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Business News/ Opinion / Columns/  Opinion | A revolt is brewing in China, but don’t expect Tiananmen Square
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Opinion | A revolt is brewing in China, but don’t expect Tiananmen Square

The discontent among workers hurt by the trade war with the US should give Xi cause to pause

 (Photo: Reuters)Premium
(Photo: Reuters)

The proletariat is very unhappy. And it’s happening in Communist China. According to a New York Times report, “Factory workers across China are staging sit-ins demanding unpaid wages for ‘blood and sweat’. Taxi drivers are surrounding government offices to call for better treatment. Construction workers are threatening to jump from buildings if they don’t get paid."

The Chinese economy has been slowing for some time now. Official figures put the gross domestic product growth rate at 6.6% for 2018, the lowest in a decade, but hardly anyone believes official Chinese economic figures. If the Chinese government itself is admitting to a low growth rate, the actual number must be far lower.

There could be no better proof of this than a directive sent to journalists in China in September last year, which named six economic topics to be “managed". These were:

l Worse-than-expected data that could show the economy is slowing;

l Local government debt risks;

l The impact of the trade war with the United States;

l Signs of declining consumer confidence;

l The risks of stagflation, or rising prices coupled with slowing economic growth; and

l “Hot-button issues to show the difficulties of people’s lives."

Wow. President-for-life Xi Jinping is taking China back to the days of Mao Zedong, creating an autocratic state that George Orwell could have barely imagined. He has imprisoned more than a million Muslim Uighurs in northwest China in “re-education camps" where they are forced to learn Communist text by heart and sing songs in praise of Xi. The social credit system he has introduced can deny a Chinese citizen a bank loan if he has been caught jaywalking three times or found smoking in a no-smoking area.

However, now Xi is facing some difficulties. Factories all over China are sending workers on unpaid leave or cutting work-weeks to four days. The country’s big push from an export-driven economy to a consumption-driven one has not worked so well. Ford Motor Co. cut output at its Chongqing joint venture by 70% in November, in what Ford says was a move to reduce inventories of unsold cars. Chemical industry experts said that mostly Chinese-owned chemical factories in Jiangsu had been shutting down because of weak demand.

The numbers that the Chinese government releases have always been unreliable. It will also never release unemployment figures. After all, “unemployment" does not figure in Communist theory, right? However, when thousands of workers are laid off or asked to go on leave, there is something going wrong with the system.

China’s economy is essentially powered by its state-owned enterprises, which borrow money at hardly any cost. This has led the country into a massive debt problem, with the private sector starved for funds. Regulators have now ordered banks to lend more to private businesses. Ministers have promised to compensate businesses for not laying off workers. Environmental controls are being less stringently enforced, making it easier for polluting factories to stay open.

However, it’s not that simple. After the 2008 global financial crisis, China made bank managers responsible for life for loans that aren’t repaid. If you were a Chinese banker, would you take the risk of lending to a troubled business? Then there is the government-led spending, which just keeps on piling up the debt. Add to that the massive shadow banking sector, whose size is just unknown. In short, Xi is sitting on a mountain of debt, whose height cannot be measured, and his people are not buying enough stuff. When Apple announced revenues $10 billion less than what it had projected and blamed it on weak iPhone sales in China, there was a message there for the world.

The trade war with the US is hurting China. Of course, retail prices have gone up in the US for a lot of goods, but many supply chains to the US are stuffed with extra inventory thanks to stockpiling, so American importers may need fewer goods in the months ahead. China’s coastal areas are dependent on exports to the US. As the US-China trade talks continue, Chinese factories will be feeling rather insecure.

US President Donald Trump is fundamentally a dealmaker. Do not be the one to blink first. His motto in life seems to be to drive as hard a bargain as possible and move on. In Trump, China faces a person who is very difficult to be classified according to its ancient texts—be it Sun Tzu, or Confucius, or the 36 Stratagems, a classic Chinese essay that illustrates a series of tactics used in politics, war and civil interaction, with its focus being on cunning and deception. The world will have to wait and see what carries the day—Trump’s rough bluntness or the Chinese DNA of deception.

However, to come back to where we started, the proletariat is angry. It will not lead to a Tiananmen Square situation, but it should certainly give Xi Jinping, the most powerful dictator on earth, some food for thought. Things are not going well. Three cheers to that.

Sandipan Deb is former editor of ‘Financial Express’ and founder-editor of ‘Open’ and ‘Swarajya’ magazines

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Updated: 10 Feb 2019, 08:34 PM IST
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