China's Economic Slowdown, Rising Social Tensions

Published: 10th March 2016 06:00 AM  |   Last Updated: 10th March 2016 07:29 AM   |  A+A-

An economic slowdown usually accentuates existing grievances and the shortcomings of a government. With the slowdown over the past year, the hitherto comforting glow of China’s double-digit economic growth of the past two decades seems to have already dimmed in people’s minds. If the perception that the slide cannot be controlled grows, it could weaken the legitimacy of the Chinese Communist Party (CCP), which has told the Chinese people that China’s rise and the economic growth, which had brought them jobs and prosperity, was due to the able leadership it had provided. This would, in turn, appreciably increase domestic social tensions.

While China’s leadership is aware of the difficulties and appears to assess that it will be able to ensure that the transition from an export-led economy to one that promotes innovation and domestic consumption will not be too painful, its problems are exacerbated by the annual flight out of the country for the past few years of billions of dollars. This flight of capital is suggestive of a lack of confidence in China’s economy among China’s wealthy businessmen who are investing large sums in real estate in countries like the US, Canada and Australia. Official Chinese reports released in January 2016, estimated that there had been a net outflow of US$ 367 billion in the last quarter of 2015 with a surge noticed in December.

Income inequality and unemployment have simultaneously increased. The Hurun Report stated that China added 90 more US Dollar billionaires last year bringing the total to 568 and for the first time surpassing the US which has 535. At the same time, an official Peking University study disclosed in January 2016 that China’s Gini coefficient had increased to 0.45 last year and that one-third of China’s wealth is owned by the top 1 per cent of households.

Official Chinese reports add that millions of workers will lose jobs this year. Yin Weimin, China’s Minister for Human Resources and Social Security, divulged on February 29, 2016, that 1.3 million workers in the coal sector could lose jobs and another 500,000 from the steel sector. Just days earlier, the official China Daily reported that the five top overcapacity industries will shed 3 million jobs in the next one or two years. People’s Daily earlier this year disclosed that thirty per cent of college graduates from rural areas are unemployed. Graduates in Beijing, Shanghai and other cities also complain that they do not get jobs, though authorities say there are adequate jobs but not of the kind students want! Adding to the leadership’s concerns are the disgruntled demobilised People’s Liberation Army (PLA) soldiers, mostly veterans of China’s 1979 border war with Vietnam and the Sino-Soviet border conflict of March 1969.

They stage protests when major conferences are being held and on June 23, 2015, thousands of veterans staged a sit-in outside China’s Central Military Commission headquarters to protest at the lack of pension and other benefits. Thousands of PLA soldiers are to be demobilised in the course of the ongoing military reforms and though State-owned Enterprises (SoE)s have been instructed to reserve thirty per cent of their recruitment for these demobilised PLA soldiers and many will be absorbed in the People’s Armed Police Force (PAPF), a large number will still have to fend for themselves. The mix of disgruntled ex-soldiers, laid-off workers and unemployed students can be potentially volatile. Already, a recent report of the China Labour Bulletin acknowledged that there had been a “massive upsurge” in worker strikes and protests during the second half of 2015. Tracing the uptick in disputes to market turmoil last summer, the organisation said it had tracked twice as many incidents in 2015 as it had in 2014.

China’s official media separately reported last year that the country was witnessing at least 500 protests each day and the number was rising rapidly. Clear indication of this disillusionment is the resurfacing of nostalgia for Chairman Mao and its candid reflection in the state-owned media.

On December 28, 2015, the state-owned Global Times published a lengthy article under the unusual caption: ‘A Global Times article on Mao’s birth anniversary: A sign of disaffection, rural worship of Chairman Mao is treated with caution’. It said that on his 122nd birth anniversary on December 26, 2015, thousands of people gathered at a Taoist temple in Jingyuan county in Gansu Province to install a new statue of China’s former leader. The report said temples commemorating Mao are seen in many rural areas especially the Shaanxi, Guangdong, and Hunan provinces.

Despite Chinese President Xi Jinping’s public assertion on Mao’s 120th birthday in 2013 that “we cannot worship (revolutionary leaders) as gods just because they are great people, not allowing others to point out and correct their errors and mistakes”, Maoists in China continue to demand that Mao’s birthday be declared ‘People’s Day’ to celebrate Mao and his legacy. This year they drafted a petition forwarding this demand to the CCP Central Committee and National People’s Congress (NPC) Deputies.

A petition posted on social media sites exhorted: “A great Party needs a soul, an undefeatable army needs a soul, a rising country needs a soul, and the great rejuvenation of the Chinese people needs a soul. Mao Zedong is that soul!” Another said “Mao has stamped everything in China with ‘people’ — people’s government, people’s army, people’s courts … even our currency is called the renminbi, or people’s currency…. Mao should forever be remembered in history as the people’s leader!” State-owned Chinese media reported that thousands of people signed the petition, including sons and daughters of former officials, party leaders and generals, as well as some leftist scholars. The Global Times article added that many youth who were not even born during the Mao era were flocking to Mao temples.

Notwithstanding these increased domestic tensions, China’s leadership seems confident of being able to tackle the economic situation. The sheer size of the country’s domestic market, volume of trade and huge forex reserves give the economy resilience. This should help the leadership check any uncontrollable slide of an economy, which remains one of the fastest growing in the world. It is, however, in this backdrop that Xi Jinping continues to accumulate power and consolidate his authority.

His campaigns against ostentation and for ‘rectification’ of the Party have straight-jacketed Party members and reached down to the grassroots. Controls on the media and universities are being progressively tightened, provoking some prominent journalists to say inner-Party channels for ‘criticism’ are not available. Designed to strengthen the Party Centre, these measures can also make China’s authoritarian structure more brittle.


The author is a former Addl Secy in Cabinet Secretariat, Govt of India and president of the Centre for China Analysis and Strategy. Email:

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