Recently, it seems no developing country is safe from sudden, unexpected protests. In Brazil and Turkey, empowered middle classes pushed back against perceived governmental injustice; protests erupted, and leaders’ approval ratings dropped precipitously. In Egypt, the economic picture was as ugly as the political one, and the military’s ouster of President Mursi has fomented conflict and instability.
China may look like a candidate for the type of protests currently sweeping the developing world. Not only is a newly empowered middle class demanding better services and more accountability from government — growth has also tapered off in recent quarters. Don’t hold your breath. At least for the time being, China is well-positioned to navigate such challenges far better than its emerging market competitors.
How Much Slowdown Can Beijing Tolerate? | The Diplomat
The question on the minds of most people is how much of a slowdown Chinese leaders can tolerate. Many people, including senior government officials in the West, seem to believe that Beijing will not allow its GDP growth per annum to fall below 8 percent (sometimes one also hears 7 percent as the magic number) because growth below that line is supposed to trigger social unrest. Typically, those who place a lot of faith in this number argue that unemployment will explode once growth stalls. For a government obsessed with domestic stability, that would be a nightmare.
While seemingly persuasive and plausible, the widespread notion that there is one magic growth number that will trigger panic in Beijing is simply a myth.
One reason to dismiss the purported connection between growth and unemployment-based social unrest is the divergence between growth and employment in the Chinese economy in recent years. Because of its investment-driven growth model, China’s economic expansion has been capital-intensive but labor-light. Modern power plants, steel mills, toll roads, and ports are expensive to build, but require a small number of workers to operate. As a result, each additional yuan invested in the Chinese economy is generating fewer jobs. This disconnect between investment-driven growth and job generation can be seen in these numbers. Between 2004 and 2009, Chinese investment in equipment and plants quadrupled, but the number of manufacturing jobs increased only by 15 percent.Sponsored Ads
If Chinese leaders are worried about the GDP slipping below 8% then that is what matters. What will they do? Will they employ a more aggressive foreign policy to compensate? I think they have already answered that question with a yes. Also, the decline in the economy is just one more problem added to a list of many problems for Chinese leaders to cope with.
The potential consequences of China’s economic slowdown
The initial thoughts of declinism among Chinese leaders provide an alternative explanation for China’s assertiveness. While optimists can simply wait for a better future, pessimists need to exploit the image of the rising China to their advantage. The prospect of decline creates an incentive for Chinese leaders to grab what they can while they can. Overconfidence certainly is dangerous in international relations, but a pessimistic Chinese leadership can be more threatening than an optimistic one.
It is not advantageous to admit that your nation’s power will decline, and so signs of declinism among Chinese leaders may be hard to detect. But the Chinese Communist Party has many reasons to worry about the future. China has been benefiting from its demographic structure, with a large working-age population and relatively small number of young and elderly dependents. China’s labor force, however, has already begun to shrink, a process that will accelerate from around 2020, leaving a large number of retirees.
The Chinese economy must also overcome the middle income trap, inefficiency of state-owned enterprises, corruption and environmental problems.
With all challenges the Chinese leaders will face, declinism in Beijing may palpably impact upon domestic and foreign policy sooner than present optimism dares to hint.
YouTube videos on next page.
Continue reading Will China’s slowing growth lead to unrest? | Ian Bremmer