“What do you think is unique about the China model?” That was the question posed to me by a television reporter, last time I was in Beijing. My answer was that I don’t think there was a specific Chinese economic model.
There is an east Asian development model of rapid, export-driven industrialisation that was pioneered by Japan, South Korea and Taiwan. What China did was to pursue the same model — at scale. I added that China’s one real innovation was that the country had not liberalised politically as it had grown richer. This sets China apart from the South Koreans and Taiwanese.
After we had finished talking, I asked the reporter if she would be able to use any of my answer. “No, I don’t think so,” she replied. “But it must be nice to be able to say what you think.”
I thought of that exchange this week, as China gears up to celebrate the 100th anniversary of the foundation of the Communist party. It is a central claim of President Xi Jinping that, under the wise guidance of the party, China has discovered a unique path to development that the rest of the world can now learn from. In a speech to the party congress in 2017, Xi proclaimed that China was “blazing a new trail for other developing countries to achieve modernisation”.
The Chinese leader’s claim to have discovered a new route to economic growth is questionable. The early stages of China’s post-Mao economic reforms followed a formula that was recognisable to anyone with a knowledge of previous east Asian economic “miracles”.
Many of the first factories in southern China were set up by overseas-Chinese investors from Taiwan, Hong Kong, Thailand and elsewhere. They were transporting a model that had worked in these countries into a new low-cost environment. The fact that China continued to grow at double-digit rates for decades is remarkable. But it is not unprecedented. Japan managed a similar feat for many years after the second world war. South Korea was poorer than parts of sub-Saharan Africa in the 1950s, but today it is a rich country.
But while the economics of the China model are derivative, the politics are new. Unlike Taiwan or South Korea, which turned from one-party states to democracies as they got richer, China under Xi has entrenched the dominance of the Communist party.
When Chinese commentators talk of offering a new model to the developing world, they also have a political proposition in mind. Why not embrace the order of Chinese-style authoritarianism, rather than the chaos of western-style democracy?
China has also challenged the geopolitical environment that provided the backdrop for the rise of Asia. The original Asian tigers were all American allies. In the context of its cold war with the Soviet Union, the US saw the advantages of opening its market to exports from its east Asian allies. Washington was also willing to tolerate their protectionist policies for longer than it might otherwise have done.
The emergence of Asian economic competitors was never an easy proposition for the Americans to deal with. There was a panic about the rise of Japan in the 1980s. But the backlash was containable because Japan was an ally and a fellow democracy.
China was never going to be an ally of the US. But, until recently, it was very careful to avoid overtly challenging American power in the Pacific area. That has changed under Xi, as China has built military bases across the South China Sea.
As an authoritarian country, which is increasingly open about its ambition to challenge US military, political and economic power, China has belatedly provoked a backlash in Washington. The Trump administration focused largely on the national trade deficit with China. Under Joe Biden, however, the backlash has become more explicitly ideological. The new president frequently says that the US and China are locked into an ideological and political struggle to provide the model for the 21st century — democracy or authoritarianism.
The Chinese government has reason to hope that the US has left it too late to rethink its support for the Asian model of growth that has facilitated China’s rise. China is already the world’s largest manufacturer and exporter. The country now has a huge domestic consumer economy, which provides an alternative source of growth to the export markets that were so critical to the early decades of China’s rise.
China has also just become the world’s leading recipient of new foreign direct investment. Chinese companies are expanding all over the globe. The US and Chinese economies are so deeply entwined that true decoupling would be extremely difficult — not to say unpopular with many businesses on both sides.
Even so, Xi has taken a big risk by overtly challenging American power. During the first decades of China’s rise, the consensus in Washington was that China too would liberalise politically, as it grew richer. So the US took an encouraging and permissive attitude to China’s ascent — similar to its approach to the other east Asian tiger economies.
In the case of China, American “permission” has now been withdrawn. The US is restricting Chinese access to certain advanced technologies and is organising its allies to push back against Beijing. In this new geopolitical environment, Xi really does need to find a new “China model” — distinct from the east Asian model — if the rise of China is to continue uninterrupted.
gideon.rachman@ft.com
Source: Economy - ft.com
