Inflation and the Lhasa riots – May 1 2008
The Olympic torch arrived in Hong Kong amidst much fanfare on Wed 30 April, and authorities have been doing their utmost to ensure that the HK torch relay is not hit by the same sorts of pro-Tibet protests that have dogged the flame’s progress thus far. Various media outlets have reported that pro-Tibet activists have been deported from HK over the last few days, and the BBC even notes that a Chinese factory in Guangdong manufacturing ‘Free Tibet’ flags has been closed down (http://news.bbc.co.uk/2/hi/asia-pacific/7370903.stm) – made in China indeed. More worryingly (from a press freedom perspective) was the last-minute decision by the Hong Kong Law Society to pull a thought-provoking article by Senior Counsel Paul Harris debating whether Tibet is entitled self-determination. The article had been commissioned for their journal the Hong Kong Lawyer. Thankfully, the ever vigilant David Webb has published the article on his Webb-site (http://webb-site.com/articles/tibetharris.htm). It is well worth a read.
Lest we forget, it was the events of mid-March – starting with the Lhasa riots – which gave the torch protests impetus. Depending on which version of the Lhasa riots story you believe, either the culturally-repressed Tibetans rose up against their overlords in a popular expression of discontent, or some “criminal elements” seeking Tibetan independence rioted and attacked Han Chinese businesses, killing some Chinese, in an action which was said to be masterminded by the Dalai Lama. (The People’s Daily puts the Chinese side of the story and will “Tell you a True Tibet” at: http://english.people.com.cn/90002/93607/index.html.) In any case, with sentiment running high on both sides, facts can be hard to come by.
Initial eyewitness reports of the riots (such as the excellent account by the Economist correspondent who happened to be in Lhasa at the time – http://www.economist.co.uk/world/asia/displaystory.cfm?story_id=10875823&CFID=12895953&CFTOKEN=25589131) have mentioned that it might have been the beating of two Buddhist monks by police which triggered the unrest. But Lhasa was apparently already a “tinderbox” waiting to be set alight. Cultural repression over the last few decades was almost certainly a contributory factor, as was the rapidly growing population of Han Chinese within Lhasa itself (many of whom had opened shops and businesses in the town). But there seems to be a key ingredient missing in this mix. Why had tensions risen so much over the last few months?
To me, the answer has to be: inflation. The historical record on this score is fairly unambiguous: Over the last 3,000 years in China, inflation has lead to unrest. One of the most notable recent incidences of high inflation was in 1988 (when inflation was running at approximately 19%). This inflation fueled tensions and helped give rise to the Tiananmen protests of 1989. In 1994, also a period of social upheaval, inflation was running at around 24%.
The year-on-year headline inflation figure for March 2008 was 8.3%. Prices in March typically fall in China (following the Chinese New Year); this was also true this year, but the cumulative increases over the first quarter of 2008 are the fastest since the mid-1990s (the snowstorms in February were partly to blame). Bear in mind that it is food prices, up around 18% yoy, which make up a major component of this inflation figure. In China, food makes up around a third of the consumption basket for the general population (which is higher than in developed countries). However, poor Chinese spend as much as half of their income on food. Rising food prices are thus a recipe for popular discontent.
Now apply this situation to Lhasa… I have not been able to get my hands on food inflation figures for Tibet, but imagine that it is in line with China, or perhaps even running slightly higher because of high transport costs. A probable scenario was that relatively economically-disadvantaged Tibetans, who buy most of their food from Han Chinese shopkeepers, had to pay higher and higher prices for their groceries. Was it this that led to the mid-March “tinderbox” atmosphere in Lhasa? In such a situation, racial tensions would have risen to the fore. No doubt all that it would have taken to trigger unrest was an incident such as two monks being beaten…
As China modernizes, the Chinese authorities have various challenges; they are particularly aware of the threat that inflation poses to social stability. High inflation and social unrest is the last thing they need, especially in the year of the Olympics. It is best not to underestimate the measures they will take to slay this beast…
