A few months ago, as analysts fought to drop their GDP forecasts to new lows, few people believed that China would hit the magic figure of 8% growth this year. With signs that the construction meltdown is bottoming out, we can expect those same analysts to start pushing their forecasts back up. If China does hit the magic 8%, perhaps Armageddon isn’t nigh after all.
But the real question is where this mystery obsession with 8% came from. Sure, 8 is a lucky number in China – but how does that explain the near universal acceptance that China requires 8% growth to create a sufficient number of jobs and secure social stability?
In the past we have been told that 7-9% was the key to ensuring peace and stability. But we have now heard 8% so many times that it has gained a mystical ring of truth. It is particularly popular with foreigner commentators, who nod their heads wisely and incant the magic 8 whenever a new story about migrant layoffs or falling exports hits the headlines.
The basis for these views appears to be that the legitimacy of the Communist Party rests solely on delivering fast economic growth – a simplistic idea that fails to appreciate the resilience of the party-state and the capacity of ordinary Chinese people to put up with hardship.
Some of this is motivated by ideology: many Western critics of Beijing seem to believe that living under authoritarian rule is so painful that ordinary citizens are itching to rise up – if only the material benefits were not so compelling. Ipso facto slowing growth means more unrest.
Why is there no magic growth number in India and Brazil? The difference is that other big developing economies are democratic, so political legitimacy is not regarded as an issue.
But the vast majority of Chinese citizens are not strongly opposed to the current political system, although they might moan about specific problems. There is no evidence that a few years of sub-8% growth is likely to send the average, apolitical citizen out onto the street in revolt.
If anything, the opposite is true.
Between 1995 and 2005, China’s state enterprises shed 50 million jobs. At the height of this massive industrial restructuring, the true (unreported) growth rate stagnated at around 5.5% for three years in a row. The laid-off workers lost what they had believed were jobs for life, which also provided them with food, education, health care and pensions. They had few skills and were effectively unemployable elsewhere.
Inevitably there were protests, particularly in the hard-hit northeast – but these were aimed at specific factories rather than the government or political system in general. And no serious damage was done to the national social fabric.
Past experience, then, suggests that temporary economic hardship is likely to provoke isolated protests but no widespread social or political tensions. Why should things be different this time round?
The most vulnerable people are migrants working in export factories and on construction sites. They are accustomed to finding work where they can get it and many have been laid off before. And unlike workers in state-owned enterprises, they do not present an organized labor threat and have the security of the family farm to return to.
The next few years will be tough for migrant workers and the Chinese economy. But don’t expect a revolution if the economy doesn’t hit the magic 8%.