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China’s Intellectual Dilemma of Capitalist Label


The People’s Republic of China (PRC) has discernibly climbed up from nearly desolate economic player to a reckonable power in the last three decades. This has happened in the last 30 years since December 1978, and most strikingly, when it dumped lock, stock and barrel the developmental paradigm of the yesteryears beginning Oct 1, 1949.{i} The cliché “Reforms and opening up” has proved all purpose vehicle for earthshaking changes in Chinese domestic and foreign policy instruments across ideological limits. Seemingly tough task has been to repudiate the long hailed glorious ‘socialist” past and appreciating the long deviled ‘capitalist’ present, while holding fast to the mandate for the former with relative ease. The cliché ‘Socialism with Chinese Characteristics’ (zhongguo tese de shehuizhui) and/ or ‘Socialist Market Economy with Chinese Characteristics’ (zhongguo tese de shehuizhui shichangjingji) has gone down well to keep intact their credentials of adherents of ‘Marxism-Leninism and Mao Zedong Thought’.{ii}

There have been constant debates in the intellectual circle, both inside and outside the Chinese establishments. Hard core works, devoted to Deng Xiaoping’s theory (deng xiaoping lilun) of building socialism with Chinese characteristics (jianshe zhongguo tese shehuizhuyi) find discernible gaps in Deng Xiaoping’s initial and subsequent assertions. In all, Deng Xiaoping kept on his shedding ambivalence. While quite a few works credit him for providing ‘ideological legitimacy for the reform and modernization’ of the Chinese economy, he had his own doubts about the compatibility of the concept when he rather issued a clarion call: “watch out for the Right, but mainly defend against the left (yao jinti “you”, dan zhuyao sh fangzhi “zuo”. Deng Xiaoping had his doubt about the soundness of the epistemological foundation of his theory or else why should he go on promoting “no debate theory” (bu zhenglun lun) on the issue of capitalist/ socialist nature of his prescription of Chinese ills. While the probity of the Deng Xiaoping’s prescription of China’s ills stands largely testified, the debate is still inconclusive. It has of late been sparked by China weathering the storm of global financial crisis and economic down turn to better the home turf of Deng Xiaoping’s prescription. Four articles in the “Study Times” (xuexi shipbao), the mouth piece of the Party School of the Communist Party of China (CPC) cautioned against the term “China Model”, finding currency in the world media while eulogizing China’s stunning economic performance.

The alternatives, suggested thus far, included “Chinese Characteristics”, “Chinese Case”, “China’s Experience” and “China’s Model has its Costs”. While innocuous, each of these alternatives appears to carry predicaments of the authors. There are then studies that variously put Deng Xiaoping’s prescription and its on-ground implementation as little different from being crony capitalism.

The irony is that the Chinese ideologues themselves tend to vary widely in their choice to find a suitable terminology to characterize China’s case. Of the four contributors, Li Junru and Zhao Qizheng hold positions in China’s top statutory advisory body, the Chinese people’s Political Consultative Conference (CPPPCC). Li Junru happened to be the former vice Principal of the Party school while Zhao Qizheng earlier worked as the Director of the state Council Information Office. Shi Xuehua is currently working as a professor at the School of Political Science and International Studies under Beijing Normal University. Qiu Gengtian is again a professor at the Department of Philosophy under the Party School.

As the four articles in question have been published in a party mouth piece and at a time when the Chinese economy is witnessing the best of times and the worst of times, it is but likely that the move is aimed at getting to public mood. In the changed scenario, one must not expect the history of the 1956-1957 “let a hundred flowers bloom; let a hundred schools of thought” (baihua jifang; baijia zhengming) campaign repeat itself and prove entrapment.{iii} This is while the context is not materially much different. One does not expect the four ideologues to suffer the fate of Liu Xiaobo either.{iv}

The paper goes to delve into the factors agitating the minds of the Chinese intellectuals, and underlines their worst fears, if any and whatsoever. The Deng Xiaoping prescription has discernibly worked well in getting China jump its ranking as an economic world power. However, the instruments, brought to bear upon to achieve the avowed aims and objective, in particular the reliance to high investment to GDP ratio strategy, have turned out to be shaky, if not outright unsound. Global financial crisis and economic down turn have just been a touchstone. Where it relates to social impacts, measured variously in terms of equality/ inequality yardstick, the Chinese developmental paradigm turned pale to all solemn presuppositions.{v} The phenomenon, in fact, has cast shadow over the socialist credentials of the PRC.

The study, in its perspective, brings out the objective realities of the Chinese case. Schematically, it focuses on: Views and Stand of the Chinese Ideologues; System Chinks and Weaklings; and, the Horizon of New Vision and Approach. The assumptions include: China’s development as a reckonable economic world power draws on ‘reforms and opening up; China’s policy shifts have played catalyst role both in the glide over to prosperity and a drift from socialist egalitarian principles; and, the Chinese experiments suffers glitches and hence, it is long where after it can set examples worth emulation.

Views and Stand of the Chinese Opinion Makers

Li Junru stands by the expression “Chinese characteristics” to “China model”. The term “Model”, as Li Junru argues, implies a “set pattern or formula”. To his fears, “China model” would, thus, mean that “China has formed a set pattern or formula”. He is explicit in acknowledging that “China’s system has not yet completely formalized and continues to explore forward (womende tizhi hai mei you wanquan dingxing, hai zai jixu tansuo). People talking “model” fell to the category stereotypes. Li Junru called the terminology dangerous as it could lead China to complacence and turn blind optimist. It held the prospect of “shifting the direction of reforms” as well. “Chinese characteristics”, says Li Junru “refers to the process of the formation of socialist development with Chinese characteristics of the institutional mechanisms for their own”.

Zhao Qizheng believed that “Chinese model” is not the right term. He preferred the term “Chinese case”. The word “model”, wrote Zhao Qizheng, “denotes a certain kind of particular example, which China does not yet have.” Zhao Qizheng has some more reasons. The article said, “We should be very cautious when we use the phrase ‘China Model’. Personally, I prefer ‘Chinese Case’ to ‘China Model’. I think ‘Chinese Case’ is a summary of China’s social development ideas, policies, practices, fruits and problems in the 60 years since the new China was founded, especially in the 30 years since the reform and opening-up started. Besides, we should also emphasize that the ‘case’ is still going and developing now.” China does not have the plan to export the so-called “Chinese model”. Some developing countries may consult on certain methods that China has adopted, and at the same time China may refer to some methods used by western countries in their social and economic development, said Zhao Qizheng. China is still in the primary stage of socialism and has a long way to improve itself, Zhao Qizheng said. He also pointed out that perhaps when the country reaches the standard of moderately-developed countries in the future, he can really understand what a “Chinese model” is.

Zhao Qizheng’s fears are equally important. He quotes Western writings which speak of 21st century as an epoch belonging to China or Asian countries as the 19th and 20th centuries were marked as the era for British and American supremacy. While gleeful to the comparison, he turns defensive in reflex as the terminology carried connotation of China then treading the hegemonic path. Zhao Qizheng argues: “ China has no intention of exporting the “China model.” Exporting the “China model” goes against the Chinese principle of making policies in accordance with our national conditions. We hold that any developing country, including China, should develop correct policies based on their national conditions…………China has no wish or desire to become a superpower. With its growing comprehensive national power, China is willing to assume international responsibilities in line with its national strength.

Shi Xuehua believed that it was yet too early to use the term “China Model.” At present, it is more scientific and reasonable to call the development experience and the road with Chinese characteristics “China’s experience” or “China’s development road” rather than “China Model” because it will leave room for the “China’s experience” or “China’s development road” to develop into the “China Model” in the future. He cites the examples of the “British model” and “French model”, where the former relied on progressive social reform, while the latter treaded to radical political revolution. Shi Xuehua holds that China’s experiences cannot yet be defined as a model, first, because, for one thing, it’s still uncertain whether the experiences of the early part of China’s successful reform and opening-up can go on sustaining China’s future success. Secondly, while the experience and path of China’s reform and opening-up possessed Chinese characteristics, it yet lacked unique features of a generalized concept to be a model. Shi Xuehua has conceded that the primary reason for China’s success is the authoritarian leadership of the Party and the government, combined with the reforms advocated by them.

Qiu Gengtian held that China’s current priority constituted of ‘scientific development’. He pointed out that China encountered a series of very serious problems in development and paid a heavy price while achieving progress. Crises exist even though China has entered a “flourishing age.” China’s development is based on high costs. If the high costs for development are included into the “China Model,” it indicates to a large extent that such a “China Model” is not mature and consummate. Therefore, the model does not have value serving as a model and being popularized widely. If the high costs are not included however, it shows that such a “China Model” is one-sided and does not correspond to reality.

System Chinks and Weaklings

China’s intellectual dilemma on the issue does not call for formal null hypothesis tests. The mere fact that the four ideologues did not agree to one common terminology while being univocal to oppose eulogistic reference of “China Model” speaks volumes the pervading dilemma.

As it is, the mould of the Chinese economy is neither an American kind of liberal market economy, nor a social market economy of European kind. And of course, it is not a Stalinist command economy what it used to be. Quite broadly, It is an economy with free markets of labor, and free markets of commodities and very soon, of capital flow. The market competitions are so intense that everywhere one could see fraud and fakes. On the other hand, one could as well see the state’s very determined intervention in the use of land and natural resources, as well as a few very strong state enterprises, banks, and research institutions, levering domestic and overseas competitions. This model has grown out of the trials of error; copying where it can; and, will change only at a high cost, that again, only in times to come. In a word, there is yet far to go before China could set its example.

China’s miracle of economic growth and development thus far is a story of high investment-GDP and capital-output ratios on the one hand and high export-GDP ratio on the other. Conceptual wherewithal of China’s adherence to high investment-GDP and capital-output ratios interestingly did not stem from its own intellectual articulations. It had but to draw on ‘Harrod-Domar Model’ and its further extensions including the ‘Exogenous Growth Model’.{vi} There were then half a dozen forerunners to set their examples. Post-war Germany, for example, achieved a peak investment to GDP ratio of 27 percent in 1964; Japan’s peaked at 36 percent in 1973, and South Korea’s at 39 percent in 1991. China stands out as it peaked at 50%-plus investment to GDP ratio for 12 years in a row. Thailand and Singapore had earlier sustained investment boom for nine long years at 33 percent. Notwithstanding, near home ASEAN economy did as well platter a high export-GDP ratio approach to prosperity to emulate with and develop further. It peaked and ran across roughly 30-40 percent for the whole range of the first decade of the current millennium.

China’s US$ 4.4 trillion GDP now ranks third in the world after the US and Japan in exchange rate term, accounting for 6.4 percent of the world economy. When measured on a purchasing power parity basis, it ranks second after the US. But for the exposures to the global financial crisis, the Chinese economy registered an average annual growth rate of 10 and odd percent for nearly three decades. Exports of goods and services accounted for 39.7 percent of the total GDP.{vii} It holds 7.6 percent share in the world exports. It tops the list of foreign exchange holders with US$ 2.27 trillion in its kitty.

The Chinese achievements to this effect have largely came through first, investment in fixed assets including infrastructure and by exporting all manner of consumer goods churned out in low-wage factories; workers parked their savings in state-run banks, which then loaned the money to companies to make more stuff. Technology and managerial knowhow came mostly from multinationals. Though that model has fueled phenomenal growth, Hu and others now call it “unbalanced” and “unsustainable.” By Beijing’s own admission, the economic model that powered China for three decades can no longer be counted upon for future as it has irreparable invisible costs such as pollution, decaying social services, and a yawning gap between the urban rich and rural poor.{viii} Long standing structural deficiency, in particular over capacity of production, borne of sheep-like investment, is now an accepted blight.

Horizon of New Vision and Approach

The Chinese political, institutional and business leaderships are discernibly seized with the issue. New visions, unfolded in the past couple of months, swear to make over the lost ground. The prescription, broadly, calls for: ‘grimy factories’ giving way to renewable-energy industries and a growing service sector; Chinese consumers, rather than stretched Americans and Europeans, coming round to underpin demand; and, instead of churning out me-too goods for little profit, Chinese companies taking the call to create innovative products based on home-grown technologies’.

Seen in retrospect, China’s rise to prosperity, with all attendant dimensions of ramifications, is part of a path breaking travail. It involved various set of adjustments and reforms, if not transformation of centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector. There have been pressure groups, which pulled and pushed the policy directions to their benefits. There is quintessentially a story of two Chinas – an entrepreneurial rural China and a state-controlled urban China. In the 1980s, rural China gained the upper hand, and the result was rapid as well as broad-based growth. In the 1990s, urban China triumphed. In the 1990s, the Chinese state reversed many of its productive rural experiments, with long-lasting damage to the economy and society. A weak financial sector, income disparity, rising illiteracy, productivity slowdowns, and reduced personal income growth are the product of the so called ‘socialism with Chinese characteristics of the 1990s and beyond’.

In a recent study, the European Union Chamber of Commerce in China in partnership with Roland Berger Strategy Consultants holds China’s long-standing structural deficiencies in the Chinese economy, responsible for ‘overcapacity’, playing truant in its sustainable economic development.{ix} Much of China’s “overcapacity” has been driven by an orgy of capital spending and the artificial peg of the Chinese Renminbi to the US dollar to protect the export-led manufacturing industry. Analysts at Pivot Capital Management warn that it had potential of leading China to “hard landing” no sooner it runs out.

There is then UBS economist Tao Wang who does not “”sky-is-falling” outlook on China.” The high investment-GDP and capital-output ratios, she argues, “are specific to the current phase of China’s growth, which has been very manufacturing-intensive and, in particular, biased toward heavy-industries.” But even she believes that unless “structural imbalances” in China’s economy are addressed through adjustments to macro policies, “we expect… non-performing loans to increase down the road, and asset bubbles and excess capacity problems to worsen.”

There are tens of other problems with the Chinese approach to developments. It has brought about all sorts of inequalities, in particular, the rich and poor, both in urban and rural China. Conscious of the consequences on socio-economic and political life at the long last, the Chinese mandarins have introduced an array of palliatives, strengthening social safety net included. However, as in the past, there is precious little very specific in the China’s developmental paradigm that can be classed as socialist. There is then little to address the dilemma of Chinese intelligentsia.

[The writer, Dr. Sheo Nandan Pandey, is an eminent China analyst based in New Delhi. He can be reached at]


{i} Dec 1978 stands a watershed as it marked 180 degree shift in Chinese approach at the third plenary session of the 11th National Party Congress. Before the formal meeting, Deng Xiaoping gave a speech at a working group session where he urged that the regime better focus on ‘development and modernization’, and let facts—not ideology—guide the path. The shifts in stance is better known and remembered for Deng’s anecdotes: “It does not matter if it is a black cat or white cat. As long as it can catch mice, it is a good cat”. {ii} Amendments to the seventh paragraph of the preamble of the “Constitution of the People’s Republic of China”, approved on March 29, 1993 by the 8th NPC at its First Session reads: “China is in the primary stage of socialism. The basic task of the nation is, according to the theory of building socialism with Chinese Characteristics, to concentrate its efforts on socialist modernization. Under the leadership of Communist Party of China and the guidance of Marxism-Leninism and Mao Zedong Thoughts, the Chinese people of all nationalities will continue to adhere to the people’s democratic dictatorship and follow the socialist road, persevere in reform and opening to the outside, steadily improve socialist institutions, develop socialist democracy, improve the socialist legal system and work hard and self-reliantly to modernize industry, agriculture, national defense and science and technology step by step to turn China into a socialist country with prosperity and power, democracy and culture.” {iii} During 1956 and 1957, the CPC launched 1957 launched “let a hundred flowers bloom; let a hundred schools of thought” campaign, where it encouraged party cadres to express themselves against the government policies. This was the time when land reform dominated the agenda. The three anti/ five anti campaigns brought an end of the private ownership of land. The campaign witnessed purge of thousands of people believed to be landlord and capitalist. In his speech, “On the Correct Handling of the Contradictions among the People”, Mao displayed open support. Mao said: Our society can not back down, it would only grow….criticism of the bureaucracy is pushing the government towards the better.” In their out pours, the Chinese intelligentsia the CPC control over intellectuals, corruptions among the party cadres and the like. Mao considered it an offence to the working of the party. The CPC launched anti-rightist campaign, and over 550,000 were subjected to humiliations. They were sent to labour and re-education camps, where a large number of them died after suffering tortures. {iv} Liu Xiaobo happened to be one of the first 300 signatories of “Charter 08 Petition” besides author of six articles that sought to espouse the cause of multi-party democracy. He was tried on the trumped up charges of “inciting subversion of state power” by Beijing Court on 23 Dec 09. He was declared guilty and awarded imprisonment of 15 years. {v} China’s wealthiest 10 percent families make up 45 percent income of total urban residents. In contrast 10 percent of the low income families own 1.4 percent of the total income of the families in the entire country. From 1978 to 1984, the Gini index in China was at 0.16. In 2007, it stood at 0.473. http;//english. people. com. cn/ 90001/ 90778/90862/6840372.html {vi} ‘Harrod-Domar Model’ bears out that the economic growth of a country depended on the ‘quantity of labour and capital’. Accordingly, efficient use of savings and investments held center stage in all developmental strides. Roy F. Harrod had developed the model independently in 1939. Evsey Domar did it at his own in 1946. This ‘Harrod-Domar’ later turned precursor for ‘Exogenous Growth Model’, also known as ‘Solow-Swan Growth Model’. {vii} With 39.7 percent share, export of goods and services constituted the second best contributor to China’s GDP growth after gross fixed investments which accounted for 40.9 percent. Private consumption and government consumption accounted respectively for 36.4 and 13.7 percent respectively. This is one reason why China’s GDP growth plummeted fast as the export demand fell in the course of global financial crisis and economic down turn. Sector-wise share of the Chinese GDP shows industry including construction accounting for 47.5 percent and services 41.8 percent with share of agriculture being just 10.7 percent. As a result, the recessionary pressure exerted so heavily on industry which depended on exports demand. {viii} {ix} In the 60 page study, “Overcapacity in China: Causes, Impacts and Recommendations”, the President of the European Chamber of Commerce says: European Chamber President Joerg Wuttke, “Our study shows that the impact of overcapacity is subtle but far reaching, affecting dozens of industries and damaging economic growth not only in China but worldwide. Domestically, excess capacity squeezes profit margins, hampers innovation and prevents the emergence of true local champions, while on the global stage its influence is clearly seen in the rise in trade tensions between China and its major trading partners. This study, then, aims to offer solutions that will benefit not only Chinese companies and Chinese industry in general, but the whole global economic system. When China prospers, we all benefit.”;

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