China Facing Economic, Social Unrest

April 10, 2006 — -- When a group of senior Chinese economists, officials and scholars gathered in early March to discuss the current situation in China, they exchanged frank views behind closed doors.

The high-level forum, which was organized by a think tank linked to the government's Cabinet, was intended to provide policy advice to the Chinese leadership.

But when the full transcript of the deliberations was leaked to the Internet in late March, it sparked a strong reaction among the intelligentsia and gave rare insight into the policy debate on the country's economic direction.

What emerged was a growing divergence in the supposed consensus behind the model that has propelled China's economic boom since the 1990s. Identified with the late Chinese leader Deng Xiaoping, this model combined market economics and authoritarian politics, while abandoning central planning and embracing market forces. It boosted exports and opened the country to foreign investment, but it also maintained tight political controls to ensure social stability.

While this strategy has succeeded in transforming China into a major economic power, it has also brought about major problems that now challenge the leadership. It has widened the gulf between rich and poor, spread rural unrest, weakened the social security network and produced rampant corruption.

Gao Shangquan, a top policy adviser and a former official who organized the forum, argued for more capitalist-style reforms to sustain economic growth and redistribute the benefits. But he also expressed worry about what he viewed as "unprecedented controversy and dissent" among Chinese intellectuals and recognized the growing public frustration at the side effects of these reforms.

"Some people believe ... that the marketization of housing has hurt the interests of the weakest group, left ordinary people unable to afford housing, unable to see a doctor, unable to send their children to school," Gao said, according to the transcript.

What the transcript revealed was a sharp debate raging among reformers who want a stronger dose of market economics along with liberal political reforms, and Marxist conservatives who want a greater degree of state intervention and authoritarian politics. Most of those who attended the forum supported Deng Xiaoping's vision and the discussion took the tone of rebutting the arguments of these conservatives.