Monthly Archives: May 2009

With a total population of 1.3 billion and a historically unprecedented level of economic growth, it is easy to see how projections suggest that China will soon be the largest economy in the world. Even in recession, China continues to grow at “only” 6% per annum. The country is sitting on over $2 trillion in cash reserves which the government is spending on yet more infrastructure projects to add a stimulus to the economy. Their banks are actively lending and their shops and malls are packed.

But looks are deceiving; just below the surface there is a quiet sense of unease. China, like virtually every country in the world, has been hard hit by the current financial crisis. Over the last twenty years millions of workers moved from the countryside to the cities. For example, one in four residents of Beijing is a migrant from the countryside. But now, tens of millions of jobs have been lost, causing yet another mass migration, this time back out to the countryside. The problems that China faces are immense and every bit as daunting as the rest of the world is today facing – even bigger and more complex. Their 6% growth rate is hardly sufficient to maintaining stability and social order.

Their problems are such that the entire system of governance that has brought them to this point is under threat. For all of our problems, President Obama and Joe Biden do not have wake up in the morning worried that the legitimacy of the Presidency is at risk. Hu Jintao and Wen Jiabao must worry about the future of the Communist Party. For decades now, the Chinese social contract has been very simple: we will give you economic prosperity – you keep quiet about political issues. While the next few years should remain calm, the clouds are there on the horizon.