There Is No ‘China Model’

The idea that there is a legitimate, authoritarian Chinese alternative to Western ways — development with Chinese characteristics — is not a new one, but Chinese spokesmen and officials have been advancing it ever more unabashedly these days.

A highly conspicuous and well-publicized instance of this came earlier this month during the first high level meeting between Chinese officials and senior members of the Biden administration.  In his opening remarks, with the media of both countries watching, Yang Jiechi, China’s most senior foreign policy official, heralded the success of “Chinese-style democracy,” even as he scolded the U.S. for trying to impose its political model on the rest of the world.

China, he said, has achieved “a full victory in ending absolute poverty”; it has even made “steady progress in human rights,” while the United States, Yang continued, citing the Black Lives Matter protests, needs to do better.  “Many people within the United States actually have little confidence in the democracy of the United States,” he said, claiming, by contrast, that “the Chinese people are wholly rallying around the Communist Party of China.”

Or, as Zhang Weiwei, the head of the China Institute at Fudan University in Shanghai, rather grandly put it in a recent article: “China has produced a miracle of development never seen before in human history.”

The idea that China might generally be doing better than the Western democracies, plagued by political gridlock, wealth disparities, and social turmoil, has gained a certain acceptance among Western commentators, some journalists, and corporate leaders as well as Chinese propagandists. Certainly, many prominent Americans, from Tim Cook of Apple to the basketball star LeBron James, have in the past both praised China’s leaders and  minimized the country’s human rights abuses, generally on the grounds that it has lifted so many people out of poverty.

More recently, China’s crackdown on democracy in Hong Kong and its imprisonment of a million or more Uighurs have made it more difficult to make excuses for it. Still, “Chinese-style democracy” almost by definition means a tightly controlled one-party state, and a belief that China has discovered a unique, exceptional formula to achieve prosperity implies that at least some strong degree of authoritarian control may not only be justified, but necessary.

But is there really a China model, some special authoritarian, one-party Chinese sauce that has led to “a miracle of development never before seen in history”? Or has China’s impressive eradication of poverty come about despite “Chinese-style democracy”?

Certainly, no serious analyst doubts that China has achieved rapid economic growth over the past 40 years. But many of these analysts have concluded that China’s success didn’t come about by developing some special “China model” but resulted from copying the example of other countries — Japan, South Korea, and Taiwan specifically — that have also achieved remarkable economic growth, and did so years earlier than China. What makes China remarkable in this sense isn’t some ineffable Chinese exceptionalism or the brilliance of its political leaders, but the mere fact that it is many times bigger than the countries whose model it has followed.

“I basically don’t believe there is a China-centric model of growth,” Nicholas Lardy, a specialist on China at the Peterson Institute for International Economics in Washington, D.C., said in a phone interview. In his most recent book, “The State Strikes Back,” Lardy challenges the narrative of Chinese efficiency, arguing its political system’s insistence on control has led it to invest in inefficient and often unprofitable state-owned enterprises, rather than in the private sector where most growth is generated.

“The ‘China model’ is one in which you have a very dynamic private sector with a very bad, resource-consuming state sector that doesn’t show much sign of improvement,” Lardy said. “So in that sense you could say that China does have a model, but it’s not one that many people would want to emulate.”

Looked at in this way, what may be most striking about China’s development isn’t that it has been so successful, but that it came so late.

For the first couple of decades of communist rule, the country’s semi-deified “Great Helmsman,” Mao Zedong, insisted on total state control of all economic activity. Private enterprise was essentially criminalized and everything from massive steel factories to neighborhood food shops were state owned. The result, despite the propaganda proclaiming “ever greater victories,” was dreary, grinding poverty, and, during one three-year period, 1959-1962, the most devastating famine in the 20^th century.

After Mao died in 1976, replaced by the more pragmatic, less ideological Deng Xiaoping, China essentially adopted not a “China model” but what might be called an existing Asian model, one long since forged by postwar Japan, South Korea, and Taiwan.

Deng allowed small, then larger private enterprise to flourish, which it did in a society almost literally starved of goods and services. He opened the country up to foreign investment, using its enormous supply of low-cost labor to create assembly plants in special economic zones, and this in very short order made China the “factory to the world” that it is today, manufacturing an enormous percentage of the goods consumed globally.

Helping this was one of the few good things that happened under Mao: the expansion of basic education and health care. But the magic sauce of economic development wasn’t the authoritarian ruling party; it was the hundreds of thousands of workers who moved from the impoverished countryside to the manufacturing export zones near the big cities that propelled the early stages of the country’s rapid growth.

Comparative statistics show that while China has done well, it has not done better than the Asian “tigers.” At the end of the Korean War, for example, South Korea was one of the poorest and most devastated countries on the planet. But since 1961, it has maintained an average annual growth rate of 7.2% while its per capita income has gone up from well under a thousand dollars to about $32,000 in 2019.

Similarly, Taiwan’s per capita income, about $1,950 in 1979 when China was beginning its economic reforms, is now about $27,000, a 13-fold increase. China’s per capita income was a paltry $185 in 1979. It is now just over $10,000 — an impressive increase, but barely one-third of Taiwan’s and a fifth the size of the United States’.

While reflecting China’s growth, these statistics suggest its success isn’t due to some unique authoritarian governing system, but to the same factors that have propelled growth in other countries – political stability, the creation of a market economy, individual creativity, and a well-educated, hard-working population.

There are differences in the ways all of these countries have developed. Japan, for example, relied much less on foreign investment in assembly plants than China did, developing its own now world famous export brands instead. According to Lardy, for example, 25% of China’s output comes from foreign companies manufacturing foreign products in Chinese factories. In Japan, that figure was never higher than 1%.

But there is a certain basic similarity to the development pattern of all the most successful Asian countries. Indeed, two of them, South Korea and Taiwan, were authoritarian regimes in their early stages of growth, and it could be said for all of them that tight political control – or certainly an absence of domestic turmoil – was helpful in getting these countries through the early stages of development.

Since then, South Korea and Taiwan have become democracies, and they have successfully managed the “middle-income trap,” the difficult transition from a cheap labor economy to one fueled by innovation and high tech. It remains to be seen whether still authoritarian China can be equally successful in this.

Taiwan, for example, has the world’s most advanced computer microchip industries, while China has remained highly dependent on imported chips. Though South Korea’s population is just 51 million, 12 private Korean companies are among the Fortune 500, including such well known global brands as Hyundai, Samsung, LG Technologies, and Kia Motors. China, which has 30 times the population of South Korea, has 124 Fortune 500 companies, but the vast majority of them are state-owned and often state subsidized, not models of economic performance and not internationally competitive. Among the top 25 Chinese companies, only three of them are private.

“The Chinese companies that are most successful and innovative are not the result of state planning and far-seeing bureaucrats, but were created by private sector entrepreneurs and foreign investment,” Martin Chorzempa, a senior fellow at the Peterson Institute, said in a phone interview.

A notable example is Huawei, which is the leading manufacturer of 5G equipment in the world. “Huawei is interesting because it’s so exceptional in the Chinese system,” Chorzempa said. “It’s not a state-owned enterprise, or an example that came out of state planning. It’s unique within China, so not indicative of any general rule.”

Even there, state control looms. Huawei has been banned from doing business in the United States because of fears that its equipment can be turned into spyware against those using it, something Huawei denies.

Lardy said private companies are not always subject to market forces in China. While noting that the governments of South Korea and Taiwan also exerted control over many industries early on, they eventually imposed market discipline on them, allowing them to disappear if they failed.

“That’s not what we’re seeing in China,” Lardy said. “Thirty to forty percent of SOEs have been losing money and very few of them go out of business.  They’re following the Taiwan model but not in that important respect.”

One commonly cited measure of China’s technology advances is the enormous number of new patents Chinese inventors and companies apply for every year, now the highest in the world. But several studies show that when the same patents approved in China are put up for approval in the U.S. or the European Union, a very small percentage of them are successful.

One study of patent applications in 2016, for example, showed that nearly half of the 1.2 million patent applications made in China were filed abroad, but only 6.3% were granted. By contrast, when American patents were filed abroad, 48% of the applications were granted.

The numbers indicate that a large number of China’s supposed innovations are actually minor tweaks or adjustments to existing technologies rather than something genuinely new. This may put some perspective into China’s high amounts of investment in research and development, which the country recently vowed to increase by 7% a year for the next five years. China has announced an ambitious state-guided program, known as China 2025, to become the leading global power in key such areas as artificial intelligence, green energy, robotics, and others.

“The real question is how much innovation they’re getting from their research and development,” Chorzempa said. “In general, the Chinese record is quite disappointing.  They produce a lot of stuff but they don’t drive a lot of innovation. A lot of their patents are not cited by anybody else; a lot of them are junk patents granted in China but not getting attention anyplace else.”

Certainly, as in other areas, China has made progress. Its network of high-speed trains, for example, has transformed domestic transportation, and, as many commentators point out, the United States has nothing comparable.

But again, China’s Asian competitors all have their own high-speed train networks, and they’ve had them longer than China. Japan’s, the first in the world, started operations some half a century before China’s.

The other area where China’s success has, at least for the national media, burnished the “China model” reputation was its response to the COVID-19 epidemic.  China was able to mobilize very quickly and thoroughly to quarantine affected areas, test, do contact tracing, and isolate infected individuals, and to return to normal life much faster than most other countries, including the United States – a record that Chinese propaganda happily holds up as proof the superiority of the governing system.

But, as with high-speed trains and internationally competitive industries, China’s authoritarian system did not do better than its democratic Asian neighbors, especially South Korea and Taiwan. Meanwhile, it’s widely acknowledged that China’s authoritarian impulse led it to hide information about the virus in its early stages, reprimanding doctors who revealed its initial appearance in the city of Wuhan, locking up citizen journalists who, in contrast to the state-controlled press, were putting out accurate reports about the situation. Taiwan and South Korea did nothing of the kind.

“The beginning of China’s response was an utter failure,” Chorzempa said, “but keeping containment down was quite positive.  They did mass testing far beyond what other countries have done, and there are debates about the civil liberty restrictions and the forced quarantine of travelers that they imposed.

“Korea was the gold standard here,” Chorzempa continued, “because it had a serious outbreak and managed to contain it without a lockdown, so Korea is an example of a country that faced early challenges and got it under control without the kind of brutal measures that China used.”

The basic question, of course, has to do with a key element of the “China model,” the authoritarian control exercised by the CCP and the country’s constantly reiterated claim that this has always been indispensable to “the miracle of development never seen before in human history.”

There is no “control” in this experiment, no proof that had China become more democratic, its economic record might actually have been better. The experience of South Korea and Taiwan suggest that it may well might have been, and that an authoritarian political system wasn’t necessary.

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