Is the Chinese economic model, which is based on Asian values and the primacy of the collective over the individual, more competitive than the Western liberal and individualistic one? What will the outcome of their competition be for the whole world? These questions are pondered by renowned Russian economist Vladimir Popov in his recently published book The Chinese Model. Why China Lagged Behind the West Before and is Overtaking It Now. With the permission of the publisher Fortiss Press, BRICS Business Magazine reprints one of the chapters. It is about what will happen to the world if China, which has stepped so rapidly from a third world to a first-place country, continues to develop at its previous pace.
“East is East, and West is West, and never the twain shall meet.” Since Rudyard Kipling wrote these words, they have been widely quoted and discussed. A more modest question: does the Chinese economic model today differ radically from the Western one? Does it truly possess magical properties allowing it to grow during global recessions and pandemics, or is this happening simply by happy chance?
Of course, the Chinese economy is no longer either centrally planned or state-owned. The dominant role today belongs to the private sector: 75% of GDP is produced by non-state enterprises, including joint-stock companies, partnerships, and individual private enterprises, which differ little from their Western counterparts.
Yet, the differences from the Western economic model are no less significant:
In general, the differences from Western countries, especially European ones, might not seem so radical but, if you put it all together and take into account the development vector, it turns out to be a different model.
“We in the West have a choice,” wrote Anatole Kaletsky (a renowned economic commentator, head of The Institute for New Economic Thinking. – Note by BRICS Business Magazine) in The Times in 2010. “Either we accept the argument that China, over the 5,000 years of recorded human history, has been a much more successful and sustainable culture than America or Western Europe, and is now restoring its natural position as global leader. Or we stop denying the rivalry between the Chinese and Western models and start thinking seriously about how to reform Western capitalism to have a better chance of winning.”
<…>
Predictions of an imminent collapse of the Chinese economic model and political system abound. The problem with these is that they were made 20 or 40 years ago, so anyone who has observed Chinese growth long enough involuntarily gets the impression not just of “déjà vu” and not even of repeated cries of “wolf, wolf,” but of the “Guizhou donkey that has exhausted all its tricks”.
This is an old Chinese parable: in Guizhou Province, there were no donkeys before, and, when the first imported donkey was let loose to wander in the mountains, it encountered a tiger. The tiger had never before seen a donkey; it seemed big and loud to him, so at first he was even afraid to approach it. But then, after drawing closer, he discovered that the donkey only knew how to kick. After easily dodging its hooves a few times, the tiger then ate it with pleasure. So now they say “the Guizhou donkey has exhausted its tricks.”
<…>
In 2004, the journal Foreign Affairs published an article by head of Shell China, George Gilboy, The Myth Behind China’s Miracle. The article concludes that China will not become a serious competitor to the US in the near or even distant future, as it lags far behind Korea and Japan of 20 and 30 years ago, respectively, in the share of high-tech products in exports, R&D expenditures, the share of high-tech products produced by domestic rather than foreign manufacturers, etc. China is experiencing rapid growth without development; technologically it will lag far behind the US for a long time and is incapable of competing with it.
Indeed, in 2002, 55% of all Chinese exports and 75% of computer and parts exports came from foreign companies operating in China. The share of R&D expenditures in China’s GDP was only 1% then, compared to 2.5–3% in Korea and Japan. And, in terms of the number of scientific workers per 1 million population, China lagged almost five-fold behind Korea and eight-fold behind Japan. It was said that the structure of Chinese exports was less advanced than that of countries at a similar level of development. For example, based on cross-country comparisons, Mayer Jorg and Adrian Wood concluded that the share of products requiring highly skilled labour inputs in Chinese exports in 1990 should have been 40% (based on a GDP per capita level of USD 342) against 33% in reality.
Now, 20 years later, no one even remembers these predictions. Now one hears more often that the Chinese model is good only for catch-up development but not for breakthroughs at the forefront of technological progress. For innovation, personal freedom, human rights, a competitive environment, and other liberal values are needed. Yet, paper, printing, the compass, gunpowder, porcelain, silk: all these were invented in China long before capitalism and democracy. Nor do the successful technical progress and high rates of economic growth in the USSR in the 1950s align with the notion that personal freedom and free enterprise are prerequisites for successful growth.
In the 1960s‑1980s, there was more freedom in the USSR than in the 1950s but growth was slower. And, in the 1990s, personal freedom, entrepreneurship, and the flow of ideas did, indeed, flourish, but that was a period of economic decline. Fundamental research declined, applied research at enterprises virtually came to a halt, there was a sharp drop in high-tech industries, and the share of machinery and equipment in exports fell.
By all patent activity indicators, China is already ahead of the US. In 2021, China issued almost 700,000 patents, more than the US (327,000), Japan (184,000) and South Korea (146,000) combined. Moreover, in total, these four countries account for 84% of all patents issued worldwide. Russia, by the way, accounts for 2% (24,000 patents). And, as already mentioned in the introduction, China accounts for more than half of all first-class scientific articles (those in the top 1% most cited) in eight out of 14 natural and technical sciences.
China spends 2.4% of GDP on R&D (2023), and, in absolute terms, almost as much as the US (USD 620 and USD 710 billion, respectively), the share of high-tech products in its exports is growing so fast that the US and other Western countries are now imposing restrictions on Chinese-exported 5G technologies, electric vehicles, and TikTok.
<…>
If the Chinese model remains as competitive as it is now, it is very likely that, if not all, then at least many developing countries will try to follow the Chinese recipes. Today, in the 21st century, China’s rise could make the catch-up development model based on dirigisme not only attractive but also legitimate, which could create a new international economic climate favourable to development of this type. We may well witness the triumph of the Chinese model in the Global South. Not all developing countries possess the same institutional potential as China, a necessary component of a successful non-Western growth model, but many of them do, while those that do not will eventually be forced to move in the direction of limiting inequality and strengthening institutional potential.
Trade protectionism, industrial policy, undervaluing of the exchange rate through accumulation of foreign exchange reserves, control over international capital flows (not only short-term but also foreign direct investment) might become acceptable and legitimate tools for catch-up development. A new regime for protecting intellectual property rights and technology transfer, new rules for international trade in energy and resources, for international migration, new agreements on reducing pollutant emissions (revision of the Kyoto Protocol), etc., might also emerge. A profound reform of the world economic order and international relations will be on the agenda, including abandoning the dollar-based currency system. Real democratization of international economic relations and creation of more favourable conditions for the Global South’s economic development might occur. The result could be the gap between rich and poor, the West and developing countries being overcome.
Furthermore, the principles of political relations between states and international law could change radically. The mentioned Beijing Consensus, while perhaps not yet a strict term, clearly indicates that the Chinese approach to international politics (without interference in internal affairs, without military intervention, sanctions, and trade embargoes) offers the developing world a real alternative. New international relations could, first, limit use of force only to serious violations of non-political rights (e.g., mass repression, famine, ethnic violence, etc.), prohibit use of force solely to “establishing democracy” and, second, prohibit unilateral military intervention (without UN consent).
As already mentioned, China’s success is not limited to its recent (since 1979 or even 1949) impressive growth in GDP per capita. Another measure of success is the ability to become the most populous country on the planet and maintain this status even when the country lags behind the West in GDP per capita (1500–1950). By integral criteria (total GDP), China is today the most successful country in the world. From this long-term perspective, China’s exceptional success before the Opium Wars (mid‑19th century) and after Liberation (1949) is due to institutional continuity, the ability to move along an evolutionary path without destroying traditional collectivist structures (Asian values).
<…>
As stated, Asian values might prove more attractive to other countries than the Protestant personal freedom with human rights. After all, Chinese civilization is already 5,000 years old and it is the only one that has preserved absolute continuity and not dropped out of the race. And China’s second wind, demonstrated over the last 75 years, forces us to view the lag in the 19th – first half of the 20th century as temporary growth difficulties.
Yes, if inequality continues to grow and the potential of the Chinese state weakens, China will become a “normal” developing country. In this case, China’s rapid growth will come to an end, and there will no longer be a question of what is so special about the Chinese economic model. But, if China’s successful catch-up development continues, then it could become a turning point.
In general, it seems that precisely today, before our eyes and during the lifetime of current generations, the choice is being made of development scenarios for many decades, if not centuries, ahead. As the positions of the West weaken almost everywhere, and the East Asian model demonstrates increasing competitiveness, the elite of developed countries might gradually and peacefully accept Asian values and the collectivist model, which will thus spread throughout the world, including the US. In Western countries themselves, governments might then come to power that are inclined to limit human rights to maintain positions in the competitive struggle and technological race.
But rejection is also a possible reaction: the West might move towards autarchy, turn away from left-wing parties in favour of right-wing nationalist and even pro-fascist ones, which are no less socially orientated than the left, but more committed to an anti-globalist programme.
The liberal idea of guarantees of inalienable rights for all people irrespective of gender, race, nationality, and creed is deemed one of the two great ideas of the 20th century, and perhaps not only the 20th century but of all human history, alongside the Communist idea of universal brotherhood of all working people. Liberals consider freedom an end in itself, while adherents of Asian values and Communists believe that freedom cannot be an end in itself; one can always ask – freedom for what? Freedom is only a means for achieving full, all-round development of the individual in society.
Nikolai Shmelev, one of the architects of perestroika, whose articles were devoured by the entire country in the late 1980s, considered this a fundamental idea: the individual needs humanity more than humanity needs the individual. If there had been no Shakespeare, Luther or Newton, others would have done what they did, perhaps a little later and maybe not as well, but maybe even better. And without other people, the life of the individual is meaningless.
