The Chinese Model and the Global Crisis

Date: Monday, 25 April 2011

Time: 10.30 am – 12 pm

Venue: S. Rajaratnam School of International Studies (RSIS)

Speaker: Professor Shaun Breslin, Director of the Centre for the Study of Globalisation and Regionalisation at the University of Warwick and Visiting Senior Fellow at the RSIS Centre for Non-Traditional Security (NTS) Studies.

Chairperson: Associate Professor Ralf Emmers, Acting Head, RSIS Centre for NTS Studies.

Introduction

The impressive economic growth in China has attracted increasing interest in the country’s model of development, and has prompted discussion on the possibility of the Chinese model, also known as the Beijing Consensus, replacing the Washington Consensus as an alternative model for the developing world. The onset of the global financial crisis has further intensified the focus. However, there is also fear that the growing prominence of the Chinese model would disrupt the global liberal economic order.

In the economic context, the Washington Consensus which was most influential in the 1990s but became contentious in the first decade of the 21st century refers to an economic agenda that promotes market-friendly policies. Among its main prescriptions are the exercise of fiscal discipline, the liberalisation of interest rates, the encouragement of cross-border investment, the deregulation of international trade and the pursuit of export-led growth. In the 1990s, developing countries were advised by international organisations such as the International Monetary Fund to adopt the aforementioned policies in their economic reforms. The Beijing Consensus, a term coined by Joshua Ramo in a 2004 paper,has been viewed by some as providing an opportunity to break the exclusivity of the liberal-based Washington Consensus. Yet, there is no precise definition of the Chinese model. Rather, it is an evolving term that represents a potential alternative model of development for developing countries.

Instead of focusing on what the model is, Professor Breslin explores the model by identifying what it is not. For instance, it is not about an abrupt transition to a market economy, it is not about complete liberalisation and it is not about following a model or telling others to follow that model. By distancing itself from the previously laid down economic development plans, China is constructing an identity that is different from other dominant powers.

Presentation

The increasing focus on the Chinese model of development is the result of China’s rising economic power. The discussion of the Chinese model by some was initiated by people outside China who saw the rise of the country as a threat to the existing global liberal order and a signal of the potential shift of power in the global system. These concerns are reflected in Stefan Halper’s The Beijing Consensus which views the Chinese model as dangerous as it might chip away at US power around the world, and particularly in Asia and the Pacific. Interestingly, in another publication with the same title, Ramo takes a contrary position and considers the shift to be positive since it sets out a new developmental model. Other observers sharing Ramo’s positive view include some international organisations, such as the World Food Programme which has openly supported the Chinese model as a way to lift people out of poverty. Largely inspired by foreign interest in the Chinese model, people within China began to study this topic around 2004 (the year in which Ramo’s report was published).

It is important to note that the evolution of the discussion on the Chinese model coincided with the onset of the past two financial crises. The 1997 Asian financial crisis drew attention to how China responded to and survived the crisis, and the resilience of China served as a justification for other countries in the region to reinforce the role of government in the economy. Another big jump in interest in the Chinese model was witnessed in 2008 and 2009 during and after the global financial crisis, with two views coming to the fore. On the one hand, there was a belief that the global crisis revealed the weakness of the Western economic model and that the recovery in other regions was tied to China’s economy. Thus, the Chinese model might be the only way to save global capitalism. This perception has, from late 2009 onwards, bolstered China’s national pride and resulted in overconfidence in its growing power. On the other hand, however, it was argued that this crisis spelt the end of the Chinese model as it had exposed some inherent flaws in China’s growth pattern that need to be redressed, a view shared by some of China’s academics and even its high-ranking government officials.

Despite the lively debates, there is still no widely accepted definition for the notion. Various attempts to define the term have converged on several characteristics of the Chinese model, such as gradualism, autonomy, the crucial role of the government in key industries, strong support for export and pragmatism. Regime continuity and political stability are the preconditions for the Chinese model. However, due to the expansiveness of China’s territory and substantial regional differences, there are various local variations.

Another way to analyse the Chinese model is to divide it into two phases. The first phase was in the 1980s, during which the government balanced liberalisation and privatisation relatively well. The achievements in this period laid the foundation for much of the later growth. The second phase which began in the late 1990s is characterised by even stronger state control.

Another issue raised by Prof. Breslin is whether the Chinese model is abnormal. How different is China’s development from other countries in East Asia and other regions, now and in the past? In fact, strong-state developmentalism can be traced back to Listian developmental states, for instance, the US in the 1830s and other European countries in the early stage of industrialisation. China shares some of the characteristics of these states – the rejection of free trade, the focus on production, and the strong role of the government in regulating the economy. In these states, domestic products were protected by tariffs until they were able to compete with cheaper foreign goods. However, the not fully liberalised China also resembles capitalist developmental states in its policies. Thus, Prof. Breslin defined China as a neo-Listian developmental state with Chinese characteristics.

Discussion of the nature of the Chinese model is also influenced by the pre-existing perceptions held by China observers. Some associate the Chinese model with positive traits, such as growth, job creation, strong government, managed globalisation, independence, etc. However, there are also criticisms against it from China’s competitors in regional and global trade and from those unemployed due to the operation of Chinese-run mines and factories in other countries.

Although the idea of the Chinese model was first sparked by foreign observers, China is taking advantage of the discourse to construct a new identity, one that emphasises its contrast to other status quo global powers, and that could enhance the attractiveness of its developmental model to other countries and regions. China emphasises in its diplomacy anti-hegemonism, global democracy, respect for sovereignty, the goal of a harmonious world and collective rights. It tries to project the image of a benign and responsible power through not promoting a normative position and not providing prescriptions for other developing countries. Prof. Breslin argued that the attraction of the Chinese model lies in its not carrying out big bang reform, not abandoning the state, not pursuing full liberalisation, not following the Western model of development and not linking economic relations with domestic changes. In this way, China represents a metaphor for the possibility of alternatives.

Prof. Breslin noted however that China’s international behaviour does not always conform to the principles it claims. For instance, China’s economic aid to underdeveloped countries is not always unconditional but linked to the Taiwan question.

In conclusion, Prof. Breslin again emphasised that China shares many of the developmental traits of other countries at different periods in history. By being not, China sets an example for pursuing state development in a way different from the Western model and this can win China support from other developing countries. Moreover, China’s expanding national power and long history of being exceptional have added to the attractiveness of its model. By engaging in the debate on the Chinese model, China is attempting to shape the discourse to its own advantage so as to legitimise the strong-government policy of the Communist Party of China (CPC) regime.

Discussion

The negative consequences of the Chinese developmental model were repeatedly expressed by participants. These include economic inequality, regional disparity, environmental pollution, trade barriers, over-reliance on export for growth and corruption. Participants noted the need to carry out reforms on the political system and transform the government to be listening, people-centred, predictable, more transparent, tolerant and comfortable with the rule of law. With regard to economic reforms, the growth paradigm needs to be reviewed. There has to be a reduced reliance on export and a shift towards domestic consumption.

It was noted that the strong-government approach was adopted by China in response to the global financial crisis in 2008, and that this has to be understood in the context of realities in China. The crisis slowed down China’s economy considerably, impairing the legitimacy of the CPC regime which had been built on economic growth. This led to a sense of insecurity within the CPC government, which reinforced the need to turn to a strong-government approach. China’s resilience during the crisis created the expectation of China becoming an international power like the Western powers, but China’s stubborn position during the UN Climate Change Conference 2009 dashed that hope.

The promotion of the Chinese model to the world serves the CPC’s purpose, which is to strengthen the position of the regime. At home, China advances the idea of peace and harmony and emphasises its long history to arouse nationalistic sentiment. In the international arena, it stresses the difference between itself and Western powers, thus aligning itself with other developing countries. The efforts to open a new avenue for development also create a basis for it to not implement democratisation.

About the speaker:

Professor Shaun Breslin is Visiting Senior Research Fellow at the RSIS Centre for NTS Studies. In his ‘day job’, he is Director of the Centre for the Study of Globalisation and Regionalisation at the University of Warwick, Co-editor of The Pacific Review and Associate Fellow of the Chatham House Asia Programme at the Royal Institute of International Affairs (RIIA). He is author and co-author of books on China and the global political economy, Mao Zedong, centre-local relations in China and comparative government and politics. His edited collections, journal articles and book chapters are primarily on the international politics / political economy of China and studies of comparative regional integration.