The Economic Model of Development of China - Term Paper Example

IS IDEOLOGY DEAD IN CHINA? An ancient civilization and an emerging economic powerhouse in the heart of Asia, China is quickly developing one of the strongest economies in the world. Chinese products can be found all over the world from Athens to Zurich and since its cautious embrace of a more market-oriented capitalist outlook, the modern People’s Republic of China has exhibited phenomenal economic growth. China today represents a new form of economic development and this country has witnessed sustained financial growth while resisting pressures to democratize and has continued to develop inline with Maoist socialist thought. Oftentimes, the economic model of development propagated by China today is described as “authoritarian capitalism” (Gat, 2007, 33). China has recently taken cautious steps towards the embrace of market-oriented principles and while capitalism and entrepreneurship remain relatively new concepts, these concepts are starting to take hold. How has China developed over the past century? What is the recent history of China and how does this history explain the model of development which it has decided to pursue? How has the Chinese economy grown under globalization and has the ideological underpinnings of socialism in China evolved or simply withered away? These questions, and many more, will be addressed in this exploration of China and its cautious embrace of capitalism and entrepreneurship today. Brief Economic and Political History An ancient civilization with an extensive tradition of dynastic and centralized rulers, China was been ruled by the Communist Party of China (CCP) since the successful overthrow of the Nationalist government in 1949. Establishing a socialist form of government through the creation of the People’s Republic of China, the Communist Party of China is avowedly socialist and sought to impart communist teachings throughout this vast country. Accordingly, the communist leaders initially saw capitalism through a skeptic’s lens and implemented profound overhauls of the economic structure of Chinese society. Thus, the implementation of a series of top-down economic initiatives such as a series of Five Year Plans, the Great Leap Forward and the often-times violent Cultural revolution, all paved the way for the establishment of a socialist society in which economic matters were dictated by the state and implemented accordingly. Significantly, socialism provided the ideological impetus for the Communist Party of China to govern. Thus, while implementing an economic overhaul of the country, the socialist credentials of the ruling authority became the ideological basis through which the state was run. Ideology provides the basis for political movements and ideologies provide a conceptual framework for political action. Ideology plays an important role in Chinese politics and the basis of the Chinese regime is predicated upon the ideological basis of the socialist regime in Beijing. What affect has China’s role in the global economy had on the ideology of this regime? We now turn to an overview of China in today’s global economy (Kim, 1998). China and the Global Economy Despite these early years of communism in practice, China has cautiously embraced economic liberalism and a capitalist economic orientation, albeit with strong authoritarian tendencies. China today has the 4th largest economy in the world behind the United States, Japan and Germany, estimated at $2,645 billion per year. With a population of more than 1.3 billion, China remains a largely rural country with 43% of its labor force employed in agriculture with another 25% in industry and 32% in the service sector. Accordingly, decollectivization of the agricultural sector, public investment in the industry and market reforms have all played a role in stimulating this development. Human capital has been utilized by the authorities in Beijing through direct investment in the agricultural sector as well as through institutional changes aimed at developing this sector. By emphasizing the natural resources which China has been endowed with and employing technology appropriated through an opening up of the economy, the Chinese government is currently employing market liberalization to aid in the development of this industry, among others. China’s latest “New Rural Campaign” is the latest manifestation of this development, accounting for strong macro-economic growth and sustainable agricultural development. Industry, however, has driven the economic growth of this country which represents 49% of the total $2,645 billion GDP. Significantly, the average annual growth in China over a ten year period was an astonishing 10.5% (1996-2006). Much of this growth is tied to the global economy and China’s role in international economic affairs today (The Economist, 2008: Jia & Fock, 2007). Based upon the principles of economic liberalism but with a strong role for the state, China began with the creation of attractive economic-oriented trade zones to appeal to foreign investors and stimulate national growth. Industrialization and export-oriented development are key to China’s development model. Accordingly, this model of growth is a modern attempt at harnessing the forces of global economic capitalism through state-led development. Chinese development, while embracing market-oriented economic policies, differs substantially from the other Asian Tigers in that it has chosen to gradually liberalize its economy but has resisted pressures to democratize in the face of an opening in the economic sphere. This form of development focuses on macro-economic concerns (raising the Gross Domestic Product, decreasing the national unemployment rate, etc.) by attracting foreign investors and utilizing the resources already available to stimulate growth. While his form of economic development is currently being practiced around the world, it has been particularly successful as a developmental model in the case of China (Nolan 2001; Close et al. 2006). Although in East Asia, Taiwan, South Korea, Japan and Hong Kong remain important economic actors, "the most dynamic and rapidly growing economy of the globe after the fall of Soviet communism was that of Communist China, leading Western business-school lectures and the authors of management manuals, a flourishing genre of literature, to scan the teachings of Confucius for the secrets of entrepreneurial success" (Hobsbawm 1994, 131). China has benefited tremendously from increased economic interdependence and has established a strong manufacturing centre, shifting employment away from traditional manufacturing centers in the West. China remains the major challenge to US economic control as wages continue to remain low in China and Chinese products continue to flood the world’s global marketplace. China has remained competitive, commands one of the world’s largest economies and has established a working and viable example of authoritarian capitalism. Importantly, the ideological basis of the Communist regime in Beijing has not been threatened by the shift in economic productivity. Importantly, China’s unique form of authoritarian capitalism represents an evolution of ideology of the CPP (Hobsbawm 1994). China’s developmental model is unique and is described as authoritarian capitalism as China has cautiously embraced economic liberalism and a capitalist economic orientation, albeit with strong authoritarian tendencies. China today has the 4th largest economy in the world behind the United States, Japan and Germany, estimated at $2,645 billion per year. With a population of more than 1.3 billion, China remains a largely rural country with 43% of its labor force employed in agriculture with another 25% in industry and 32% in the service sector. Industry, however, has driven the economic growth of this country which represents 49% of the total $2,645 billion GDP. Accordingly, the average annual growth in China over a ten year period was an astonishing 10.5% (1996-2006). Much of this growth is tied to the global economy and China’s role in international economic affairs today (The Economist 2008). Significantly, China has cautiously embraced the principles of economic capitalism in its efforts to stimulate development and growth while maintaining true to its revolutionary socialist credentials. It has also subverted to-down approaches and utilized its comparative advantages in stimulating development. China has engaged in development through the establishment of secure business-orientated zones (Free Trade Zones in China) which cater to foreign investors and large multinational corporations. Arguing that this is the most effective way to ensure quick yet far-reaching development, the Chinese government utilizes these zones to promote efficient economic development while maintaining an officially socialist political structure. Seeking to address economic stagnation and underdevelopment through direct governmental intervention and the establishment of business-oriented Free Trade Zones, China employs this model as a development path. As the region’s growing economic powerhouse, China employs a form of economic development which utilizes rural communities and traditional knowledge in an effort to develop economically. Under this strategy of development, the state establishes free trade zone and attracts investors (generally large multinational companies or MNCs) to help stimulate development. While encouraging direct foreign investment and providing a forum which attracts economic actors to help propel the development of the nation, this model of development does an excellent job of using both the private and public sectors to promote economic growth and development. Significantly, economic development has been at the forefront of the CPP’s ideological inititiatives aimed at strengthening the Chinese economy and opening it up to foreign competition (Nolan, 2007). Concluding Remarks China today represents a new form of economic development and this country has witnessed sustained financial growth while resisting pressures to democratize and has continued to develop inline with Maoist socialist thought. Unlike the countries of the former Soviet Union who became capitalist in a haphazard manner after the implosion of the USSR, China’s economic development model has been managed from above. China’s model of economic development since 1978 is far less chaotic than that of the countries of the former Soviet Union and China’s capitalist economic development has been slow and piecemeal. China advocates an alternative developmental model and has grown its economy through strategic economic planning, The most pressing challenges to China as it enters the global economic community include independence pressures from Tibet, international pressures to democratize and maintenance of a developmental model which blends authoritarianism and capitalism. Economic reform in China has been successful only so much as this country can resist internal pressures to democratize and respond to human rights concerns. On paper, China’s economic development is outstanding but the question is whether or not it is sustainable in the future. Despite questions about the sustainability of the economic model, politically the power of the CPP remains firmly entrenched with an unwavering ideological basis (see Gat, 2007). China’s governing ideology has evolved with time and the authorities have successfully reoriented the economic structure of the society without losing political power or control. China represents an alternative development model than that articulated by the liberal democracies of the West, including France, the United States and Great Britain, who have espoused democratic capitalism as a model for development. Strong economic growth, as China emphatically demonstrates, can be predicated upon the notion of a strong role for the state and is not necessarily tied to the forces of democracy. China advocates an alternative developmental model and has grown its economy through strategic economic planning, exported oriented growth in a global economy and a strong current of political authoritarianism. Capitalism and entrepreneurship are new concepts which are starting to take hold in China. Only by understanding its past can we understand why China is the way that it is now. By embracing capitalist economic principles and reforming the structures of its economy, China has effectively positioned itself as a key player on the international economic stage and has witnessed incredible economic growth while resisting pressures to democratize. Ideology is not dead in China but is based upon the idea that Chinese economic development is unique and legitimate. Thus, a strong role for the state combines socialism and Confucianism while at the same time embracing market oriented principles of economic growth (Peerenboom, 2007). REFERENCES Hobsbawm, E. (2004). Age of Extremes: The Short History of the Twentieth Century: 1914-1991. London: Abacus. Gat, A. (2001). “The Return of Authoritarian Great Powers”, Foreign Affairs, July/August. Nolan, P. (2001). China and the Global Economy. London: Palgrave. Peerenboom, R. P. (2007). China modernizes : threat to the West or model for the rest? Oxford: Oxford University Press. The Economist. (2009). Pocket World in Figures, 2009 Edition. London: Profile Books. Xiangping, J. & A. Fock. (2007). Thirty Years of Agricultural Transition in China (1977–2007) and the ‘New Rural Campaign. Beijing: World Bank. Read More