China is going through various crises that are mutually reinforcing. Savers take to the streets because ATM withdrawals are no longer possible. Real estate deals deprive people of their wealth. And then there is the Corona crisis.
In Germany, people are wondering whether they will even be able to pay potentially rising gas prices in winter. Tenants have already received announcements from their landlords that the price of their gas will increase by a factor of four.
The middle class worries about how much the war that Kremlin ruler Putin started in Ukraine will affect them. In addition to rising gas prices, people are already struggling severely with inflation.
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Similar fears are keeping people in China awake at the moment. The Middle Kingdom is currently going through various crises that reinforce each other. The Chinese are looking in particular to Henan Province, where two of the disasters began.
A few weeks ago it was announced that savers in this province were taking to the streets because the ATMs of four of the major local banks no longer allowed withdrawals.
The result was that these banks attracted savers from all over the People’s Republic with good returns. However, they used their deposits for high-risk products and thus wasted the money.
The demonstrators, some of whom were violently driven out by the police, blamed the provincial government and accused it of corruption. To them it seemed impossible that this scam could be set up without the knowledge of the local authorities.
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Henan is also a prominent scene of the nationwide real estate crisis. In the People’s Republic, people pay for an apartment even before it is built. This procedure, which is not legally possible in Germany, invites fraud.
The real estate developers speculate with the money they receive for apartments and buy new land with it, for example. If they now have to pay for apartments they have bought, they use money from new customers. They, in turn, believe that the reserves will be used for their own apartments that are yet to be built.
This artificially generated construction boom gives the impression that endless demand would increase the money that the middle class has saved while they sleep. But many of the developers have speculated. People have stopped paying their loans in protest.
They want to put pressure on the government. Because the industry was very vaguely regulated until recently. In any case, China’s confidence in this form of investment has been shaken. If the government doesn’t step in, many people will lose their savings or be in debt without getting anything in return.
It is also the children of this middle class who, having left university, are slipping into unemployment. At 18.4 percent, it is at its highest level for a long time. The government’s Covid policy has brought the country’s economy to the brink of a standstill, consumption and thus growth figures have collapsed.
With cities and manufacturing plants still shutting down in China and people there having to go into quarantine, the economy is not recovering. People blame President Xi Jinping’s “zero Covid” policy.
The best example is the lockdown in Shanghai. All over the country, people followed the conditions in the economic metropolis with a population of 23 million.
Although the government had recently put on record that there would be no lockdown, that is exactly what happened. People who were short on food and medicine screamed their frustration out of the windows at night. The whole country listened.
Xi Jinping, who wants to be proclaimed president again in October, may have to face headwinds for the first time in view of this situation. He took office in 2013 with a promise to defeat corruption in the country.
Critics have always accused him of only using his anti-corruption campaign to get rid of opponents he didn’t like. How much Henan is stuck in the corruption morass has yet to be clarified.
In order to stay in power, Xi will have no choice but to put together a bailout package that will prevent the middle class from continuing to protest and challenge the Communist Party’s rule.
Alexander Görlach is a Senior Fellow at the Carnegie Council for Ethics in International Affairs in New York. The PhD linguist and theologian teaches democratic theory in Germany, Austria and Spain as an honorary professor at Leuphana University. In the 2017-18 academic year, he was at National Taiwan University and City University Hong Kong to conduct research on China’s rise. He is currently researching new technologies at the University of Oxford’s Internet Institute and how they are used in democracies and abused in dictatorships.
