An underground walkway in Beijing. The yuan touched 6.4250 against the dollar yesterday, the strongest level since China unified official and market exchange rates at the end of 1993. Image Credit: Bloomberg

The six-day-old confrontation between residents and the authorities in the village of Wukan in southern China is dramatic evidence of the volatility of the last major state on earth ruled by a Communist party.

Three decades of economic growth since the patriarch Deng Xiaoping partially embraced market mechanisms at the end of the 1970s has made more people materially better off in a shorter space of time than ever before in human history. But that process has thrown up a plethora of problems from which the leadership has generally shied away as it concentrated on two linked objectives — to maintain high economic growth and to ensure the continuation of Communist rule over the world's most heavily populated country.

But now the internal contradictions of the People's Republic are pressing in on the leadership, just as it moves towards a wholesale change in the party's ruling Politburo and the state government starting next October.

Increasingly, Chinese people are ready to take to the streets to protest over issues ranging from the requisitioning of their land and homes to corruption, from poisoning of the environment to police abuses.

Nobody knows quite how many such protests occur each year, but estimates run at 150,000 or more. Many are settled, but some escalate into violence. The revolt in Wukan, reported from inside the lines by The Daily Telegraph's Malcolm Moore, is the latest — if the largest — instance of this eruption of discontent. The mood is reflected in opinion polls showing that, while Chinese generally take pride in their country's material renaissance, they are increasingly worried by the way in which the nation is evolving. This concern is sparked by the widening gap between rich and poor, recurrent food safety scandals, high property prices and by the evolution of what is seen as a two-speed society in which those with connections profit hugely, while the rest are left to rub along as best they can.

Symptomatic

The clash in Wukan, classed as a village but with 20,000 inhabitants, is symptomatic of this. It was caused by the local authorities requisitioning land, and then using force to try to head off protests. The authorities can do the first because all land belongs to the state in China and is leased out to farmers who have no ownership rights.

Local authorities lack revenue-raising powers to meet their expenditure requirements. Beijing is meant to remit central tax revenue to them, but is often quite stingy in doing so.

To fill the gap, local governments grab land from farmers (and sometimes urban houses as well), reclassify the land for development and auction it off to developers, paying compensation which the leaseholders (as in Wukan) often regard as inadequate.

To restore growth in 2009, Beijing let the local governments off the leash; it is now trying to rein them in again. The second reason the authorities can act as they do is that the rule of law is weak. Legal reform that started early this century has been halted or reversed. This affects human rights activists — more than a dozen lawyers have been detained without charge this year and the prominent artist Ai Weiwei was held after running a dissident blog.

The 2010 Nobel Peace Prize winner, Liu Xiaobo, is serving an 11-year jail sentence for having circulated a petition calling for democracy. But it also means that citizens with grievances often see their only recourse in direct action. That leaves the leadership with a tricky choice. Crushing protests by force, as Deng did with the Beijing demonstrators in 1989, is increasingly difficult when complaints are so widespread.

However in China, from imperial days to the present, dissent is equated to, at best, a lack of patriotism, at worst, treason.

It may seem a long stretch from Liu Xiaobo to the villagers of Wukan, but both cases illustrate the gulf between China's material progress and the insistence of the rulers on retaining power as they seek to marry economic progress with top-down control. That union worked in the past. Whether it can survive, and whether the new leaders who take over next year can find new bottles for their Marxist-Maoist-Market wine, is a question that will resonate for China and the world for years.

— The Telegraph Group Limited, London, 2011

 Jonathan Fenby's new book on China, Tiger Head, Snake Tails, will be published in April.