Often at CLB, when talking with visiting guests and scholars, it becomes apparent that people seem to have the impression that the Chinese government will inevitably crush any worker protest or strike with its proverbial iron fist. In part, this misconception comes from the notoriously well-deserved reputation “communist” countries have earned themselves as far as tolerating dissent. Admittedly, the government still tolerates very little dissent when it comes to liberal political opinions. However, generally speaking, the government is more tolerant than it used to be, and viewing it purely through the prism of ideological dispositions doesn’t make much sense. And as CLB’s research report series on the worker’s movement has found, the government has increasingly taken a more conciliatory approach towards resolving worker protests and strikes in recent years.

One reason why officials have been more receptive towards workers’ grievances may be that supporting higher wages for workers is increasingly an important component in restructuring the economy. As economists have noted, China needs to increase domestic consumption as a percentage of GDP and stop relying on (structurally subsidized) exports. Indeed, many economists have debated about whether or not China, as a country that built its economy primarily based on exports, faces a bleak future similar to Japan’s: with decades of stagnant growth, deflated global ambitions, and missed opportunities. A recent article in Foreign Policy warns that China could be repeating the same mistakes that caused Japan to suffer such a dire economic fate − over investment in infrastructure, a lack of internationally competitive companies, a dearth of innovative R&D, an under-developed service sector, an over-reliance on exports, and an economy dependent on massive government spending.

In particular, the role of consumer spending is crucial. If wages remain low and a social safety net doesn’t exist, people will be more inclined to save their money and less likely to spend. The article notes (emphasis added):

With the global economy now out of free fall, China's leaders have issued a comprehensive slate of reforms to foster consumption and curb excessive capital investment. Using the full suite of policy tools available to a command economy, the government has removed tax incentives for some exports and added new ones for research and development while directing banks to curb lending and utilities to raise power prices for certain heavy industries. At the same time, new pension schemes, health-care coverage, and even a budding tolerance for collective bargaining with underpaid workers are intended to boost consumption. Although the Chinese authorities have long frowned on labor unrest, they have looked the other way at a recent spate of strikes and demands for higher wages. In fact, in some cases, local authorities have done the collective bargaining for their citizens by mandating higher minimum wages.

The article is worth reading in full, as it lays out the very difficult decisions Chinese policymakers will have to make over the coming years as they try to re-orient the economy. Advocates for higher wages for workers should at least be satisfied in knowing that there is sound strategic sense in raising workers’ wages. Although Chinese policymakers are very weary of "instability", they may not necessarily see workers demands for higher wages as a bad thing.