Interesting times in China 2009

We live in interesting times.

What will 2009 bring to China? How will the economic crisis affect China and her relations with the rest of the world?

Although I don't pretend to have all the answers, as an expatriate who has lived and worked in China for five years now, I figure that I am just as qualified to comment on China's current status as all the other academics, authors, columnists, and economists who got it so wrong in 2008.

The top-down approach of these experts, although necessary and valuable, is limited. This perspective views China's complex society through the prism of Beijing's politics, Shanghai's skyline, and Shenzhen's factories. As a consequence it has not been as inclusive as it should have been. China is more than the sum of these key factors.

The big-picture window

China is not one dimensional. China is a complex and sophisticated society which is difficult to make sense of at the best of times, despite the plethora of books published by western experts on how to understand and/or do business in China.

Big pictures sometimes reflect one's own illusions. Top-down perspectives miss the detail. I've read it all: from predictions of the Communist Party's demise post Tiananmen Square, to economic implosion before 2000, to widespread social unrest before the 2008 Olympic Games. And now look at what has happened: it is the USA rather than China which is in serious difficulty.

The truth is that there are no templates or text-books to guide and inform foreign observers on what is happening socially and economically here in rising China today. The situation here is different from that of other rising powers throughout history such as England, Germany, Japan and the USA. Believe it or not, it really is socialism with Chinese characteristics. It's a new model.

Meanwhile, the central government in Beijing is breaking new ground as China continues its remarkable drive towards developed nation status.

Western experts will write their definitive books on China's rise after the event, and not before.

A bottom-up perspective

In my opinion, a bottom-up as well as a top-down perspective might be the way to attract the ordinary westerner’s attention and satisfy his curiosity. It might also help him to understand China better.

Although my own perspective is informed by big-picture analysis, it is also shaped by the bottom-up reality of daily life here in the largest city in China, Chongqing (Pop: 6.5 million). This municipality (Pop: 31 million) is situated in the less developed hinterland of the Middle Kingdom on the banks of the Yangtze River above the Three Gorges dam. It is 1,600km west of Shanghai, and is the Beijing government's hub for growth in China's western regions.

This is mainstream China where there is tradition as well as modernity, countryside as well as city life, minority peoples as well as Han Chinese, and earthquakes as well as infrastructure.

It is also home to many migrant labourers who relocated to the construction sites and factory slums of the coastal boom-towns a few years ago. These are the hard-working humble folk whose cheap labour has built modern China.

Now, those who have lost their jobs in the coastal boomtowns are returning to their farms and villages in the countryside. Their anger and disillusionment has been a worry for the government which has directed local authorities to be pro-active in managing social instability. So far there is no news of any major demonstrations of discontent.

The possibility of large-scale social instability has diminished, however, as people realise that the government is managing this downturn better than was previously thought. The migrant workers seem to have disappeared back to where they came from, and from what I see, nobody seems to care too much about their fate. I think that this issue is a “sleeper”, however.

Middle-class folk who had been concerned about job security, their future, and whether or not they would be able to maintain their current lifestyle have relaxed a little as they see the value of their houses rise slightly due to increased demand as a result of easier credit. Although many investors had lost a lot on the sharemarket last year, they are happy now that Chinese stocks are at last heading north again. And of course, the government's fiscal stimulus program is having a positive effect in this developing region of China.

Their children are worried though. This year's graduates are going to have a tougher time than usual in finding employment. And the word on the street is that there are also fewer skilled and semi-skilled jobs around.

The good news for the central government is that the social contract is holding. That is; if it continues to manage the economy well, the people will continue tolerate its monopoly on power.

If it all turns to mud, however, then that is another story.

Mainstream China

Mainstream China is different from Beijing, Shanghai, and the rest of China's showcase cities. You get a different perspective when in China.

Few foreigners live in these places, thus life here is authentically Chinese. For example, my colleagues and friends are Chinese, my wife is Chinese, and my environment is boots-on-the-ground Chinese reality (I wipe the mud off them every day before I enter my apartment).

There are no English language newspapers, no western television programs (just the international CCTV9), and no clubs for foreigners. So I watch Chinese TV, get my news from the Chongqing Daily and from the internet, and socialise with Chinese colleagues and friends in local restaurants and tea-houses.

I hear what the Chinese man-in-the-street is saying. He reads between the lines and forms his own conclusions about what is happening around him. He is no fool, and is skilled at interpreting all the signs. What the Beijing government does not say is just as important as what it does say.

Until the economic crisis, these good folk would complain about the effects of rapid social and economic change on themselves, their careers, and their families. It is different now. They have stopped complaining. Now there is silence and deep thought. These ordinary Chinese are confronted with something they have never heard about, let alone experienced before: a western-style capitalist recession.

Nothing in their recent history has prepared them for this. At least we westerners know what to expect from a recession. We understand that recessions are part of the capitalist cycle. As far as they are aware, a capitalist cycle could be a bicycle made in the USA.

The Chinese middle-class however, had presumed that the 9-11 per cent per annum growth rates of the last 30 years would continue forever. However, middle-class folk here are on a rapid learning curve, and they appreciate the fact that China is in a better economic position than the West.

They also understand that this crisis was precipitated by Wall Street, and not by anything their own government did or did not do. In fact they are feeling some pride in China's current economic position relative to the West.

Key point: there is no blame being directed towards the central government. This means social stability for now.

Understanding Beijing

The central government's legitimacy is dependent on what it can deliver to its people. Communist ideology is dead, money is the new God, and if the central government can't maintain the living standards of the new middle-class, it will have trouble on its hands.

And that is not considering the needs of 800 million poor people in China who have not shared in the new wealth, who are effectively disenfranchised, and who may one day express their discontent in the only way known to them: via widespread social disorder.

This is why President Hu Jin Tao and Prime Minister Wen Jia Bao have talked so much about a Harmonious Society. They fear this possibility and the threat it would represent to the ruling elite.

At the geopolitical level, their nightmare scenario is national disintegration. This is why Taiwan and Tibet remain non-negotiable issues.

There are many issues such as these which influence policy in China. Issues which are often misunderstood by the West, and which provoke the “knee-jerk” self-righteous reactions of some segments of western society. These reactions are counter-productive. There are better ways to encourage change.

If we hope to engage productively with this rising power, we westerners need to understand this ancient and complex society. Believe me, China is different.

Earthquake, superstition, and politics

My more superstitious friends have an interesting spin on the recent earthquake which occurred nearby on May 12 (2008) and its relationship to modern politics.

In the old days, natural disasters on this scale were believed to signal dynastic change. The last time this happened (in the mid 1970s), Chairman Mao died, the Gang of Four were toppled, and regime change was the result. Deng Xiao Ping became paramount leader, and he changed China forever.

Now they wonder what will happen this time.

Mainstream, middle-class people are adjusting their perceptions of the world around them. Old templates of reality are being shown to be exactly that: old and out of date. The new template of materialism is being challenged by harsher economic times. One wonders what lies ahead for this industrious, intelligent race which has endured so much in the past.

Surely they will survive and prosper. We hope so anyway.

China today is the largest social, economic, and political laboratory in the world. And here I am, living in the middle of it. There are many stories to tell.

Interesting times indeed.