Amid the shining mega-cities and sodden wealth, millions of impoverished Chinese are rising up in anger,



Amid the shining mega-cities and sodden wealth, millions of impoverished Chinese are rising up in anger,




Amid the shining mega-cities and sodden wealth, millions of impoverished Chinese are rising up in anger,


PAUL MITCHELL was sitting in a hotel room in Beijing, his bags packed. The next morning he was getting on a plane, determined to get as far away from China as possible. His dreams of setting up a joint venture had dissolved in acrimony, his Chinese partner was convinced the Canadian businessman was doing what most everyone else in China did: skimming money from the company. Physically exhausted and emotionally drained, Mitchell was anxious to put the most painful five years of his life behind him. “I was

getting out of this country and I was never, ever, ever coming back,” he recalls.

Then came a knock at the door. It was three of his former employees, begging him to stay. They offered to pick up their families and follow him wherever he went. When the Ontario entrepreneur asked why they would be willing to risk everything to follow a foreigner, he was stunned: “They told me, ‘We don’t know where to go without you.’”

The heart-wrenching plea overrode Mitchell’s misgivings, and in 1994 he built his own factory, which manufactures grain-handling equipment, outside Beijing. Grateful for a rare lifeline in the often ruthless scramble to survive in the world’s fastest-growing economy, Mitchell’s employees still cling to their jobs. But billions of others have not been so lucky. In an ironic twist, China’s poor are growing ever more desperate and directionless in the face of high unemployment and systemic corruption. While shimmering mega-cities and a rising middle class attest to China’s newfound industrial might and burgeoning wealth, social tensions are on the rise, fuelled by a widening rift between rich and poor and a crumbling social safety net

bowing under the strain of fast-paced change. The frustration percolating just below the surface is now rising to the fore, with a dramatic increase in violent protests that are arguably the greatest threat to the ruling Communist party’s grip on power, and to the whole country’s economic awakening.

In one of many recent protests, thousands of angry citizens took to the streets in the impoverished province of Anhui in July. Provoked by a seemingly minor traffic dispute, the mob set fire to cars, looted stores, and cut off power to the police station. This month, a 42-year-old farmer with terminal lung cancer boarded a bus in Fuzhou and detonated a homemade bomb, injuring 31 and killing himself. In June, six farmers were killed and dozens wounded after clashing with armed thugs, allegedly in the pay of local officials, over the state seizure of farmland. According to Chinese authorities, there were 74,000 such protests last year, a dramatic increase from 2003. While the unrest can still be managed by the party’s impressive political machinery, the “widening income gap is clearly a source of major concern,” says Ken Lieberthal, a professor

at the University of Michigan and a one-time adviser to former U.S. president Bill Clinton on Asia. “If the inequality reaches a point where people believe there is no more chance of upward mobility, it will be highly destabilizing. It has to worry the Chinese leadership a great deal.”

Although China’s official jobless rate is 4.3 per cent, the real number is believed to be well above 10 per cent. In addition to as many as 40 million people laid off from inefficient state-run enterprises in recent years, another 30 million are listed on the employment rolls of public companies that are no longer operational, but because of poor bankruptcy laws, have never been officially liquidated. No longer receiving salaries, these floating workers subsist on a paltry payout equivalent to US$12 a month.

They are joined by large numbers of peasants whose land is indiscriminately expropriated to feed China’s breakneck industrial expansion. The land grabs, which are often orchestrated by corrupt local leaders and offer little compensation, leave farmers few options. “They remind me of the deportation of the Jews out of Europe to the Warsaw ghetto,” says Sherry Cooper, a China watcher and chief economist at BMO Nesbitt Burns in Toronto. “It’s a horrible thing.”

Some farmers are relocated. Others join the ranks of an estimated 150 million migrant workers drawn to the booming cities in search of jobs. Because of China’s restrictive household registration system, which prohibits rural inhabitants from moving to the cities, they are forced to work illegally, earning pennies an hour and without access to social services. While the migration is good for China’s overly rural economy, another 150 million peasants, lured by the promise of a better life, are expected to move to urban centres in the next decade. “China concerns me a lot because of the massive unemployment,” says Mitchell. “I see enough people wandering the streets as it is. If they can’t keep this drive of construction and development, what are these people going to do? You just have to think about that. The Chinese are incredibly strong, they can take a lot more than any Canadian ever could. But I think there’s a limit to all that, too.”

The unprecedented migration is putting tremendous strains on the country’s already wobbly infrastructure while sharpening the

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income rift, once limited to the urban-rural divide. As the masses pour into cities to become urban poor, they are coming face to face with the opulent wealth of Chinese tycoons like Zhang Hue, whose fleet of luxury cars includes a yellow Ferrari, cherry-red Hummer and a silver Mercedes limousine.

In an effort to counteract negative fallout, the Communist party has made the pursuit of a “harmonious society” a top priority. It has repeatedly warned it will not tolerate violence and, until now, has defused some potential powder kegs by cutting off air and train transport to areas of unrest for weeks at a time. Tiananmen Square, where hundreds of students were mowed down by the military in 1989, is conveniently closed for “repairs” whenever the anniversary of the massacre draws near.

Since coming to power in 2003, President Hu Jintao and Premier Wen Jiabao have cracked down on media coverage of the conflicts, closing newspapers, blocking university Internet sites and forcing Microsoft to ban the words “democracy” and “freedom” from Chinese portals. The regime even took the unprecedented step of arresting members of the foreign media on charges of spying and fraud. In recent months, dissident intellec-

tuals and lawyers have been rounded up and jailed. “To Hu, social inequality is the greatest threat to regime survival, and he sees these intellectuals as threatening social stability,” says Jiang Wenran, an associate professor of political science at the University of Alberta. “He’s made a pragmatic decision to crack down on the intellectuals so they won’t be able to make trouble.” But while the party has been effective at muzzling dissent, it has been less so at easing the income gap, whereby a city dweller effectively makes six times as much as a rural worker. Although Beijing has made progress cutting agricultural taxes, the rural population remains bogged down in fees and taxes created by local governments to pay for ever-expanding bureaucracies. “As soon as one tax is abolished, another is being invented,” says Wenran. “It’s a game of survival.”

In fact, it is this cat-and-mouse game that goes to the very heart of China’s troubles. There is a well-known saying in China: the mountains are high and the emperor is far away. Despite Beijing’s autocratic rule, in such a massive country it is at the local level where true power lies and where the most

flagrant abuses—from the flouting of environmental and health regulations to the outright corruption that often fuels unrestare committed. The countryside is scarred with blackened streams contaminated by the toxic runoff from factories that deaden farmers’ fields and rack the population with cancer and horrible birth defects. In midAugust, 122 coal miners drowned in southern Guangdong province, just the latest in a slew of horrific industrial disasters. Since the start ofjuly, 218 accidents in China’s mines have claimed almost 700 lives, according to a government report. Critics say the death toll keeps rising because corrupt local officials allow hundreds of illegal mines to operate unregulated, to feed the country’s demand for power.

And it is no coincidence that potentially devastating pandemics like SARS and avian flu have plagued China. In the latest outbreak of so-called swine flu, 39 people have died and more than 200 have been infected. To date, four local officials in Sichuan province, China’s top pork producer, have been sacked for faking reports about the spread of the disease. “The rural public health

system is a catastrophe and it’s deteriorating, not improving,” says Lieberthal. “It creates risks for the entire society, and now that China is so integrated into the global economy, for the whole world.”

Similarly, the roots of China’s pervasive corruption can be traced back to local party leaders who run their territories like fiefdoms and often work hand-in-glove with state-owned enterprises whose “comparative advantage” lies in the piracy of intellectual property rights. In perhaps the most stunning case, U.S. automaker General Motors is suing China’s Chery Automobile Co. for knocking off one of its models. Chery’s chairman of the board also happens to be the top government official of Wuhu province. Lieberthal predicts that, within a year, piracy will become “the biggest single economic issue between the U.S. and China.” But while Beijing recognizes the problem, fixing it would entail “changing the entire political strategy of economic reform.” So instead, the central government is taking a hard line on officials caught with suitcases brimming with millions in cash. In the past four years, China executed at least 25 officials for corruption-related offences—more than the rest of the world combined. Close to one million party members have also been sanctioned.

With an estimated US$60 billion stashed away each year in offshore accounts, corruption is not only undermining China’s economic boom, but the ruling party’s political legitimacy. The combination of official corruption and social unrest could one day unravel the party’s monopoly on power, says Wenran. “When people perceive they are not benefiting from economic growth and they see it is primarily as a result of official corruption, I personally see that as a deadly combination.”

That kind of systemic breakdown could manifest itself in a number of ways, from a run on the teetering banking system to a pandemic health scare resulting from government malfeasance. The hallmarks of such a scenario are ever-present. In July, Beijing was forced to close eight credit cooperatives after fears of imminent bankruptcy sparked a run on the rural banks, which had a non-performing loan ratio of 96 per cent. And after the Fuzhou suicide bombing, news reports were quick to point out that some 50 per cent of the country’s farmers cannot afford to see a doctor.

The frustration is being aggravated by what

Mitchell and other foreigners perceive as a complete lack of regard by the newly wealthy for the plight of the rural and working poor. “There’s no connection between having that much money and having social responsibility to someone who doesn’t,” says Mitchell. “It’s exactly the opposite to what you would think a Communist system should be. The rich have no eye for the poor.”

CHINA’S city dwellers

have long believed the country’s 750 million peasants are somehow ‘less than human’

China’s city dwellers have long believed the country’s 750 million peasants are somehow “less than human,” explains Elliot Wilson, a correspondent with Hong Kong’s Standard newspaper. “There is a fear of the mob.” Until recently, any “mob” protests have been localized and usually spontaneous. But pockets of unrest are becoming more politically organized, says Wenran, “which

is quite alarming to the central government.”

For some, however, the real cause for concern lies not with the struggling masses but the coddled offspring of China’s one-child policy. While parents prefer to carry their so-called “Little Emperors” rather than put them in strollers, these children will soon be shouldering a much heavier burden: supporting up to eight grandparents should they marry. With more people retiring over the next decade than entering the workforce, China, the saying goes, may grow old before it grows rich.

As parents, and sometimes entire villages, funnel all their hopes and dreams into a single golden son, the prospect of a future without any real payoff may not sit well with this new generation. “There will be a day of reckoning,” says Wilson. “It will happen when these Little Emperors, who are pampered within an inch of their lives, grow up and are confronted with the system.”

That is, if “the system” doesn’t collapse under its own weight in the meantime, ful

Andrea Mandel-Campbell’s forthcoming book, Why Mexicans Don’t Drink Mo Ison, will be published by Douglas & McIntyre in fall 2006