China: how can the social contract be restored?
This column was previously published in l’Opinion on 6th november 2023.
With no recovery happening, Beijing might well have to go back on its policy towards sensitive areas like data protection and education. A revolution?
In all major countries, the end of Covid has brought disruption to the social contract. This varies from the disappearance of the concept of authority in France to the proliferation of daily mass killings in the United States. But the greatest disruption has been in China because its unique social contract was the very source of its forty years of success, from 1980 to 2020: “For the government, politics. For my family, material advancement by means of my own economic freedom.”
It was anticipated that post-Covid recovery would likely be slower in China, for Beijing had decided to privatize losses, whereas the West had nationalized and then monetized them through central banks. However, two paradigm shifts show that the reasons for the lack of recovery in China go deeper than this.
First and foremost, state intervention during the Covid crisis was, for the first time, anti-business. The repeated lockdowns of 2022, without any financial support, caused many private businesses to go bankrupt. The “zero Covid” policy, which went counter to traditional pragmatism, showed the disastrous effects of ideology and wiped-out confidence in the government. Ever since the 20th Party Congress of October 2022, Beijing has been seeking systematically to increase control, directly or indirectly, of private capital — both Chinese and foreign. The result has been a freeze on private investment, which has merely remained stable since last year. All entrepreneurs are holding on to their cash — their final bastion against any eventual threat from the state.
The basic belief in the virtues of education is now bringing parents to think that the material situation of their only child will be less favorable than their own.
Vague signs. Secondly, from the standpoint of the individual, the ban that was placed on private online education in the summer of 2021 compromised the schooling of 100 million young Chinese. The basic belief in the virtues of education is now bringing parents to think that the material situation of their only child will be less favorable than their own. This is the exact opposite of the “Chinese dream” to which they aspire. The tendency of young people to “lie low” has become “let it rot”, which illustrates their disenchantment, and the disengagement of a whole generation.
Beijing must therefore reconstruct a social contract, for both individuals and businesses. Are there any vague signs that might indicate — as has very often happened in the past — that China might be going into reverse, as soon as the government recognizes its mistakes?
The fate of the data security law could be emblematic of a relative relaxation. Its intention was to punish anyone found responsible for transferring so-called “sensitive” data, but “sensitive” was not precisely defined. Any relaxation of this incongruous measure would be a sign of a return to reason, and could indicate the coming of less state control. Furthermore, the return to any form of private education, like a few years ago in South Korea after a similar ban, would give new hope to a generation which today considers itself ill-fated.
Among all these doubts, one thing is certain: today, Chinese recovery depends on variables that go far deeper than the usual decreases in interest rates or increases in banks’ liquidity ratios.
