China’s Growing Contradictions

My post at Foreign Exchange today is about the Chinese Communist Party’s latest five-year plan, which aims to reorient the economy to be more equitable and more consumption and service driven. I’m skeptical that this is going to work without the political reforms that the Party remains hesitant to make.

The economic part is easy. Of course an authoritarian regime has the ability to mandate changes in wages, to make dramatic shifts in managing currency and to reorient capital investment towards services. And it’s heartening that China is now interested in doing so after several years of other countries’ whining falling on deaf ears. But the political part seems impossible. How do you raise wages at the bottom to the point where you have a consumer economy without producing enormous pressure for democratization (something this five year plan has chosen to kick down to the road and which the Party elders still seem in denial about)? The mantra of consumer-centric, service-heavy capitalism is “What about me?” It won’t last long in a political culture of “Shut up and sit down.”

Go read it all.