the two dozen senior politicians who walk the halls of Zhongnanhai, the compound of the Chinese Communist Party’s leadership in Beijing, are worried. What was inconceivable a year ago now threatens their rule: an economy in freefall. Exports, critical to China’s searing economic growth, have plunged. Thousands of factories and businesses, especially those in the prosperous coastal regions, have closed. In the last six months of 2008, 10 million workers, plus 1 million new college graduates, joined the already gigantic ranks of the country’s unemployed. During the same period, the Chinese stock market lost 65 percent of its value, equivalent to $3 trillion. The crisis, President Hu Jintao said recently, “is a test of our ability to control a complex situation, and also a test of our party’s governing ability.”
With this rapid downturn, the Chinese Communist Party suddenly looks vulnerable. Since Deng Xiaoping initiated economic reforms three decades ago, the party’s legitimacy has relied upon its ability to keep the economy running at breakneck pace. If China is no longer able to maintain a high growth rate or provide jobs for its ever growing labor force, massive public dissatisfaction and social unrest could erupt.
Excerpt reproduced with permission from Foreign Policy, www.foreignpolicy.com. Copyright 2009 Washingtonpost.Newsweek Interactive LLC. Re