A revolution is not a dinner party. Thoughts about the future of China

This is a follow-up to Will China collapse? (5 August 2008).

Recent analysis:

  1. Get ready for lower Chinese growth“, Michael Pettis, op-ed in the Financial Times, 29 July 2009
  2.  “The spend is nigh“, Economist, 30 July 2009 — “The second article in our series on global rebalancing asks whether China can reduce its trade surplus by consuming more.”
  3. China’s economic policy: A ‘Great Wall’ or Capuan complacency?“, Arthur Kroeber, Financial Times, 11 August 2009 — See excerpt below.
  4. Excerpt from The Coming Collapse of China, Gordon G. Chang — See excerpt below.

Quote of the decade about China

Secondly, a revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous. A revolution is an insurrection, an act of violence by which one class overthrows another.
— Mao tse-tung, “”Report on an Investigation of the Peasant Movement in Hunan”, March 1927

(3)  China’s spirit is not a Great Wall

China’s economic policy: A ‘Great Wall’ or Capuan complacency?“, Arthur Kroeber, Financial Times, 11 August 2009 — Excerpt:

The Romans bounced back from calamity because they had a resilient set of alliances based on well-developed political and economic ties and a constitutional system that enabled a broad array of talent to come forward and express itself. No error lasted too long unchecked.

… China’s ability to maintain economic growth of around 8% despite the global shock took many by surprise. But this ability has nothing to do with systemic advantages, a distinct “China model” of growth, or skill in macroeconomic management.

… China’s present economic vitality results from a Great Wall all right – a Great Wall of borrowed cash. There is nothing remarkable or spiritual about an economy growing at 8 per cent when credit is allowed to expand by 34%.

The fact becomes even less remarkable when we recognise that nominal GDP (the appropriate comparator for nominal credit growth) grew just 3.8% in the first half. In other words, 10 dollars of new loans were required to generate just one dollar of economic growth.

In fact China’s first-half growth shows one thing and one thing only: the existence of a powerful state with the ability to commandeer its citizens’ wealth and plough it into more buildings, bridges and roads, with no regard for the return those investments will bring.

(4)  Excerpt from The Coming Collapse of China, Gordon G. Chang (2001)

There are plenty of Chinese this evening, but nothing is horrible and no one is sad. If anything, some are a bit too merry. The crowd, numbering in the hundreds, is boisterous as free-flowing liquor enlivens the revelers on the rooftop terrace of Shanghai’s historic Peace Hotel. The city around them is sparkling, floodlit in clashing colors against a pitch black sky, and the Huangpu River just below is bustling with commerce even at this late hour.

On the roof this perfect evening the wealthy and the famous mingle with Shanghainese on the make; pride, arrogance, and envy all on display. Personalities in black tie chat with gentlemen in long gray robes, and women in floor-length gowns mix with friends in tight-fitting qi pao split almost to the waist.

Guests have traveled across China and halfway around the world to be on display this evening in the radiant city that is Shanghai. But now the guests take their seats and the table chatter slowly dies. They look at the figure standing before them this Saturday evening in October 1999, just days after the fiftieth anniversary of the People’s Republic. The ornate ballroom at the top of the Peace Hotel is finally quiet.

The tall American woman is particularly striking; she’s in her finest revolutionary red. Her gown, covered in hundreds of Mao buttons of red and gold, is a fashion statement, however, not a political one, because she’s here to have fun. She takes a look around the room before starting. “The Revolution has become a dinner party,” says Maggie Farley, and the crowd cheers.

Yes, the revolution has become a dinner party. The People’s Republic today is not gentle, temperate, or kind, but it is not revolutionary either. The country and the party that leads it are now both old in their ways. The zeal that carried Mao from near defeat to total victory has been spent, lost in all the campaigns and programs that have gone wrong. Here, in the city where the Chinese Communist Party was born, there is nothing that is revolutionary. Nothing, that is, except the opponents of the current regime. They are weak today, but that will change.

The Chinese now want something different, as they did at the end of the Qing Dynasty and at the fall of the Kuomintang. The people are no longer poor and blank. They know what they want. The Chinese will take what they want one day, and that day will be soon.

The truth is that Party cadres will have only themselves to blame when that time comes. They have, over more than five decades, failed. Their republic is corrupt, repressive, and brutal. Its sheet of paper is no longer unblemished. China, for all its recent progress, is still poor. Chinese history has a pattern: governments like the current one fall.

About Gordon G. Chang

He has no special expertise about China.  From his Wikipedia entry:

He is a lawyer and author, best known for his book The Coming Collapse of China (2001) in which he argued that the hidden non-performing loans of the “Big Four” Chinese State banks would likely bring down China’s financial system and its communist government and China would collapse in 2006. In Nuclear Showdown: North Korea Takes On the World (2006) Chang suggests that North Korea is most likely to target Japan, not South Korea. Chang suggests that North Korean nuclear ambitions could be forestalled if there was concerted multi-national diplomacy, with some “limits to patience” backed up by threat of an all-out Korean war.

For links to his articles and speeches see his website.

Other posts about China on the FM site

  1. Power shifts from West to East: the end of the post-WWII regime in the news, 20 December 2007
  2. What you probably do not know about China’s food crisis, 21 April 2008
  3. China becomes a super-power (geopolitical analysis need not be war-mongering), 9 July 2008
  4. Words to fear in the 21st century: Lǎo hǔ, lǎo hǔ, Lǎo hǔ, 14 July 2008
  5. A different perspective on the US and China, seen by an American living in Russia, 23 March 2009
  6. China – the mysterious other pole of the world economy, 22 July 2009
  7. Another big step for China on its road to becoming a great power, 27 July 2009
  8. Will China collapse?, 5 August 2009

Afterword

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20 thoughts on “A revolution is not a dinner party. Thoughts about the future of China

  1. I think you might be interested in an essay published by China Beat a week or so ago. China’s Migrant Workers in the Wake of the Economic Crisis: Unemployed, Undeterred, Robert D. O’Brien, poste at China Beat, 12 August 2009.

    O’Brien argues against the notion that a recession will cause Chinese migrant workers to riot, thus leading to the collapse of the CCP. Taking both the economic status and the cultural underpinnings of these workers into account, O’Brien’s piece is rather persuasive, methinks.
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    Fabius Maximus replies: I agree, the theory is absurd. Revolutions usually result from divisions at the top, not uprisings from the bottom.

  2. It’s an interesting question isn’t it? Most successful revolutions that I’m aware of required one or both of two things. First, a large group of relatively well off, relatively well educated people who were for one reason or another disaffected with or frozen out from the current government. Second a government that was unwilling or unable to deal effectively with it’s internal enemies. AFAIK, by that scale, another revolution in China is a very long ways away.

  3. Arriving in Shanghai for the first time I was impressed with the metropolis I saw. It rivaled nearly any city I had been to before. I had a mental image of a backwards China being a country racked with poverty, but the maglevs, new cars, modern shopping malls really changed my mind, that is until I got to my final destination an three hours west of Wuhan.

    It was like I stepped into a time machine. Miles and miles of shanties dotted along the rice patties. Most of the homes I saw didn’t have power and the local workforce that came to work on the power plant we were building carried homemade tools with them.

    The majority of China is like this, 600 million people living on $100 or less a month and there is no way a system like that wont implode under the weight of its own contradictions.
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    Fabius Maximus replies: Is this quasi-Marxist thinking, that societies collapse from “contradictions”? Most societies throughout history had a rich aristocracy and a poor peasant class. Few collapsed.

  4. FM: “Is this quasi-Marxist thinking, that societies collapse from “contradictions”? Most societies throughout history had a rich aristocracy and a poor peasant class. Few collapsed.

    And even more to the point: this is precisely what virtually every successful capitalist society has looked like at some point in its development: England, Europe, the US, Japan, South Korea, etc.

    Some more (much of Europe, Japan, South Korea) and some less (England and the US) for various historical reasons, but rural poor versus urban prosperity is the normal sign of the rise of industrial capitalism.

    That doesn’t mean that China can’t collapse — it certainly could — but it doesn’t mean that it will. And the Chinese government is both very much aware of the issue and doing all that it can (and in a police state that’s quite a bit) to try to shove folks off the farms and into the cities, while also providing support for massive growth in those cities.

    China may fail in its bid for capitalist conversion…but it won’t be for lack of trying.

  5. FM: “Most societies throughout history had a rich aristocracy and a poor peasant class. Few collapsed.

    All collapsed, eventually. Not because of that, though. But some collapsed because they tried to end that division, though.
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    Fabius Maximus replies: No. Most societies end in some fashion, usually by evolving. Some change rapidly, through conquest or revolution. Social collapse is a rare event.

  6. “the Chinese government is both very much aware of the issue and doing all that it can (and in a police state that’s quite a bit) to try to shove folks off the farms and into the cities, while also providing support for massive growth in those cities.”

    I don’t think there’s much shoving required–the rural poor are only too happy to get out, but there aren’t always enough factories and construction sites to absorb them all. The real issues as FM points to are the ability of the government to maintain an exchange rate and capital flow policy that allows the government to use workers’ wealth for political ends. If I had to bet on whether the Chinese government could keep this act up for the decade or two required to wring out the uncomfortable parts, I’d bet “yes.”

  7. I wonder, what is particurarly interesting in the China’s economic policy: A ‘Great Wall’ or Capuan complacency?

    Addicted to the creature comforts of high growth, they are unwilling to stop the money flow and undergo the tough re-training necessary to ensure that China evolves from the road-building and widget-assembling behemoth it is today into a diversified, vibrant, genuinely competitive economy

    What a solemn, sublime advice to an economy of a hard working producers by a prophet of economy hard eating consumers. As your reader “jimbo” nice put it in comment to Beginning of the end of the Republic’s solvency

    we currently spend a great deal of effort figuring out ways to consume everything we produce. We have a marketing industry of millions of highly paid people who produce nothing, but spend their lives trying to figure out how to get people to buy cars, ipods, houses, etc.

    Incidentally, there was minor mistake – instead of “everything we produce” there have to be “everything that dummy chinee produce”, but it is detail of little importance.

  8. FM: A comment directed at the under-12 segment of our readers.
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    With the limited exception of 1905 Russia (which forced the Duma back into relevance), I don’t think there’s ever been a genuine popular revolution. It’s a all myth: revolutions are forced by ideological vanguards who take over during a crisis. That’s it. Then they rule the place into the ground.

    This site is crap.
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    Fabius Maximus replies: Yes, children, Mr. Crap is correct. A “genuine popular revolution” is a rare thing. Though I doubt the 1905 revolution is the only example.

    Now back to our discussion in progress, about the real world.

  9. Maybe this is just semantics… many tend to confuse ‘collapse’ with ‘regime change.’ Power changing hands from the aristocracy to the monarchs or captains of industry is simply regime change even if it is revolutionary. It hardly constitutes complete systems collapse or heralds a new dark age.
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    Fabius Maximus replies: You are too kind. It is semantics in the sense that the difference between fruit and apple is “just semantics.”

  10. Insofar as China may follow patterns of Western history, various statements about how revolutions have proceeded may be helpful in diagnosing its status.

    China, however, has a long history of its own. Which, among other things, happens to include a long tradition of peasant uprisings, many if not most of which were quite populist, from the bottom up type of things.

    It all has to do with theories such as the cycle of yin vs. yang ( the Shanghai vs. Wuhan discussion, cited above, would be relevant here ) as well as the Mandate of Heavan ( both corruption and environmental policy would be relevant here. )

  11. One of the financial blogs to which I subscribe made some observations regarding China’s real growth vs. China’s Potemkin growth, to wit: One reporter (of a kind too infrequent these days) actually went to one of the supposedly huge-growth Chinese cities, and found far too many new, finished skyscrapers totally unoccupied. Another remarked that a country whose projections of growth for the current year exceed 8% should not have declining electricity usage–but it does, seriously so. Yet another noted that he had some reservations about any country that could certify large percentage increases in GDP years in advance–which, apparently, the Chinese apparatchiks still do, and the West now swallows it wholesale.

    My point is that whatever progress China has made to date has been made on the backs of the Western consumer societies, especially the US. The US consumer debt machine is broken beyond repair–as well it should be, because this was a totally unnatural, untenable, excessive situation, and a return to something approaching normalcy was well warranted. 8% gains in China, if dependent upon the West, are impossible for the foreseeable future. What will China do in the wake of this? The answer, unfortunately, has national security implications.
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    Fabius Maximus replies: Those stories about Chinese mal-investment and overinvestment are a staple for the past 10 years. Someday perhaps they will prove significant, but they are by themselves just chaff.

    “China has made to date has been made on the backs of the Western consumer societies”

    An odd way to describe commercial relations between two parties. Are we children, perhaps requiring UN supervision of our affairs? If not, then such things are just whines.

    “8% gains in China, if dependent upon the West, are impossible for the foreseeable future.”

    That’s just a guess, assuming that domestic consumption and investment cannot offset reduced exports. Stating it like a fact is absurdly over-confident.

  12. S.H. Silberberg: “8% gains in China, if dependent upon the West, are impossible for the foreseeable future.”

    Please, read “The spend is nigh — Rebalancing the world economy: China“, The Economist, 30 July 2009. Excerpt:

    In fact, the popular perception that China has always relied on export-led growth is rather misleading. Its current-account surplus did soar from 2005 onwards but until then was rather modest. And over the past 10 years net exports accounted, on average, for only one-tenth of its growth.

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    Fabius Maximus replies: Thank you for posting a link to this excellent article.

  13. The revolution that Mao was talking about wasn’t just one event it was a continuous shaking up of society to stop it settling back into it’s capitalistic ways with a new set of owners. Mao understood where the natural tendencies lay and that only by continuous disruption could they be overcome.

    The Chinese collapse theories popular in the US show two things.

    One that Americans don’t really understand their own history – the rise of China built on the betterment of a mass of peasants very much parallels Americas own rise on a mass of impoverished immigrants.

    The other is that the US has no idea how to compete with China. Because China is eating into the very economic niche that the US occupies.

    From the people actually on the ground in China the story you get is even more positive these days then say 10 or 20 years ago. 8% growth compounded over 20 years is a rate of change that can be seen on the ground in a staggering fast improvements that even impress the jaded china hands I talk to.

  14. An interesting question would be , whether the Chinese system is managing to control high level corruption ? Which at the moment , seems to be the No 1 enemy of ‘ the people’ worldwide ?
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    Fabius Maximus replies: Corruption is a widespread problem, but seldom threatens the existence of a political regime. However, it can provoke or spark outrest during periods of stress.

  15. I just go back from China, and some inside information shine some lights about the current Chinese economy.

    My uncle is a bank manager, and it seems like the Chinese government are tightening up the loans. The official bank policy in China states that only one loan per person.

    Also, the property price really shot up the roof. In this year alone, my family will have to buy two houses while building a thrid one, just for my young cousins who will all be going into university this year. The catch is that everyone buying property in China has to do it out of their own pockets, I have to pay few thousand dollars in building materials for the new houses. Thus people are extremely puzzled on why the house prices/construction fees are rising so fast. There are rumors that there are big players (in another word, government) are flipping houses in cities, but most of the Chinese has to build houses by themselves in the country side.

    finally, the stock is getting ridiculous. Seriously, everyone, from kids in junior high to 80 year old trying to cashing in on the market by themselves. Unlike in America where people buy stock as investment with agents and mutual funds, the Chinese treated as a free for all sports arena. The Chinese way is that you got few hundred yuan and the energy, you burn it at the stock market.

  16. “A revolution is not a dinner party.”

    I don’t know that is the big deal about this phrase, but if you tried to pull that quote on a Chinese, in China, they will either laugh in your face, or punch you in the teeth, or just mark you as a psyco.

    Seriously, even though people still respect Mao in China, every sane Chinese know that he technically is a psychopath (the debate is on whether he is a good or bad psychopath). Revolution is officially dead in China, and people are glad for that. And seeing Gordon G. Chang talking about the Chinese people will revolt because the ideological hold of the Communist will soon be broken is the most outdated, if not the most offensive things I read in my life. Why didn’t Mr. Chang mention that the revolution ideology has been dead ever since Deng Xiaoping take over? Why he does not open his eyes and see that the something different that Chinese want are money, freedom to make money? By invoking Mao’s quotation, is he implying that the Communist are the most strong when they running around doing revolution while killing millions, including some of my familes? Why can’t he look at the quote and see its abandonment as a way for the nation to heal as oppose to people killing each other?

    Mr. Chang, at first I though you and I have a different opinion, but now you are a complete nut case.
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    Fabius Maximus replies: You seem to have totally missed the point of the essay. Chang makes a comparison between the early revolution and now in order to show the decay of the Communist Party. Wasn’t this obvious?

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