1. The paradoxical coexistence of economic liberalism and political authoritarianism in China Carmen Amado Mendes Universidade de Coimbra Centro de Estudos Sociais

2. Summary Market Socialism & Authoritarianism Chinese growth strategy: investments Public Finances: savings Changes in social stratification and household consumption Will the Middle classes bring about political instability and democracy?

3. Market Socialism Deng Xiaoping reforms 1978 The second generation of Chinese leaders begin the policy of opening up to the outside world Capitalist elements are introduced into the economic regime

4. Authoritarianism Economic reforms continue –Fourth generation (Hu-Wen) –Fifth generation (Xi-Li) But, political and human rights regime with Chinese characteristics Government discourse: citizens are not prepared for democratization –avoid USSR-style collapse Primary source of legitimacy: Economy

5. Chinese growth strategy Growth lead by –Investments –Exports Low consumption Very high savings rate The pervasiveness of the state in the economy impairs the growth of middle classes, and therefore preserves political stability

6. A successful and unique growth strategy Source: Chinese Statistical Yearbook 2009

7. Public Finances: savings and investments The Chinese state controls the financial system Borrows from its citizens Compensating the low tax receipts Gains the ability to influence the allocation of resources across sectors This allowed the construction of infrastructures

8. The thrifty Chinese

9. An investment-led strategy GDP = C + I + G + (X − M) Source: McKinsey Global Institute (2006)

10. Chinese investment rates Unique in the history of economic growth High investment rates have occurred in other Asian countries but for very short periods.

11. China overtakes Japan 2 nd World Economy Source: International Monetary Fund (IMF)

12. Forecast: 40% by 2040? Source: Angus Maddison database

13. Changes in social stratification Source: McKinsey Global Institute (2006)

14. Private consumption in China 2008: 37% of GDP (IMF data) Source: McKinsey Global Institute (2006)

15. Middle Class growth? National wealth has increased undoubtedly But the state is retaining most power over national resources. Clues: –private consumption share of GDP –investment-led strategy Authoritarianism

16. State grandeur Individual impotence National pride is fed by –The economic emergence of China –Mega-events, 2008 Olympic Games, 2010 Expo Shanghai Growing feeling of individual vulnerability and impotence –Collective rights over individual rights –State above citizen

17. Stability and Authoritarianism Priorities: economic growth and social stability –led to collective apathy regarding political and cultural issues –Tiananmen, Tibet, Human Rights Authoritarianism continues with Xi Jinping Maoism is back: State above individual

18. Middle classes and the quest for democracy Pessimists: the economic satisfaction of the middle classes increases political stability and reduces prospects for democracy Optimists: middle class culture is conducive to democratization. Increased consumer choice leads to the desire for political choice.

19. Conclusions High savings signify a constraint on consumer choice –wealth created by workers is allocated according to the government’s wishes The increasing access to goods and consumer choice of the middle classes will lead to the desire for political choice.