The China Model &
Whither China?
In the News
•The Eurozone crisis: China to the rescue?
•G20
•China’s new assertiveness
•A multipolar world
•Progressives in the US and globally are split
The China Model
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What is the China model
Is the China a model “better”?
Is the China model sustainable?
Can the China model be replicated?
What can developing countries learn from the
China model?
Background: Washington Consensus
• Coined in 1989
• A set of ten specific economic policy
prescriptions that would constitute the
"standard" reform package promoted for
crisis-wracked developing countries
• Developed by Washington, D.C.-based
institutions such as the IMF, World Bank, and
the US Treasury Department.
The IMF/WB Reform Forumlae
• Fiscal policy discipline;
• Redirection of public spending from subsidies to pro-growth, propoor services like primary education, primary health care and
infrastructure investment;
• Tax reform – broadening the tax base and adopting moderate
marginal tax rates;
• Interest rates - market determined
• Competitive exchange rates;
• Trade liberalization
• Liberalization of inward foreign direct investment;
• Privatization of state enterprises;
• Deregulation – abolition of regulations that impede market entry or
restrict competition
• Legal security for property rights.
In search of a development model:
The Washington Consensus
• “ It argued that the keys to success in
developing countries were three things:
macro-stability, liberalization (lowering tariff
barriers and market deregulation) and
privatization. It was largely formulated out of
experience with Latin America…..There is a
consensus that those precepts, while
important, are neither necessary nor sufficient
for successful development. “ Joseph Stiglitz,
Nobel Laureate in economics
• http://multinationalmonitor.org/mm2000/00april/interview.html
What is the China model?
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Market authoritarian
One party rule
Major role for state enterprises
Eclectic approach to free markets
Growth without political and economic rights
Performance-based legitimacy
Town and Village Enterprises?
The greatest development story
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Lifted 400 millions from poverty
Economic growth
Infrastructure development
“the modern world’s greatest development
story………………” Stephen Roach
Debates
• There’s no such model: Chen Zhiwu, Huang
Yasheng
• The model can’t be replicated: Huang
Yasheng, Halper
• The China model is not better, but different:
Halper
• The China Model is vulnerable: Susan Shirk
• End of the Beijing Consensus: Yang Yao
http://psdblog.worldbank.org/psdblog/2008/08/
Joshua Ramo Cooper
Former Time foreign editor
Business consultant
a managing director and partner at the Beijing
office of Kissinger Associates."
Model to emulate
• China was "marking a path for other nations
around the world who are trying to figure out
not simply how to develop their countries, but
also how to fit into the international order in a
way that allows them to be truly
independent”
Joshua Ramo Cooper
Nothing special
• “China’s growth experience is very
conventional. Private ownership, financial
liberalization, property rights security and
some degree of constraints on the political
rulers .” Huang Yasheng
Getting the Facts Right
“To get the facts
right need deep
digging into many
details.. Getting
the China story
right is also about
constructing the
correct
explanation about
China..”
Huang Yasheng, professor of int’l
management , MIT
http://t.sina.com.cn/1645226103
Who owns Huawei?
http://www.huawei.com/corporate_information/corporate_governance.do
Huawei’s mysterious shareholders
• It is commonly known in China's business
community that Ren makes final decisions at
Huawei. The bulk of Huawei's shareholders
cannot execute rights as bona fide
shareholders, and executive team members
cannot override Ren's decisions. Moreover,
operating and management teams that report
to Ren are evidently more powerful than the
company's board.
• It's been reported that all employee-owned
shares are restricted "virtual" shares, and no
single employee knows anything about his or
her holding. Except for Ren, perhaps no one
任正非,
has access to information about specific
percentages and other internal company facts. Ren Zhengfei
– Caixin Online , Nov 2, 2010
President,Huawei Holdings
Danger Signs
• growing income inequality
– Gini coefficient 0.47
– city dwellers earning 3½ times as rural residents
• Internal imbalances (spending vs saving, city
vs rural, growth vs environment)
• External imbalances (trade surpluses)
• Environmental degradation
• Rise in public protests
A Virtual & global
Tiananmen Square?
• Vocal dissidents congregating
• Diverse quality of discourse: rational critiques,
satire, emotional outbursts, facts and fiction
mixed
• Government taking hard line, no dialogue
• Increased polarization
History at a Higher Level?
• Middle income trap per-capita GDP reaches
$3,000 to $8,000, the economy stops growing,
income inequality increases, and social conflicts
erupt
• huge pent-up demand for wage growth. Despite
rapid GDP growth, wage growth has been
extremely modest or even stagnant in several
years.
• Growth of crony capitalism: corruption has
reached the highest level
New media landscape
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The internet, blogs, microblogs
Cell phones
Instant communication
Global connectivity
Elements of civil society
The post-80’s generation with no experience
Wither China?
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“Moving towards major crisis”? Yang Yao
Economy in trouble in 3-5 years - Chen Zhiwu
Collapse in 5 years? Chen Ping
“revolutionary upheavals..hard to avoid,”
Susan Shirk.
• “No political reform; China’s authoritarian
capitalism will compete with the West as a
possible model for the developing world,
Halper
What is to Be Done?
• Income distribution reform (Chen, others)
• Ownership reform (Chen Zhiwu, Huang
Yasheng)
• Deep institutional reforms in the countryside
and to provide supportive conditions for the
revival of rural entrepreneurship. (Huang
Yasheng)
• Rule of law
• Political reform (Wang Yao)
New World Order?
• “I think you need a new world order that
China has to be part of the process of creating
it and they have to buy in, they have to own it
in the same way as the United States
owns…the current order”
– George Soros
End