Tuesday, March 27, 2012

What effect would near-term democratization in China have on Chinese demographics?

China Daily and Spiegel Online and Canada's Sun Media empire are just a few of the Western news sources that have been making claims that well-off Chinese are seeking to leave their country in large numbers, hoping to find safer, stabler places to live. Wieland Wagner's Spiegel Online article is typical.

Though the room is already overcrowded, more listeners keep squeezing in, making it necessary to bring in additional chairs for the stragglers. Outside on the streets of Beijing, the usual Saturday afternoon shopping bustle is in full swing. But above the clamor, in the quiet of this elegant office high-rise, the audience is intent on listening to a man who can help them start a new life, one far away from China.

Li Zhaohui, 51, turns on the projector and photographs flicker across the screen behind him. Some show Li himself, head of one of China's largest agencies for emigration visas, which has more than 100 employees. Other pictures show Li's business partner in the United States. Still others show Chinese people living in an idyllic American suburb. Li has already successfully arranged for these people to leave the People's Republic of China.

Li's free and self-confident way of speaking precisely embodies the Western lifestyle that those in his audience dream of. Originally trained as a physicist, Li emigrated to Canada in 1989. In the beginning, he developed microchips in Montreal, but he says he found the job boring. Then he found his true calling: helping Chinese entrepreneurs and businesspeople escape.

Of course, Li doesn't use the term "escape." Emigration from China is legal and, with its population of 1.3 billion, the country certainly has enough people left over.

Likewise, hardly anyone in the audience is actually planning to burn every bridge with their native country. Almost everyone in the room owns companies, villas and cars in China.

Many of them, in fact, can thank China's Communist Party for their success. But along their way to the top, they've developed other needs, the kind only a person with a full stomach feels, as the Chinese saying goes. It's a type of hunger that can't be satisfied as long as the person is living under a one-party dictatorship.

These people long to live in a constitutional state that would protect them from the party's whims. And they want to enjoy their wealth in countries where it's possible to lead a healthier life than in China, which often resembles one giant factory, with the stench and dust to match.

These longings have led many people in China to pursue foreign citizenship for themselves and their families. The most popular destinations are the US and Canada, countries with a tradition of immigration. "Touzi yimin" are the magic words Li impresses tirelessly upon his listeners. Loosely translated, it means "immigration by investment."

There have even been reports that large numbers of hopeful immigrants have been hoping to take advantage of Québec's immigration policy by learning French in large numbers.

Is the sort of emigration described, of well-off people seekng not so much economic opportunity as a better environment, potentially significant? Very much so. China may well be on the cusp of multiple sudden transitions, including political ones. The purge of Chongqing Communist Party chief Bo Xilai is one of the more notable events, helping to give credence to the false rumours of a coup inadvertantly amplified by the sort of heavy-handed censorship of Chinese microblogs that made people suspect something is up. Could China even be on the verge of democratizing? Who knows, but a recent post by Daniel Drezner at his blog suggested that premier Wen Jiabao might be interested in revisiting the official verdict on the Tiananmen Square student protests in 1989 before his tenure is up. Drezner was suspicious of this rumour, since apparently it has been in circulation for a while, but he still thought it worth noting. Why?

The omitted argument is a bit tangential, but bear with me. It relates to this Keith Bradsher story in the New York Times about China's relaxation of foreign capital strictures[.]

Both the inward rush of capital and the capital flight by affluent Chinese are interesting. They could force the central government to start making credible commitments with respect to property rights. Only such commitments will ensure that the locally wealthy Chinese will not immediately have their capital move to the exit whenever possible. Oddly, Wen deciding to open up Tiananmen might be a way of signaling to investors that Beijing intends to be a bit kinder and gentler than it's been over the past decade.

The international diversification of China's wealthy elite has another effect. Via Erik Voeten, I see that John Freeman and Dennis Quinn have a new paper in the American Political Science Review that concludes, "financially integrated autocracies, especially those with high levels of inequality, are more likely to democratize than unequal financially closed autocracies." Why?

[M]odern portfolio theory recommends that asset holders engage in international diversification, even in a context in which governments have forsworn confiscatory tax policies or other policies unfavorable to holders of mobile assets. Exit through portfolio diversification is the rational investment strategy, not (only) a response to deleterious government policies. Therefore, autocratic elites who engage in portfolio diversification will hold diminished stakes in their home countries, creating an opening for democratization.

Freeman and Quinn might as well be talking about China right now. Soo.... maybe the "princelings" are less worried about democratization than they used to be.

Certainly China has reached a level of economic development, as measured by GDP per capita, where a more democratic order is likely to be enduring. Certain suggestive correlations have been noted by other observers.

Looking at 150 countries and over 60 years of history, [Russian investment bank Renaissance Capital] found that countries are likely to become more democratic as they enjoyed rising levels of income with democracy virtually ‘immortal’ in countries with a GDP per capita above $10,000.

” Only five democracies above the $6,000 income level have died. Even democracies above the $6,000 level have a 99 percent chance of sustaining their political system each year. The only exceptions were the military coups in Greece in 1967 ($9,800), Argentina in 1976 ($8,180) and Thailand in 2006 ($7,440), and the events in Venezuela in 2009 ($9,115), as well as Iran in 2004 ($8,475),” RenCap global chief economist Charles Robertson writes.

The $6,000 per capita GDP seems to be a crucial level, marking the point where a country is likely to shift to democracy. Tunisia, which early this year triggered the wave of uprisings against autocracy across the Arab world, recently crossed that threshold.

[. . .]

According to Robertson, China has just entered a most dangerous political period, with per capita GDP at $6,200 in 2009. Even assuming 9 percent annual growth in per capita GDP, the country will remain in the most dangerous $6,000-10,000 range until 2014.

“The Communist Party of China is right to fear a revolution, and history suggests it will be lucky to avoid democracy by 2017, assuming per capita GDP has reached $15,550 by then,” he adds.

What impact would democratization have Chinese international migration? In post-Communist Europe the end of Communism made large-scale migration from post-Communist Europe to points around the world possible, but that model doesn't apply very well to a China that's been more successfully integrated into the wider world than any of the European Communist states. If there was a shift to a more democratic government in China, conceivably it could stem the migration of well-off Chinese seeking security that's been described recently in the Western press. If a democratic transition is triggered by an economic shock--not unimaginable, since economic shocks (like, say, a bursting of the Chinese real estate bubble?) often triggered democratic transitions, as in Mediterranean Europe, Latin America, and the former Soviet bloc--there could be more emigration notwithstanding increases in security.

All this occurs in the context of China's ongoing significant demographic changes, as described by Nicholas Eberstadt in a Swiss.Re essay from last year. Below-replacement fertility, the impending decline of China's working-age population and rapid growth of its seniors, the hollowing-out of rural areas to the benefit of urban ones, the surfeit of unmarriageable young men, the shift from the traditional extended family to somethiing closer to the Western nuclear family ... Rapid political and economic shifts would only complicate things further.

Does anyone have any ideas as to what might happen to Chinese demographics in the event of a radical political shift? I'm opening up the floor to everyone, here: it strikes me as a significant question that has not, however, been examined in significant detail.


Anonymous said...

I have heard it said that many of the factors that have lowered total fertility levels unintentionally in other nations (both developed and developing) have been working on Chinese society behind the mask of the fertility laws. There would probably be a baby boom of some level if the regulations were removed but I think the level would drop again soon after the first few years. The boom might be bigger in rural areas but then, some of them and certain minorities have been allowed an extra kid for a while if I remember correctly.

I would be surprised if there was a large enough boom to mitigate many of the demographic challenges of an aging population.

Andrew said...

If anyone is looking for more content on this issue, The Economist just put out a quick (6 minutes) and informative podcast on the demography issues China is facing - here is the link if anyone is interested http://bit.ly/Jqcqtj