The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Hugo Dixon
China’s economy is riddled with vested interests, while free speech is suppressed. This potentially explosive mixture sounds similar to Hosni Mubarak’s Egypt, though Beijing has been much more successful at promoting economic growth than Cairo in recent decades. No wonder the regime is cracking down on dissent — including arresting Ai Weiwei, the internationally renowned artist. But it won’t be easy to maintain the current political model — or to reform it. And failure to do either could knock the economy off its extraordinary trajectory.
The country is officially run by the Chinese Communist Party. But, apart from the suppression of individual rights, it is hard to see much about it that is communist. Inequality is high and rising. The Gini Coefficient, a standard measure of income inequality in a society, is over 0.4 and, by some measures, is close to 0.5 — high figures normally associated with sub-Saharan African countries.
If this inequality were merely a reflection of the market — the fact that some Chinese are more talented and hard-working than others — it could be motivational. But a lot is also a result of economic goodies being grabbed by insiders, sometimes via corruption and in other cases by excluding outsiders from opportunities. One lesson from the Arab Spring is that populations can grow restless when they think rulers and their cronies are enriching themselves unfairly.
In China, the “class” system operates on several levels. At the top of the socio-economic scale are the “princelings,” children of important party officials, who have become multimillionaires by trading on their contacts. Then there are bureaucrats, who enjoy attractive lifestyles funded by the people’s taxes and sometimes bribes. Transparency International puts China joint 78th out of 178 countries in its 2010 ranking of perceived corruption. State-owned enterprises, meanwhile, benefit from monopolies or oligopolies and pay minimal dividends. The fruits of their economic activity are therefore largely enjoyed by those who run them.