https://orcid.org/0000-0003-1094-8260
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ABSTRACT
China’s effectiveness in quickly solving the health crisis caused by the coronavirus pandemic and in softening its economic impact is rooted in the structural characteristics of its development model, in which state-owned enterprises remain crucial. This article holds that a strong public presence within the industrial and banking sectors has provided Chinese government with the opportunity to rapidly reactivate domestic production and, potentially, to maximise the effectiveness of the recently launched monetary and fiscal policy measures.
Acknowledgements
I am indebted to Roberto Nadalini, Leonardo Bargigli, Ronghua Wang, and Enrico Calzolari for the discussions and ideas that made this article possible. Any error is responsibility of the author.
Disclosure Statement
No potential conflict of interest was reported by the author(s).
Notes on Contributor
Francesco Macheda is Associate Professor of Political Economy at Bifröst University, Iceland. He holds a PhD in Analysis of Socio-Economic Transformations from the Marche Polytechnic University (Ancona, Italy). His publications include “Samir Amin in Beijing: Delving into China’s Delinking Policy” (Review of African Political Economy, co-written with R. Nadalini), “The Danger of a ‘Geyser Disease’ Effect: Structural Fragility of the Tourism-Led Recovery in Iceland” (Radical Review of Political Economics, co-written with R. Nadalini), “Neoliberal Economics and Imperialist Ideology” (The Palgrave Encyclopedia Imperialism and Anti-Imperialism), “The Political Economy of Nationalism and Racial Discrimination” (Journal of Labor and Society, co-written with R. Nadalini), “The Role of Pension Funds in the Financialisation of the Icelandic Economy” (Capital & Class). His current research interests lie in the field of technological inequalities of nations, and economic mechanisms of scientific-technical progress.
Notes
1 The spread of the epidemic in the USA, in Italy, in France and in Great Britain could also affect the production capacity of the Chinese manufacturing industry, being these countries the major suppliers of high-tech products, components and engines, turbines, agricultural products and industrial raw materials.
2 Data on exports was obtained from the General Administration of Customs of the People’s Republic of China.
3 As Keynes envisioned, it is not the ownership of the instruments of production which it is important for the State to assume. If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary (Keynes Citation1936, 378). This contains the idea that the capitalist state, by controlling the levers that contribute to determine the real wage (such as the possibility to implement income policies and/or to adopt expansive monetary measures) “is in a position to calculate the marginal efficiency of capital-goods on long views” (Keynes Citation1936, 164). In this sense, the main goal of state intervention in capitalist countries is the improvement of profitability expectations, which will induce private firms to increase their investments.
4 Between 1979 and 2017, the share of investment in China’s GDP was 15 points above the world average.
5 Yet in 2012, one in four SOEs operated at a loss (Yu Citation2014, 177).
6 Data relating to the composition of the activities of banking institutions in China are obtained from the website of the Chinese Banking and Insurance Regulatory Commission. See (CBIRC Citation2014).
7 The development of the capital market in China has not eroded the government’s power to demand that SOEs fulfill their “duties,” as their IPO requests are scrutinized by the political power, and their approval is linked more to the pursuit of growth strategies centred on full employment rather than on profit maximization (Johansson et al. Citation2017; Li and Zhou Citation2015).
8 In the early stages of the epidemic, the Wuhan government denied the possibility of infection between humans. For this reason, local representatives of the Communist Party were removed from their positions.
9 On the role of SOEs in the fight against the virus, see http://en.sasac.gov.cn/TimelineSOEsfightagainstCOVID19.html.
10 From the January 25 to the March 10, 2020, the SOEs benefiting from the first tranche of credits produced 1.6 billion masks, 87.79 million protective suits, 4.21 million protective goggles, 10.29 million test kits, 4143 pressurized ambulances, 2.49 million tons of vegetables, 3.74 million tons of wheat and 1.56 million tons of meat (PBC Citation2020a, Citation2020b).
11 Since COVID-19 hit China about a month earlier, February and March of 2020 have been selected for this country, while for all the other countries are considered the months of March and April.
12 A study conducted by CEIBS in February 2020 quoted by Huang et al. (Citation2020) reported that 85% of the 995 SMEs under investigation would not survive for more than three months.
13 Liquidity was injected through rediscount operations and exceptional loans—the latter being the main means by which the PBC broadened the monetary base during the planning era.
15 The estimate is by Renmin University’s Vice President, Liu Yuanchun (Economic Daily Citation2020).
16 This measure, which costs 2500 billion yuan, is designed to help labour-intensive SMEs, where social security contributions account for about 30%–40% of labour costs.
17 In 2009 and 2010, China’s average GDP growth was 10%, compared with a world average of 1.3%.
18 This new phase can be associated with the transition from an export-oriented growth model—based on the accumulation of foreign exchange reserves aimed at compressing the exchange rate—to a progressively domestic consumption-oriented one.
19 Although there are no official figures, a study published by BNP Paribas Asset Management with the self-explanatory title “Demystifying China’s local government debt” estimates that China’s total public debt is between 51% and 76%, concluding that “China’s total (central + local government) public debt-to-GDP ratio is not excessive compared to many other countries” (Lo Citation2019).