Vulgarisation of Keynesianism in China's response to the global financial crisis

ABSTRACT

When Keynesianism received renewed interest in the global financial crisis, some economists regarded China’s response as exemplary of effective Keynesian counter-cyclical strategy or even a non-crisis development strategy. At the same time, there have been critical voices against China’s Keynesian measures. This article therefore asks: To what extent was China’s response to the global financial crisis Keynesian? What factors determined the Chinese characteristics of Keynesian policy both in design and in implementation? It points out that China did follow a Keynesian formula in its crisis response, boosted infrastructure construction, GDP growth and created some employment. However, Chinese Keynesianism is a vulgarised version that is merged with its developmental state model. It simply boasted a big state and massive deficit spending, and socialised investment without really benefiting consumers or the private sector. This article also provides an analysis of how ideational and institutional politics in China vulgarised Keynesianism and exacerbated socio-economic problems. Ideational politics included the dominance of Keynesian discourse at the beginning of the crisis and an obsession with short-term results. Institutional factors included ‘firework’ local government politics, the state being captured by state-owned enterprises and a concentration of central distributive power without proper monitoring over implementation.

Keywords:

• China
• Keynesianism
• developmental state
• global financial crisis

ACKNOWLEDGEMENTS

The author would like to thank the two anonymous reviewers, Shaun Breslin, Andrew Walter, Jonas Parello-Plesner, Kjeld Erik Brødsgaard, Ari Kokko, Niels Mygind, Anthony D'Costa, Zhang Xiaoke and Miwa Hirono for their inputs and comments on various versions of the paper.

Notes

1. Chinese names are written in the order of surname followed by first name.

Additional information

Notes on contributors

Yang Jiang

Yang Jiang is Senior Researcher at the Danish Institute for International Studies, with a PhD in international relations from the Australian National University. She does research on contemporary political economy of China, mainly the politics of economic reform, trade and financial policy-making, outward investment, and economic diplomacy. She has published in Review of International Political Economy, The Pacific Review, and Journal of Contemporary China, among others. She published a book China's Policymaking for Regional Economic Cooperation with Palgrave Macmillan in 2013.