Is China Really rising?

A look ahead to the challenges of China’s 2012

Europe is staring at recession, fuelled by continued turmoil over the euro. The US economy is lagging and its politics paralyzed. India has seen a sharp fall in industrial production and confidence. In contrast, China is still registering over 9% growth and, in a demonstration of its technology and ambition, will send astronauts into orbit next year to bring a Chinese space station a major step closer.

China is in the ascendancy. But beneath the surface, it has its own challenges. And while Western policy makers focus on what this rise means for China’s role in the world in 2012, the country itself will be increasingly preoccupied with managing its internal political, economic and social growing pains.

Politically, the next year will be dominated by the 18th National Party Conference which will usher in the next generation of the Communist Party of China’s (CPC) leadership. Seven of the nine members of the Politburo Standing Committee, China’s head decision-making body, will be replaced. Who takes over and which faction dominates will shape the country’s direction.

At present power is shared between the Shanghai-based, pro-market, pro-growth faction and Hu Jintao’s more orthodox populist wing which is pushing for tougher central control. Vice President Xi Jinping, who is economically liberal, is widely tipped to succeed Hu Jintao as President. Despite his elite background as the son of a former deputy prime minister, he has widespread popular support for the time he spent working in rural China.

But it is also expected that Vice Premier Li Keqiang, a close ally of Hu who wants to direct economic development away from coastal regions to promote social harmony, is expected to succeed current Premier Wen Jiabao. This combination would suggest the current balancing act will continue, bringing stability despite the wholesale changes at the top.

The increasing political power of the People’s Liberation Army (PLA), however, cannot be ignored. The PLA enjoys popular support both for its more assertive nationalistic stance and for the rescue role it has played in natural disasters such as the 2008 Sichuan earthquake. The Government’s determination to modernize the military has also handed it a much larger budget, partly funded through PLA-owned and run businesses. But China’s tradition of civilian rule is extremely strong. Its political leadership has also been alert to the dangers of excessive popular nationalist tendencies in respect of China’s foreign policy and economic ambitions. The PLA seems certain to be kept in its place.

Economically, the position is less certain. Although Western politicians may look at China’s economy with envy, projections of China’s growth for 2012 are set to be the lowest for over a decade. Rising labour costs are squeezing profit margins in the manufacturing sector, forcing factories to move to cheaper locations elsewhere in South East Asia. These moves have led to angry protests.

China is also seeing signs of the same property asset bubble which has caused such damage to economies in the West. Below inflation returns on savings in China’s undercapitalized and insular banks has led to property being seen as a safe haven. This property boom was further encouraged when the Government increased spending on construction at the outset of the 2008 financial crisis. With housing prices having jumped 70% since 2000, China’s Government is now faced with the unenviable task of trying to rein in property demand and prices while avoiding job cuts in the construction sector.

Nor, of course, has economic prosperity benefitted everyone equally. Chinese citizens share global anger at widening income gaps, made worse in China by restrictions on rural residents moving to cities. These economic frustrations are the most obvious signs of a wider unease caused by a population struggling, in many cases, to adapt to a society changing at breakneck speed.

The public has been increasingly vocal about their unease. So-called “mass incidents” – characterized by the government as demonstrations of 100 or more people – have risen tenfold since 1994 with more than 100,000 protests recorded in 2011. Despite the failure of this tactic in many other parts of the world this year, the CPC is trying to keep the lid on discontent by tightening censorship.

The Government already employs more than 50,000 censors and seems determined to monitor the internet increasingly closely to prevent popular demonstrations in the run up to the Party conference. It is, however, far from certain this will be any more successful in China in deterring citizens from voicing their concerns. Watchdog journalism, known as “supervision by public opinion”, is on the rise. The traumatic Wenzhou train crash in 2011 saw a spike in angry posts demanding an explanation for the tragedy. Bloggers are also increasingly adept at finding ways of getting past government firewalls and devise code names for forbidden words or events.

The result is that Chinese citizens are demanding answers from their Government as never before. They want to know, for example, why so many elementary schools collapsed in the Sichuan earthquake when many Party buildings remained standing. They are questioning why it is fair that rural residents are prevented from moving to the city for work, cutting them off from the rising prosperity enjoyed by their urban counterparts. Pointed questions have also been asked about a legal system which led to 18 bystanders refusing to help a two-year-old girl hurt in a car accident for fear of being held responsible for her injuries.

Du Daozheng, a former Chinese censorship official, has compared the current climate to a “pressure cooker”. If China wants to continue its success, it needs to be much franker with its citizens about the challenges which must be overcome to develop its economy and society in the 21st century. It is not just Europe and America which face big tests in the coming year.

Kristen Robinson is a Researcher on Portland’s International Affairs Team. She previously served as Publications and PR Manager for the Shanghai German Chamber of Commerce and worked for the U.S. Department of Agriculture’s Shanghai trade office.