc manner in which “mass incidents” are handled raise fundamental questions about accountability and governance.

The number of what the Chinese authorities call mass incidents has risen from 84,000 in 2005 to some 180,000 in 2010. The CCP’s policy has been to isolate such protests and contain any attempts at larger scale organization. This strategy is, however, becoming increasingly difficult. The digital culture – the internet, and in particular Weibo, a micro-blogging site similar to Twitter, and cell-phone cameras – is tearing down boundaries in time and space. In the last two years, the number of micro-bloggers went from few to more than 300 million. A convergence between what’s happening off and on line seems inevitable, though the Communist Party is doing its utmost to block this connectivity.

In the light of these developments, it’s useful to examine the three schools of thought on Chinese authoritarianism among sinologists since the early 1990s: the democracy school, the collapse school and the resilient-authoritarianism school.

In recent years, the third school of thought has come to prevail. According to this school, the system has simply proved itself to be much more flexible, and efficient than its critics have claimed when predicting its collapse. More than 30 years of growth at an average of 10 percent speaks for itself.

A few months ago, Elisabeth Perry and Sebastian Heilmann, both belonging to the resilient – or “adaptive” – school, released a long awaited edited volume, Mao’s Invisible Hand – The Political Foundations of Adaptive Governance. The title is explained by their argument that a Maoist-inspired “work style,” a “guerilla policy style” based on ideological control and mass mobilization, still is playing a role. Their point of departure is that no explanation of Chinese resilience thus far has been very convincing. They assess that “far from decrepit, the regime – having weathered Mao’s death in 1976, the Tiananmen Uprising in 1989, Deng’s death in 1997, and large-scale ethnic riots in 2008-9 – seems over time to have become increasingly adept at managing tricky challenges ranging from leadership succession and popular unrest to administrative reorganization, legal institutionalization and even global integration.”

The authors are eager to stress that they don’t claim to predict the future, just explain the past. Still, during the next few years, their views will be tested, as China enters complex years of leadership transition and mounting domestic and international challenges.

In their book Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise (2011), Carl E. Walter and Fraser J. T. Howie, argue that the Chinese party-state is increasingly dominated by “special interest groups,” foremost by a “National Team,” a “gamechanger in China’s political economy.” At its core, this team consists of elite party and commercial interests centered around the large, monopolistic state-owned enterprises, SOEs, or National Champions. These “National Champions, their family associates and other retainers plunder the country’s large domestic markets and amass huge profits,” according to the authors.  Former premier Zhu Rongji’s vision of a country opening up to international competition has, as they see it, “faded from sight.” The authors do not predict a collapse, but paints a picture of a clearly unsustainable state of affairs.

It is difficult to believe, that the two writers and Justin Yifu Lin, the Chinese chief economist of the World Bank, are writing about the same country. In his 2011 book, Demystifying the Chinese Economy Lin – the first Chinese to hold such a high position at the Bank – concludes that “China has great potential to continue the current dynamic growth for another two decades or more.”

Lin bases his argument on the theory of the potential advantages of backwardness and the fact that Japan, Taiwan and South Korea grew at such pace for two decades from the time when they were at China’s current per capita income. While expressing deep concern about the lack of state-enterprise reform and China’s growing disparities, Lin is confident that the CCP will navigate the pitfalls, clearly regarding the system as resilient.

There is obviously a great need for comprehensive efforts to explore China’s future, and David Shambaugh, one of the world’s leading authorities on China, has done so by editing Charting China’s Future – Domestic and International Challenges (2011). Though rich in content, the volume still leaves a feeling of not being entirely on the pulse of current complexities: Regarding the CCP, Kjeld-Erik Broedsgaard writes that “in recent years a renewal has taken place.” Rod Wye seems closer to current realities when talking about an increasing “air of divorce from reality about the political system.” Rachel Murphy has an excellent grasp of civil society and media, but suggests that “the party-state maintains a firm grip on the parameters of permissible conversations in the public sphere.”  A reader must wonder why micro-bloggers go unmentioned. Two years from now, their number may exceed 500 million.

Shambaugh concludes the volume by writing that “the only thing that is completely predictable about China’s future is the unpredictability.”  Still, he does share one safe prediction – the adaptive capacity of the CCP will be profoundly tested in the next few years.

At a recent Harvard event, China scholar Tony Saich described change in China as “like a ball bouncing down a hill, moving faster and faster.” The fifth generation taking over power in China in 2012 must show great agility to keep pace.