An estimated 1.5 million graduates failed to find jobs last year and the employment prospects look set to get worse this year. Addressing a student gathering in Beijing last month, Prime Minister Wen Jiabao said, “Your difficulties are my difficulties, and if you are worried, I am more worried than you.” The subtext of wanting to stave off prospects of student unrest is obvious.

China is also gearing up to face the implications that growing social angst holds for the legitimacy of the Party itself. President Hu Jintao sees the ability to maintain and deliver continued growth as a “test of our Party’s capacity to govern.” It is easy to understand why. China is seeing more public expressions of anger in the form of protests and strikes than it cares to acknowledge. Referred to as “public order disturbances” or “mass group incidents”, official figures recorded as many as 87,000 such protests in 2005. Recently, the Blue Book of Chinese Society, an annual assessment of social problems and development trends in the country published by the Chinese Academy of Social Sciences (CASS) identified issues such as access to medical care, unemployment and “an excessive income disparity and the gap between the rich and the poor” as key social problems. It is perhaps no coincidence that the concepts of “harmonious society, sustainability and stability”, till recently virtually unknown in China’s lexicon, are grand signature slogans of the leadership today.

China’s plans to spend its way out of the crisis could also prove tricky. The widely feted 4 trillion yuan stimulus package has much in its fine print that is problematic. China’s top economic planning agency has warned that local governments need to come up with a substantial portion of the funding. But this is easier said than done. Regional variations in performance indicators of health, education, housing and infrastructure have been massive across China owing to vast differentials in local revenue bases. These have in many cases directly translated into a scaling back of social development spending and passing on the burden for the individual to bear. Out-of-pocket expenses borne by the individual on health, for instance, have risen sharply in recent years. Given this, the trillion yuan question is, can the local level seriously be expected to deliver the resources?

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