China or the Chinese? Han economic and political development in perspective
As we in the West struggle to find our footing in the middle of one of the most severe public health crises in recent memory, coping also with political unrest, people may feel tempted to reevaluate the apparent sleek bureaucratic management style of the Chinese state. The mantra-like praise of the country’s foresight has been a frequent theme in Western media outlets over the years. We are reminded each month that China will be one of the world’s few economies that grew this year, and in a large way, at least according to official data from Beijing. There is an almost bad-boy-style allure to China doing things differently and better, especially when in recent memory we contrast this with our poor economic performance and bad policy decisions. When the health situation begins to stabilize somewhat, I imagine many more will diligently highlight the ground we lost to China in more comprehensive and emphatic terms.
Yet despite this, success always has a way of generating its own new challenges, and China proves no exception. To see this, we need to examine the rhetoric of Chinese government officials and the policy direction of the state while comparing these to the fundamental changes taking place in the country.
The Made in China 2025 plan is one major example of China’s broader strategy to continue its growth and expand its strategic position at the great power table. The Plan’s goal is essentially to bring the so-called Fourth Industrial Revolution home to the state in the form of technology transfer and native development of cutting-edge technologies and companies. At the heart of the plan is a theory advanced by the government that “dual circulation” — of products and services that get consumed by Chinese — will drive future Chinese success.
Though at face value the plan makes greater use of the language of economic liberalization, focusing on enhanced foreign investment into China, more property and IP protections, the plan itself is conceived as a centrally-coordinated development effort backed by state planners. Xi Jinping has consistently underscored this posited relationship between market and state, most recently, through his visit to Shenzhen in October, praising the “historic leaps” and “miracles” that such major companies as Huawei and Tencent were achieving in China’s “Silicon Valley” city that first opened to the world in the 1980s. This cozy alliance runs in stark contrast with Shenzhen’s neighbor Hong Kong where Beijing and the city have had a stormy relationship, but one in which markets and companies enjoy greater IP, property protections, and investment options.
In another sign that China is courting market mechanisms to do its bidding is the warmer rhetoric on monetary liberalization recently. Zhou Xiaochuan, China’s former governor of its central bank, went on record last month with remarks that cut to the heart of the pressure on China to loosen its capital control and monetary policies. According to Zhou, the benefits to a freer currency on the market outweigh its costs. The state has lagged behind Zhou’s ideal, but nonetheless it has taken tangible efforts recently to admit greater flexibility into China’s capital flows, changing, for example the quota level for the circulation of China’s currency under the Qualified Domestic Institutional Investor scheme.
But there are other important factors at play in the push-and-pull to finding the right relationship whereby the market is leashed to the state but at the same time given room and independence to grow. China’s consumers are the other critical component to this strategy of promoting growth through a more flexible market and one that China’s government aspires to make more autarkic.
Chinese increasingly find themselves with more power to change their lives in mundane or more weighty ways. They increasingly occupy a larger more dynamic space in public life which weighs heavily on Chinese planners’ minds. Such behavior is apparent where Chinese live, the medical care they use, the consumer items they buy, and even the greater diversity of names Chinese choose.
Individual ability to make more choices (which one might be quick to label as “individualism” in the Western setting) is more than an extraneous attribute of European nations. Instead, individual agency is a powerful motivator anchored to the kind of self-interest that market exchange necessarily promotes. To argue against the relation between free exchange and greater exercise of preference runs contrary to both the theoretical and empirical cases of economic liberalization, as they have occurred over the last fifty years.
With the rise in individualistic behavior, “defection” from norms and community expectations rise. This is a kind of revolt, and it doesn’t just stop at the door of the market, but spreads through a market actor’s entire being. Giving people freedom and discretion about exchange opens Pandora’s Box. Chen Hong, director of the formerly Beijing-based think tank Unirule (which shuttered last year due to pressure from the government) describes the link between the individual and his or her market actions succinctly: for Chen, there is an “intrinsic tie between free trade and free expression… because free trade refers to the free exchange of commodities, and free expression refers to the free exchange of ideas.”
As Chinese display greater discretion in the market becoming more empowered — and in the state’s eyes, powerful — consumers they also begin to enter uncharted and unmentionable territory.
Even assuming that the Chinese state is radically more capable of managing its economy than its 20th century ideological forebears, it still lacks the rhetorical and ideological bandwidth to plan for the dynamic future they have helped unleash.
The mutual incompatibility between hundreds of millions of increasingly educated, globally-aware Chinese and the doctrinal necessity of the continued supremacy of the government as it is reflects the fault line that could animate evolution in the future China. But don’t expect the Chinese government to give ground and consent to this idyllic “end of history”. An abrupt and sudden shift, or even a more fluid and gradual transition, seems less likely than what I would refer to as the growth of a pressure valve that siphons discontented Chinese en mass out of China and into a globalized economy oriented towards China, but not controlled by it. As the Chinese share of wealth on the planet grows, these networks of global business will only strengthen. And, out of arms reach from their government, Chinese expatriates might find a comfortable intermediary role between its ossifying government, and the global market of opportunities.
Chinese creating economically vibrant communities outside the full reach of the Chinese state may prove at first glance an appealing extension of Chinese power (from Beijing’s perspective), but in the longer term, it is hard to imagine how such communities could not go their own way (as has historically been the case, for example with many Chinese communities in Southeast Asia). So what would this future look like? Perhaps its most nascent model can be seen in the attempt of one Hong Kong real-estate tycoon to try to build a new city in Ireland recently. The tycoon Ivan Ko told the Guardian when interviewed that he and others were “in pursuit of freedom and democracy, which is a little bit similar to the pilgrims and puritans who left Europe in pursuit of religious freedom.” Though the project itself is unlikely to get off the drawing board, the basic principle that empowered people will sooner avoid interference of their freedoms (however defined) than be subject to control, will continue and perhaps only grow in the decades to come.
When Rome built itself an empire it had to build and maintain roads to march its soldiers and bind together its economy. All roads led to Rome because the imperial government was at the heart of the purpose these roads served. But it became these same roads that the Christian evangelizer Paul traveled ultimately assisting in the subversion of Roman pagan society and, at least according to a classic interpretation of Roman decline presented by Edward Gibbons, its fall.
If China can build the next Rome (which itself is open to debate), it will still need to anticipate what the people it has helped empower will do with the roads, technology, and wealth, the state has helped create for China.