Lessons from Tiananmen and the Arab Spring

Corruption, pollution and the real estate sector could lead to more social unrest in China, a Singapore investors' conference heard on the 25th anniversary of Tiananmen.
Victoria Park on Wednesday night
Victoria Park on Wednesday night

Twenty five years on and the protests in China continue but the emphasis is a little different to that which brought the students to Tiananmen Square in 1989.

On that definitive June morning, China’s army marched into a peaceful pro-democracy protest and opened fire, killing hundreds or, by some estimates, thousands of people.

China has been transformed in the intervening quarter of a century. But the memory lingers; Wednesday night’s candlelit vigil in Hong Kong’s Victoria Park drew a record crowd of 85,000, police data show.

Beijing also continues to face unrest from inside its own borders, and not just from regional or religious groups with an axe to grind. The government is struggling to get to grips with corruption and excess, chronic pollution, and an overheated and now faltering housing market, all of which have the potential to create social instability. At the same time, economic growth is stalling.

Annual economic growth has slowed from 10.4% in 2010 to 7.4% now. Meanwhile, the value of homes sold declined 18% in April from the previous month, according to Bloomberg data.

So a warning given earlier in the day at Nomura's annual Investment Forum Asia in Singapore by Alastair Newton, a senior political analyst at the Japanese bank, is timely.

"I want to bring your attention to social tensions and, on today of all days, on social unrest, Newton said. "Investors are very focused on economic risks in China, particularly on the residential real estate in third- and fourth-tier cities and the fragility of the financial system."

The warning was clear, if a little alarmist: that the social unrest experienced by other emerging countries may act as a template or even be a curtain-raiser for what might yet occur in China.

Newton and his team of analysts began watching for regional social unrest after the Arab Spring kicked off a series of demonstrations, protests, riots and civil wars in 2010.

The team did not have to wait too long. In late May 2013, protests erupted in Turkey, initially to demonstrate against a development plan for Istanbul's Taksim Gezi Park.

Hundreds of thousands joined to protest a wide range of concerns, including freedom of the press and of expression, and these demonstrations are still ongoing today.

Over the past year, the conference heard, a further dozen countries have been affected by significant civil unrest: South Africa, Brazil, Egypt, Thailand, Bosnia, Bulgaria, Ukraine, Italy, Taiwan, Venezuela, Argentina and Vietnam.

The social unrest was sparked by a myriad of factors but the similarities are hard to ignore -- the disturbances took place in countries characterised by high economic inequality and high levels of perceived government corruption.

Rising inequality

Although income inequality is being addressed, with the wage gap in rural and urban centres easing, China’s Gini coefficient -- a key measure of inequality ranging from zero, which represents perfect equality, to one, perfect inequality -- is still high.

China’s Gini has risen from 0.3 in the 1980s to nearly 0.5 today, which means its level of income inequality is now in the same ballpark as that of Latin American countries such as Mexico and Peru, although still lower than nearby Brazil and Honduras.

The Nomura conference heard that the lead protestors are typically young, middle-class, city-based citizens with a university education. Most importantly, these protestors, who believe their "political elite are corrupt, self-serving and not listening, [are] joined together by a social network," Newton said.

Although Newton maintained that China is on his "possible, not probable" list of countries that might experience unrest in the near future, some isolated signs of trouble have already been seen (in Wuhan for example), and it is not such a leap of faith to imagine it spreading if economic grievances intensify.

Newton noted how fast news of the Wenzhou high-speed rail crash in 2011 spread across Weibo, China's version Twitter, for example.

"That troubles China's leaders. What would it take to get the Tweeters and bloggers [offline] and onto the streets?" Newton asked the audience.

Unpredictable

Crucially, no government can predict when such demonstrations will start; not even one that craves close control of its media, industry and markets. The trigger for these events is also widely unpredictable.

Newton pointed to the 20-cent bus fare increase in São Paulo in 2013 that triggered Brazil's first nationwide unrest in more than two decades. "No one could have predicted that in Brazil. And I can't tell you if it'll be the same in China."

The factors stoking social tensions in China have changed over the past 30 years. In 1979, starving Chinese fled to Hong Kong. In 1989, they protested for democracy. Today, pollution and atrocious air quality are key concerns that unite the country, said Zheng Yongnian, a professor and director of East Asian Institute at the National University in Singapore.

While the poor air quality may lead to social unrest, Xiao Geng, vice-president of research at the Fung Global Institute, pointed out that the Chinese may simply vote with their feet.

"Today, Chinese people are not hungry for food. They're hungry for clean air, clean water, safe food, and access to information. And today, they can run [to] anywhere in the world," Geng said.

"Chinese kids study overseas and the Chinese [constantly] buy property overseas. [The government] faces serious challenges to keep people [happy] with clean water, air and food," Geng said.

Despite the enormous challenges that face President Xi Jinping and his fellow leaders, Zheng praised the Chinese Communist Party for its flexibility.

"Communist parties everywhere have been brought down by corruption, internal power struggles and massive social protests," Zheng said. "The CCP continues to rise. Why? It has transformed from one party [of] personal dictatorship to an open-party system."

Less impressed were the demonstrators at Victoria Park as a succession of speakers called for the Chinese government to retract its claim that the Tiananmen protest in 1989 was little more than a counter-revolutionary riot.

¬ Haymarket Media Limited. All rights reserved.

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