op_yhuang1_DALE DE LA REYAFP via Getty Images_hongkongstockexchange Dale de la Rey/AFP via Getty Images

How to Kill Chinese Dynamism

Those who believe that Chinese entrepreneurship and growth have thrived under a magical formula of statism ignore the role that Hong Kong played in providing the conventional pillars of market finance and the rule of law. Without this escape valve, China's great economic success story never would have happened.

BOSTON – In Lonely Ideas: Can Russia Compete?, MIT historian of science Loren Graham shows that many technologies pioneered by Soviet and post-Soviet Russia – including various weapons, improved railroads, and lasers – nonetheless failed to benefit the national economy in any substantial way. The reason for this abysmal failure, he concludes, is Russia’s lack of entrepreneurship.

The same insight can be applied to Imperial China. Many ideas that originated there were lonely orphans and brought little to no benefit to the Chinese economy. By contrast, the China of the post-1978 reform era moved in an altogether different direction from both Russia and China’s own past. As the reforms took root and blossomed, China began to develop a large, dynamic private sector with many entrepreneurs who were highly motivated and capable of bringing technologies to scale.

Chinese ideas and innovations were no longer lonely but had quite a lot of company. More importantly for China’s economy, they were regularly deployed to generate growth, employment, and the tax revenues that helped keep the Communist Party of China (CPC) in power.

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