China's 10 grave problems

1. No breakthroughs in economic restructuring and constructing a consumer-driven economy. Though China’s economy is now the second largest in the world, it is both distorted in structure and of low quality. Vulnerable to fluctuations of the external economic environment, the current development model is an obstacle to long-term prosperity. China has to shift from the current model that overly stresses investment and exports and high resource consumption to a high-tech, consumer-driven economy as well as solve the inner rebalancing problem of the economy. In particular, following the global financial crisis priority shifted from reform and restructuring to merely maintaining growth.
2. Failure to nurture and grow a middle class. The history of modern states indicates that the middle class is the cornerstone of social stability and prosperity. But certain conditions need to be created to help a middle class grow: the middle class should be the mainstay of class structure, and the government needs to work to ensure the growth of the middle class through adjusting policies concerning income, housing and social security. In the last decade, benefiting from the economic boom, the sheer number of middle class people increased. However, the growth rate lags far behind general economic growth rates, as a result of the lack of any mechanism to nurture the middle class. As regards income distribution, reform has stagnated, resulting in an ever-increasing gap between rich and poor. The road leading towards the middle class is becoming even bumpier for low-income households. High housing prices have eroded people’s spending power, putting middle-class the living standards beyond their reach. Bearish stock markets have sucked in people’s savings yet denied them the chance of getting returns on investment. 
3. The rural-urban gap has increased. The residence permit system used to be the main tool used to rein in urban migration, in particular, the migration of farmers. In the past decade, despite increasing migration, the residence permit system remains tied to public services, and influences local government tax incomes and regional economic growth, therefore there is little incentive for reform. Some small cities have loosened their controls, but barriers remain high, and migrant workers still have great difficulties adapting to cities and obtaining new urban identities. The delay of residence permit reform has also radicalized conflicts between the countryside and cities, exacerbated government land sales and worsened the situation of landless farmers. Farmers’ interests are trampled on, and the traditional urban resident-farmer two-element structure has evolved into triangular structure of urban, rural workers and farmers.
4. Population policy lags behind reality. The population is aging at an accelerated rate. Giving birth is a basic human right, but in the last decade the state continues its rigid one-child policy, which not only contributes to the aging of the population and a depletion of the demographic dividend, but also affects the country’s economic growth, retirement benefits, causing grievances to many families that have lost their only children, exacerbating the imbalanced sex ratio at birth, as well as other social problems. Birth-regulation policies trample on countless people’s rights on a daily basis.
5. The bureaucratization and profit-incentivisation of educational and scientific research institutions shows no indication of being ameliorated and it continues to stifle creativity. Education and scientific research is the foundation of a country. In the past decade, even though major progress has been made, quantity instead of quality is given priority. Few great scientists have emerged and original results are scarce. All these impair the realization of the goal of constructing an innovative country. The bureaucratization of the educational system has became more entrenched. The guiding philosophy of education is tilted more and more towards profit-generation, as universities and scientific research institutes alike are evaluated on the basis of the number of published papers, which has taken a toll on people’s spirit and capacity of innovation.
6. Environmental pollution continues to worsen. There has been no improvement in environmental protection. ‘Coarse economic development’ is often marked by the high environmental cost that one pays for economic growth. Over the past decade, large numbers of energy-intensive, highly polluting projects have been launched, leading to further damage of our shared homeland and further diminishing the quality of life. Welfare and life itself is threatened by pollution. In addition, conflicts and confrontations are becoming more frequent and more intense, putting the concept of creating an ‘ecological civilization’ sorely to the test.
7. The government has failed to establish a stable energy supply system. China’s current development model can only be sustained by large amounts of energy. China’s per capita energy reserve is very low and its energy supply relies heavily on imports. As a result, if China can’t maintain stable and diversified energy sources, it will be at mercy of other countries and its long-term plans will be compromised. Over the past decade, though China has been actively seeking to expand its overseas markets and develop new energy technologies, it has failed to build either a stable energy supply network or the necessary military prowess to safeguard such a network, while the development of new energy technologies remains rudimentary.
8. Moral lapses and the collapse of ideology. The government has failed to build an effective and convincing value system that can be accepted by the majority of its people. If a society is unable to prevent moral standards from degenerating, and if its members are unrestrained by any moral principle and have no sense of shame and see nothing but profit as their goal in life, it will soon descend to the level of the jungle. In the past decade, while the economy has developed rapidly, the state of morality has declined. In a time when old moral standards have collapsed, and the ideology developed during the revolutionary era has become bankrupt, a modern moral system suitable for a new market economy and commercial civilization has failed to fill in the gap. As a result, there are no guiding principles for the society. The damage done to the people’s spirit and the effects of the crisis of faith are gradual and subtle. This trend has hardly been reversed in the past decade.
9. ‘Firefighting’ and ‘stability-maintenance’ style diplomacy lacks vision, strategic thinking and specific measures. The state has failed to take advantage of the opportunities that have come with the shift in the international order. China has landing itself in a passive position. In the past decade, even though China has gained in power when it comes to deciding international affairs and putting forth a set of principles and targets as regards the world order, the state has failed to transform this potential into deeds. The reason is that China’s diplomacy has only principles and goals, and lacks strategic planning and an agenda-setting capacity, or indeed the will power to carry them out. In terms of diplomatic principles, the state is unable to adjust its diplomacy according to changes in the international situation and China’s own strength. Instead it limits itself to the philosophy of ‘hiding our capacities and biding our time’. As a result of this China’s diplomacy has failed to reflect its increased clout, which is demonstrated by the use of ‘firefighting’ and ‘stability-maintenance’ style diplomacy in handling international affairs. This has worsened China’s international situation and undermined the confidence of the Chinese people.
10. Insufficient efforts in pushing political reform and promoting democracy. There is a long way to go before the ideal of returning power to the people. This is the biggest and the most challenging problem. From the experience of modernization in other countries it is evident that the problem can’t be solved once for all. It should be done methodically and with caution. However, the state should at least make some gesture to show that the Party is sincere in its efforts to give people some hope, instead of dithering when faced with difficulties. In the past decade, despite the administration’s emphasis on democracy, freedom, rule of the law and political reform, little progress has been made regarding democratization. In fact, the solution to all these problems lies with the reform of the political system, and how profound political reform will be. So, the government should be courageous and take a bold step to realize China’s political reform and democracy.