Back in 2009, in the midst of the financial crisis, some Chinese leaders issued a stark warning: if the economy failed to grow by at least 8 per cent a year then the ensuing social unrest could spiral out of control and eventually topple the Communist party.
The country’s state-owned banks, local government and companies responded with an orgy of debt and infrastructure construction, which allowed Beijing to overshoot its target and helped pull the world out of its dip.
In the first quarter of this year, the world’s second-largest economy shrank by 6.8 per cent, its first contraction since the end of the Cultural Revolution in 1976. Unemployment is soaring and growth stuttering as China attempts to be the only large country that achieves total elimination, rather than mere mitigation, of coronavirus.
Yet no Chinese leaders are warning of revolution this time, even though the economic situation is far worse than it was in 2009. Despite sharp criticism of the early handling of Covid-19, they are right to be more confident.
The concern about unrest stems from an implicit bargain Beijing offered its people in the wake of the 1989 Tiananmen Square massacre: stay away from politics in exchange for ever-rising prosperity.
By embracing capitalism, the Communist party was able to meet its end of the bargain. It achieved high levels of “output legitimacy” by improving people’s daily lives despite the nearly total absence of “input legitimacy” in the form of popular participation in deciding who governs and how.
But behind closed doors, Chinese leaders have worried for decades that their legitimacy rests too much on rapid growth and wondered what will happen when the expansion comes to an end. Since Xi Jinping took power in 2012, preparations for this inevitability have ramped up and the Communist party is arguably in a better position to handle it than at any time in recent decades, despite the pandemic and the economic downturn. Mr Xi’s construction of a vast techno-security state makes it very difficult to imagine any kind of grassroots organised resistance.
Open displays of anger towards the government’s handling of the virus peaked in February. Although there have been sporadic calls on the internet for political reform since then, the authorities have moved quickly to arrest and silence their authors.
A couple of years ago I interviewed a former leader of the Savak — the Shah of Iran’s feared secret police — in the US, where he still lives in hiding at an undisclosed location, with a price on his head. He remains certain that if the Shah had taken his advice and resolutely crushed the 1978 uprising in its early stages, the Iranian revolution would not have succeeded. Mr Xi seems to have taken that lesson to heart: whatever else you say about him, he cannot be accused of being irresolute on quashing dissent.
Nonetheless, China’s spike in unemployment is a serious concern for its leaders. The official unemployment rate is just 5.9 per cent but government statistics do not capture most of the migrant workers who have lost their jobs during this crisis. Independent estimates put the real unemployment rate as high as 20.5 per cent.
These tens of millions of unemployed migrants do not pose a potent threat to stability because of a two-tier citizenship structure that Beijing refuses to reform, at least partly for this reason.
In China, all citizens are designated at birth with either an urban or a rural “household registration” that is very hard to change. The vast majority of internal migrant workers are peasant farmers who travel to the cities to work in factories and restaurants or drive delivery vehicles. They are not entitled to the benefits provided to urban citizens. If they lose their city job they mostly return to their hometown or village where, in the absence of a proper social safety net, they can at least grow enough food to eat.
That means China does not have enormous slums filled with landless poor like in India, Brazil or Indonesia. The set up also ensures that disenchanted people will disperse across the country before mobs can form. Meanwhile, the urban middle class remains the prime beneficiary of China’s rapid growth. They are entitled to basic social welfare and can be mollified with further handouts. They are also unlikely to rebel now.
Since February, the Communist party’s image at home has been helped immeasurably by the disastrous virus response from other major countries, especially the US and UK. Shrill rhetoric from US President Donald Trump’s regime, blaming China for the pandemic, has helped Beijing build solidarity and nationalism. Though some in the west wish China was on the cusp of open rebellion, they are likely to be disappointed.