BEIJING – Today’s financial crisis and looming global recession are challenging China’s export-driven economic model as never before in the 30 years since Deng Xiaoping opened the economy. Indeed, in recent weeks, “the factory of the world” has become plagued by the closure of thousands of manufacturing plants and the threat of widespread labor unrest.
I believe that China’s innovative model for development is likely to help it weather both the gathering economic crisis and any resulting social and political unrest. Moreover, should China safely navigate this storm, its status as a rising economic and political power will be strengthened.
The essence of the Chinese economic model is a careful sequencing of reforms, with priority given to economic reform over political reform, which means retaining the existing constitutional system and the ruling status of the Communist Party of China (CPC). This model has involved substantial liberalization in terms of official ideology, the economy, and society, while maintaining public ownership of the major banks and largest state-owned enterprises (SOEs) as “anchors of economic stability.”
Similarly, whereas much autonomy has been extended to local governments in economic and social development, the central government has kept its grip on the direction of policy by maintaining the power to appoint local party and government officials. In short, the Chinese model reflects a combination of pragmatism, liberalism, and market competition, but with a strong dose of state intervention.