![Sample our Area Studies journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5922/TOC-Subject-Sample-2021-Area-Studies.jpg"})
Abstract
Trilemma situations, which have long been the subject of lively discussion in economics in many fields, indicate risks of instability and unsustainability. This article shows that China has also been facing a political-economy trilemma (and thus the ongoing danger of unsustainability of its development strategies) for 70 years now and has reacted differently to it in different eras. The article distinguishes three epochs: the Mao era (1949–1978), the Deng era (1979–2011), and the Xi era (2012–). It argues that in all three epochs basically the same main objectives were pursued (economic growth/convergence; stability; and the maintenance of a one-party communist rule system), but with different priorities and with different instruments. It is shown that the Mao- as well as the Deng-development strategies related to these goals ultimately failed due to increasing systemic imbalances. Now the question arises whether the Xi strategy, which relies on partly new instruments, namely the nationalism map, the BRI program and digital surveillance, will be better able to control the unsustainability threat hidden in the trilemma. In addition, the article discusses possible strategy alternatives to overcome the trilemma problem.
Notes
1 For a short overview of the history of the open economy trilemma see Aizenman and Ito (Citation2020); in more detail, Boughton (Citation2003).
2 Politicians first try out whether it works as thought. The problems only emerge with time (they are not immediately (as such, as trilemma) visible as in (trilemma) decision theory). By "intelligent" compromise solutions one tries to "muddle through" as long as possible. Or, as Brunnermeier et al. (Citation2016) argue: "In practice, there are thus almost no cases where policy is positioned so as to fully abandon one corner of the trilemma, and practical policy stances fall somewhat in between the corner positions. The corners simply represent the boundaries of the possible." (p. 76)
3 Before (in 1949), the state sector accounted only for 34.7% of the total industrial output value, whereas the private sector accounted for 63.3 per cent and the joint state-private sector 2%. (Muqiao Citation1981, p. 19).
4 If workers are forced to migrate from the agricultural sector to the industrial sector without ensuring that the reduced agricultural sector can feed the increased industrial and service sector workers, this must lead to problems. It would have been necessary for the productivity in the agricultural sector to have risen sufficiently strongly beforehand, which apparently was not the case in China in the 1950s.
5 As is often claimed, the protection of equality is the highest good for socialist humanism.
6 See, e.g., Alesina et al. (Citation2020).
7 Although he has never been party leader or prime minister, he can be described as the mastermind and intellectual leader of the economic miracle in China, which lasted for over 3 decades.
8 Deng Xiaoping was often called "the architect" of a new brand of thinking that combined socialist ideology with free enterprise, dubbed „socialism with Chinese characteristics“.
9 Das (Citation2012).
10 A modern, specific type of a special economic zone (SEZ) in China are free trade zones (FTZs) where goods can be imported, handled, manufactured, and exported without direct intervention from customs, with the objective to attract (foreign) investment with fewer restrictions. See, e.g., Peng and Fei (Citation2017).
11 See, e.g., Sun (Citation2017).
12 This rebalancing had already been demanded by international organizations such as the IMF in the 2000s (see also Aziz, Citation2006; Aziz & Cui, Citation2007; Blanchard &Giavazzi, Citation2005; Prasad, Citation2009).
13 Song (Citation2015).
14 The China Standards 2035 plan will lay out a blueprint for China's government and leading technology companies to set global standards for emerging technologies like 5G internet, the Internet of Things (IoT), and artificial intelligence, among other areas.
15 The Corona crisis will only be able to serve here briefly as an excusable excuse/reason for postponement.
16 On indoctrination and censorship inside China, see e.g., Roberts (Citation2018).
17 As I said, this goes hand in hand with the re-education towards socialist/communist values and guiding principles.
18 A renunciation of further growth/convergence may also be accompanied by a further increase in unwelcome income and wealth inequalities.
19 “The Chinese side and the Chinese people are stubbornly following the path of realizing their dream of a great revival of the Chinese nation.” (Xi Jinping during his visit in Russia 2017; see Front News, Citation2017).
20 In the current coronavirus pandemic, the focus on building hard infrastructure has been somewhat expanded with the idea of a "Health Silk Road" to help distribute medical support and food aid (hoping that in this way gratitude will be achieved among the recipient countries), and a "Digital Silk Road", helping other countries replicate China's success with app-based approaches to tracking the coronavirus.
21 While President Xi Jinping began promoting the concept of the “China model for a better social governance system” (2016), the Western press began to speak of a “digital totalitarian state” (The Economist, 13. September 2018, “Reinventing Liberalism for the 21. Century”; cited from Qiang, Citation2019, p. 64.)
22 In July 2017, China’s State Council released a policy plan for establishing global leadership in Artificial Intelligence (AI) in which it envisions AI “playing an irreplaceable role in effectively maintaining social stability.” (cited in: Larson, Citation2018, p. 229).
23 A recent study (Acemoglu et al., Citation2019) has shown that democratizations are, on average, preceded by a temporary dip in GDP. That is, transferred to our case, that the call for democratization may get louder if a slump in GDP (or its side effects, such as unemployment or unproductivity) does not harmonise with the preferences or expectations of the population.
24 See, e.g. Acemoglu (Citation2014).
25 However, illiberal democracy has the same disadvantage as a non-democratic communist one-party regime: it is not compatible with good "rules of law". It can guarantee these, but is not obliged or inclined to do so; it is therefore susceptible to corruption and arbitrariness.