Growth and Development of China: A Developmental State ‘With Chinese Characteristics’

Abstract

The aim of the paper is twofold: 1. to examine the identities and differences of the Chinese model of the developmental and entrepreneurial state ‘with Chinese characteristics’ with the general East Asian developmental state model, and 2. to derive some perspectives for the future of the particular Chinese model of the developmental state. The paper is structured as follows. The first main section briefly discusses China’s growth performance and policies since World War II with respect to the country’s development efforts. Subsequent sections analyse aspects of the particular economic development framework of China, based on an interventionist heterodox developmental state argument, and describe some critical development policy areas that emanate from such an argument—placing great emphasis on industrial targeting—while taking the country’s socio-cultural and politico-institutional traits into consideration. Some conclusions end the paper.

KEYWORDS:

• China
• macroeconomic performance
• developmental state
• development policy
• industrial targeting
• regional production growth

JEL CODES:

• E6
• F1
• F5
• O1
• O2
• P2

Notes

1 According to orthodox interpretations, China’s rapid growth may be ascribed to the market-oriented structure of its economy since 1978 (Balassa, 1988; World Bank, 1993). However, it is a common mistake that mainstream economists and social scientists believe that the rapid growth in China only happened in recent years as, evidently, the economic power of China was a cumulative growth over the past 70 years. Chinese policy makers have adopted strategies and policies that, in many ways, violate the principles of neoclassical and neoliberal economics.

2 For a detailed discussion see MacFarquhar (1987), The Politics of China.

3 For important socio-political events, such as, the “cultural revolution” and the “gang of four”, see MacFarquhar (1987), “The succession to Mao and the end of Maoism”, in The Politics of China.

4 One may think of the recent conditions of the trade-economic-technological war between the USA and China.

5 Despite political stability under the Chinese Communist Party, the question remains whether the national government has established adequate institutions and policy measures to guide its economic development efforts. Therefore, the state would need to place special emphasis on a more functional integration into the society through state-business and state-society networks.

6 See, also, one of the latest releases by the State Council of the People’s Republic of China titled “State Council promotes experience of optimizing business environment” that was updated on Sept. 19, 2019. http://english.www.gov.cn/policies/latestreleases/201909/19/

7 For instance, looking at the decisions taken in October 2017 and March 2018, there has been made a lot of reshaping of government structures.

8 The central bank, the People’s Bank of China, is most likely to continue to be controlled by the State Council and to be allowed little autonomous discretion as the government still prefers direct control rather than indirect control through the central bank.

9 Since the late 1990s, China’s central government has promoted “bureaucratic-led restructuring” and has been developing major business groups: PetroChina and Sinopec were targets of massive restructuring and international notation; many telecommunication companies were reorganized and China Telecom acquired and merged many of them; Chinese airlines were reorganized into three big groups; Huaneng Power International was merged with Shandong Huaneng Power Development Company (Nolan, 2001, pp. 229–232).

10 Justin Y. Lin at Peking University considers comparative advantage the most desirable strategy under the present Chinese situation. From his viewpoint, the support for capital-intensive industry under present conditions would deepen the problem of capital shortage, which in turn might cause inefficient government investment and high dependence on foreign capital inflows (Lin, 2003; Lin & Wang, 2017a, 2017b). On the contrary, Wu Jinglian at the Development Study Centre of the State Council does not accept Lin’s analysis about comparative advantages and proposes that the government develops leading SOEs through an active readjustment policy (Wu 2009). Hu Angang, another influential adviser for government economic policies, does not accept the comparative advantage analysis either (Hu, 2011).

11 The Chinese have long been known for their scientific accomplishments as many discoveries and inventions credited to Western scientists were first made in China. However, despite its several contributions to technological development, Chinese science and R&D efforts would need further advancement.