SINOWEEKLYPLUS

Will Xi really strike back in trade clash with the US; official data shows China’s economy worsened in May

SinoInsight 1
Shortly before noon on June 28, a 29-year-old man hacked to death two elementary school children outside the Shanghai World Foreign Language Primary School. The man also stabbed a mother and another child.

According to the Shanghai police, the man was unemployed and wanted “revenge on society” due to his financial difficulties. Chinese citizens say that the man was a teacher who sought vengeance because his child was kicked out of school. Chinese internet rumors say that one of the murdered children was carrying an American passport.

The Shanghai World Foreign Language Primary School is a prestigious institution that charges up to 52,000 yuan per semester in school fees.

OUR TAKE
1. The rich-poor gap in China has been widening in recent years, and social violence has become more pronounced and frequent in 2018 as China’s economy noticeably worsens. Chinese language media reported several cases of “revenge on society” killings in June alone.

2. The Chinese Communist Party tied its ruling legitimacy to economic performance after the disastrous Cultural Revolution bankrupted the communist ideology. However, the four decades of “reform and opening up” has left the commanding heights of the economy (state-owned enterprises, stock markets, etc.) in the hands of the CCP elite, and this inequality has raised tensions in society. To curb dissent and preserve its rule, the CCP spends vast sums of money each year for “stability maintenance” work. The CCP is presently finding it a challenge to keep the status quo with China on the brink of a trade war with the U.S. and the economy in bad shape (debt crisis in the provinces, fabricated economic data, liquidity issues from deleveraging, etc.).

3. Currently, local government debt in China has reached a high of nearly 40 trillion. Most local governments do not appear to want to pay their debts, and some are struggling to pay civil servants. On June 22, meeting minutes of the Changde government in Hunan Province indicates that it is defaulting on its debt.

If the CCP cannot resort to heavy-handed security measures as China’s economy worsens, there could be more violence and protests across the country. In this scenario, China could be headed for tremendous social change.

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