I do see a very large threat of instability. The government seems to agree, given the almost comical moves they take to restrict dissent.
Since liberalization, the implicit promise of the Chinese Communist Party has been “as long as you do not question our right to rule, we will make you rich.” And it worked. China has achieved humankind’s greatest rise out of poverty ever. So people played by the rules and the money kept rolling in.
But the Chinese people tend to be very practical, and for the most part they feel no special allegiance to this particular form of government. The greater concept of “China” and “being Chinese” has a very strong meaning, but China has endured empires, wars, and countless political incarnations. The Chinese Communist Party is just one player in a long story, and people will not be sad to see them go when it’s their time.
But, as long as that promise gets kept and people keep getting richer, they’ll roll with it.
The moment that stops, the moment the economy slows, stalls or shrinks, there is going to be potential for trouble. The party will have stopped delivering their end of the deal, and the people will stop having any use for them. China has some pretty heavy class, geographic and ethnic divides, and all of those will start coming out as people stop working together to get rich. There is a lot of simmering anger. It will start to matter.
The government is trying to plan for this by working with Chinese nationalism to build their own legitimacy as the sort of “end result” of the evolution of a continuous Chinese empire, rather than as yet another government that will rise and fall as China’s are wont to do. This is potentially worrisome, because back when it was less important, Taiwan became the symbolic capstone of Chinese nationalism. The fear is that an imperiled Chinese Communist Party’s last ditch effort to stay in power might be an attack on Taiwan in an attempt to raise nationalist feelings and buy legitimacy. Obviously that could get complicated really quickly.
I’m of the belief that right now, as it stands, the Party could not stand a major economic shock. And the potential is there. The bubble is real. The Party can manipulate the market in ways we can’t, and might be able to head this one off. But they do have some real reasons to feel very insecure.