The story the West has told itself about China has changed dramatically over the past couple of years as Beijing’s initially successful response to the coronavirus turned sour and its post-pandemic economic recovery has faltered. Overtaking the United States to become the world’s biggest economy is no longer seen as inevitable, much less imminent, and those who hope to halt China’s rise are emboldened by each disappointing set of economic indicators.
A hawkish consensus on Capitol Hill has encouraged Joe Biden to maintain the trade tariffs imposed by Donald Trump, to ban the sale of some advanced microchips and to prohibit investment in strategic technological sectors in China. The European Union has been more cautious but it is debating plans to “de-risk” its economy by reducing its reliance on China for some imports and supply chains.
If the old western consensus about China’s economic prospects was too sunny, the emerging one risks overlooking some of the advantages Beijing still enjoys despite the current slowdown. Above all, western commentators and policymakers are in danger of underestimating the changes that are taking place within China as they continue to misread its political and economic system.
In The New China Playbook Keyu Jin illuminates these changes in a clear, detailed picture of China’s political economy after the end of the coronavirus pandemic. If you want to understand China today, there is no better place to start than with this book.
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Jin describes how shifting priorities are driving a new model of development that will no longer pursue economic growth at all costs. And she examines the benefits as well as the drawbacks of China’s unique blend of the state and the market economy and its balance between communalism and individualism.
An economist at the London School of Economics, Jin grew up in China where her father served as vice minister of finance but went to school in New York and to university at Harvard. At 40, she is part of the generation that has seen China transformed during their lifetimes but retains an awareness of how life was before prosperity.
The scale of China’s transformation since Deng Xiaoping opened its economy in 1978 remains astonishing, with more than 800 million people lifted out of poverty, average life expectancy increasing by a decade and infant mortality falling by 80 per cent. The biggest process of urbanisation in human history has seen massive cities springing up to accommodate 61 per cent of the population, compared with just 20 per cent 40 years ago.
If China lags behind the US in fundamental scientific and technological breakthroughs, it is often more innovative when it comes to finding new applications for technology
Jin notes that while the Industrial Revolution improved living standards by 75 per cent over a lifetime, many Chinese people can expect their standard of living to rise by 7500 per cent. The Chinese economy has grown by an average of 9.5 per cent a year for the past four decades, compared with an average of 4 per cent a year in the United States during its period of fastest economic growth in 1920-1970.
This has all been achieved in a country without some of the usual prerequisites for economic growth: the rule of law, secure property rights and an easy business environment. The state and the economy are deeply intertwined in a polity that is governed by a single party, the Communist Party of China (CPC), that tolerates no rival sources of authority.
But although political power is concentrated at the top, economic decision-making is decentralised so that local officials directly control vast resources from land, energy and raw materials to local banks. This has produced a phenomenon known as the “mayor economy” that sees local officials competing with one another to create technology hubs and industrial centres and to attract foreign investment.
Jin identifies three prominent features of the Chinese state: the power and resources to mobilise rapid collective action; a structure that allows for creative local business activity under central guidance; and the capacity to adapt quickly to changing circumstances by dialling back policy measures and shifting priorities. As she points out, dramatic interventions such as a clampdown on consumer-facing technology companies in 2020 are often eased or even reversed once the message gets across and starts to bite.
Western observers have often dismissed China’s technological advances as the result of copying or forced technology transfers from European and US companies operating in the country. But although these were important in the past, Chinese firms are now more innovative in some sectors such as electrical vehicle technology than their western competitors.
As mobile phone payments have become ubiquitous, there are more digital payments in China every day than in the US in an entire year. Online food delivery is 10 times more common, shared bike rides 300 times more so and before the pandemic, one in four retail transactions in China were online compared to one in 10 in the US.
This activity generates enormous amount of useful data that can help businesses to improve their products and services quickly to adapt to changing consumer demands. This means that if China lags behind the US in fundamental scientific and technological breakthroughs, it is often more innovative when it comes to finding new applications for technology.
China’s one-child policy is now abandoned but its economic and societal impact remains huge and Keyu suggests that, if Chinese parents had two children instead of one, the country’s savings rate would fall from 30 per cent to 20 per cent. She says the policy, which once saw baby girls abandoned in the countryside, has had the perverse effect of elevating the status of women, with 10 times the impact of the contraceptive pill in raising girls’ college attainment.
While much western commentary assumes that the removal of a term limit on Xi Jinping’s leadership means that his brand of leadership, with its focus on national security and greater party control, is here to stay. But the rising generation, shaped by the years of reform and openness rather than the Cultural Revolution, has more complex priorities and are no longer focused solely on economic prosperity.
[ China stops publishing data on youth unemployment as economic worries deepenOpens in new window ]
“Unless it adapts to the changing conditions, the current system, which was stellar at mobilisation and co-ordination, may not work as well in the new era, without the flexibility and resilience to manage a more complex society, and the right set of governance mechanisms to prevent deeply entrenched interests from standing in the way of further reforms. To encourage indigenous innovation and technology breakthroughs, the state, including local governments, will need to recede to the background while letting markets and entrepreneurs do the work,” Jin writes.
“To reflect what the people want, rather than what the states think they should want, paternalism must give way to greater political representation for all. New mechanisms will need to supplant old ones, but they are not yet part of the new playbook. And thus, in an age of unprecedented challenges, the ultimate test is whether China’s political economy system can continue to adapt to the shifting landscape.”
Deng’s guiding philosophy for China’s policy was, famously, to “hide your light and bide your time”. But under Xi, China has been more assertive abroad and more confident in using its economic power to further its political goals.
In Beijing Rules: How China Weaponised its Economy to Confront the World, Bethany Allen documents some of the ways China has used economic coercion in recent years to discourage criticism of its internal and external policies. A reporter with the US news website Axios, she describes the impact of these measures on everyone from salmon farmers in Norway to wine producers in Australia and the chilling effect they can have on policymakers.
China has used such sanctions (although it seldom describes them as such) to punish criticism of its human rights record, questioning of its version of events during the pandemic and breaches of diplomatic practise over Taiwan. Allen makes a persuasive case that the measures are disproportionate and often unfair but she has a blind spot about the precedent Washington set for them in its use of economic sanctions.
Estimates of the number of deaths caused by US sanctions on Iraq vary but most agree that hundreds of thousands of children died because of them. For Allen, this is “whataboutism” and she warns that “an obsession with self-criticism can result in dangerous policy paralysis”. Allen endorses Washington’s hawkish consensus on China, calling for more limits on trade but she fails to acknowledge how efforts to contain China economically carry geopolitical risks that make military conflict more likely.
Besides seeking to silence dissenting voices abroad, Beijing has in recent years stepped up efforts to get across a positive story about itself. In Beijing’s Global Media Offensive, Joshua Kurlantzick describes how these have gone beyond funding international news services to buying up Chinese-language media, particularly in other Asian countries.
In this deeply-researched, fair-minded and highly readable account, Kurlantzick describes how China’s attempt to create its own version of Al Jazeera failed on account of the turgid content it produced in an atmosphere of censorship. Its most successful news export has been the news agency Xinhua, which is made available at low cost or even free to news organisations across the world, particularly in the Global South.
For cash-strapped newspapers in poor countries, Xinhua represents an affordable alternative to Reuters or the Associated Press. Because it is well staffed with correspondents around the world and many of its news stories are told straight and with little political spin, Xinhua is attractive and often uncontroversial.
Kurlantzick argues that western countries, particularly in Europe, should introduce tougher controls over media ownership. But the threat to democracy from the concentration of media ownership in countries such as Hungary comes from much closer to home.
Part of China’s motivation in its global media offensive is to counteract the dominance of a western liberal worldview in global media outlets such as CNN and the BBC. Beijing complains that coverage of China is distorted by this prevailing outlook and that its achievements are undersold while its faults are magnified.
But much of the blame for China’s poor image abroad lies at the door of its own government and its restriction of access to foreign correspondents and the worsening of reporting conditions in the country. By welcoming more correspondents into the country, Beijing would ensure a greater diversity of stories about China and tilt the balance from news desks in London or New York to reporters on the ground who can see a more nuanced picture.
Denis Staunton is China Correspondent
