The economic causes and consequences of social instability in China

This paper provides a survey of the economic literature relevant to social instability in China and moulds it into an argument. The objective is to offer a fresh view of economic policy and performance through the lens of the threat posed by social instability. This is a concept that economists rarely analyse, and yet it can lurk behind much economic policy-making. China's leadership has often publicly expressed its concern to avoid ‘social instability’. It is viewed as a threat both to the political order and to the continued rapid growth of the economy. This threat to growth in turn endangers the maintenance of social stability. The paper examines the likely economic determinants of social instability, using both surveys and other evidence. After discussing the determinants of China's rapid growth, the paper goes on to examine the likely mechanisms by which social instability can affect the growth rate. There is a case for more research on the role of social instability in the economic development process.