Chinese leaders worry economic slump could spark more protests

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The images of Greek demonstrators rioting over austerity measures and American protesters scuffling with police as part of the Occupy Wall Street movement is no doubt unsettling to China’s communist leaders.

No force is potentially more destabilizing to the government’s inner circle than a sustained financial crisis, especially given that the party has staked its credibility to the promise of high economic growth.

Now one of China’s most senior leaders has acknowledged that the souring global economy has the government on edge.

According to an official New China News Agency report published Saturday, China’s top security chief warned provincial officials to brace for unrest if financial conditions continue to deteriorate.

Zhou Yongkang, a member of China’s nine-person Politburo Standing Committee, said the country should focus on developing better social management -– a euphemism for control aimed at stamping out opposition and unrest.

“The Party and the government have always paid a lot of attention to social management ... but it still cannot keep up with the changes in economic and social development,” Zhou reportedly said, using typically dense party jargon.

“Faced with the negative impact of the market economy, we still have not established a complete social-management system,” Zhou continued. “How to establish a social management with Chinese characteristics to suit the socialistic market economic system in China is the most pressing task we face today.”

Chief among those threats is the destabilizing manufacturing sector. Zhou’s remarks come as the country is being hit by a spate of labor strikes sparked by complaints of unfair pay, long hours and even a factory boss disappearing without paying salaries.

Over 200 workers demonstrated at a Singaporean-owned electronics plant in Shanghai last week over rumors of a mass layoff.

Manufacturing activity contracted in November, the first time the sector has retreated in nearly three years, signaling the worst is yet to come.

China’s property market, a cornerstone of the economy, is also slowing faster than expected. National real estate prices declined for the third consecutive month in November. Developers have slashed prices in some locations, triggering isolated protests by existing homeowners.

Policymakers have responded by lowering the ratio of money banks are required to hold in reserve -– equal to an injection of $62 billion into the credit system. Analysts say the move is the first major sign China is shifting policy from tightening to loosening.

Fear of a repeat of the 2008 financial crisis, when 20 million migrant workers were estimated to have lost their jobs, may be setting in. Beijing responded to that crisis by unleashing a nearly $2-trillion stimulus plan that the country is still paying for with systemic imbalances and nagging inflation.

If mass unrest does break out, China will at least be better equipped. For the first time, China this year will spend more on “public security” than the military, boosting the budget by nearly 14% to $95 billion to cover surveillance, jails and paramilitary police.

Authorities haven’t been shy about unleashing force -– swiftly, and sometimes violently, stifling opposition in the restive provinces of Tibet and Xinjiang.

When the Arab uprisings in the spring sparked an online call for a so-called Jasmine Revolution in China, officials responded by disappearing dissidents and intellectuals and even jailing the famed artist Ai Weiwei.

The reality, however, is that most protests in China are not sparked by calls for democracy but by economic grievances.

“We have a huge gap between rich and poor in our village. We want to see what role land sales play in that,” a villager told The Times earlier this year when asked why he and others destroyed an office and restaurant belonging to a developer that had allegedly pushed local residents off their land.

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-- David Pierson in Beijing
Twitter.com/dhpierson