Why China Is Unhappy

Editorial do WSJ

Rising discontent is challenging Communist Party rule.

If economic growth is supposed to enhance people's welfare and therefore satisfaction, China in 2011 is a conundrum. The economy is on track to grow more than 9%, yet this has been a year of rising discontent.

On the Chinese equivalents of Twitter, criticism of the government is exploding, despite fierce censorship. A recent poll by Tsinghua University and the magazine Xiaokang found that 40% of Chinese are unhappy with their lives, while another survey by the magazine Outlook and Peoples University found 70% of farmers dissatisfied, mainly because of land seizures. Some 60% of the rich are emigrating or considering doing so, according to a survey by the Hurun Report and the Bank of China. Even the People's Daily warned last week that there is a "crisis of confidence" in government.

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The crisis is real, but the Communist Party mouthpiece didn't quite get it right. Chinese lost faith in local-level officials a long time ago, but until recently they continued to believe in their national leaders. They also largely accepted the post-1989 social contract in which the Party provided rising living standards in return for not questioning its monopoly on power.

This is changing as a result of two trends. The first is a growing awareness among the bottom strata of society that it is policy made at higher levels, not merely the incompetence or corruption of local officials, that is responsible for their woes. The second is the interest of the wealthy and the intellectuals in reform after two decades of being bought off by the Communist Party.

The first trend is typified by the willingness of about 100 people across the country to risk their freedom and put themselves forward as independent candidates in elections for local People's Congresses. Some are professionals, but most seem to be ordinary workers. These government bodies have traditionally rubber-stamped Party decisions, but their members theoretically have the power to supervise officials.

Most Chinese won't to be so bold unless they are mobilized from above, which is why new activism among the educated minority is so significant. Beijing intellectuals are making pilgrimages to the remote Shandong town of Linyi where blind legal activist Chen Guangcheng is under house arrest. Since the tax authorities last week presented the dissident artist Ai Weiwei with a $2.4 million bill for fines and back taxes, a movement has sprung up to donate money, both electronically and in paper airplanes delivered to his house, to keep him out of prison. Anger over the government's concealment of air pollution levels, even as the leaders in Beijing install air purifiers to protect their own health, has spawned another ad hoc campaign.

What seems to be turning the tide toward political activism is a realization that unless one is a member of the Party elite, upward mobility is limited and hard-won advancement can be taken away without due process. Since universities expanded enrollments in the early 2000s, many families have borrowed heavily to pay tuition for their children. But graduates without political connections have trouble getting on the career ladder, ending up joining the "ant tribe," slang for educated young people living in slums. Meanwhile, the children of elites can street-race their Ferraris without fear of arrest.

Faith in the competence of the central government is also declining because of a lack of accountability. After the July crash of two trains in Wenzhou, the media exposed problems in the trophy high-speed rail program. Yet the Railways Ministry continues to receive massive amounts of new capital to finance rail lines that probably can't recoup the investment. New parents are obsessed with obtaining imported baby formula because they don't trust domestic brands.

State-owned industries increasingly prosper at the expense of private companies and households. In order to tackle high inflation the central bank tightened credit, but state companies continue to get bank loans while entrepreneurs are going bankrupt. Property developers are forced to sell inventory to stay afloat, so the price of real estate, one of the main stores of savings for the rich, is falling nationally, destroying wealth.

That has important knock-on effects. Local governments, which borrowed heavily to build public works and depend on land sales for much of their budgets, now are scrambling to raise tax revenue, which is growing at almost three times the rate of GDP. These taxes further increase discontent, as shown by the riots two weeks ago in the city of Huzhou in Zhejiang province, where capitalists and proletarians went to the barricades arm-in-arm to protest Communist Party exploitation.

So it's hardly surprising that for the first time in years, capital is starting to flow out of China. This reflects the judgment of many Chinese that opportunities to invest are scarce and the economy faces tougher times. Some also worry about political upheaval and so are keeping part of their nest eggs abroad.

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The government response to all this unhappiness has been to increase the resources and power of the domestic security apparatus. This year the budget for security surpassed that of the military for the first time, and disappearances of dissidents have become commonplace. Instead of cowing the population, this is only creating more instances of official abuse that are publicized on the Internet, leading to greater anger and defiance.

Alarm bells should be ringing. The virtuous cycle of social stability and material progress that has persisted for two decades is going into reverse. This need not lead to disaster, as long as the Communist Party recognizes its mistakes and responds to the public desire for the rule of law and curbs on the power of the state. Otherwise there is more unhappiness ahead.