Chinese leaders fret about unrest as economy sours

Reporting from Beijing —  Images of Greek demonstrators rioting over austerity measures and Occupy Wall Street protesters scuffling with police in the U.S. appear to be worrying China’s communist leaders.

One of China’s most senior officials has acknowledged that the souring global economy has the government on edge.

According to an official New China News Agency report 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 demonstrations.

“Faced with the negative impact of the market economy, we still have not established a complete social management system,” Zhou said. “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.”

Nothing is potentially more destabilizing to the government than a sustained financial crisis; the Communist Party has staked its credibility on delivering solid economic growth.

Chief among those threats is the slowing manufacturing sector. China has been hit recently by a spate of labor strikes sparked by complaints of shrinking paychecks and poor working conditions. More than 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 that the worst is yet to come.

China’s property market, a cornerstone of the economy, is also slowing. Real estate prices declined for the third consecutive month in November, according to an index of values in 100 major cities. Developers have slashed prices in some locations, triggering isolated protests by existing homeowners.

Policymakers have responded by lowering the ratio of deposits that 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 that China is shifting policy from tightening to loosening.

Fear of a repeat of the 2008 financial crisis, when an estimated 20 million migrant workers lost their jobs, may be worrying the government. Beijing responded to that crisis by unleashing a nearly $2-trillion stimulus plan, which kept the economy humming but fueled inflation.

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

Authorities haven’t been shy about unleashing force swiftly, and sometimes violently, as they have in the restive provinces of Tibet and Xinjiang.

When the Arab Spring uprisings emboldened anonymous Chinese Internet activists to call for a so-called Jasmine Revolution in China, officials responded by rounding up dissidents, tightening online censorship and deploying huge numbers of police to public spaces to head off potential demonstrations.

The reality, however, is that most protests in China are sparked by economic grievances.

A villager who helped destroy an office and restaurant belonging to a developer who allegedly pushed local residents off their land told The Times this year, “We have a huge gap between rich and poor in our village.”

david.pierson@latimes.com