SHANGHAI—As the Chinese economy slows, the regime is ramping up an assault on dissidents and others it brands as troublemakers. Call it the repression index. One of the best indicators of the country’s economic direction is now a political one.
The crackdown is telling us that the leadership, despite outward displays of confidence, is growing increasingly insecure as it grapples with faltering growth, the mainstay of the Communist Party’s legitimacy. That translates into crippling indecision; leaders seem unable to summon the resolve to implement tough yet necessary economic overhauls.
Meanwhile, evidence of policy disarray is growing with President Xi Jinping and his premier, Li Keqiang, apparently disagreeing on how aggressively to add stimulus. A People’s Daily article in May by an “authoritative person,” most likely a proxy for the president, read like a rebuke of Mr. Li for going off on a credit binge this year.
These are perilous times for the party. It knows that an accelerated economic transition from a wasteful investment-led model to one driven by services, consumption and innovation will deliver a hit to growth and likely generate social unrest—with no guarantees of ultimate success.
Switching gears was always going to be more of a political challenge than an economic one. It will entail redistributing the benefits of growth from large state-owned corporations toward households.
This isn’t the revolution that party stalwarts signed up for; it implies a transfer not just of wealth, which has helped fill the bank accounts of families of the governing elite, but power.
And the process threatens to destabilize the system. State enterprises bankroll the regime, provide social services and keep workers in line.
Moreover, they are huge employers, in particular the loss-makers that operate old-fashioned steel furnaces and cement plants and keep exhausted coal mines alive.
In purely economic terms, closing down these industrial relics is a no-brainer. They add to rampant overcapacity, as well as choking pollution. They’re the zombies at the heart of the country’s growth dilemma: More and more credit is producing less and less output. Mounting corporate debt threatens to crash the financial system. “Warning signs are flashing,” writes David Lipton, the first deputy managing director at the International Monetary Fund.
Yet apparently that prospect isn’t as troubling to the regime as the specter of unemployed workers flooding the streets.
Hence, the slow pace of factory closures, along with the desire to continue chasing an unrealistically rapid growth target.
By contrast, the political crackdown is imbued with urgency. A repression index would prominently feature data on the plight of rights lawyers. More than 300 legal professionals and activists were briefly detained or interrogated last year, and several dozen formally held. Show trials are now under way.
An index would also track new restrictions on civil society groups, capture the intensity of censorship and count references in state media to “hostile foreign forces” trying to subvert the government, a phrase that since Mao’s day has been a reliable gauge of paranoia among the ruling elite.
A sub index might measure television hours devoted to images of missiles, military jets and warships. Rising nationalism is the other corollary of political insecurity.
The political chill recalls the immediate aftermath of the bloody army crackdown that ended the Tiananmen Square protests in 1989. Not coincidentally, the economy was in trouble then too.
Public-interest lawyers are in the crosshairs because of their ability to coordinate and channel scattered public grievances at a time of growing economic distress. They offer the means, in other words, to empower a citizenry increasingly aware of its rights. That runs against the control instincts of a top-down Leninist party.
And there’s the rub. Can an economic transformation be successful without a loosening of the reins? Censorship is at odds with a knowledge economy. Ideological dogma suppresses free inquiry essential to creativity.
The political signals are unsettling the private sector, which creates almost all the new jobs and drives innovation in products and services. Private investment is collapsing, despite the government’s instruction to local officials to “chant bright songs” about the economy.
The reluctance to invest can only partially be explained by factors such as falling returns amid global economic weakness, on top of worries about currency depreciation. It also reflects what analysts at the Chinese investment bank CICC call an “uncertainty trap”—doubts about the “timetable, road map and implementation” of reform.
According to one school of thought, the repression is setting the stage for bold and politically risky economic overhauls. In effect, the government is battening down the hatches in preparation for hard times.
Entrepreneurs aren’t so sure: the key group that will make or break reforms—and can’t be easily coerced—is making a free choice to sit it out.
http://www.wsj.com/articles/a-new-measure-for-chinas-economy-the-repression-index-1471926512
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