ROBERT SIEGEL, host: We're familiar with the anxieties that the United States brings to the relationship with China. For a sense of Chinese anxieties, we turn now to James Fallows, who is based on Beijing, and writes about China for the Atlantic. He has an article in the latest issue called "China's Way Forward" and by chance he happens to be in San Francisco today. Hi, welcome to the program once again.
Mr. JAMES FALLOWS (Writer, The Atlantic): Thanks for having me.
SIEGEL: We've heard a lot about Chinese unemployment. As you write about it, Chinese unemployment in Beijing, say, is something visible and palpable these days.
Mr. FALLOWS: Indeed. In the big Chinese cities over the last decade or so, the flow of workers into the cities has been easy to pick out because the people just look different from your normal city folk. Their clothes are different, their skin is rougher, you can tell they come in from the countryside. And in the last couple of months, even in Beijing, we've been able to see the busses roll back out into the countryside as construction projects have been shuttered, and other factories have closed down.
SIEGEL: And you can literally breather easier.
Mr. FALLOWS: It's true that for three or four months before the Olympics were a kind of living hell of pollution, as it looked like the factories were running 80 hours a day, to sort of anticipate the close down for the Olympics. Since then, whether it's been the weather or just the sort of decline in industrial activity, it's been much nicer in Beijing in general than for the previous year or two.
SIEGEL: You write about the great bargain between the Chinese Communist Party and the Chinese people, which is essentially limited freedom for the prospect of unlimited wealth, economic growth. So a big question now is, would limited economic growth - and you define stagnation in China nowadays as anything less than eight percent annual economic growth - would that make the deal unravel, and make China a politically unstable place? You say no, it wouldn't.
Mr. FALLOWS: I think it's a question of scale. If it were the case that what I believe most Chinese families perceive as the narrative of the last 30 years, which is that from a very, very low starting point, things have gotten materially better for most people. And in terms of civil society, have also gotten somewhat better for most people, given their reality that still people are locked up, still there are controls on the media, and all the rest.
If that 30 year narrative were to change, so it became not a matter of a one year rise in unemployment, or not, something larger than that, but a sense of the country gone fundamentally in a different direction that delegitimized their approach, then I think you might have some instability. But to my mind, there's little evidence of that having happened so far, or little real probability that it will, because of this economic shock.
SIEGEL: Because, as you describe it, you think that the Chinese economy is capable of innovations to actually continue to be strong and get even stronger over the next couple of years.
Mr. FALLOWS: Well, I think there are a couple of things which equip China to be able to, both China as a society, and the Chinese communist government, as a regime, to absorb what are likely to be pretty significant unemployment shock. So - in the time ahead. In the literal sense, there's a kind of absorptive capacity because many of the people being laid off came from the countryside within recent memory, and so they're headed back there. And that can be unstable in the longer term, but in the short-term it's different from having these masses of the urban seething unemployed as you might in a number of Western societies.
And also it is impressive that, number one, the government which is so clumsy often in dealing with the outside world, has been somewhat deft in dealing with internal sources of discontent, dislocations, so there are local infrastructure and other projects being developed. And a number of private companies seem to be using the shock of this time to move up the value chain when they can, a year from now, five years from now in the future.
SIEGEL: So you say, when you talk about economic stimulus in Beijing, the Chinese idea of the stimulus is just build something.
(Soundbite of laughter)
Mr. FALLOWS: The Chinese government's idea of almost anything is to build new projects and this has some good aspects for China. One reason it's so powerful as an exporter is the ports are so good, the airports are so good, the freeways are so good, and all the rest and it's what has made China such an economic power in the world. But that's - we talked about shovel-ready projects here, -that's the thing that the Chinese government most likes to do.
SIEGEL: Jim Fallows, thanks very much for talking with us.
Mr. FALLOWS: Mr. Siegel, thank you so much.
SIEGEL: James Fallows' article in the Atlantic is called "China's Way Forward." His new book about China is called "Postcards from Tomorrow Square."
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