Can China’s Top-Down Economy Keep The Masses Calm Forever?


President Hu Jintao began a triumphant U.S. visit Tuesday, lifted by a Chinese growth engine that is pulling the global economy even as America and other rich nations struggle to recover from major recessions.

But rising strikes over pay and protests over government policies and corruption suggest some flaws in China’s top-down model. Rising social unrest as well as political and economic challenges could upend the country’s growth miracle in the not-too-distant future, according to some executives and China experts.

Massive social turmoil and violence aren’t that far back in China’s rearview mirror.

“In thinking about China’s future, we should bear in mind that its modern past includes numerous failures,” said Harvard University researcher Ross Terrill, author of several noted books on China.

The crackdown on student protestors in Tiananmen Square took place just 21 years ago. The Cultural Revolution, in which millions died, raged as recently as the 1960s. Millions more perished in the forced collectivization of Chinese agriculture during Mao’s Great Leap Forward of the 1950s. China’s history for thousands of years has also been marked by the cyclical rise and fall of dynasties that usually involved violent overthrows of the existing order.

While China has clearly transformed itself for the better in the past three decades, the country shows signs that it hasn’t quite shed the nightmares of the past.

Mass protests in China soared more than 750% to about 74,000 between 1993 and 2004, according to a study of Chinese newspaper reports by Susan Shirk, former deputy assistant secretary of state for China. Foreign and local news reports indicate such disturbances have surged in number since the factory layoffs that followed the global downturn in 2009.

A struggling China would produce mixed results for the U.S., which is grappling with China’s rising power but relies heavily on its economy for trade, investment and offshore manufacturing. A bad stumble by Beijing’s technocrats may offer competitive breathing space for the U.S., Japan and other nations but at the cost of lost business.

China also might try to redirect popular discontent by whipping up nationalist sentiment. That could turn nasty for foreign businesses and governments, notably the U.S. and Japan.

China’s heavy-handed government may trigger further unrest.

“In today’s China, ‘efficient’ decision making often has unintended consequences and comes at high human costs,” said Benjamin Wey, the head of New York Global Group, a middle-market advisory firm for China-related M&A deals.

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