by Guest Author Henry S. Rowan, Senior Fellow, Hoover Institution Stanford University
Global Economic Intersection Article of the Week
Executive Summary
Big changes are ahead for China, probably abrupt ones. The economy has grown so rapidly for many years, over 30 years at an average of nine percent a year, that its size makes it a major player in trade and finance and increasingly in political and military matters. This growth is not only of great importance internationally, it is already having profound domestic social effects and it is bound to have internal political ones — sooner or later.
Social Changes
Sooner versus later can make a large difference. It is one thing to believe that China’s growth will lead eventually to political change (Deng Xiaoping told George Shultz in 1988 that China would become a democracy in 50 years, perhaps meaning: “Forget about it.”), but is quite another matter to expect political change within this decade — an argument made here. But things are not so simple (they never are); another line of argument, discussed below, is that there is a good chance of an abrupt economic slowdown over this period. One should not expect these conjectured events to be independent; political turbulence would hurt the economy and a sharp economic slowdown would surely have political consequences. The interplay between these two prospects, a political disruption and/or an economic jolt, can only be a matter of speculation, and some is offered here.
The leading edge of the time when these events might occur, assuming continued high-speed growth, is 2015 — soon enough to get our attention — with the odds increasing in successive years. The common factor that connects them is that China will reach a gdp per capita level of $17,000 by about then (in 2005 purchasing power parity). This is the level at which all non-oil-rich countries are at least “partly free” as rated by Freedom House, with the large majority being “Free.” Also fostering freedoms is the level of education, and that too is steadily increasing in China. While today it is deep in the “non-free” category, assuming growth is sustained at nine to ten percent a year it will reach this freedom benchmark level by 2015; if growth slows to seven percent annually, as Premier Wen Jiabao has suggested it will, that level is reached not long after — by 2017. (To be more precise, with continued high growth there is a 50–50 chance of China being declared partly free by 2017, odds that will increase thereafter.)
Most discussion on this topic focuses, understandably, on political freedoms, the ability of a people to choose their rulers. But Freedom House has two freedom indexes: One is on political rights while the other is civil liberties (for the latter, think of the U.S. Bill of Rights). On these measures, China today has a bottom score on political rights and is rated one step above the bottom on civil liberties. There should be no argument about the political rating; it is a Leninist state in which the Communist Party has combined economic liberalizing with tight political control. But economic liberalizing is having profound social consequences. Its foundation is prosperity. Prosperity is decidedly unequally divided, but a large middle class has emerged centered in the cities in the eastern part of the country, there is a growing private sector, the press is freer than a decade ago and much freer than 30 years ago (but with political speech remaining decidedly unfree), the labor market is more open, urban residency permits are less binding, religious practices are often harassed but are widely tolerated, the legal system crawls ahead, and people have a growing sense of having rights (not a traditional Chinese value). Prosperity may be decidedly unequally divided but, again, a large middle class has emerged centered in the cities in the eastern part of the country. In Freedom House terms, these advances mean progress on civil liberties.