What might the new populist protest in China portend?

Making sense of the momentous change taking place in China has never seemed more pressing, or more impossible. Even the most knowledgeable observers of the Middle Kingdom now have a hard time agreeing on where the country is headed or what China's rise portends. If you read the business press, filled with stories about the Chinese economic juggernaut, you would believe that China is rewriting the laws of economics and will continue to grow forever. If you follow the annual Pentagon reports on Chinese military power, China seems to be replacing the former Soviet Union as America's "peer competitor," soon to challenge U.S. supremacy. But if you care to look at the countless books and articles about China's internal transformation since the end of the Cultural Revolution, you would be totally confused.

One school, perhaps the dominant view, contends that China's capitalist revolution has not only created an economic miracle but also launched the country on the road toward gradual—but inevitable—democratization. Extrapolating from the West's own historical experience, believers in the power of capitalism to transform politics are convinced that China is no different: A liberal order is evolving. They cite as evidence the expansion of personal freedoms, the emergence of nongovernmental organizations, the spread of the Internet, and the increasing sophistication of government policies made by pragmatic technocrats.

The other school questions the assumption that capitalism can foster political liberalism on its own. Skeptics note that instead of opening up the political process to greater public participation or establishing the rule of law, the ruling Communist Party has, since the Tiananmen crackdown in 1989, consistently resisted pressures for democratic reforms. By skillfully deploying the economic and repressive resources of the state, the party has stifled internal dissent, co-opted social elites, and solidified its hold on power.

In Out of Mao's Shadow: The Struggle for the Soul of a New China, Philip Pan—a prizewinning reporter for the Washington Post who spent nearly eight years in China (2000-07)—bolsters the case for the skeptics. He weaves his portrait of a "new China" out of the dramatic stories of individuals whose real-life experiences he views as a guide to where China is right now and may be headed. They do indeed supply a vivid glimpse of a system in turmoil, and he's right not to find revolutionary heroes in his cast of characters. But Pan may miss stirrings of collective resistance, quieter and less colorful, that could challenge the party's authority and doom its self-perpetuated political monopoly.

One of the decisive struggles for China's future is, ironically, being waged over its history. As Pan deftly shows through his first batch of stories, history in China is resolutely suppressed by the party—and turned upside down. Hu Jie, a documentary filmmaker, gets fired from his government job for daring to portray an obscure college student's opposition to the government, never mind that her defiance and execution occurred a half-century ago. In the juxtaposition of his next three characters, Pan illuminates with rare clarity the ironic reversals at the heart of a political and economic order that increasingly resembles crony-capitalism, maintained for the benefit of precisely those who were the targets of the Communist-led revolution. In today's China, a well-connected few reap a disproportionate share of the rewards of the growth, while the majority of the people—ordinary workers and peasants—see their job security disappear, wages go unpaid, and houses get bulldozed for urban development. If they dare to make a fuss about their unjust treatment, they risk immediate repression.

Pan has found individuals who epitomize this sharp contrast. Chen Lihua, a Beijing mogul and China's 54^th-richest person, accumulated a real-estate fortune worth at least $1 billion, thanks to political connection—guanxi—which in the new political order can turn a virtual nobody into a billionaire overnight. Among other murky dealings, she managed to get the most senior members of the Communist Party leadership to intervene on her behalf so that her company could clear an old neighborhood in downtown Beijing for building commercial real estate. Zhang Xide is a corrupt party boss in an impoverished county who ordered police to beat up villagers who refused to pay taxes; gleefully, he told Pan how he chased a six-months-pregnant mother of two into a river trying to "persuade" her to undergo a forced abortion.