The New Class War

SPECIAL REPORT CHINESE SOCIETY July 9th 2016

THE NEW CLASS WAR

20160709_SRchineseSociety.indd 1 28/06/2016 13:56 SPECIAL REPORT CHINESE SOCIETY

The new class war

China’s middle class is larger, richer and more vocal than ever before. That threatens the Communist Party, says Rosie Blau WHEN13-YEAR-OLD Xiao Kang began to feel lethargic and his breathing CONTENTS grew wheezy last autumn, his parents assumed he was working too hard at school. Then his fellow classmates at Changzhou Foreign Languages 2 Chinese nationalism Middle School started complaining too. The private school in a wealthy East, west, home’s best city on China’s eastern seaboard had moved to a smart new campus in September 2015, close to a site formerly occupied by three chemical fac- 3 Family, identity and tories. Tests showed the soil and water to have concentrations of pollut- morality A nation of individuals ants tens of thousands of times the legal limits, and over100 pupils have been diagnosed with growths on their thyroid and lymph glands. Yet the 5 Wealth school denies responsibility, and the local authority has put pressure on Keeping up with the Wangs parents to keep their children in attendance and stopped them from prot- esting. The toxic school remains open. 8 Public opinion Crowd control Xiao Kang and his family are beneficiaries of China’s rise. His fore- bears were farmers and more recently factory workers, but he attends the 10 Civil society “best” school in the city (meaning it gets the highest university entrance Daring to think, daring scores). His father hopes he will become an architect or a designer and to act may go to study abroad one day. As with many of his generation, all the financial and emotional resources of the boy’s two parents and four 12 Emigration The long march abroad grandparents are concentrated on this single child. The family is shocked that the government is so heedless of the youngster’s fate. If a school in 13 Looking ahead any other country was found to be built on poisoned ground, it would The writing on the wall immediately be shut, says the boy’s father. Why not in China? For most of China’s modern history, its people have concentrated ACKNOWLEDGMENTS on building a materially comfortable existence. Since 1978 more than 700m people have been lifted out ofpoverty. Forthe past four decades al- Apart from the individuals named in this report, the author would like to most everyone could be confident that their children’s lives would be thank the following who provided betterthan theirown. But the future looks less certain, particularly forthe generous help and shared valuable group that appears to be China’s greatest success: the middle class. Mil- insights: Holly Amelia, Alec Ash, lions of middle-income Chinese families like Xiao Kang’s are well fed, Elizabeth Knupp, Michael Kovrig, Kai-fu Lee, Glenn Leibowitz, Li Jian, well housed and well educated. They have good jobs and plenty of Helen Liu, Stephen Olah, Jacob choices in life. But they are now confronting the dark side of China’s 35 Poushter, Qiu Wenjing, Tom Rafferty, years ofdazzling growth. Karla Simon, Charlie Smith, Tang This special report will lay out the desires and aspirations of this Zi’an, Wang Hai, Wang Xiao, Jeff Wasserstrom, James L. Watson, Wing fast-expanding group. Many Chinese today are individualistic, empow- Woo, Xie Yu, Yan Yunxiang, Zhang ered and keen to shape society around them. Through social media, they A list of sources is at Hong, Zhang Xin and Daniel Zipser. are changing China’s intellectual landscape. They are investing in new 1 Economist.com/specialreports

The Economist July 9th 2016 1 SPECIAL REPORT CHINESE SOCIETY

dissenting voices. Today’s young Chinese tend to do what they want, not what society expects—a profound and very recent shift. Most of these young people exercise their autonomy by choosing their own marriage partners or shelling out for a new car. But many have an appetite forcivic engagement too: they are the foot-soldiers of China’s non-government organisations, a vast, though often politically sensitive, array ofgroups seekingto improve society in a variety ofways. Pressures on the middle class are growing. Some feel that no matter how able they are, the only way they can succeed is by having the right connections. Housing has been a driver of economic growth, yet property rights are shaky, and the government encourages private investment without adequately regu- lating financial products. As more people go to university, returns to education are falling and graduate jobs are harder to come by. Many fret that their children may not see the progres- sive improvements in material well-being they themselves have 2 experiences ofall kinds. But discontent overcorruption, inequal- enjoyed, and more youngsters are going abroad. ity, tainted food and a foul environment is sharp and deep; many Political scientists have long argued that once individuals worry that their hard-fought gains are ill-protected. For decades reach a certain level of affluence they become interested in non- the Communist Party has kept control over a population that material values, including political choice. Average income per now numbers 1.4 billion by exceeding people’s expectations. person in China’s biggest cities is now at roughly the same level Their lives have improved faster than most of them could have as in Taiwan and South Korea when those countries became de- dreamt. Though the state hasused coercion and repression, ithas mocracies. When China opened up its markets in the 1980s, 1 also relieved many pressure points. Now it is finding it increasingly hard to manage the complex and competing demands of the middle class; yet to suppress them East, west, home’s best risks holding back many of the most pro- ductive members ofsociety. When the Communist Party seized Do not expect China’s middle class to be liberal power in 1949, China’s bourgeoisie was tiny. In the Cultural Revolution two de- ACROSS CHINA’S PARKS, elderly folk gather the country’s “great rejuvenation”. China’s cades later, wealth, education and a taste of a morning to sing, dance, play music and land reclamation around contested rocks in for foreign culture were punished. But exercise. Much of the music is about their the South China Sea is controversial abroad, after housing was privatised in the 1990s, country: an anthem from the Cultural but the vast majority of Chinese people the government tied its fortunes to this Revolution, Peking Opera numbers or support its territorial claims there, accord- rapidly expanding sector of society, en- songs from one of China’s many ethnic- ing to a slew of polls. Nationalism has couraging it to strive for the material trap- minority groups. Most of the exercise is become a glue to hold people together, says pings ofits rich-world peers. rooted in traditional Chinese medicine. Joshua Eisenman of the University of Texas: For the first time in China’s history a China is a hugely patriotic country, but it is “The Communist Party of China is no longer huge middle class now sits between the also increasingly nationalistic. Its people communist so it had better be Chinese.” ruling elite and the masses. McKinsey, a feel that it is superior to other nations, and At the same time sentiment has consultancy, estimates its size at around that as China rises, others must cower. become more defensive. More than three- 225m households, compared with just 5m Chinese society is far more connect- quarters of Chinese surveyed in the 2015 in 2000, using an annual income of ed to global culture than it was just a few Pew Global Attitudes poll felt their way of 75,000-280,000 yuan ($11,500-43,000) as decades ago, but exposure does not trans- life needed to be protected from foreign a yardstick. It predicts that between now late into tolerance. In April Global Times, a influence. Mr Xi has tapped this vein too. In and 2020 another 50m households will jingoistic state newspaper, published a 2015 his education minister called for a ban join its ranks. They are spread across the poll showing that an astonishing 85% of on “textbooks promoting Western values”. country, but are highly concentrated in ur- respondents supported unifying China More puzzlingly, the Minister for Civil Affairs ban areas (see map); around 80% of them with Taiwan by force. In 2012 demonstra- has proposed renaming “over-the-top, own property; and they include many of tions erupted across China about Japan’s West-worshipping” place names like the Communist Party’s 88m members. claim to sovereignty over disputed islands “Thames Town” near Shanghai, a cobbled Though China’s population as a in the East China Sea; shops were looted, recreation of an English market town. whole is ageing, the middle class is getting Japanese cars were destroyed and riot International news coverage in China younger. Nearly halfofall people living in police had to be deployed to protect the mostly makes other countries look stupid, cities are under 35: they are eight times Japanese embassy in Beijing. dangerous or crime-ridden (particularly if more likely than country-dwellers to be Such belligerence has been fed by they have recently overthrown an autocrat- university graduates; and most are trea- the Communist Party’s own narrative of ic government), but that has not deterred sured and entitled only children, with no history, which credits it as saving China the Chinese from wanting to go and see the memory of a time when their country from a “century of humiliation” at the world for themselves in droves. Last year waspoor. The internethasexpanded their hands of Japan and the West. Xi Jinping, they took 120m trips abroad, a fourfold horizons, even if the government shuts China’s president, now claims to be leading increase in a decade. out many foreign websites and quashes

2 The Economist July 9th 2016 SPECIAL REPORT CHINESE SOCIETY

2 democratic demands were widely ex- ing too. And across China millions of pected to follow. They did, but were sav- workers in declining industrial sectors agely silenced in Tiananmen Square in risk losing their livelihoods. Many mi- 1989. Since then, a mixture of political re- grants from rural areas working in cities pression, fear of chaos, pride in China’s feel rootless and marginalised, denied ac- advance and a huge rise in living stan- cess to facilities such as health care and dards has kept the country steady. education. Divisions within the party China’s middle classes increasingly elite are also a potential problem. And al- look and behave like their rich-world though dissidents have been silenced for peers, but they do not necessarily think now, they could find their voice again. like them. Intellectuals privately express a China’s Communist Party has sense of despair that since becoming shown extraordinary resilience to desta- party chief in 2012, Xi Jinping has shut- bilisingforcesand an impressive ability to tered free expression and ramped up ide- recreate itself. It has ditched most of its ology. Yet most of the population at large founding principles and tied itself to the seems unconcerned. If an election were middle-class wealth-creators, expanding held tomorrow, Mr Xi would very proba- its membership to include the very group bly win by a large majority—and not just it once suppressed. Since the 1990s the because there is no viable opposition. Chinese model hasproved so flexible that However, although few people in it appeared to break the democratic China are demanding a vote, many are world’s monopoly on economic progress. becoming more and more frustrated by the lack of political ac- To some it seemed to offer a credible alternative to democracy. countability and transparency, even if they rarely label them as Now China is beginning to reach the limits ofgrowth with- such. The party is clearly worried. In an internal document in outreform. The complexityofmiddle-classdemands, the rush of 2013 it listed “seven things that should not be discussed”: univer- unintended consequences ofeconomic growth and now a slow- sal values, press freedom, civil society, economic liberalism, his- ing economy are challenging the party’s hold. It has to find new torical mistakes made by the party, Western constitutional de- ways to try to appease a population far more vocal and more in- mocracy and questioning the nature of socialism with Chinese dividualistic than previous generations. 7 characteristics. Recentlythese have often become flashpoints between the middle class and the government. No wonderthat political trust in China is declining. Aseries Family, identity and morality of nationwide surveys from 2003 to the present, commissioned by Anthony Saich of Harvard University, show that the wealthy think less of the government than poorer folk do. Other polls A nation of individuals show that richer and better-educated people are more likely to support the rule oflaw, market allocation ofresources and great- erindividual autonomy; the less-well-offoften favourtraditional values and authoritarian rule. Chinese people increasingly do what they want, not Wang Zhengxu of the University of Nottingham in Britain and You Yu of Xiamen University in China go further. They ob- what they are told serve a clear decline in trust in legal institutions, the police and FOR A TASTE of the traditional Chinese approach to mar- local government between 2002 and 2011, despite a consistently riage, visit Lu Xun park in Shanghai. Advertisements with good economic performance and rising social benefits, and reck- details of 20-somethings looking for a mate are plastered over on that “the era ofcritical citizens” has arrived in China. upturned umbrellas. Those describingmen often note their sala- Many wondered how the party could ever survive after it ry and where they hold residency rights. Women use more ad- brutally crushed pro-democracy demonstrators in 1989. Its sol- jectives: beautiful, decent, quiet, “not fat”. What is curious about ution was to make people rich very quickly. Since 1990 the blis- this marriage market is that almost everyone in the crowd of300 tering pace of economic growth has been the party’s most im- or so is over 50. None of the youngsters said to be in search of a portant source of legitimacy, delivering its overriding priority: spouse is present; their parents even write the ads. The young to- stability. For a while these goals meshed well with each other day are picky, says Wang Xianghua, who is looking for a wife for and with people’s personal aspirations: under an unspoken her 30-year-old son, a software engineer at a state-owned enter- agreement, people could amass wealth so long as they did not prise. Women “marry houses”, not men, she says. In contempo- try to amass political powertoo. The recent slowdown in growth rary urban China a man is expected to bring a (mortgage-free) puts a question markover that compact. property to a union. The scene sums up a fundamental change in Chinese soci- Kingdom in the middle ety. The oldergeneration sees marriage as essential; many young Lookingahead, in a host ofareas from taxation to industrial Chinese say their parents bug them almost daily about finding a overcapacity to the environment, the party must make an invidi- spouse. Youngsters want partners too, but they do not define ous choice: introduce unpopular reforms now and risk short- themselves by their marital status, and few wish to be matched. term instability, or delay reform and jeopardise the country’s fu- Chinese youths increasingly put their own emotions above so- ture. On present form, stability is likely to win: the mighty party cial expectations. As they see it, their role in society is no longer is terrified ofits own people. about their responsibilities to the family and the wider commu- The middle class is not the only source ofpotential instabil- nity but about their own rights. Collective identities and group ity. In the western province of Xinjiang, repression of ethnic mi- membership have become secondary to personal preferences. norities has aggravated an incipient insurgency. Tibet is simmer- The ramifications reach far beyond private life. 1

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2 For nearly 2,000 years the family has been the organising principle of Chinese society. “Confucian values” is shorthand for the idea that a peaceful society was built on the family as an extended, stable unit ofseveral generations under one roof, each with a distinct social role and status. Ties were vertical and hier- archical, defined by respect and obligations flowing from the young to the old, from the kinship group to the emperor. Small wonder that Xi Jinping, China’s president, preaches family values as part ofhis own vision ofa harmonious China. He may be disappointed. Like every society that has shifted from agrarian to urban, China has seen a wrenching change in family ties, dispersing kinsfolkacross vast distances. In addition, people’s values have been torn up twice in quicksuccession, first bycommunism, which duringthe Cultural Revolution often sep- arated family members or set them against each other, and then by capitalism. Notions of family and identity have struggled to keep up with the country’s accelerated modernisation. This raises practical problems. China will get old before it gets rich: one in six of its people is already over 60, and by 2025 nearly one in four will be. The one-child policy pursued over decades, together with delayed child-bearing, will bring a rapid decline in the ratio of working-age adults to the over-65s, from 12:1 The apple of their eye now to 2.5:1 by 2050. China’s weak welfare system is still based on the assumption that kin will look after their own, placing the social and financial burden of caring for the elderly squarely on Shanghai and Guangzhou, men on average marry at 30 and the shoulders of adult children. Yet people’s new mobility, com- women at 28, later than in America. bined with the vast size of the country, makes that particularly Young people used to move straight from living with their hard. A declining share ofthe population now lives in multi-gen- parents to their marital home; now 58m of them live alone, and eration households (see chart), though it is still bigger than in the number is growing fast. “Our generation does not want to most rich countries. live with our parents,” says Zhou Haiming, a social worker in Growing individualism is transforming every aspect of so- Guangzhou. cial behaviour. For hundreds of years marriage was essentially Divorce isgettingmuch more common aseducation, migra- an economic contract between two families, designed to ensure tion and exposure to different ideas erode traditional norms. The heirs for the groom’s clan. But in the one-child society a child is national rate is well above that in Australia and most of Europe; regarded as the centre of the family, so weddings are focused on in parts ofChina it already exceeds that in America. the couple, not, as formerly, on the groom’s parents. Even in the 1980s adulthood was still marked by getting married and having Han solo a child; puttingself-interest above the collective was “basically il- All these trends are part of a wider liberalisation. What legitimate”, says William Jankowiak of the University of Neva- most distresses the older generation—and the government—is da, Las egas. Now, he says, coming ofage is about achieving au- the rise in the number of permanent singletons, a remarkable tonomy. People are motivated by love, not responsibility. change from near-universal marriage in the very recent past. That has helped bring about a sexual revolution. According This group includes over 8m bachelors in rural areas, often to one studypublished in 2012, more than 70% ofChinese young- among the poorest. Unable to find wives, they are unhappy vic- sters now have sex before marriage; ever more ofthem lose their timsofa preference forsonsthatmeantmanyfamiliesaborted or virginity at a younger age, and lots have had several partners. abandoned baby girls. Around 2m women over 35 are single too, More than 40% of couples live together before they wed, a dra- and the number is rising fast. For them this is more often a con- matic change from the 1980s. They also get married later: in scious choice, a sign ofrising status, better job opportunities and a determination to find the right person. That upsets parents who want grandchil- dren. It also troubles the Communist Party, which sees the family as a path to stability, responsibility and acquiescence. Every new generation believes their parents do not understand them, but in China this is often true. Most people in their 50s still have strong memories of being hungry; their children, by contrast, have known only a land of sizzling pork and high-speed trains. The world has radi- cally changed within a single generation. Take 34-year-old Zhang Diqi from Harbin in China’s frozen north. In 2013 he packed in his steady job in Beijing working for CCTV, the state broadcaster, to launch shijianpaimai.com, a website auc- 1

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2 tioning people’s time (“I believe that Arise in the numberofself-proclaimed Buddhists is tolerat- everyone has a price”). His initiative ed because most of them enjoy the ritual aspects of the religion caused a clash with his father: his parents but do not get seriously engaged. The Christian church is more value quantifiable, visible skills, he says, challenging. At an estimated 100m, it has more followers than and do not understand the value of ideas. the Communist Party has members. The party oscillates be- His mother nags him about finding a wife, tween wanting to embrace and to crush them. but he does not want one: “Marriage is the Rather than fix or regulate the institutions people rely on, restructuring of capital,” he says. He last the party is instead trying to enforce its own version of morality. went home to see his parents—a two-hour Mr Xi sums up his vision in “12 core socialist values” that stand in flight away—two years ago. silent contrast to Western notions of “universal values”. In order The rise of individualism extends to “engrave them on people’s minds”, folksy propaganda posters into working life, as Mr Zhang’s example now preach these ideas from almost every bare patch of wall in suggests. HundredsofmillionsofChinese China, on TV, at road junctions and in aeroplanes. Judging by the now workin small businesses rather than 13th five-yearplan released thisyear, MrXi hashigh hopes forthis large institutions—the work equivalent of campaign: “The core socialist values should become people’s the socialising family. In recent years the firm inner belief, and people’s conscious behaviour, so as to party has established small cells within strengthen the whole society.” private firms and even foreign enterprises Just in case citizens do not willingly embrace its vision, the to monitor them. The government is now government is prepared to enforce it. In 2013 it introduced a law encouraging “entrepreneurship and inno- compelling people with elderly parents to visit frequently and vation”, offering grants for startups, yet it ensure that their emotional and financial needs are met. Earlier is nervous about their rise. this year the government ofShanghai, where 30% ofthe popula- The demise of traditional family val- tion is over 60, threatened to downgrade the credit rating of ne- ues has strained conventional notions of trust. Until the 1970s, glectful adult offspring, which could bar their access to jobs, sometimes later, individuals knew most of the people they en- loans or even welfare payments. The party claims to know what countered in their life—those they bought food from, met isbestforitspeople, buta centrallyimposed publicmorality isin- through work, and even those they ended up marrying (because creasingly at odds with the private sort. 7 most were introduced by family networks). Strangers were treated with a degree of caution unless introduced by someone within the group. It is this relationship oftrust that is behind Chi- Wealth na’s emphasis on guanxi, or personal relationships, often misun- derstood by outsiders as fostering corruption. Urbanisation, mass migration, the private company and Keeping up with the the stretching of supply chains across thousands of miles have wrecked those personal networks. Most people live far from Wangs where they were born, work for independent firms and rely on services staffed by strangers. They must depend on institutions China’s growing wealth is unevenly spread—and good far more than on known individuals. But those institutions, or the laws that govern them, often turn out to be weak. investments are hard to find That has led to a rise in scandals that would have been im- “FOLDING BEIJING”, A short story by Hao Jingfang, a Chinese possible in former times: things like food contamination, inter- science-fiction writer, is set in a futuristic version of China’s capi- net scams, bogus ads for financial products, the recent illegal sale tal where inequalityisso starkthatdifferentsocial groups are not of improperly stored vaccines and the like. China Daily, a state allowed to use the same ground simultaneously. They take turns mouthpiece, recently lamented that such events indicated a loss occupying the area within Beijing’s sixth ring road, which flips of “moral compass” in Chinese society, and that trust had be- over every 24 hours. One side has clear blue skies, tranquil leafy come “a scarce commodity”. streets and supermarkets with imported food, where the 5m people of “First Space” people enjoy a whole 24 hours, whereas The long search the 75m people of “Second Space” and “Third Space” get only 12 This idea of decline seems to be supported by some shock- hours each. This last group is crowded together in a place where ingincidents. In 2011a two-year-old girl wasrun overbya carand construction dust obscures the tops of neon-lit buildings and lay bleeding in the street for seven minutes before someone workers toil “for rewards as thin as the wings of cicadas”. People came to her aid. This year a video camera caught people walking are beaten and imprisoned if they enter a zone above their sta- by as a woman was attacked in a Beijing hotel. In another case a tion. “There are many things in life we can’t change,” says one woman was found dead after being trapped in a lift for a month character. “All we can do is to accept and endure.” because nobody had checked it before cutting the power. Present-day Beijing resembles Ms Hao’s fiction: you can Many people look to religion for answers. In the 1990s the buy handbags that sell for more than some workers make in a state first turned a blind eye to and then crushed Falun Gong, a year. The People’s Republic has travelled a long way since it was Chinese discipline ofself-improvement and meditation that had founded on the dream of equality in 1949. Today it is one of the millions of followers. Its message was peaceful enough, but in most unequal societies on Earth. 1999 more than 10,000 Falun Gong followers demonstrated in Until the late 1970s owningprivate property was almost en- Beijing, demanding legal recognition and freedom from state in- tirely prohibited and very few people had substantial personal terference. The government is still strugglingwith the tension be- assets. The accumulation of wealth since then has been extra- tween the stabilising moral message of most religions and their ordinary. Between 1990 and 2014 income per person in China in- potentially destabilising capacity to mobilise people and preach creased 13-fold in real terms, whereas globally it less than tripled. some dogma other than its own. After Mao Zedong died, Chinese consumers dreamed of buying 1

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the “four rounds” (bicycle, lower ends of the middle class is growing too, according to Bos- sewing machine, washing ton Consulting Group, a consultancy. machine and wrist watch) and Many middle-class folk feel that, having fought their way “three electrics” (phone, refrig- up, they are being rewarded ever less generously for their efforts. erator and television); these Returns to education are declining because universities have ex- days they are more likely to panded rapidly. Last year more than 7m students completed uni- yearn for sports-utility vehi- versity degrees, compared with fewer than 1m in 2000. That cles and trips to Thailand. makes society more equal, but middle-class households fret that The greatest divide in new graduates are finding it harder to get good jobs. both income and opportunity is between rural and urban ar- The squeezed middle eas. Less than 10% of rural Manythinkthe gap between the super-wealthyand the rest youths go to senior high is growing because the game is rigged. They see society as unfair, school, compared with 70% of divided between those with connections and those without. A their urban counterparts. Most lot of Chinese believe, often correctly, that having personal net- rural youngsters leave school works which include powerful people trumps hard work. State- at 15, whereas a third of urban owned enterprises account for only one-third of GDP, but they ones gain degrees. Within cit- control key sectors such as energy and finance that affect every ies the main division is be- company, big or small. Even if no graft is involved, people “who tween migrant workers and lo- know people” find out about new policies and projects first, says cal residents: most migrants lackthe urban residence permit that Kong Miao, aged 25, who runs a startup in Beijing: “It’s not a pro- would give them and their children access to public services blem of corruption, it’s a problem of information asymmetry.” such as schools and hospitals. As long as the government maintains a monopoly on the com- Most of China’s middle classes own property and have demanding heights ofthe economy, this will remain true. cent jobs, yet they, too, worry that they are being squeezed, both The party is well aware that inequality is bad for social sta- from the bottom and the top. In the 1980s China was among the bility. From 1978 onwards it consistently said that its “chief task” most equal societies in the world, with a Gini coefficient of 0.3 (the Gini is a stan- dard measure of income inequality in The party has helped hundreds of millions of people get which 0 means total equality and 1 total inequality). By 2008 it had risen to a peak richer, but has done little to ensure that their assets of 0.49. For the past seven years it has serve them well been declining slightly as pay for rural and blue-collar jobs has been rising faster than for white-collar ones, but at 0.46 the official figure is still was economic construction, but in 2006 it changed its goal to es- higher than anywhere in the OECD, a club of mainly rich coun- tablishing a “harmonious society” by 2020. It seems reasonable tries (see chart), and many unofficial estimates are higher. to help the poorest in society move up, but that could make the Despite that narrowing ofthe income gap, in other respects middling sort feel even more unsettled. people feel thatinequalityisgettingworse. Thatispartly because Ofall the social groupsin China, the middle classes seem to of the way they think about success. Traditionally they com- have the mostto lose from instability. Mostare primarily interest- pared their lives with those of their parents, which should leave ed in making money, but some now worry that their precious as-

almost everyone feeling better oﬀ. But today’s young tend to sets are in jeopardy. The party has helped hundreds of millions

£ ¢ think horizontally, says Jean Wei-J¡eung of the National Uni- of people get richer, but has done little to ensure that their assets versity of Singapore, and judge themselves against their peers. serve them well. Pension and insurance schemes are weak. The City folk are far more likely to run into the full spectrum of in- super-rich often parkmoney abroad, but the merely well offfind 1 equality in their own streets, and thanks to the internet and television they are also well aware of how their global counterparts are doing. That helps explain why a report on well-being in Chi- na by researchers from Oxford University in Britain and Monash University in Australia, published last year, found that a rise in rural incomes has a far more positive effect on happiness than in urban ones. The middle class’s biggest grievance is that the super-rich have surged ahead and appear to have pulled up the ladder behind them. Beijing now has more billionaires than New £ork, according to Hurun, a Shanghai luxury publishing company. It cal- culates that the combined net worth of the country’s 568 billionaires is much the same as Australia’s total GDP. A study by Peking University earlier this year found that the top 1% of Chi- nese households controlled a third ofthe country’s assets, many ofthem in the form of“hidden income”, or undeclared earnings. Wang Xiaolu of the National Economic Research Institute in Bei- jingreckonsthatifhidden income isincluded, the top 10% earned 21 times as much as the bottom 10% in 2011, compared with official estimates ofnine times. The distance between the upper and

6 The Economist July 9th 2016 SPECIAL REPORT CHINESE SOCIETY

that harder to do. And the from state-owned companies. “The government is irresponsible, choices on offer at home look I’m truly disappointed in this country.” less than enticing. It may prove The party has no good explanation. Either it knew about a fatal flaw—not only for the the Ponzi scheme and did not warn investors, or it was oblivious economy, but for confidence in to the scam when it should have known about it. At the very the underlying political sys- least, it failed to provide adequate regulation: more than a third tem—that the party failed to of the 4,000 peer-to-peer platforms launched in recent years build a proper legal system at have failed. And since China has no independent judiciary, it the same time as it launched a lacks any system oftrustworthy dispute resolution. roaring economy. Things are getting worse. Between 2003 and 2013, courts Banks in China frequent- across China ruled on 1,051 cases of financial fraud and “illegal ly offer interest rates below the poolings” of public savings, including Ponzi schemes. Last year level of inflation, so people there were nearly 4,000 cases, and in the first three months of look elsewhere to protect their 2016 alone a further2,300 were uncovered. In the pastyearfinan- savings. Around 15% of house- cial frauds have cost investors at least $20 billion. Although the hold financial assets are invest- government has belatedly woken up to the problem, so far its ed in the stockmarket, not main response has been to ban the registration of new compa- enough to sink the economy nies with the word “finance” in their title. Peer-to-peer schemes when the market plunged last year but plenty to anger large still account for only a tiny share of household savings, but their numbers of stockholders. Around 3m people have also invested failure shows how hard it is to ensure that savings are safe. in peer-to-peer schemes, which have proliferated in recent years. That so many individuals and small businesses are prepared to From homes to castles put their money into products they know little about is a “mani- Since there are so few outlets in China for investing profit- festation of people’s deep desperation in a slowing economy”, ably and safely, putting savings into property is even more pop- says Edward Cunningham of Harvard University. And some of ular than elsewhere. Urban housing was privatised only in the them have been badly burned. 1990s, but already around 85% of city folk own their homes. Yet In 2014 Ding Ning, an entrepreneur who had made a for- property rights are shaky. Time after time, apartment-owners tune manufacturing screws and tin-openers, started a company have formed residents’ associations to fight plans to build addi- called Ezubao. It quickly became China’s largest peer-to-peer tional towers close to theirs, usually in vain. In some cases buy- lender, attracting 50 billion yuan ($7.6 billion) from nearly1m in- ers have shelled out for apartments before they were built, only vestors. Itadvertised returnsof9-15%, manytimeswhattradition- for the developers to disappear with the funds. al bankscould offer. Agovernmentbodyeven named ita “Model A recent series of cases in Zhejiang province revealed the Enterprise” fore-commerce integrity. Unfortunately it turned out weakness of China’s legal framework for property rights. Since to be the wrongkind ofmodel. Last yearthe government froze its the party abolished land and property ownership after 1949 assets; in February it pronounced the company a Ponzi scheme, there have been no freeholds in China, and leases are typically the world’s largest by number ofdepositors. Almost all the mon- 70 years for urban residential properties, but some are much 1 ey that flowed out to long-term investors came from deposits by new ones. When Ezubao collapsed, protesters gathered in several cities, and hundreds of social-media groups formed online to discuss “rights protection”—just the kind ofwidelydispersed protestthe state fears. Depositors were angry not only because they had lost money, but because they felt it had been “deliberate government policy” to encourage investment in such pro-

ducts, says ¤ictor Shih of the University of California, San Diego. The case of Ezu- bao is unusual—and signiﬁcant—because the protests were directed at the central government rather than the local authorities or institutions that typically attract such criticism. According to Harvard’s Mr Cunningham, amateur investors in Ezu- bao believed that the central government had endorsed the scheme, and were furi- ous when they found their trust had been misplaced. “It’s like giving a car to someone who doesn’t have a driver’s licence and letting him rampage around reckless- ly,” says a 32-year-old investor from Ningbo, near Shanghai, who had put 150,000 yuan into Ezubao afterseeing ads in state media and read endorsements High, and rising

The Economist July 9th 2016 7 SPECIAL REPORT CHINESE SOCIETY

2 shorter. Earlier this year hundreds of people who had signed 20- year leases on property in the wealthy city of Wenzhou in the 1990s were asked to pay a third of their homes’ market value to renew the leases. This provoked an outcry on social media, and Xinhua, the state newsagency, warned thata blurrydefinition of home ownership could cause unrest. The 20-yearleaseson thousands of other apartments in Wenzhou and other coastal cities are due to expire in 2019. Not in my courtyard Propertyownerswere dealtanotherblowin February with China-wide proposals to stop the building ofnew gated commu- nities and gradually open up the many parts of Chinese cities that have been shut away behind fences and gates since the 1990s. The idea was to relieve pressure on the overcrowded road networkand make betteruse ofurban land, but it proved inflam- matory. Within 12 hours the news had been forwarded tens of thousands of times on social media. Many complained that the proposal contravened a 2007 property law under which roads within such zones belong to the homeowners. The indignation was not just about money. Owning a residence in a gated community is seen as a sign ofupward mobility, a domestic space re- moved from state control. Itisthe opposite to the Mao-era danwei or work unit, where the state told everyone where to live and neighbours all knew and monitored each other. Millions of peo- The smell of success ple now question whether their assets are safe from some as yet unsuspected new plan. Even though the Chinese have little appetite for political change, they have a huge thirst for security, ticlesaveraged over600 partspermillion fora full 24 hours, near- transparency and the rule oflaw. ly 25 times the level the World Health Organisation deemed safe. The cost of housing is soaring in China’s biggest and most The “airpocalypse” threatened stability as well as health, so the desirable cities. In Shanghai, for example, it rose by 20% over the leadership took note. The following year Li Keqiang, the prime past year. That is good for those who already own a property, but minister, declared a “war on pollution”, describing smog as na- frustrating for young people hoping to buy in the next few years ture’s “red light”. The party is now making a real effort to im- before gettingmarried. Italso raisesfearsthatthe next generation prove the country’s notoriously foul air. will fare less well than the current one, especially in view of Perhaps the biggest myth about China is that because its slowing growth. And as middle-class certainties are being called people do not have the vote, theiropinions do not matter. Forde- into question, people are becoming more vocal. 7 cades the Communist Party claimed to embody and express the will of the masses. Surprisingly, since 1980 it has often done that, forpragmatic reasons. It has remained in powerlargely by letting Public opinion its citizens get richer and staying ahead of their expectations, oc- casionally even bending to some of their demands, as with air pollution, but retaining overall control. Crowd control That deal is now fraying. The party is finding it harder to keep track of, or respond to, multiplying gripes. Many Chinese, despite being well fed, living in their own homes and now offered the chance of having two children, are looking for some- thing beyond material comforts. Too often, China’s problems to- The views of Chinese people matter—but only up to day are by-products of economic growth unfettered by a point regulation or rule of law. People are angry about inequality, cor- IN 2011, FOLLOWING a string of serious incidents involv- ruption and environmental degradation, and as the economy ing lead and cadmium poisonings in various parts of the slows and prices and taxes rise they are becomingharder to paci- country, the Chinese government named contamination by fy. The system of making small tweaks to keep things going is heavy metals as the country’s number one environmental reaching its limits; the party’s competing goals are becoming in- health problem. China’s12th five-year plan for 2011-15 included a creasingly incompatible. requirement to tackle it. That same year a well-known Chinese The environmentisan obviousexample. The about-face on property tycoon and blogger started translating hourly tweets air pollution showed that the government is particularly respon- with readings from an air-quality monitor on the roof of the sive to urban opinion. Repeated polls over the past decade show American embassy in Beijing and posting them on a Chinese that concern about smog is far greater in urban than in rural ar- site. That drew attention to a different environmental health pro- eas, because belching factories usually cluster in cities. The gov- blem: the often extraordinarily high concentrations ofPM2.5 par- ernment’s plan on pollution, such as it was, was to get rich first ticles, a category ofvery tiny pollutants particularly damaging to and clean up later if necessary. But the protests about Beijing’s health. The readings contradicted the government’s persistent smog demonstrated the limits of using economic growth as a claim that the capital was simply “foggy”. proxy forlegitimacy. The turning-point came in January 2013 when a dark blan- Technocracies are often said to be more efficient than de- ket ofsmog choked the capital for weeks on end and the tiny par- mocracies at getting things done because they can focus on 1

8 The Economist July 9th 2016 SPECIAL REPORT CHINESE SOCIETY

2 things that really matter rather than waste time on such fripper- Information control is now the party’s main battlefront in ies as elections. China shows this to be wide of the mark. The shaping and responding to public opinion, says Nicholas Beque- foul air is just one of a host of urgent environmental problems. lin, East Asia director of Amnesty International, a human-rights The government responded to this one because the public grew group, in what he calls “the grand bargain between state and restive, an indication thatChina’senvironmental policyisaimed society”. In 2009 the arrival of a Twitter-like microblogging site, at stability, not sustainability. Weibo, appeared to usher in a new age of free expression in Chi- Aside from waterand soil contamination, which remain se- na, but the authorities got spooked when users showed outrage rious threats, another, longer-term environmental challenge after a deadly high-speed rail crash in 2011. Several prominent poses a farhigherriskofunrest: watershortages. The north ofthe bloggers with a huge following, known as “Big Vs”, were soon si- country has two-thirds of the farmland but only a ﬁfth of the lenced. Much traﬃc has migrated from the public Weibo to We- available fresh water. Grain-growing areas around Beijing have Chat, where only invited members can join conversations (the about as much water per person as arid countries such as Niger party lurks as an uninvited guest), but it is so widely used that and Eritrea. Rather than raise the price of water or import more news ofscandals spreads around China instantaneously. food, the government has built two 1,200km-long canals to bring Technology has created more space for people to express

water from the (often drought-prone) south of the country. That themselves, but also made it easier for the state to shutter discus-

§ © pricey technical ﬁx will not work for ever. Instead of curtailing sion. Censorship is moving faster, says Zhou Runan of S at- demand, which would provoke short-term discontent, the party sen University; many messages are now deleted in minutes, risks turning a diﬃcult but not insoluble problem into a perma- sometimes seconds. Criticism is often drowned out by pro-party nent environmental catastrophe. views. A Harvard University team that analysed leaked e-mails

In other arenas, too, the party shies from necessary but un- from a district internet-propaganda oﬃce estimated that govern-

§§

¦ ¨ popular decision ¥u ue, who runs Horizon, a polling comment staff post nearly 500m social-media comments a year pany, testspoliciesforthe partyto see whatthe popular response within China. The country was named the world’s worst abuser might be. Raising the retirement age, currently 50 for most wom- of internet freedom in 2015 by Freedom House, an advocacy en and 55-60 for men, would help pay to look after China’s age- group in Washington, DC, measured byobstaclesto access, limits ing population, but Mr §uan’s poll found that 70% of those on content and violation ofuser rights. polled, both young and old, are against it. A rise in income tax facessimilarresistance. In the same vein the government isreluc- Great walls of ire tant to deal with industrial overcapacity because it fears the des- The space fordisagreement, always narrow, has shrunk fur- tabilising effect of mass lay-offs. For decades the economy has therunderMrXi. Ayearago about120 civil-rights lawyers and 50 served the cause ofstability, but now there is a trade-off between support staffwho defend ordinary citizens against the state were preserving order in the short term and keeping the engine of rounded up. In March this year a party journal berated China’s growth running to safeguard long-term stability. entrepreneurs, long ago co-opted into the party, for “errors in After the violent crushing of pro-democracy protests in their thinking”, and Mr Xi urged them to “love the Communist 1989, the party concentrated on shaping Party and actively practise socialist core values”. This was pre- public opinion through the media. It is ceded by the disciplining of Ren Zhiqiang, one of China’s most now trying the same again. President Xi prominent tycoons, for speaking out online against the party’s Jinping courts popularity by kissing ba- control of the media. Celebrities also face increasing scrutiny. bies, cultivating a public persona more Now the middle classes fear they may be turning into targets too. akin to that of a democratically elected The Chinese are accustomed to the often thuggish behav- politician. Animated videos about Mr Xi iouroftheirpolice, usuallyaimed atthe poorand helpless. Butin

project an image of a hip yet humane May such violence appeared to be being meted out to a diﬀerent

party. The press, never free, is becoming kind of victim when L ang, a well-educated 29-year-old Bei- more constrained. The president recently jinger who had been working as an environmentalist for a gov- called on mainstream newsorganisations ernment-affiliated institute, died in custody in unexplained cir- to redouble their efforts to “reflect the cumstances. His family spoke out, questioning the police’s party’s will and views”. account of events. For weeks afterwards social media rang with Over the past two decades the party calls for justice. Former classmates from the prestigious Renmin haslargelywithdrawn from people’spriv- ate lives, but its tentacles are spreading again. Liu Xianran, who runs a startup in People are angry about inequality, corruption and Beijing, complains he can no longer watch the TV programmes or films he environmental degradation, and as the economy slows wants because the government has intro- they are becoming harder to pacify duced quotas for foreign ones. Online video was freer, but now the party is try-

ing to inﬂuence that too, by going for a stake and a board seat at University in Beijing led a petition: Mr Lei’s death, it said, “was a § §ouku, China’s version of ouTube, and similar ﬁrms. tragedy arising from the system…We want our most basic rights In May online videos ofyoungfemale presenters eating ba- to personal safety, civil rights and urban order.” nanas in a seductive manner were banned, and TV dramas are Popular sentiment has often been an ally of the party, says censored to edit out previously acceptable plunging necklines. A Ma Tianjie, who blogs about public opinion. In recent decades recent government-sponsored advertisement warned Chinese the state has used it to help push through changes against vested women against “dangerous love”—dating foreigners—because interests. Now the party seems to be bent on criminalising or they might be spies. Mr Xi has spoken out against “weird” build- marginalising many previously acceptable means ofexpression. ings and demands that art, architecture and all forms of culture Given the choice between accountability and authoritarianism, serve the party. the party is leaning ever more towards the latter. 7

The Economist July 9th 2016 9 SPECIAL REPORT CHINESE SOCIETY

Civil society Daring to think, daring to act

Civic engagement of all sorts is becoming much more widespread THE CONVERTED FLAT in a quiet residential neighbour- hood in north-east Beijing does not look like a hotbed of revolution. A sticker on the door declares it to be a “safe space”; inside are some armchairs, a meeting table, a rainbow flag and a counsellingroom. Yetoverthe pasttwo yearsthisorganisation in Beijing, which represents the lesbian, gay, bisexual and transgen- der community, has attracted increasing attention from the police. On one occasion the head of the centre was questioned for nine hourswithouta break. Itisbecomingharderto predict what forms of activism the Communist Party will tolerate, she says: “We often say our government is full ofG-spots. You don’t know how and where you touch them.” These days many Chinese want to get involved in non-profit organisations and civic groups, but the government does not always make it easy for them. After the party seized power in 1949 it stamped out anythingthat stood between it and the prole- Let’s have some colour in our lives tariat. Society was divided into work units, distinct walled com- munities that provided not just jobs but food, housing, schools, medical services and elder care for the toiling masses. The state ing a wider Chinese concern; and most give to the province claimed to meet every need from first to last gasp. What is now where they work, replicating and reinforcing China’s overall called civil society all but disappeared. wealth gap. As the party has retreated from people’s daily lives since A large and growing body of NGOs are essentially service the 1990s, a host of civic organisations has sprung up to fill gaps providers for the state. The nine-storey building from which Da- in state coverage. The needs and demands of society have be- tong, or “Great Harmony”, a government-sponsored NGO, oper- come far more complex, but state provision is surprisingly thin. ates in the southern city ofGuangzhou is home to a bevy ofsimi- Some civic outfits workwith particular groups, such as the elder- lar organisations; their names form the leaves of a tree in the ly or migrants; others are organised around issues such as the en- lobby, representing the Guangzhou government that nurtures vironment or labour. About 550,000 domestic non-government them. The local government commissions Datong to provide so- organisations (NGOs) are registered with the government, and a cial services for the elderly, children, migrant families and HIV further 2m or so are either unregistered or registered as business- sufferers. Its founder, Liu Jinglin, is a party member, as are some es, often to try to avoid scrutiny or harassment. On top of that, ofher social workers. around 7,000 foreign NGOs are operating in China. Some hoped that by working with the government, NGOs This looks like an outbreak of altruism in a country often like Datongmightinfluence itfrom within, butmostof them turn charged with lacking a sense of morality. The rise in individual- out to have little autonomy over their own services. Many are, in ism that has caused some to pursue blind self-interest has had effect, arms ofthe state. “The party wants to take all the credit for the opposite effect on others, instilling more of a social con- sortingoutsociety’sproblems,” saysJingJun ofTsinghua Univer- science and increasing civic engagement. Many Chinese are re- sity in Beijing. spondingto the anomie and inequalitycaused bytheircountry’s accelerated modernisation by trying to improve the lives of Any size as long as it’s small strangers. Such groups meet the demand for such services and Datong is precisely the kind of civic group that the govern- provide an outlet for the mainly middle-class individuals who ment hopes will help it increase social stability by alleviating so- want to do their bit for society and have the capacity for it. Their cial ills. In March China’s first charity law was passed to allow efforts seem to enjoy widespread support: people’s trust in registration with the government, legalise fundraising and pro- NGOs is increasing year by year, according to the annual “trust tect donors. It sends a strong signal that the state encourages at barometer” put together by Edelman, a public-relations firm. least some kinds ofcivic groups. Despite reservations, most peo- This urge to engage has recently spread to charitable giving. ple in the sector see it as an important step forward. Total donations have nearly quadrupled since 2007, to $16 bil- But the new charity law also sets clear limits. In effect, it lion, though ordinary folk tend to contribute ad hoc when caps the size of such civic groups. Institutions have to be in busi- prompted by some crisis or natural disaster, rather than system- ness for two years before they can raise funds, which is longer atically. Giving in China is still paltry compared with America, than some will be able to wait. Charities’ operating costs must which collects 25 times the Chinese total from a population a not exceed 10% of spending, which will make it hard to find and quarter ofthe size, but it is rising fast. The richest individuals lead retain skilled staff. And most of the income must be distributed, the way. According to researchers at Harvard’s Kennedy School, so accumulating an endowment will be next to impossible. over a third of China’s biggest philanthropists made money in The party is wary ofcivic groups because it views them as a property; nearly 60% of their donations go to education, reflect- training ground for political participation. It is well aware of the 1

10 The Economist July 9th 2016 SPECIAL REPORT CHINESE SOCIETY

ed souls bound by a common cause linking up around the country is anathema to the party. Most of its responses can be ex- plained by this overriding concern. Rather than bow to government repression, the feminists have changed their strategy, becoming active on social media and looking forcrowdfunding to pay forads against harassment. LGBT groups have changed tacktoo. Although Chinese society is becoming more tolerant of diversity, even at the top, the state worries that such groups are becoming increasingly well organised. In the past LGBT groups have helped stage “performance art” such as faux gay weddings in popular tourist spots to raise awareness. Now they have taken to helping people use the legal system to advance their cause. Individuals have brought cases fighting illegal “gay conversion” therapy, homophobic language in textbooks and pushing for the right to marry. Bold star Activism is not restricted to the non-profit sector. Luo Changping, a journalist, is known in China for his online exposure of the cheating and corruption of a top party official in 2013, which eventually got the cadre sacked. Mr Luo himself, although not exactly sacked, was moved from his reporting role at Caijing, one of China’s more outspoken magazines, for investigating se- cret offshore accounts, and transferred to an affiliated research institute. Now he works for Okoer.com, a Chinese-German joint venture that tests the quality ofproducts made in China and other countries. Mr Luo is a rare individual in China who is willing to speak 2 role that trade unions, churches and other civic groups played in truth to power, so inspectingsextoys, soy sauce and biscuits may bringing down the Soviet bloc. Mass participation is also an un- seem like a comedown. But his work still involves exposing the welcome reminder of China’s own Cultural Revolution. There is effects of corruption, negligence and the weak legal system on a reason why the party calls NGOs “social organisations”: it fears the lives of ordinary Chinese people, he says. “What I do now is that “non-government” may be misread for “anti-government”. more effective than journalism. One test can affect millions of The party is particularly cautious about foreign NGOs and consumers, but a big media exposé would change nothing.” foreign-funded domestic ones, seeing them as potentially sub- That points to another reason why the party fears such en- versive “anti-China forces”. A new law requires international gaged citizens: they lay bare the gross failings of the state, includ- NGOs to register with the public-security bureau; they riskbeing ing its institutional inability to protect its citizens. Food safety is a shut down if they “endanger national security”, a vague term particularly touchy subject in China. Most notoriously, in 2008 critics worry will be used to justify increased monitoring or ha- vastquantitiesofbabymilkwere found to be contaminated with melamine, killing four babies and sending 50,000 to hospital. Every month brings new such scandals. Though indi- The idea of like-minded souls bound by a common cause viduals sometimes go to jail for their part linking up around the country is anathema to the party in them, the underlying failure of regulation and accountability is not dealt with. Since the subject is so controversial, Chi- rassment. “It’s unfortunate that they decided to see us as crimi- nese labs often will not test food samples nalised from the get-go,” says the head ofone such foreign group. from private firms or individuals, so The state’s fear that activism will turn into political action Okoer sends all its products to Germany explains the ambiguous and at times antagonistic relationship to be analysed. between NGOs and the state. Yang Xiong of the Shanghai Acad- Ai Weiwei, a Chinese artist, once re- emy of Social Sciences says social organisations are “friends of marked that a distinctive feature of dicta- the government”, and only those working on “religion, politics torships is that they make individuals feel orthe military” are sensitive. In fact the distinction is not as clear- powerless to change anything in society. cut as that. etalthough civicengagementispolitical- Since Xi Jinping took office in 2012, the crackdown on civil ly sensitive, China today has more and society has intensified. Tolerance of the more sensitive groups more engaged groups such as parents’ as- has declined and previously accepted groups have been subject- sociations at schools and residents’ ed to greater scrutiny. Leaders of labour-rights groups have been groups that represent apartment-block tenants. Few of them are arrested. Courses on civil society at some universities have been interested in liberal causes; they may be NIMBYists, or objecting closed and professorstold to behave. In March 2015 five feminists to migrant children in theirmiddle-class schools. The vast major-

were imprisoned for over a month, purportedly for planning a ity are tiny and would never consider themselves part of a

campaign against sexual harassment. Their crime was not that broader movemen et in pressing for action, they show that they stood up for women’s rights, but that they wanted to stage their voice matters, that the party cannot direct all social change simultaneous campaigns in several cities. The idea of like-mind- from the top. Slowly they are shaping China, step by tiny step. 7

The Economist July 9th 2016 11 SPECIAL REPORT CHINESE SOCIETY

Emigration The mass exodus of students like those at Lanzhou Oriental is just one part of the story. Since 2001 well over 1m Chinese have become citizens of other countries, most often America; a far The long march abroad larger number have taken up permanent residence abroad, a status often tied to a specific job that may last foryears and can turn into citizenship. Chinese make up the bulk of individuals who are given in- China’s brightest and wealthiest are leaving the vestor visas, a fast-track immigration system offered by many countries to the super-wealthy. Others are just moving their country in droves money offshore, investing in foreign companies or buying prop- IN FAR WESTERN China on the edge of the Gobi desert, 17- erty. Officially Chinese citizens are limited to moving $50,000 year-olds in a social-studies class are discussing revolution abroad a year, but many are finding inventive ways to get round (the Russian one) and the use and abuse of nationalism (Ger- that rule, including overpaying for imports, forging deals with many, Italy). When the teacher asks what “totalitarianism” is, a foreign entities and even starting, then losing, fake lawsuits girl immediately replies: “One leader, one ideology, no human against foreign entities, triggering huge “damages”. rights.” These are Chinese pupils in a Chinese classroom study- ingthe second world war, but by attendingLanzhou Oriental Ca- An export industry nadian School they have already written themselves out of at Studying abroad has become an ambition for the masses: least part of a Chinese future. They will all go to university 57% of Chinese parents would send their child overseas to study abroad, many to Canada, others to the United States, Australia ifthe family had the means, according to the Shanghai Academy and Britain. So great is Chinese demand for foreign schooling of Social Sciences. Even Mr Xi sent his daughter to study at Har-

thateven here in Gansu, China’ssecond-poorestprovince, a new vard. Nor is this open only to the super-rich. Liang uqi from blockis being built to house more students; the hoardings on the Zhangye, a city close to Lanzhou, is beingquietly guided towards building site are plastered with posters about “The Chinese a relativelycheap Canadian state universityto studypsychology. Dream”, a slogan Xi Jinping launched in 2012 to promote the Her parents are government oﬃcials who have never been country’s “great revival”. But like hundreds of thousands of peo- abroad (cadresmusthand in theirpassport) and will pool money

ple acrossChina, these teenagersand theirfamiliesharbour a dif- from relatives to fund her foreign education. The sacriﬁce is

ferent dream: escape. worth it, says her mother: in middle sc uqi was “fat” and The extraordinary outflow of people from China is one of “mediocre”, now she is confident and asks lots of questions. the most striking trends of recent decades. Since the country Many others are spending their all to make the break. More than started opening up in 1978, around 10m Chinese have moved halfa million university students went overseas last year. abroad, according to Wang Huiyao of the Centre for China and This aspirational market is served by hundreds of interna- Globalisation, a think-tank in Beijing. Only India and Russia tional schools in China. Some cater for non-Chinese citizens, of- have a larger diaspora, both built up over a much longer period. ten the foreign-born offspring of returning Chinese. Since 2003 a growing number of regular Chinese schools, such as Lanzhou Oriental Middle School, have launched lucrative interna- Since the tional programmes for Chinese passport- country holders (fees at Lanzhou Oriental’s international arm are 70,000 yuan ($11,000) a started year, 11times the price of a regular educa- opening up tion there). Their popularity caused a backlash against the use of public facili- in 1978, ties and funds to send kids to study around 10m abroad after they finished school. Beijing city government and a number ofprovin- Chinese cial authorities have stopped approving have moved new international programmes, and the education ministry is pondering nation- abroad wide restrictions. But students are leaving younger and younger. Since 2005 the number ofChinese secondary-school pupils in America alone has increased almost 60-fold, to 35,000. Of the 4m Chinese who have left to study abroad since 1978, half have not returned, according to the education ministry. By most unofficial counts the share is even larger. In some fields the brain drain is extreme: almost all of China’s best science students go abroad for their PhDs, and 85% ofChinese science and engineer- ing graduates with American PhDs had not returned home five years after leav- Dreaming of America ing, a study by the National Science Foun- 1

12 The Economist July 9th 2016 SPECIAL REPORT CHINESE SOCIETY

2 dation found this year. Many of the teenagers at Lanzhou Orien- Outflows ofcapital, even more than people, directly mirror tal Canadian School know that they are responsible for their political risk. The torrent of cash flowing out of China almost ex- entire family’s future: 16-year-old Hai Yingqi says she has to get a actly matches fears about the strength of the economy and the good enough job upon graduation to allow her parents, young government’s capacity to handle it (see chart). In the second half brother and all four grandparents to emigrate. of2015, for example, capital moved abroad at an annual rate of$1 trillion in response to a fragile economy, the government’s One, two, flee botched attempt to intervene in the falling stockmarket and a China has long seen education as a passport to success, slight but unexpected drop in the yuan. The government tempo- which helpsexplain whythe middle classisnowfocusing on for- rarily slowed that outflow by stepping up capital controls earlier eign schools and universities. One Beijing businesswoman pre- this yearand takingsome sensible decisions on the economy. Yet paring to give birth in America says she wants to avoid sending as with so many problems, the party dealt with the immediate the child to a Chinese school because she would have to bribe crisis, not the underlying cause. her way into a good primary school, and then “make sure the China has long been a land of emigration, establishing teacher is happy”—more bribes: “It’s not the money I mind, but small outpostsofitspeople in almosteverycountryin the world. the trouble.” Anotherparentquestionshowa child can learn val- Theirmain motive wasto escape poverty. Butthose nowbowing ues in such a system, and cites the corrupting influence of“patri- out are among China’s richest and most skilled. It is a profound otic education”, the compulsory propaganda classes all pupils indictment of their country that being able to leave it is such a must attend, where there is only one right answer and nothing strong sign ofsuccess. 7 can be questioned. Others find different exit strategies. The super-rich can, in essence, buy foreign residency. Chinese citizens who invest at Looking ahead least £2m ($3m) in Britain are promised permanent residency in five years; Australia offers a similar scheme for A$5m ($3.6m). Around 70,000 Chinese millionaires have emigrated to Canada The writing on the wall since 2008 under an immigrant investor scheme. This is no lon- gerin operation, but the country is now encouragingChinese en- trepreneursand startups. HongKonghascracked down on mainland mothers giving birth there to gain Hong Kong passports The Communist Party’s policy of balancing freedom of (and citizenship has become less appealing than it used to be), but birth tourism to America and other countries is increasing. expression with repression is not sustainable

And many of those working for multinational companies even- IN 1970 AN ECONOMIST called Albert Hirschman pub-

tually transferelsewhere. lished a book called “Exit oice, and Loyalty” in which he Businesspeople who have returned to the mainland now setouttwo waysin which people can expressdisappointment in lead some of China’s most innovative companies. But most a company, institution or state: they can either vote with their come back only once they have secured an escape route for feet (exit) or stay put and speak up (voice). The Chinese Commu- themselves or their children. The government has sponsored nist Party owes its longevity to having kept the door ajar to both some expensive schemes to lure academics back to China, and outlets fordisillusionment. some have taken up the invitation, having first made sure that After the Tiananmen Square pro-democracy demonstra- their children were born abroad so they would be able to choose tions in 1989, it offered a quiet exit by allowing some of the re- where to live in future. Yao Ming, a famous2.29-metre-tall basket- gime’s bravest critics to leave the country. In recent years it has ball player, is one ofChina’s icons, a true product ofthe Commu- also turned a blind eye to capital outflows. China’s internet fire- nist Party (which encouraged his exceptionally tall parents to wall is managed in similar fashion: millions of people in China marry), but his daughter, now six, was born in America. Chen are able to use virtual private networks (VPNs) and the like to Kaige, one of China’s best-known film directors, has at least two leap over the fence and experience the world wide web rather American children; GongLi, a film star, and Jet Li, a Chinese mar- than China’s filtered version. The authorities could crack down tial-arts actor, both have Singaporean passports. on such circumvention tools, and sometimes do so on politically sensitive occasions. But mostly they choose not to, partly for economic reasons (some businesses need VPNs to operate) and partly because they want to maintain stability (which might be upset by wholly effective filtering). Exit is still possible: hundreds ofthousands ofpeople leave each year to study, work or join family. Many invest in foreign countries or send their money abroad. But the world does not have enough universities, houses or jobs to support 225m extra households; nor would everyone in China want to leave. So although this route is still open, the middle classes are expanding so fast that an ever smaller proportion ofthem can use it. The government has employed the same tactic for voice, appearing both to allow and respond to criticism. Listening to the people on issues such as airpollution relieves tension and re- duces pressure, as well as producing some good policies. On the internet low-level dissent is tolerated, but censored quickly once it starts to be widely shared. The government has become expert at dealing with crises—send in officials, launch an investigation, sack a few people—without tackling the underlying problems, 1

The Economist July 9th 2016 13 SPECIAL REPORT CHINESE SOCIETY

2 which would usually show up far bigger cracks in the founda- is impossible because the state tions. In April Mr Xi even claimed to welcome criticism online. intrudes into people’s homes. The party is responsive but not accountable. Chinese nationalism is strong, This artful balance will be hard to maintain. Disappoint- but on its own it is not enough to ment among different groups is growing, in different ways. The nurture the dream. middle classes want more autonomy over their personal lives; The government’s answer they want to comment online, even if they are censored or has been to silence voices. Some drowned out; many want to help remake their rapidly changing by force, such as those of civil- society rather than wait for the government to do so. They are rights lawyers, labour activists anxious about protecting their property and assets in a country and brave feminists; others by where regulation and the rule of law is weak. They want assur- telling them to put up and shut ances that the government can safeguard their children’s future. up. That is true ofparents whose Mr Xi’s vision of the “Chinese Dream” has proved largely children have been poisoned by empty. Meant to echo the American dream, instead it highlights tainted food or toxic soil, inves- the difference between the two. The American idea that people tors who have lost money in can be whoever they want to be contrasts with the tightly Ponzi schemes or civil-society scripted social and moral codes the Chinese government is vig- groups that are being prevented orously trying to impose. Chinese people with American-style from trying to make society bet- aspirations who hope to be rewarded for ability and hard work ter. Their call for expression is are frustrated by the continued monopoly ofthose with connec- being met with repression. tions (though the journey from rags to riches has become harder What is happening on the in America too). And in China living a life free from interference mainland now is reminiscent of what happened in Hong Kong more than a quarterofa century The company September 17th ago. In the 1990s, after the Tia- The world economy October 1st Russia October 22nd nanmen Square protests, many Espionage November 12th Hong Kongers were afraid of what rule from Beijing might bring. Those who could afford to obtained foreign passports before the territory was returned in 1997, but many lacked the means to leave. So although HongKonglost some ofits most pro- ductive people, it ended up with an increasingly independent, individualist, confident yet potentially restive middle class. Even with a far more relaxed government than on the mainland, since 1997 protesters in Hong Kong have repeatedly poured onto the streets, infuriated by mainland attempts to impose its laws and to introduce “patriotic education”, frustrated bynothavinganyreal sayin who runsthe territoryand annoyed by the hordes of mainlanders crowding the streets. Many of the underlying causes of this discontent resonate with China’s middle classes: concerns about an ageing population, strained health-care resources, the quality and quantity of graduate jobs, high property prices, low pensions, jobs moving offshore and an inability to determine their own future. A slow-burning fuse The Chinese people are not likely to rise up and fight for democracy any time soon. But they are looking for change, and ag- itating (mostly in small ways) for some of the freedoms that go with democracy, though few would describe them that way. The regime has survived by staying ahead of people’s demands and offering some outlets fortheir dissatisfaction, but now those outlets are shrinking. Givingthis group what it wants would destroy the monopoly on power that the party has sought so hard to build and maintain, and for now it shows no sign ofdoing so. But in the longer term it will find it hard to contain these forces. The middle classes are increasingly dominated by those born after 1980, whose expectations are shaped by global travel and the internet. They are no longer so cowed by history or so grateful to the party for the improvements in living standards they have enjoyed. At some point the party’s institutional amne- sia may come back to bite it. Those who do not remember the Walls still have ears past may be in danger ofrepeating it. 7

14 The Economist July 9th 2016