China Watcher: Confessions of a Peking Tom

Epilogue

292 Epilogue The onset of global recession in the second half of 2008 brought a good deal of uncertainty and stress to the Chinese economy. With foreign demand for Chinese manufactured goods dropping sharply toward the end of the year, tens of thousands of factories along China’s eastern seaboard were shuttered, leaving upwards of twenty million workers, most of them rural emigrants, unemployed and without an adequate social safety net. In many cases, factory owners simply padlocked their gates and skipped town without notice, leaving their workers unpaid and angry. In Dongguan, a major coastal production center near Guangzhou, almost half of the city’s 3,800 toy manufacturers went out of business in the winter of 2009. By spring, unofficial estimates placed China’s urban unemployment rate at close to 8 percent—twice the government’s official figure. Meanwhile, projections of China’s GDP growth for 2009 slid downward, from 12 percent to 8 percent. For years the conventional wisdom among political economists has held that given China’s extreme polarization of wealth, inadequate welfare net, and oversupply of unskilled labor, a GDP growth rate of less than 8 percent annually would produce a sharp increase in the likelihood of social unrest. PRC leaders have not been oblivious to this risk. In an effort to jumpstart China’s ailing economy, the central government in December 2008 announced a new ¥4 trillion ($600 billion) stimulus package designed to increase public spending on infrastructure projects and social welfare. To put more money into circulation, central bank regulators lowered interest rates and instructed local branch managers to lend more money to thou- epilogue 293 sands of firms struggling to survive in the face of reduced exports. At the same time, local governments in some areas handed out cash vouchers to new car shoppers and first-time home buyers. And in January 2009, Beijing unveiled a three-year, ¥850 billion ($123 billion) program to build a network of rural hospitals and clinics and to provide rudimentary national health insurance. By the fall of 2009, the massive surge in government spending, together with sharply relaxed controls on credit and lending, succeeded in halting , if not totally reversing, China’s economic slide. Employment in the construction industry rose; padlocked export firms began reopening their doors, using preferential loans secured at below-market interest rates; and housing and new car sales recovered to near pre-recession levels. Thirdquarter economic growth was estimated at 8.9 percent—a substantial recovery from the worrisome first-quarter figure of 6.1 percent. Notwithstanding such apparently healthy numbers, however, economists were divided on the structural soundness of the recovery. Some worried that the lion’s share of stimulus money was flowing not to households in need, but to “crony capitalists” with close ties to government officials. Others were concerned that too little was being done to reorient the Chinese economy away from an over-dependence on export growth toward greater emphasis on stimulating domestic consumption. Though expert opinion was divided on the costs and gains of China’s Keynesian stimulus, the potential for social unrest remained worrisome. Early in 2009, government spokesmen bluntly warned that the country was entering a period of increased hazard. “Without doubt,” said one official , commenting in the January issue of the authoritative Outlook magazine , “Chinese society in 2009 will face even more conflicts and clashes that will test the ruling capacity of the Party and government at all levels .” To guard against spreading unrest, Chinese leaders stepped up their security precautions. Tibet was sealed off to tourists and journalists, and a fresh clampdown on liberal bloggers, investigative reporters, political dissidents , and civil society activists was vigorously—and at times violently— enforced. Adding to the political stress was the conjunction in 2009 of several important political anniversaries, including the sixtieth anniversary of the PRC's founding, the fiftieth anniversary of the 1959 Tibetan rebellion , the twentieth anniversary of the Tiananmen crackdown, and the tenth anniversary of the suppression of the Falun Gong. In China, politi- 294 epilogue cal anniversaries have often been focal points for organized protest, and the authorities were leaving nothing to chance. In anticipation of rising turbulence, the CCP early in 2009 created an elite national task force to oversee security preparations during the anniversary year. To underline the task force’s importance, it was placed under the overall command of Vice President Xi Jinping, widely regarded as the presumptive...