When China does what?

Lounging by a pool on a well-deserved holiday this week, I mostly read thrillers, but my  serious reading was the new edition of  by Martin Jacques. It is a very interesting and well-informed book, whose argument I couldn’t agree with. Reading it in the week when Chinese politics took a dramatic turn, with the highly public dismissal of Bo Xilai and detention on his wife in a murder investigation, it seems obvious to me that the China’s future in the world remains highly uncertain, no matter how inevitable the decline of the west appears. (See this analysis in the FT this weekend, and this fascinating Foreign Policy article by John Garnaut on the current political contest in China.)

Having said that Jacques’ historical determinism doesn’t persuade me, the book is nevertheless compelling, and the first edition obviously deserves its best-seller status. The history of China and its entire region is lengthy but stuffed with things I’d never known, and a great overview for newcomers to the subject. Jacques picks up on some interesting points that are often overlooked. For example, he makes I point I’ve often thought important and underestimated:

“We should not forget the increasing importance of Chinese subcontractors as ‘systems integrator’ firms in the global supply chain of many foreign multinationals, a developlment which might, in the long term at least, prove to have wider strategic significance for these multinationals in terms of their management, research capability and even ownership.” (p226)

Jacques is also interesting on aspects of Chinese culture. He is far too much of a cultural relativist for my taste – women’s rights for me are a universal, and people never seem bothered about political freedom until, suddenly, they are. However, the book gave me real insight into the very different perspective on the state, with its Confucian origins, in China. It is also eye-opening on Chinese racism. This is a subject of which the author has tragic first-hand experience, given the death of his Indian wife due to her wholly inadequate care in a Hong Kong hospital. It does make one wonder about the future of China’s investments in Africa.

However, the Chinese economic model is understandably of great interest to developing countries, and Justin Yifu Lin at the World Bank is one Chinese economist who is helping move the global development consensus away from the disgraced “Washington Consensus” to a far more statist approach (see this pdf). Jacques sums up the Chinese approach as a competent and strategic state combined with extremely vigorous competition – including competition between state firms and between them and the private sector. He writes:

“First, there is a ubiquitous state, operating at national, provincial and city level, which is highly active and involved in multifarious ways in the economy and society. Second there is, at the same time, a powerful commitment to the market and a very strong belief in competition: the Chinese government is inimical to monopolies.” (p621)

This combination looks rather compelling to other countries whose governments would like to emulate China’s growth record. But it may be that the role and economic competence of the state in China, combined with its uniquely large scale market, will make it hard for others to follow the same model. In many poor countries the state remains predatory, as Acemoglu and Robinson so forcefully point out in .

As for China’s politics and geopolitical status, the events of the past week seem to me to illustrate the uncertainty. China may ‘rule the world’ one day but it is surely, to borrow the famous saying, too soon to tell.

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2 thoughts on “When China does what?

  1. No doubt, China is going to be one of the world leaders of the future. However, I am interested to see how they manage their enormous demographic problems arising from the one child policy.

    This is getting a big challenge in the coming 20 and certainly in the next 40 years.

    • I agree with you about the enormous demographic challenge on top of all the usual challenges of development. On the other hand, China’s sheer scale is an almost equally huge and unique advantage. It’s going to be fascinating to observe….

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