Assessing China's Economic Catch-Up at the Firm Level and Beyond: Washington Consensus, East Asian Consensus and the Beijing Model

Abstract

This paper takes a new Schumpeterian economics approach in examining firm-level technological catch-up strategies in China. We focus on the strategies for learning and gaining access to a foreign knowledge base. We also underline unique Chinese features, including forward engineering (i.e. the role of university spin-off firms) in contrast to reverse engineering, acquisition of technology and brands through international mergers and acquisitions (M&A), and parallel learning from foreign direct investment (FDI) to promote indigenous companies. These features comprise the Beijing model because they were not explicitly adopted by either Korea or Taiwan. At the macro and aggregate levels, we find that China follows the “East Asian sequencing” rather than the Washington Consensus. We also discuss several challenges facing China, such as design capabilities and localization of intermediate parts. We conclude that the Chinese industry will not remain a low-end original equipment manufacturer (OEM) economy but will rise to the level of high-end or brand producers.

Keywords:

• China
• catch-up
• Washington Consensus
• East Asia
• Beijing model

Acknowledgements

Earlier versions of this paper have been presented at various occasions, including the WIDER Conference on the Southern Engines of Growth (Helsinki, September 2007) and the 2006 World Forum on China Studies (Shanghai, China). The authors wish to thank the seminar participants and three anonymous referees for their comments. The first author acknowledges the support of the WCU (World Class University) program through the Korea Science and Engineering Foundation funded by the Ministry of Education, Science and Technology (R32-20055). The third author would like to thank the support of the National Research Foundation of Korea (NRF) grant funded by the Korea government (MEST) (NRF-2009-362-B00011).

Notes

¹ The term Beijing Consensus has not been academically defined. Ramo (2004) defined it as a combination of emphasis on innovation, sustainability and equality, and self-determination.

² Cheng, Yuan, “Over protection and inefficient development whose mistakes brought out backward development in automobile industry?” (Baohu Guodu yu Fazhan Buzu—Qiche Luohou Shuizhiguo?), http://b-car.com/cywj/11.htm

³ The measures decentralized the approval of ODI projects to local authorities.

⁴ “Chinese companies abroad: the dragon tucks in,” The Economist, 29 June 2005.