China's social instability threatens investors

Reports of "China fever" among Taiwanese businessmen and the abundant negative results thereof for Taiwan's economy need no introduction. It is abundantly clear that cheap labor, the availability of relatively inexpensive land, a common language and the prospect of profiting from 1.3 billion Chinese consumers have enticed Taiwanese manufacturers to pour more than US$70 billion into China in recent years. More Taiwanese manufacturers are in the process of making the move.

And, why not? Taiwan, as well as South Korea and Singapore, has been adversely affected by the US economic slow-down, particularly its tech sector companies. Further China is the only Asian economy to emerge relatively unscathed from both the recent downturn and the financial crisis three years ago.

However, in contrast to the boundless optimism of Asian businessmen rushing to set up in China, there have been numerous Western reports about increasing signs of unrest in China.

A 308-page book entitled China Investigation Report 2000-2001: Studies of Contraditions Among the People Under New Conditions has more than confirmed the objectiveness and accuracy of the Western reports. The book is produced by a top Chinese Communist Party research group and was published by an officially sanctioned Communist Party publishing company. According to a June 3 New York Times article entitled China's Inner Circle Reveals Big Unrest: "The unusual report...describes mounting public anger over inequality, corruption and official aloofness, and it paints a picture of seething unrest almost as bleak as any drawn by dissidents abroad. It describes a growing pattern of large protests, sometimes involving tens of thousands of people." The article goes on to say that the people participating in protests "are expanding from farmers and retired workers to include workers still on the job, individual business owners, decommissioned soldiers, and even officials, teachers and students." It hasbeen predicted that when China enters the WTO, these conflicts will only increase.

Why didn't investers taken social stability into consideration before moving their capital and technology into China? Should they not re-evaluate the changing situation, particularly now that an official government report has alerted them of the danger?

Let's focus on what is arguably the most serious problem that is facing Jiang Zemin (江澤民) and his cohorts: income inequality. The economic reforms initiated by Deng Xiaoping (鄧小平) in 1979 have created a China that is becoming more unequal. Coastal China is more developed than interior China. City folks are better off than country bumpkins. Add to this equation the fact that a significant percentage of urban residents have no jobs and rising discontent among the great majority of Chinese who have not benefitted from the government's "Let some people get rich first" policy becomes irrefutable fact. More so than others, the leaders of Communist China understand well the problem of alienation.

During Mao's rule (1949 to 1976), the people were indoctrinated to embrace egalitarianism. Peasants in particular worshipped Mao as if he were god. Peasants were and, to a large extent, still are Maoists. They endured poverty when all Chinese endured it. Now, however, with crime on the rise and corruption widespread among officials, one cannot blame China's impoverished peasants for building resentment towards their government They are nostalgic for the Mao years of spartan yet egalitarian life.