China Tells

What is the best social system in the history of human being? Feudalism, Serfdom, or Capitalism? What about Socialism or Communism? Such question has aroused heated debates among scholars from generation to generation. In the most recent two centuries, however, such debate seems to be becoming more and more smokeless. Capitalism, the dominant social system in almost all the wealthy and powerful nations, has so far proved to be the most dynamic, resilient and creative system in the history of humanity. The balance between individual freedom and social harmony, and the equilibrium between economic efficiency and mass fairness work out well to a point that any attempt for an alternative solution either failed (eg., USSR) or was aborted. Of course it is not to say that capitalism is flawless. In fact it is far from being perfect. On a relative basis, however, no alternative system is anywhere near to compete against the capitalism.

The rise of China, nevertheless, poises a challenge to the most superior system in the last two hundred years. To categorize China in a book defined system is not an easy task. To begin with, China hardly suits in the category of ‘capitalism’. To quote Merriam-Webster, Capitalism refers to an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. In today’s China, the state capital accounts for about 53% of the nation’s total capital, and state owned enterprises contribute to about 40% of the country’s total GDP. Some industrial sectors, such as energy, railway, telecom and airline are almost totally controlled by limited numbers of mega big state owned companies, therefore there is hardly a ‘market’ in such sectors. In a lot of those state owned companies, the management has dual agendas from both economic and political aspects. For example, to maximize the profit of the company is important, but it is also politically risky to lay off employees even with a justifiable reason.

The Chinese government claims today’s China to be a ‘China-rized’ socialist country. ‘China-rize’ is a word that I coined in order to reflect a literal translation closest possible to the original text. According to the official media and the textbook in public schools, ‘China-rize’ means a ‘Unique-China’ way to develop the economy and society for the benefit of mass population, including every single Chinese. Following the definition, ‘China-rize’ could mean to privatize part of the economy and business units, ‘China-rize’ could mean a progressive approach to promote democracy in part of the country, and ‘China-rize’ could also mean a reversal of economic reform that started in 1979 any time if it is needed.

Whatever that system is, it seems working, and seems working very well, so far at least. There is no point to reiterate the achievement that China has obtained in the last 30 years. A quick roll of number is telling enough: in 1980, China’s GDP is 188 billion USD, 1.8% of the world GDP in that year. In 2008, China’s GDP is 4,401 billion USD, 7.3% of the world GDP.

Besides China’s staggering growth in the last three decades, its economy’s resilience to the current financial crisis is even more impressive. According to the estimate of Economist, China’s GDP is going to grow at 7.9% in 2009, compared to negative estimates for all the OECD economies (eg., US -1%, UK, -2%, etc). While US, UK and Europe are struggling with increasing unemployment rate, shrinking profit margin and dwindling asset values, China stands out to be the shining star in the darkness.

So what is wrong with the capitalism that has flourished for so many centuries? Is China’s ‘China-rized’ socialism going to prove to the world a superior new system? These are the questions that have aroused great academic interests. There are a great degree of positive acknowledgements on the ‘China-rized’ approach. First, ‘China-rize’ means pragmatism. It comes with a lot of flexibility in terms of policy making and regulation imposition with minimal interference from ideological constraints. Secondly, ‘China-rize’ takes advantage of the strategy that is difficult or impossible to realize in a capitalistic state, such as central planning, government guidance, and focused use of great amount of resource. Such a character is particularly efficient in launching the mega scale social program (eg., 4 trillion stimulus plan) and huge size infrastructure projects (eg., Gorgeous Dam). Right or wrongly, it is exactly such decisive measures made within the shortest possible lead time that keeps China still afloat in the tsunami of global economic downturn.

On the other hand, however, the camp of criticism is at least as vocal. Numerous economists question the sustainability of such a mega scale stimulus plan and its contribution to the long term prospect of China’s economy. The aggressive pace of bank loans being released to the economy, with some of them leaked into the property and equity market, is also provoking plentiful concerns on the bubble of the asset market and potential consequence of inflation.

Almost undisturbed by such suspicions, China government is determinant to continue with its ‘China-rize’ approach of reforming the economy. The important message here, is that there is an alternative system being tested in a nation of 9.6 million square kilometers with a population of 1.4 billion. Such a system is never tested or proved effective in any other state in history, and is revealing its unique quality of creativity, energy, and resilience. Such a message could be one of the most important contributions that China offers to the world, with China itself being a real life case that deserves extensive study on the pros and cons of taking a road other than capitalism. In addition, such a message from China could be one of the biggest challenges that Capitalist states need to deal with in the next decades to come.