China--Instability, Civil Strife, and Political Turmoil

Economic weakness as defined by S. Tarzi has not shown itself to be a prevalent problem for China. In the past two years it has grown at over 8.0% (Reuters, 2003), an astounding figure compared to the rest of the world. Westerners seem to question stability of growth; however, their pessimistic attitude is a staple of their nature. Speculators forecast an annual growth rate of 8.5%, a 0.3% increase over 2003 (Reuters, 2003). It is the trade surplus with the United States that seems to have the Chinese economy sitting pretty; unfortunately, that will fall nearly $20 billion this year. In spite of this, inflation will not present a problem in the foreseeable future; the benchmark consumer price index estimated a 1.0% increase for 2004 (Reuters, 2003).

Rural instability has been warned against and worried about by government officials since China had showed interest in joining the WTO. The conditions of which these officials speak are the tough migrant worker regulations for displaced farmers and high unemployment, at approximately 10.0% from 1999 to present (CIA, 2004), for the entire countryside. Income increases and taxation decreases are among the principal approaches for achieving rural stability. On a recent five-day tour of many of China's poorer communities, President Hu Jintao expressed that an increase in the income of farmers is actually "essential" (Xinhua news agency, as cited in Agence France Press, 18 Dec 2003). "Only when there is stability in the countryside will there be stability in the nation ... [o]nly if farmers develop can the country develop, and only if farmers get rich will the country prosper" was an underlying theme of a recent editorial (CND, 11 Jan 2002). This may not be much of a threat to Caterpillar; in all actuality, the income and revenue generated by foreign direct investment (FDI) could lead to greater stability in this sector. If the quotation is correct in its assumptions, Caterpillar could perhaps benefit greatly from its investment in China.

The revolution of rising expectations is somewhat of an invalid variable in some respects. When analyzing the situation in China, if one looks at the political expectations they will see that the Chinese people are happy with their current state of affairs. Although the demographics are changing and with it the inherent political affiliations, China seems to be at ease with economic freedom without political liberty. However, the situation of farmers in China is presenting a rather recurring problem, as already stated, and should be looked upon with some caution.

Ethnic and religious cleavages seem to be a problematic theme for the Chinese government; the repression of the Uigher Muslim population and the Falun Gong religious sect have each led to mass uprisings in the state. Because of their potential political risk to the current regime, the government has unofficially approved the harassment of the Uigher Muslims and formally banned the Falun Gong. If these activities continue, then the current state of acquiescence to lack of political freedom may be in jeopardy. Consequently, if the government were to fall, the economic system may find itself in peril if the wrong party were to be placed in power.

Following September 11, 2001, China used these terrorist attacks on the United States (US) as justification for its own crackdown on Uighur Muslim separatists; beginning with limitations on religious and cultural practices of the ethnic minority (Roberts, 2002). The large settlement of separatist Muslims, which has a history of volatility when interacting with ethnic Chinese, is located in the Xinjiang Province. The Uighur Muslims have also been linked to bombings, shootings and assassinations of public officials and innocent civilians in recent times. The Uighers have also been the target of harassment by the ethnic Chinese. Muslim exclusion is very real says one student, another points out that stereotypes are alienating the entire Muslim population (Pocha, 2004). Muslim students are not allowed to grow beards, nor are they allowed to observe their own religious rites. Due to the instability of this region, it may be advisable to steer clear of for foreign investment. These religious and cultural tensions have already lead to bombings of public offices, if given the current situation any number of other localities within the province could experience the same upheavals.

The religious cult of Falun Gong has also had its own struggle against repression by the Chinese government. It was founded on principles of physical exercises that lead to "spiritual and physical well-being" (Hauss, 2003). Though an unlikely threat, the Chinese government feels that its large membership, comprised of nearly 50 million members at its pinnacle, is a potential for political motivation against the current regime. Following the demonstration at Tiananmen Square, and the subsequent massacre of students by Chinese officials, the government outlawed the group. Previous to this incident, Falun Gong was a peaceful sect; however, since its ostracism the cult has been linked to several exhibitions of force against the Chinese government. For instance, the cult tapped into a national television satellite to communicate its displeasure and relative political position. Recently, it has also utilized mass telemarketing schemes to relay its position to the Chinese population. Falun Gong has a membership spanning the entire state and is not, in and of itself a threat, but because of the government's reaction to it could easily be motivated towards ends that produce socio-political disruption within the state.

The government's coercive tendencies are not exclusive to religious and ethnic cleavages, but to the general population as well. Over the past three years, oppression leading to inadequate socioeconomic mobility has led to mass rioting which has, in turn, created a social stirring.

Government misconduct was the underlying issue in the largest riot China has ever seen. The event took place in Shaodong County, Hunan Province; comprised of some 20,000 people, the mob destroyed several local government buildings in protest (Pao, as cited in BBC, 13 Aug 2002). The local officials had mismanaged local shipping businesses by amassing them all under one entity. It is speculated that the local government did this because they could incur large revenues, rather than the profits going to the individual citizens who used to handle the businesses. In response to the initial riot, the county resorted to brutal methods of calling on armed police, which inevitably enraged a number of other citizens (Pao, as cited in BBC, 13 Aug 2002). The moral of this story is that Chinese officials are not cautious enough, nor are they very knowledgeable in administrative methods. When investing in China, Caterpillar should take great means in stressing proper management and increased public awareness. This is vitally important because present-day Chinese citizens are no longer as keen to follow the directives of their leadership; they will use legal and/or less reasonable means to get their dissatisfaction across.

Another mass riot occurred when city officials tried to inhibit the ability of street vendors in Zoucheng city, Shandong province on 28 October 2003. The original intensity towards the city for its targeting of local street vendors and displaced workers for their peddling of goods on the street was amplified when one government vehicle killed a vendor while trying to confiscate his merchandise (ABC, 2003). Several thousand people participated in the ransacking of a government and communist party office building. The recent SARS outbreak has also led to a riot in a small town, where around 2,000 residents torched a local school because it was a potential location for a SARS quarantine center (Agence France Presse, 2003).

Distress from China's entrance into the WTO, government corruption and the recent Severe Acute Respiratory Syndrome (SARS) outbreak have all been motivations for these riots. However, it is not the riots themselves that Caterpillar should be worried about, but ability for mass mobilization of Chinese citizens. J. Taylor, China correspondent for the Australian Broadcasting Corporation (ABC) reported "social instability to be growing in authoritarian China, with an increasing number of protests and disputes being reported in many parts of the country (ABC, 2003).

These instances are just examples of the recent tendency for mass mobilization of the public that Caterpillar should take into consideration when conducting business in China. Caterpillar executives should stress the legitimacy and transparency of their management staff. If the local laborers should feel as if they are being exploited then there could be a potential for turmoil. It is imperative that the company not follow the example of the government in their means of business.

Literature Cited

Hauss, C. (2003). Comparative Politics, Domestic Responses to Global Challenges. Fourth Ed. Belmont, CA: Wadsworth/Thomson Learning.

Roberts, D. (29 May 2002). Beijing Stokes the Fires of Ethnic Tensions; In a move that makes a bad situation worse, authorities are using September 11 to justify a crackdown on Muslim minorities. Business Week Online. Accessed 12 Apr 2004, from LexisNexis Academic database.

Pocha, J. (2004). China's Terror Fight Fuels Muslim Fears, Alienation. Globe Newspaper Company, The Boston Globe. Accessed 12 Apr 2004, from LexisNexis Academic database.

(11 Jan 2002). Officials Warn Against Rural Instability. China News Digest International, Inc. Accessed 13 Apr 2004, from http://www.hartford-hwp.com/archives/55/355.html.

(13 Aug 2002). China's Hunan Province sees riot by 20,000 - Hong Kong report. BBC Worldwide Monitoring. Accessed 13 Apr 2004, from LexisNexis Academic database.

(29 Apr 2003). Chinese villargers riot over plan for SARS quarantine centre. Agence France Presse. Accessed 13 Apr 2004, from LexisNexis Academic database.

(25 Sep 2003). China economic growth seen accelerating in 2004. Reuters News Service. Accessed 24 Apr 2004, from http://www.forbes.com/.

(18 Dec 2003). China's Hu says raising farmers' income 'essential' to avoid instability. Agence France Presse. Accessed 13 Apr 2004, from LexisNexis Academic database.