Evidence of Social Strain in China

Yesterday the Chinese government in Beijing banned outdoor advertising (like billboards) that promotes, “hedonism, lavishness and the worship of foreign things.”  The ban also prevents ads that are considered vulgar and that encourage an aristocratic lifestyle.

While on the surface this law appears to be about the wealthy, it is not.  Instead this law is about the widening gap between the rich and poor in China.  This is an issue that I highlighted in my 2011 Predictions when I said, “The Chinese are on the brink of two ugly things: massive asset inflation and the bursting of that bubble, and social unrest.  Expect to see social protests in China as the haves and have nots gap widens.  In typical authoritarian fashion though, the protests will be convincingly squelched.  Expect to hear, if not see the true, dark underbelly of China.”

For China the difficulty is that their social contract with their people is about to fracture.  Chinese people have agreed to be repressed and have only one political party – the Communists – in exchange for a guarantee of employment.  This means that Chinese businesses are not run for profitability, but for full employment; a situation that is not sustainable in the long run.  Additionally, it means that as the gap widens between rich and poor, the overwhelming majority of people who are poor will begin to question their government.

Though I have scarcely reported on them, there have already been social protests in China this year.  Today’s billboard ban is further evidence of increasing pressures within China.  The increase in GDP per capita has been very uneven and eventually something has to give.

Jason