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| Tibet and the Chinese economy | | Print | |
| May / June 2008 | |||
 Riots in Tibet and rising inflation have everything to do with the Chinese government's stance on maintaining social stability writes Willy Lam.  What has the Tibetan crisis got to do with the Chinese economy?A lot! And not just because of a possible downturn in income from tourism - and corporate sponsors - during the heady Olympics season. To gauge the full impact of the series of rallies, protests and riots that have taken place on and off since March 10, it is instructive first to examine the extraordinary nature of the Tibetan's show of defiance. The other source of instability is the stock market. China now has 150 million gumin, or "stocks-and-shares punters" who have opened stocks-related accounts in brokerages and banks. The March demos were much bigger than the outbreak of disorder in Lhasa in February and March 1989, which prompted then party secretary of the Tibet Autonomous Region (TAR), Hu Jintao, to order the People's Armed Police to use live ammunition to quell the uprising. Hu did such a good job of restoring order to the tarred streets of Tibet that four years later, Deng Xiaoping named the then 49-year-old cadre as the "core" of the Fourth Generation leadership and successor of expresident Jiang Zemin. The year 2008, however, is different. Owing to faulty intelligence - and poor crisismanagement - disturbances broke out not only in the TAR but also in predominantly Tibetan counties in the four nearby provinces of Sichuan, Qinghai, Gansu and Yunnan. Internal party papers said at least 30,000 Tibetan "troublemakers" had taken part in almost 100 instances of "beating [up people], smashing, looting and burning" in March. A Chinese government spokesman even suggested in early April that firebrand activists might launch "suicide attacks" against Han Chinese. It is almost a foregone conclusion that while the bulk of the "splittists" and "quasi-terrorists" have been neutralized or put under 24-hour surveillance, individual protests in different parts of the five provinces will continue to take place in the run-up to the Olympics. The Hu Jintao administration has certainly lost face over the fact that several Western countries have threatened to boycott at least the Opening Ceremony of the Games. Much more significant is that the Tibet unrest - coupled with possibilities of massive disorder unleashed by runaway food prices - has infused the Chinese Communist Party leadership with a siege mentality. Most economic and political reforms have been shelved for fear of exacerbating socio-political instability. At the just-ended plenary session of the National People's Congress, Premier Wen Jiabao admitted that it would be very difficult to fulfil this year's target of keeping inflation down to 4.8 percent. Last February, the CPI rose by 8.7 percent. And since this index does not include items such as housing and services, inflation is actually much more serious. The connection between price spirals and instability is obvious. It was double-digit inflation in 1988 and 1989 which prompted hundreds of thousands of college students to hit the streets. Such protests culminated in the tragic events of Tiananmen Square in June 1989. The Chinese media is now abuzz with rumours that for the sake of stability - and "a congenial social atmosphere for the Olympics," the government may intervene to prop up the market. The other source of instability is the stock market. China now has 150 million gumin, or "stocks-and-shares punters" who have opened stocks-related accounts in brokerages and banks. Owing to the short history of China's market economy, gumin are gullible suckers of myths such as that because the bulk of the blue-chip, listed companies are famous government-held conglomerates, the stock index can only go up - not down. Due to the subprime crisis in the US however, the Shanghai Composite Index shed 34 percent in the first quarter of this year - fully 26 percent more than that of the US. The Chinese media is now abuzz with rumours that for the sake of stability - and "a congenial social atmosphere for the Olympics," the government may intervene to prop up the market. One rumour has it that the much-hated stamp duty or stocks transaction tax might be scrapped in the not-too-distant future. Bringing down inflation - which Premier Wen has termed his top priority - however, may engender bearishness in the stock market. For example, Beijing has since 2004 been pursuing a tight-money policy to rein in irrationally exuberant development in sectors including properties, minerals and infrastructure. This contractionary monetary policy will of course, result in lowering the growth rates of a phalanx of companies - including banks, insurance companies, realestate firms, mines and even energy companies. And this in turn will depress their stocks' prices - thereby making the life of the 150 million gumin more difficult. At the end of the day, Beijing may find the difficult job of catching recalcitrant monks in the Himalayan redoubt of Tibet easier than preventing disgruntled gumin - and inflationravaged Chinese at the bottom of the barrel - from taking to the streets. And the ease with which several dozen Tibetan organizers could stir up trouble for Beijing for weeks on end testifies to the fragile nature of China's façade of stability - and the dubious efficacy of Beijing's supposedly impregnable control mechanisms.
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