Social unrest and upgrade of China’s economy

By Henrique Schneider

Getting rich first! The slogan leading the first in-depth analysis of the Chinese ascension to a market economy by Duncan Hewitt is today somewhat shaky. Following the press, one might readily have the impression that China is facing severe social problems, which are new to its Communist system. According to the press, strikes, boycotts, violence and even high-scale tension is today's rule in Chinese manufacturers. Its causes have been identified as the unbounded pursuit of capitalism, the oppression of the workers and their extortions; the complete absence of social welfare and of worker's rights are equally blamed. Indeed, this is the picture that is drawn almost everywhere and solidified by analysts all over the globe.

There is, however, a certain amount of doubt resting on the inquirer's heart. Never before has the Chinese social-welfare system reached so many people as it does today; never before has the Chinese working class had access to the quality of life it has today; never before have the Chinese had to work less than today. So, why then social unrest?

A rather startling explanation could be that the Chinese workers are not unhappy with today's system, but only too happy with it. Why are they protesting, then? Well, they might fear the future. The new era of the Chinese economy has been proclaimed by the party. First, it wants to upgrade the country's economy by making it a competitive place for high-tech research and development. Second, it wants to loosen parts of the social system, preeminently the Hukou system. And third, it wants to enforce some standards of ``transparency" in management. One may ask, what is bad about all this?

At first sight and from a macroeconomic perspective, there is nothing wrong with the above. It is time for China to develop a competitive edge in the higher valued goods. Equally it is time for the country to overcome its arcane structures and ideally, it is time to enforce transparency and good governance.

From a microeconomic point of view, however, these three innovations conceal a certain amount of danger for the simple worker because it threatens not only his achievements up to today but it bans him from further advancement thus making his already not too-rosy perspectives even gloomier.

Upgrading China's productive capacities first needs qualified workers to perform qualified tasks. Those protesting today are rather unqualified with a very dim chance of scaling their capacities. If the low-end production chain is lost, they lose their jobs, and therefore their whole existence, including the families they provide for.

Similarly, the Hukou system that on the one hand prevents these people form social ascension gives them a minimal welfare basis, the possibility of returning ``home" where they have family and especially where they can use the social system as provided by the state. The safety net of going home is lost if the Hukou system is abolished transforming workers into low-paid dwellers without rights on the periphery of the cities.

Even the implementation of transparency standards can be considered a danger. These standards ― whatever they might be ― could take away the workers' most valuable asset, flexibility. Most low-paid personnel quickly exchange their place of work for other, even slightly, better offers. Furthermore, they are used to working more than one job and are dependent on networks for acquiring new jobs. In the talk of transparency they see the danger of their networks breaking away and they not being able to cumulate or change jobs.

This all means that the protesting workers, although rhetorically vilifying today's structures are in reality afraid of tomorrow's system in which they might have more theoretical entitlements but less practical opportunities. If their situation today is far from good, the plans of the party and the state do not give them individually a place to which they comfortably fit. Without the knowledge and the talents, without the flexibility and without the safety-net, workers might dislike the surprises of the future.

Even if macro-economically the Chinese plans should not be disputed, on the micro level there is some apprehension. If ``getting rich first" is the strategy, it is doubtful whether workers pursue their individual chances. Here again, the question arises: Who is getting rich first?

Henrique Schneider is a traveler in Asia as well as political analyst. He works as a consultant and analyst in Vienna, Austria, and publishes regularly in German and English on economic and security issues related to China and other Asian countries. He can be reached at hschneider@gmx.ch.