Opinion
23
Wang Yong
Professor of international political economy
and Director of the Center for International Political economy, beijing university
Resilient China
T
ODAY’S financial crisis and looming global recession are maintain high growth rates, mounting unemployment could combine
challenging China’s export-driven economic model as never with an accumulation of unresolved political and social issues to
before in the 30 years since Deng Xiaoping opened the economy. create a risk of major social unrest.
Indeed, in recent weeks, “the factory of the world” has become but the “China model” has given the authorities the tools to
plagued by the closure of thousands of manufacturing plants and avoid such an outcome. first, while the uS had to wait for its new
the threat of widespread labor unrest. president to take office, China’s government was able to intervene
I believe that China’s innovative model for development is swiftly with a rescue package. Judging from events in the last two
likely to help it weather both the gathering economic crisis and any months, its $560 billion stabilization plan has served its purpose,
resulting social and political unrest. Moreover, should China safely despite some public criticism that it was too hastily formulated.
navigate this storm, its status as a rising economic and political Second, China’s fiscal surplus, growing foreign-exchange
power will be strengthened. reserves, and high savings rate have ensured the financial
The essence of the Chinese economic model is a careful resources needed to maintain adequate investment and sufficiently
sequencing of reforms, with priority given to economic reform over rapid growth.
political reform, which means retaining the existing constitutional Third, the new stimulus package is mainly aimed at
system and the ruling status of the Communist Party of China infrastructure, equipment renovation, and industrial upgrading,
(CPC). This model has involved substantial liberalization in terms of which have suffered serious under-investment in the past, especially
official ideology, the economy, and society, while maintaining public in China’s central and western regions.
ownership of the major banks and largest state-owned enterprises fourth, increased investment in the country’s social safety net
(SOes) as “anchors of economic stability.” includes not only universal health and social insurance, but also
Similarly, whereas much autonomy has been extended to local expanded housing subsidies. This should help to solve the problem
governments in economic and social development, the central of insufficient demand for real estate, which could have led to the
government has kept its grip on the direction of policy by maintaining collapse of China’s economy.
the power to appoint local party and government officials. In short, fifth, increased investment in rural areas, provided for in the
the Chinese model reflects a combination of pragmatism, liberalism, government’s rescue plan, will help narrow the gap between urban
and market competition, but with a strong dose of state intervention. rich and rural poor. To promote the sale of household electrical
What is astonishing about this “model” is that it has enabled appliances in rural areas, the government has begun providing a
China to maintain rapid growth within a relatively stable political 13% price subsidy, not only benefiting rural consumption, but also
environment for 30 years. although China is not the only country to boosting the growth of major industrial enterprises.
enjoy such long-term growth (post-WWII Japan and South Korea finally, the authorities have subtly used the media to maintain
are other cases), it is something of a miracle that a once-poor consumer confidence by managing public criticism and thereby
country with one-fifth of the world’s population could achieve such helping maintain popular trust in the government and the economy.
sustained development. Most forecasts suggest that, with a huge effort, China can
Of course, there are problems. environmental deterioration is maintain 8% growth in 2009. but the history of economic crises
severe, the “Gini index” (the gap between rich and poor) is widening, shows that non-economic factors play an equally important role
and official corruption has not been curbed. Nor has domestic in any solution. Currently, ordinary Chinese still believe that their
consumption been sufficiently expanded, leaving economic growth country’s economic growth remains high, and China’s leaders
overly dependent on exports and foreign investment. continue to enjoy high approval ratings because of widespread belief
Moreover, the global economic crisis has proven to be a far in their abilities and dedication. Such psychological factors will need
more serious threat than China’s leaders initially recognized. The continual nurturing.
worst difficulties stem from China’s dependence on international The coincidence of economic crisis with the 30th anniversary
markets, especially the united States. a rapid decline in exports has of China’s reforms has provided a timely reminder of the pain of
caused the closure of thousands of factories in the Pearl river and the Cultural revolution, memories of which make most Chinese
yangtze river deltas, and tens of millions of unemployed migrant opposed to returning in any way to the pre-reform years. Most
workers are now returning to their hinterland provinces. Chinese now firmly believe that a more open and free China,
These newly laid-off workers are joining more than six million one increasingly integrated into the world economy, is the only
new college graduates looking for work. If the economy cannot way forward.
Exclusive Macau Business / Project Syndicate
february 2009
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