Line of Defense

In the '90s, the Chongqing Special Steelworks was touted as a modern state-run enterprise, with fat profits and grand plans to expand. In fact, its managers were cooking the books to feign profitability. They couldn't pay back loans--or, eventually, the workers' salaries. After the company declared bankruptcy in July, its 15,000 workers began protesting. Some hung white banners--and a 1970s Chairman Mao portrait--out in public, demanding new jobs. On Oct. 7, more than 4,000 workers and relatives converged near the plant, blocking traffic. When more than 100 police pulled up, a melee erupted. Cops and unidentified civilians waded into the crowd swinging electric cattle prods. "Three protesters died, and more than 30 were wounded," one jittery eyewitness told NEWSWEEK last week, requesting anonymity because he feared for his safety. Another began weeping when she recalled the bloodshed, motioning at dozens of Chinese riot police who continued to mill about the protest site last week, days after the confrontation.

At last week's Communist Party Central Committee meeting in Beijing, President Hu Jintao and his comrades approved a new economic plan that listed as its chief goal building a "harmonious society." They'd better get to work, because China is anything but harmonious these days. Protests of varying size and intensity erupt almost daily throughout the country. Because the demonstrations are scattered and isolated, these social squalls aren't a serious threat to the regime. Still, authorities acknowledge that unrest has reached "alarming" levels. Not long ago, the mainland's top cop, Zhou Yongkang, said that 74,000 major protests took place last year, up from 58,000 in 2003. More than 3.7 million people took to the streets in 2004--angry about such issues as official corruption, health problems, environmental degradation, mistreatment by employers and home evictions. Little wonder that Zhou named "actively preventing and properly handling" such incidents as his main task this year.

In a broad sense, the protests are the dark side of the country's economic miracle. Pell-mell economic growth has boosted incomes for hundreds of millions of people, but it's also physically disrupted life in the countryside and left millions more feeling left out of the prosperity boom. Wages in cities are three times greater than in rural areas. According to the U.N. Development Program, China now has one of the worst so-called Gini coefficients in the world--a quantitative measure of economic inequality. China's Gini coefficient is .45, and experts say that any number above .4 is likely to trigger social upheaval. That is precisely what's happening in rural China and high-unemployment industrial regions like the northeast (accompanying story), where citizens are seething with discontent. "Never before in human history has so much change happened for so many people in such a short time," says entrepreneur James McGregor, author of a new book titled "One Billion Customers."

At last week's Central Committee meeting, the Communist Party leadership vowed to bridge the income gap and take better care of the environment as the nation roars ahead. Beijing's strategy for placating the discontented isn't quite so progressive, however. The government has simply ordered local authorities to clamp down, and many are doing so--violently. Minxin Pei, of the Carnegie Endowment for International Peace in Washington, says that the Public Security Ministry has threatened to fire local police if demonstrators are spotted on the streets. Moreover, Zhou has warned local authorities that democracy activists might try to co-opt local gatherings and weld them into a larger anti-party movement. That's why the government has recently cracked down on NGOs, tightened controls on the conventional news media and closed down cutting-edge Internet chat rooms and Web sites.

But Beijing's plan may be backfiring. More and more, local officials are turning to harsh tactics to keep people in check. Many --are hiring "black societies"--local thugs--to keep a lid on protests. In two separate incidents in October alone, local goons roughed up three foreign correspondents when they tried to report on unrest in Guangdong's Taishi village, where in July locals began a legal signature-gathering campaign to recall the elected mayor. Many in the village have accused him of incompetence and corruption, the latter related to a lucrative real-estate deal. (The mayor, still in office, says "they're lying.") This month in Taishi, Beijing lawyer Guo Feixiong was arrested, and a political activist was beaten.

The repression of activists and journalists is beginning to make China, or parts of it, seem like a mafia state. Last Thursday a Chinese cameraman in Tianjin, who was filming a demonstration for a European TV network, was pulled out of a car and assaulted by toughs in civilian clothes. (The beating took place outside the office of Tianjin's mayor, whom the group had just finished interviewing.) "Local goons show up very quickly these days," says lawyer and veteran China-watcher Jerome Cohen, currently teaching in Beijing. He cites blind activist Chen Guangcheng, who was assaulted by toughs after he exposed rural Shandong authorities for illegally forcing women to have abortions if they had kids above the official "quota." Chen remains a virtual prisoner, his home surrounded by thugs.

Beijing's embrace of capitalism has demolished many state and corporate subsidies, making a shambles of everything from pension schemes to health-care systems to school fees. The income gap is now a chasm. Of China's 1.3 billion people, the most affluent fifth earns half of total income, according to one official study, while the bottom fifth takes home a piddling 4.7 percent. Increasingly, those at the bottom realize that the system itself must change if they are to break out of the trap of poverty. In contrast to earlier protests, therefore, more and more demonstrations now seek to boost social justice more broadly--pushing for democratization, rule of law, and citizens' rights to a healthy environment.

The tense Taishi stalemate, for instance, could influence the very development of grass-roots democracy in China. Last month Prime Minister Wen Jiabao told visiting British Prime Minister Tony Blair that "if Chinese can manage a village, I believe in several years they can manage a township." At the moment, directly elected officials govern Chinese villages only, not the larger townships where leaders are normally appointed.

So political activists saw an iconic struggle brewing when residents of Taishi (population: 2,000) began a legal campaign to oust the mayor, Chen Jinsheng. Taishi residents collected enough signatures for a recall. But in early August, after discovering an apparent attempt to burgle the village's accounting books, they took up a vigil to guard the records. Things got ugly Aug. 16, when hundreds of police and local thugs clashed with protesters. In early September, 16 hunger-strikers from the village were detained. More violence erupted shortly afterward, when some 1,000 cops took possession of Taishi's accounting books and fired water cannons at protesters, many of them elderly. On Oct. 7 local thugs punched and jostled the China-based correspondents for Radio France International and the South China Morning Post when the reporters arrived in Taishi to report on the ongoing protest.

The following day, The Guardian's Shanghai reporter Benjamin Joffe-Walt traveled to Taishi with Lu Banglie, 35, who'd been briefly detained in Taishi once already. When a gang of village toughs saw Lu, they pulled him out of the car and beat him brutally, according to four eyewitnesses who believed the attackers belonged to local mafia, known as hei shehui , or black societies. The beating triggered a wave of international press coverage and concern--raising Chinese activists' hopes that central-government authorities would take notice of the repressive tactics at last. "Now there's huge internation--al pressure," says Hou Wenzhuo of the Empowerment and Rights Institute in Beijing. "This can't be covered up easily the way it was before."

It's possible that Beijing will step in to resolve the Taishi mess. As recently as Sept. 14, the Communist Party mouthpiece People's Daily ran a commentary that was remarkably sympathetic to the villagers. They felt it was tantamount to central-government blessing for their recall campaign. "No matter who is right or wrong... there's one comforting point in that these rural villagers know how to use legal procedures to recall an unpopular village official," the newspaper said, pointing out Taishi's "signs of a democratic environment built upon rationality and legality." Says Hou, "I hope this is a turning point. Maybe the central government will intervene. Then maybe the detainees will be released."

In fact, Hu and Wen are still consolidating power. Behind the scenes, they're trying to push back some of the robber-baron tactics of their predecessors and do more for rural residents. Last year, for example, Beijing eliminated all agricultural taxes. The "Shanghai faction" close to ex-president Jiang Zemin is now more identified with unscrupulous real-estate tycoons in cahoots with crooked authorities, all of them obsessed with big business and big profits. "The current government pays greater attention to the concerns of the weaker sector [of society]," says Prof. Zuo Dapei, of the Chinese Academy of Social Sciences. "The former government didn't care."

James McGregor, the author and former journalist who worked in China for two decades, agrees. He says that in the 1980s and 1990s, the mainland's commissars "were like trickle-down Republicans." They concentrated on pushing growth and rewarding cronies--and "what went by the wayside was health care, social services and the like." He views Hu and Wen as "more like Social Democrats," adding: "If they don't [stand up for the underclass] they'll be run out of power."

They'll need more than cosmetic gestures to do so, though. Zuo blames yawning inequality in the cities on the privatization of state firms and warns that massive layoffs are likely to lead to social disturbances "just like the former Soviet Union." That looks to be the case at the Chongqing Special Steelworks. Neither the government nor the company that bought bits of the old plant feel responsible for the steelworkers, an official from the municipality's Economic and Trade Commission told NEWSWEEK. "No one wants to take the burden." Some 3,000 have been laid off in the past two years. Another 15,000 still get $15 monthly stipends but are all over 40, without specialized skills, and therefore pretty much unemployable. The official says, "This problem isn't going away any time soon." At least on that point, Chongqing's angry steelworkers would agree.