When Chinese leaders visit foreign capitals, they usually bask in the glow of the supercharged economic growth China has sustained for the last quarter-century. But there is another growth story they prefer not to advertise: social unrest.
 
Measured by various indicators, social tensions in China have risen to record levels. The number of so-called "mass incidents" (sit-ins, riots, strikes and demonstrations) reached 74,000 in 2004, an all-time high, and involved about 3.7m individuals. In 1994, by comparison, there were about 10,000 such incidents, with 730,000 participants. The number is rising. Already this year, the number of petitioners to the central government, a reliable barometer of social tensions in the provinces, has reached a new high.

Luckily for Beijing, brewing social unrest has not precipitated a nationwide crisis, and participants in these incidents, localised and poorly organised, have yet to form an anti-government movement with mass appeal. Most incidents are triggered by specific grievances (unpaid wages, high taxes and arbitrary land seizures). The government occasionally appeases protesters by punishing local officials or redressing these grievances. If that fails, the authorities can always call on well-equipped anti-riot police.

But mixing carrots and sticks is a Band-Aid approach. The fact that these incidents have grown more than six-fold over the last decade proves that this strategy has failed.

In reality, social unrest in China is fuelled principally by government policies that ordinary Chinese have perceived as harmful to their individual interests and socially unjust. Indeed, each wave of social unrest can be traced to a particular government policy or action. Following the fiscal recentralisation in 1994, local authorities began to levy unbearably high taxes on China's poor peasants, unleashing anti-tax riots in the countryside. In the late 1990s, mass bankruptcies of state-owned enterprises (SOEs) caused urban unrest as millions of laid-off workers rallied against unpaid pensions and the looting of SOE assets by corrupt officials. In China's economic boom since 2002, arbitrary land seizures have made millions of peasants landless and forced many city-dwellers to relocate with inadequate compensation. Predictably, land use has become the most contentious issue.

At a more fundamental level, China's investment-driven growth strategy, which powers economic growth with excessive physical capital but short-changes practically everything else, is generating crushing social strains: environmental degradation, a collapsing public health system and neglect of the poor. The resulting social discontent is further amplified by an unresponsive authoritarian political system with few pressure valves. Ordinary Chinese citizens have little recourse for redressing grievances. The official petition system, which ostensibly enables aggrieved individuals to seek intervention by higher officials, has broken down. Only two in 1,000 petitions actually lead to some kind of resolution. Chinese courts offer little judicial relief. They accept only about 90,000 lawsuits against local authorities each year and rule against the government in less than 25 per cent of the cases. On rare occasions, Chinese media may publicise a particularly egregious case of official abuse of power, and subsequent public outrage forces the central government to act.

Like any good politicians, China's new leaders are eager to tap into simmering social discontent to burnish a populist image. In the past three years they have espoused populist rhetoric and punished some abusive officials to demonstrate concern for China's downtrodden. Such rhetoric may have emboldened people and, to an extent, inspired the new wave of protests.

Although the current level of social unrest in China presents no imminent threat to the Communist party's survival, the trend offers two challenges to China's stability. First, the accelerating momentum indicates that the rising social costs of China's unbalanced economic growth are undermining the political stability critical to future prosperity. Second, the government is trapped in a dilemma: rising social discontent is eroding its legitimacy, but addressing it requires a more open and tolerant government. This risks inspiring even more demonstrations of societal anger, at least in the short term, and greater instability. One can only conclude that China's "low risk premium" should be raised to reflect the underlying instability and dangers.

The writer is the director of the China programme at the Carnegie Endowment for International Peace in Washington

Originally published in the Financial Times, November 7, 2005.