A cold wind in Beijing

Observations on recession

The Year of the Ox has dawned. It's meant to make you stronger and, at the party thrown by the All-Party Parliamentary China Group in the House of Commons, China's deft ambassador, Fu Ying, expressed the hope that it would bring a return of the bull market. That looks like a forlorn hope right now: China's latest economic figures, smoothly manipulated to bury the bad news, signal trouble ahead.

China presents its economic statistics with "Chinese characteristics". This past quarter the country posted 6.8 per cent growth, half the double-digit trend of recent decades and already worrying - but the truth is darker still. As the economics guru Nouriel Roubini points out, China publishes its quarterly GDP figure on a year-over-year basis, unlike the United States and most other countries, which publish their GDP growth figures on a quarter-on-quarter, annualised basis. When growth is slowing sharply, quarter-on-quarter growth may be negative, but the year-over-year figure looks positive. Converting the 6.8 per cent into the more standard annualised figure, according to Roubini, gives a truer picture of the Chinese position as close to zero. That bull might be a little shy of reappearing.

That this spells trouble is no secret in Beijing. The Year of the Ox is also a year of resonant anniversaries in China, many of them unmentionable in official circles. In March, there's the 50th anniversary of the Dalai Lama's flight into exile and the 20th anniversary of the imposition of martial law in Lhasa. It will also be a year since the biggest wave of protest across all the Tibetan territories. Spring will bring the 90th anniversary of the 4 May movement, under whose banner patriotic students and intellectuals, outraged that German concessions in China had been given to Japan at Versailles, marched to demand political and cultural modernisation. On 4 June, the 20th anniversary of the crushing of the student occupation of Tiananmen Square will be marked, and 1 October will be the 60th anniversary of the founding of the People's Republic. In December will come the anniversary - all but forgotten in China and abroad - of the crushing of the Democracy Wall in 1979, when Deng Xiaoping turned his back on what the dissident Wei Jingsheng resonantly called the "Fifth Modernisation": democracy.

To add to the giddy total, China has just celebrated 18 December 1978, the 30th anniversary of the beginning of Deng's economic reforms, which launched three decades of industrialisation and double-digit growth. When Deng turned his back on political modernisation in 1979, and again in 1989, he locked China into a political pact that committed the government to delivering rising living standards at the price of continued one-party rule. It's a pact that has held, more or less, until now, and that recession threatens to undo.

The price of the pact has been high: growth at the cost of environmental depredation, a press that is increasingly professional but ever more frustrated, endemic corruption, a middle class flexing its muscles and a ruling group that puts its own interests above those of the nation. While people were feeling more tolerated, but it was always fragile.

The students and intellectuals who marched in May 1919 articulated the beginning of China's search for a modern political form in the post-imperial era. Nearly a century later, the question repeatedly posed on the streets of Beijing remains unanswered: to whom does the state belong? Does it belong to the people, or to the emperor?

On 22 January, in a court in Shijiazhuang, Hebei Province, three people were sentenced in a case that has convulsed China and which illuminates the problems that derive from Deng's rejection of political reform. It was a characteristic trial: short, secret and with harsh sentences designed to shut down discussion of the affair of the poisoning of 300,000 children with milk adulterated with melamine. Six infants died and tens of thousands have been left with kidney damage. Embedded in the case are all the contradictions of today's China - rapid growth, a lack of political accountability, a poorly a civil society regarded with suspicion by its own government.

The guilty company, Sanlu, was a joint venture with the New Zealand dairy giant Fonterra. Three directors of Sanlu, all Chinese, were tried. (The New Zealand directors quietly faded out.) Tian Wenhua, Sanlu's former chairwoman and general manager, was sentenced to life and two other defendants were given death sentences. But the real scandal is the suppression of the story by government authorities to avoid embarrassment in the run-up to the Olympics. Parents were paid to stay quiet, newspapers were threatened, health authorities were silent and inspectors continued to wave Sanlu's samples through.

Even now, parents who are trying to bring cases against the authorities are being threatened, their lawyers intimidated and their cases refused. Wei Jingsheng's perception that economic modernisation without political reform is a cul-de-sac has never looked more prescient.