The Global Crisis Reaches China Unrest Spreads as Growth Stalls
Part 2: Will Rising Middle Class Turn against Government?
If the real estate bubble bursts, it is sure to turn China's rising middle class against the government. Until now, the nouveau riche has viewed the Communist Party as a guarantee of their own prosperity. Recently, however, outraged apartment owners organized a demonstration in downtown Shanghai, protesting the decline in the value of their property.
Wang Jiang, 28, points to a nearly complete apartment block in Anting, one of the city's suburbs. The software company manager bought an apartment on the 16th floor of the building for 138,000 in early September. It was a steep price for 82 square meters (883 square feet), especially since the building is located in an industrial area, hemmed in by factories and highways. But Wang was determined to get in on the boom. He didn't even take the time to view the housing complex before he bought the apartment. Where else, after all, should he have invested his assets, if not in real estate?
Now China's state-run banks are paying their customers negative interest and Shanghai's stock market is considered a high-risk casino, where a few major governmental investors are believed to manipulate exchange rates at will.
Wang's apartment isn't even finished yet, but he no longer feels any joy about moving in -- not now that the real estate company is offering similar apartments in the same complex for about 20 percent less.
Wang feels he was deceived about his apartment's resale value. "What are they thinking?" he demands. "Surely they can't just erase a portion of my assets?"
But they can.
Wang and many other furious apartment owners went to the real estate company's salesroom to protest the drop in value. Suddenly, Wang relates, someone started smashing the miniature models of apartments. After that, in the blink of an eye, the company's guards grabbed him and hauled the protesters to the police in minibuses. "We were interrogated until 2 a.m. in the morning," Wang says. Some of the protesters, he adds, are still in prison and authorities won't tell their families anything.
A Political Quandary
Whether in Dongguan or Shanghai, cracks seem to be forming everywhere in Chinese society. As long as the one-party dictatorship kept growth in the double digits, most people accepted their lack of freedom. Now, though, Beijing is facing a dilemma. Tough police crackdowns will hardly get the consequences of the stagnating economy under control in the long term. But nor are government subsidies enough to stimulate the economy. It seems neither money nor force will help.
Chinese Premier Wen Jiabao recently announced a "fine-tuning" of his economic policy: Banks should grant more generous loans, especially to small and medium-sized export companies, he said.
The economic situation now is far more complicated than it was after the 2008 global financial crisis, says economist Lin Jiang. In 2008, Chinese exports collapsed and roughly 25 million migrant workers had to return from factories to their home provinces.
Back in Dongguan, authorities have no cause at the moment to fear any further protest from Liu, the factory worker. He's too busy looking for a new place to stay. When he lost his job, he also lost his spot in one of the electronics factory's residences.
* Liu's name has been changed by the editors in order to protect his identity.
- Part 1: Unrest Spreads as Growth Stalls
- Part 2: Will Rising Middle Class Turn against Government?