19 November 2015

A Delicate Balance In Beijing

by Rodger Baker
17 November 2015

In China, a fear of social instability has long constrained government efforts toward economic and structural reform. After three decades of nearly unrestrained and uncoordinated growth, China's leaders are now facing a moment in which change is no longer simply desirable; it is a necessity. The global economic system is rebalancing, economic power is becoming more diffuse, and China's export- and investment-driven economy has, as its regional predecessors, largely run its course.

Beijing talks of a shift to an internal consumption-based economy - one less susceptible to the vagaries of international trade and overall more self-sustaining. But that is not a simple change, particularly in a country where the government is dictating that the transition take place over a very short span of time. Decades of redundancies and inefficiencies in the economy, significant overcapacity in some sectors and undercapacity in others, and a pervasive culture of local self-interest and corruption further complicate the desired transition.

Any change will of necessity lead to higher unemployment, to pockets of significant economic downturns, to changes in the overall balance of power among the Party elite. Moreover, the Party is no longer able to rely on its tool of social cohesiveness - the promise that all will get rich, even if some get rich sooner - and is instead emphasizing the economic "new normal" of lower and slower growth rates. Constraints on internal migration, expanding gaps between the interests of central and local government officials, and a middle class that is both comfortably established and focusing its attention on the next layer of social rights, particularly environmental issues, leave China prone to the very social instability that has thus far curtailed significant economic reforms.
Social Stability and Centralized Power

By many accounts, up to 500 protests occur in China each day, and anecdotal reports suggest the number is rising. Labor disputes, complaints against the actions of local law enforcement, accusations of corruption and mistreatment at the hands of local government officials, perennial issues of ethnic and religious rights, and environmental and "NIMBY" (Not In My Back Yard) issues drive many of the protests, which range in size from a handful to well over 10,000 participants. Managing public unrest presents a further challenge where local and central interests diverge. Often, economic reform dictates from Beijing are only tepidly enforced at the local level, or contravened entirely, because they could trigger local employment crises. At other times, local officials may prove too heavy-handed for Beijing's overall interests as the central government tries to reform the image of the Communist Party. But social unrest, despite its rise in China, has not grown beyond the state's ability to manage it.

The consolidation of power under President and Party General Secretary Xi Jinpingis in part a move to overcome the legacy of institutional inertia left by the consensus-based politics that Deng Xiaoping established to mitigate the vagaries of a Mao Zedong-type leadership. Consensus eliminated the ability of even the paramount leader, Deng, to take a route that led China too far off the rails. Consensus rule worked well in times of economic growth and prosperity, but it has not worked so well when tough decisions need to be made and rapid actions need to be taken.

The overall tendency of the consensus-based leadership was to avoid social instability - to ease off on any reforms or initiatives that were triggering a social backlash. The "one step forward, two steps back" sort of economic reform of the late 1990s and early 2000s was a case in point. China's leaders have long known of the need to significantly change the country's internal economic structures but have been reticent to do so, kicking the can of reform down the road or producing minimally effective reforms that pleased no one and created unforeseen socio-economic consequences. Although some leaders' personal economic self-interests played some role in this, so did a concern that reforms would lead to unemployment and social dislocation - something best avoided.

The idea of a centralized leadership is that the tough decisions can not only be made but also enforced. Xi's widespread anti-corruption campaign is part of this equation, because it breaks apart the networks of relationships within the Party that officials counted on for security and promotion. This is supposed to reverse local governments' resistance to central government mandates, with Beijing effectively accepting greater social dislocation in the short term and confident it can largely manage any instability. Internal media controls and the promotion of a stronger sense of nationalism are both tools of management, but they serve less to quell social instability than to keep it constrained.

Beijing's concern is not social unrest itself; that is a common phenomenon, and in a country where there is no other legal outlet to express frustration or disagreement, a certain number of protests can serve as a relief valve. The bigger concern is social instability that crosses regional and socio-economic barriers. Hundreds of disconnected protests can each be dealt with as local incidents, and although a few may strain local security forces, they are for the most part manageable. But protest movements with a central coordination, spreading across regions and preaching about goals that do not support the sacredness of the Party, become a more acute threat to the Party.

China has a history of semi-religious social movements, militant groups and rebellions that spring up during times of economic and political strife. From the White Lotus Society and the Taiping to the Boxers and the Falun Gong, these movements are seen as a challenge not solely because of violence (not all were violent in the beginning, and Falun Gong was never an overtly violent movement) but rather because of their ability to become competing centers of power against the centrality of the Communist Party.

The 1774 White Lotus Rebellion drew its support from barge workers and coolies generally dissatisfied with the status quo. The Taiping Rebellion, which lasted from 1853-1864, drew on multiple classes of disaffected society, all ultimately united in their interest to remove the then-ruling Manchus. The Boxer Rebellion in 1900 sprung up from among peasants and workers hurt by the worsening economic conditions in China, and while the government at first tried to co-opt the rebels in its own struggle against Western imperialism, it ultimately triggered the sacking of Beijing and accelerated the demise of Imperial China. Falun Gong perhaps scared Beijing even more for its ability to attract some 10,000 individuals to stand quietly around the government offices in Beijing. Even more troubling was the fact that membership included anyone from migrant laborers to prominent Party members.

Beijing has been known to crack down on anything - from religious organizations todirect marketing schemes - that could present a center of power other than the Party. The fear is that these organizations, even if not rebellious per se, can create cohesive entities that reject or even actively counter the dictates of the Party. In a one-party system, this cannot be tolerated. More recently, China's attention has shifted to another potential source of unifying opposition: environmentalism. China's emerging middle class is taking on some of the same issues and concerns as those in the developed world - questions about quality of life, air and water safety, and rampant factory pollution. At the same time, rural Chinese are more comfortable challenging local governments that are taking land for new factory construction, particularly targeting chemical plants and other potentially highly polluting facilities.

Environmentalism on a local level is acceptable to Beijing, but the potential for it to quickly become a broad-based movement that crosses regional and class lines makes it something the government watches closely. It is fairly easy to connect localized issues - complaints about specific factories or local officials - through the broader theme of clean air, clean water or even government-sanctioned anti-corruption efforts. The unifying links are often lawyers assisting locals in understanding the laws and regulations and their paths to resistance. During the past year or so, there have been increasing reports of lawyers detained, a sign that Beijing is growing concerned.
Political Tensions and Factions Arise

Although local governments are concerned about local protests, the central government is much less worried about the scope or even scale of instability; it is much more interested in ensuring that all protests remain local. This difference in views is adding to the existing friction between the central and local governments overall.

One of the problems with the center's anti-corruption campaign is that, at a certain point, it becomes counterproductive. The anti-corruption campaign was supposed to compel local officials to obey central dictates or face removal. Central policies have been ignored or countered too many times for Beijing's liking. For example, at one point attempts to consolidate the steel industry by shutting all factories producing below a certain threshold led to an increase in steel production rather than the closure of factories. But there are reports that now the anti-corruption drive is having the opposite effect. Rather than openly defying Beijing to protect local industry and avoid localized unemployment, officials are delaying the implementation of projects to keep Beijing from noticing that their local area is perhaps growing too fast, and thus these officials are being targeted in the anti-corruption campaigns. The coordination between the center and the periphery continues to fray.

But perhaps more troubling for Beijing is that the longer and deeper the anti-corruption campaign goes, the more likely that fear and uncertainty among Party cadre will lead to the re-formation of true factions to protect common interests. The rumors and leaks surrounding the case of Bo Xilai and Zhou Yongkang, including purported plans to usurp power from Xi, highlight the extent of the risk. A cult of personality around Xi, and the consolidation of decision-making, could give Beijing space for more rapid responses and a higher tolerance for risk, but it also leaves Xi vulnerable to accusations that he is the only one to blame for failure, or at least as a scapegoat for those whose interests are being usurped by Xi's initiatives.
Preparing for the Future

As Chinese leaders prepare for the new five-year plan and move closer to the 2017 Party congress, during which Xi's likely successor will be anointed, the intensity of competing interests will grow. All may agree that the Party needs to remain supreme, but officials are looking at a future in which the decades of promises and assurances for future economic and political influence are no longer reliable, and the unwritten agreements are no longer dependable. If one can at any moment be wrapped up in the anti-corruption campaign, and can no longer rely on the broad network of relationships to soften any punishment, then there must be other ways to ensure security after retirement. That may involve fleeing abroad - an option Xi has been working to eliminate - but it could also involve building up new networks of relationships to more cohesively resist change. Where many can be divided and played off one another, cohesive blocks may seem more resilient. But they also introduce a new level of political risk in China.

Reform is neither easy nor fast, and the central control mechanisms in China are being severely tested. Social upheaval is a given in deep reforms, and the government walks a fine line between allowing a certain amount of dissent to release pressure and preventing a unification of interests that could more readily challenge the Party itself. At the same time, the anti-corruption campaign - necessary both for economic reform and political control - could be breeding resistance at the political level. The long-delayed reforms are no longer an option; the economic crisis is here, and Beijing cannot stop its reforms because it is in a precarious position. However, it is under the curtain, in the realm of internecine politics, that the real crisis may be brewing. Social instability is a problem. Political factionalism can be destabilizing.

"A Delicate Balance in Beijing is republished with permission of Stratfor."

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