Without constitutional rule, China will struggle to avoid turbulence

Last updated: May 13, 2013 7:07 pm

Reform can end loose talk of a Chinese revolution

By Deng Yuwen

Without constitutional rule, the country will struggle to avoid turbulence, says Deng Yuwen

There are few books as popular among Chinese intellectuals and officials these days as Alexis de Tocqueville’s L’Ancien Régime et la Révolution. The 19th-century historian postulated that the unprecedented prosperity France enjoyed under Louis XVI, its final pre-revolt king, actually hastened the 1789 French revolution.

This seems to have relevance for China. Many people say there is a possibility of revolution in China in the next 10 years. That revolution is being discussed again at all – an idea to which China’s intelligentsia bade farewell in the 1990s – shows how enormously our country has changed over the past decade.

Indeed, when we discuss revolution today, the target is the ruling Communist party – an irony given that the party long monopolised the definition of revolution. The renewed talk of revolution also shows that without constitutional rule, China will struggle to break free from the cycles of turbulence that have dominated its history.But while there appear to be revolutionary sparks flying around in China right now, major changes are not likely. An armed uprising like the one that established Communist party rule is impossible. And while the possibility of peaceful regime change exists, it is very unlikely within the next 10 years.

Generally, revolutions occur when several factors are at play. First, economic crisis triggers a sharp deterioration in the living conditions of the majority of the people, with no improvement in sight. Second, people have been preparing for revolution for a long time, the public believes a change will come and opinion leaders have a consensus in favour of revolution. Third, the ruling party’s ability to govern has been in continuous decline, it cannot adapt to people’s expectations and requirements, it has lost its moral image and authority, and it experiences a serious crisis of legitimacy.

So, first, will China eventually experience an economic crisis? If the current economic model is not changed fundamentally, that is likely. But the government has been trying hard to correct the distorted economic structure and any plausible crisis would not be serious enough to cause prolonged recession.

Second, there is little consensus in China about the need for revolution. Although Chinese liberals loathe the regime, they generally oppose revolution and prefer reform. The revolutions in China’s modern history caused so much upheaval and suffering that another one is the least preferred option.

Third, although people do indeed worry about governance, it is an exaggeration to say that the government is losing its capacity to rule. And if the state is still able to cope with people’s demands for greater rights after launching reform, a revolution will not happen.

The party has shown a strong sense of crisis and has been making an effort to adapt to changes. In recent years, it has been stressing that new ways must be found to manage unrest. Although the results are not great, at least it shows the party’s awareness in this regard.

The party’s current resources easily allow it to put down any planned revolution. The internet has helped educate people, strengthened civil rights and created technical tools to push for revolution – but it has also enabled the ruling party to better monitor revolutionaries.

There are other factors in Chinese society adverse to revolution – not least some of the party’s policies. It is strengthening social security, building up a system that reflects the value of equality. Although political freedom is tightly restricted, economic freedom still exists – and most people care more about that.

The country’s administrative structure is also in the party’s favour. Local governments have been wasteful and aggravated corruption but they also play a buffer role, absorbing blame and discontent. This gives Beijing room to manoeuvre.

Furthermore, the ageing population will damp any revolutionary fervour. Young people are relatively more idealistic and passionate, while older groups are more conservative and dislike turbulence.

Of course, if the ruling party and government’s governance deteriorates, or if they make major policy mistakes, no one can guarantee that a revolution will not break out. Besides, even if a nationwide upheaval can be avoided, fierce social turbulence might still arise locally. If the ruling party fails to cope with these outbursts, they could snowball into a revolution.

So while revolution is unlikely, the Communist party needs to plan ahead, introducing policies and plans that guard against plausible revolutionary scenarios. This means more freedom of speech and political freedom, improving governance, raising living standards and reducing inequality. The more political and social reform that takes place, the less likely it is that China will have another revolution.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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