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Saturday, February 4, 2017

The New China

It is not the same China you grew up knowing.  The communist government decided to give in to capitalist plants in the country in order to modernize.  That has given way to a new middle class that wants individualism, something totally new to Confuscian tradition and Communist party ideals.  Meanwhile Christianity has spread and become a quiet but important minority while income inequality has skyrocketed in the home of socialism. 

            Let’s take it in order.  1.4 billion Chinese with 800 million Han Chinese are rapidly rising, both as a power, especially with a rising middle class, and yet the ruling Communists find themselves in a fix—how to manage this new bourgeois without suppressing their productivity.  The middle class, now 250 million storng don’t trust their government.  They aren’t about to rebel or even ask for the vote, but they gripe, frustrated with corruption, lack of transparency and accountability of the rulers. Since 1990 the blistering pace of economic growth has been the party’s most important source of legitimacy which supports its most important goal, stability.  But the critical citizens have taken to social media en masse.  The question is what happens after the growth peters out.  It surely will because you can sustain 7-10% growth by copying current technology, but when your nation has to create, entrepreneur, invent on its own you are doing well to get 3%.  Hence the pickle that leaders find themselves in.  The party fears its own people. 

            But how the people have changed.  The old tradition of living in an extended family fell flat as soon as the one-child policy was instituted.  Nowadays people are allowed two, but one child means marriage is no longer for the procreation of family.  And with kids getting educated and moving hundreds of miles from home, the elders aren’t taken care of as in the past.  The grandchildren as sparse.  And the educated kids are individualistic.  They want love instead of arranged marriages.  The older generation can’t quite understand this.  There are marriage “fairs” where brides and grooms advertise for a mate.  He advertizes a salary and position and has a mortgage paid.  She advertizes she is beautiful, decent, quiet, and not fat.  Except that the 20-somethings on the ads didn’t write their own ads.  The parents did, in hopes of arranging a nice marriage.  The kids fight this not wanting any arrangements.  Hence the age-old family system is crumbling, except in rural areas.  And, China will get old before it gets rich because of the one-child policy.  Today 12 workers for every retiree.  2050 will be 2.5. Unlike USA which will arrive at about the same ratio, there is little social welfare (kids are expected to take care of parents), no pensions, and savings in Chinese banks pay less than inflation.  The growing individualism of the youth also has brought about a sexual revolution of shacking up.  58M young people live alone. There is a rank shortage of eligible marriagble women since a lot of male sexual selection took place with the one child policy.

            The elders remember famines, the kids think high speed trains and pork every day. Government encouraged entrepreneurship and thus many Chinese work at small businesses rather than the state factories as in years past.  Yet the Party is nervous about the rise of so many uncontrollable businesses who march to the own drummer.  In the old days, people knew  by face just about everyone they came in contact with.  Strangers were treated with a degree of caution.  This is indicative of the personal networks everyone had.  But today the personal networks have been shredded as is true in western urban areas.  And just as in New York City, people in Beijing see a mugging and stroll right past it. Hence the Party and Chmn. Li have a campaign on to indoctrinate in socialist core values.  These values are diametrically opposite western values of liberty.

            Thus the people have discovered religion.  Buddhism has exploded in membership but since it is so philosophical and most people just do the rituals and not the serious engagement, the Party tolerates this.  Christianity is another thing altogether.  It has grown for ½ million in 1950 to 100 million today--9% compounded annually.  This growth far outstrips any other country or period of Christianity’s development.  It was 2.9% in the first 3 centuries of Rome. Of course Christianity is a true religion which governs hearts apart from politics.  So the government has cracked down but then tolerates it at other times.  Likewise civic clubs and charities would be able to help the government big time—if only the Party weren’t so nervous about groups of people gathering and thinking of things to do without government consent.  Public morality is increasingly at odds with private.

            Inequality in a communist country might seem an oxymoron.  But like Russia, oligarchs were granted an inside edge with the government resources and if they played it right became billionaires.  China has over 500 billionaires, more than USA.  And they cluster in urban areas, as does the middle class who work in their plants.  Less than 10% of rural youths go to senior high school compared to 70% of urban kids.  Income inequality is measured by the Gini coefficient.  China is .49 while USA is .39 and most European countries are about .3.  Another way to look at this is that the top 10% of earners in China make 21 times as much as the bottom 10%.  USA is 6.

            Which means that with pitiful returns available on savings in China’s banks, those who can do invest abroad.  And as the economy slows down, many in the middle see the system as “rigged.” Some government run investment schemes have turned out to be Ponzi schemes benefitting Party members. Owning property is popular.  Now don’t think of this as we do in the West.  People have long tern leases of government apartments.  Yet these are going up astronomically in places like Shanghai and there is a market in trading properties just as if the people owned them.  85% of city folks “own” their homes. Yet any false move by government in the housing market will cost homeowners enormously and a couple of these have occurred.  So people now question whether their assets are secure.  Chinese have little appetite for political change, but security is tantamount.

            As a result, many people want out.  10M have left China in the past two decades not to return.  A poll showed 57% of Chinese would send their kids overseas to study if only they could afford it.  Government charges $11K just for a passport.  Students who come to Canada and USA often are highly serious.  Their entire family depends on them getting a good enough job to import mom and dad and others.  This has bled China of the best and brightest yet the government knows that many will remain.  Cash flows to international markets too as the wealthy establish companies and domiciles abroad. 

            The repression of expression has increased in the last few years, making a slow burning fuse burn faster.  Mr. Xi’s “Chinese dream” a competitor to the American Dream has proven largely empty.  The American ideal is to be whoever they want to be which conflicts with the tightly scripted social and moral codes of the Chinese Communist Party.  And so at some point, another Tianamen, in some other form is likely.

            This article makes much use of plagiarism of The Economist’s Special Report from July 2016.