China would argue that the USSR made the crucial mistake of pursuing political reforms before implementing economic reforms. This just opened the door for a popular revolt over a still crappy-as-always economy.

Smaller more homogeneous countries (eg, Eastern Europe) can do both kinds of reform at the same time, especially with timely assistance from Western countries; larger heterogeneous countries, like oil supertankers, are much harder to turn around quickly and too big for meaningful financial aid from the West.

There is no realistic possibility that China will fall apart. They can appeal to patriotism and Confucian values, and point out that China is simply caught up in a global crisis that can (conveniently, but not entirely without justification) be blamed on the West. They can also point to a strong thirty-year track record and ask for patience. Also, the chaos and murderous lawlessness of the Cultural Revolution happened within living memory of a large part of the population, and if push came to shove they would line up on the side of law and order.

Patriotism needs to be meaningful. Harking at honest facts does not make food magically appear on the table.

For the record, I have been predicting a major collapse of either the economic bubble or the social bubble in China to take place some time after the Olympics over the next few years.

I think we are on the verge of just that. The comparison with the 60s US is inapt. There was no bubble in the US at the time. The economy could easily withstand the challenges, although long term decline was only stopped by the shock therapy of Volcker and the attack on organized labor led by Carter and Reagan.

China today is altogether another situation. The regime hoped that the transition to coastal exports would be their bridge from a de-industrializing state owned industrial sector. Unemployment has been high in China for the last decade as the SOEs were being shut down.

Now the problem is that the bridge, export sweat shops, is itself collapsing, BEFORE a stable new economy can take hold.

What will happen now could make 1989 look like a tempest in a tea cup. And by the way the absence of an organized opposition only makes the explosion likely to be bigger and more disruptive. If the regime were smart they would, immediately, legalize independent unions and political parties. If they don’t they don’t have a chance of survival without a return to North Korean style repression.

Otherwise, your point is well backed up as the source for the FT article is Chen Xiwen who has a very good reputation.

it does not include:

-people without urban resident status (primarily mingong)
-men over 50 and women over 45
-those ‘laid off’ SOE workers (xiagang)
[National Bureau of Statistics (NBS), 2002]

as a measure of urban unemployment, it has persistently understated.

a combination of land leasing, peasant indebtedness, county-level corruption, rural population growth, declining size of holdings, contraction of arable land, makes permanent return to countryside increasingly problematic even as china’s integration into the world market and capital deepening tends to reduce need for living labor…a contradiction embodied in the swelling ‘floating population’ of farmer-workers.

Much of a population of 40,000,000 in one area of inland China live in a yaodong or mostly cave dwelling. http://www.spokane.wsu.edu/academic/design/architecture_visit_Yaodong.html gives a good if idealized look at these.

One may expect many of the returning migrants used to at least dormitory living on the coasts will be less then thrilled at the return to spelunking

plschwartz

There is an old punch line:
“I AM the Sheriff”
Which is exactly what corruption is about in China. It is the local Party members who are grabbing the land and selling it -illegal in China but routinely done. Protesters are beaten by police and jailed if they attempt to go to the next level of Govt.
Because of guanxi. No are things much better in Shanghai (maybe not the beatings)
If interested in China “law” check out “Weiquan movement”

I have a post on http://blogs.cfr.org/setser/2009/02/01/asias-two-recessions/#more-4612
at 11:23 today looking at some details of the move toward consumerism Inland in China.

plschwartz

A lot of expectations have been built up in recent years. Odds are that China will remain stable, but we need to see just how big the problems are, and how people are reacting (as in the article here). It seems likely, as others suggested earlier, that much money will be thrown at the problem, and much will be wasted, digging an even bigger hole.