The Global Rise of China

Alvin Y. So, Yin-Wah Chu

• Publisher: Polity
• Year: 2015
• Print ISBN: 9780745664743, 9780745664736
• eBook ISBN: 9781509502523
• Edition: 1
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This book sets out to unravel and explain the puzzle of the global rise of China: how, in just forty years, China has been quickly transformed from a poor, backward third-world country to one of the world's core economic powerhouses. Exactly how did this Chinese developmental miracle happen? Focusing on the key historical turning point in China's post-socialist development, the book examines the complex processes through which China interacted with the global neoliberal project of the late twentieth century. Alvin Y. So and Yin-Wah Chu reveal the centrality of the communist party-state in propelling China onto the world scene, and how it has successfully responded to the developmental challenges of technological upgrading, environmental degradation, inter-state rivalry, and maintaining its power. This book provides a comprehensive and insightful study of the rise of China not solely from an economic, social, and political perspective, but also from a global and historical perspective. It will be an invaluable guide for students and non-specialists interested in post-socialist development and the global rise of China in the twenty-first century.

1
Introduction

Since the turn of this century, the mass media have been buzzing regularly about China's remarkable development (e.g. China Daily 2009; Pomfret 2009; Wines 2010a):

• China is the largest exporter and second largest importer of goods in the world. As a result, there has been a dramatic change in the country's status in the global economy. In 1980, China barely registered on the global economic scale, commanding a mere 1 percent of global GDP. In 2010, it captured 9.1 percent of global GDP owing to increases in advanced technology, competitiveness, and the expansion of foreign direct investment flows (Lin 2011; Tabassum and Ahmed 2014).
• China has surpassed the United States to become the world's largest automobile market – in units, if not in dollars. China has also superseded Germany as the biggest exporter of manufactured goods (Barboza 2010a).
• In 2010, China – the world's fifth largest economy four years previously – overtook Japan as the second largest economy in the world. If China moves in the same rate as it has been growing over the past three decades, then it might overtake the US economy by 2020 (Tabassum and Ahmed 2014).
• China had a US$265 billion trade surplus with the US and held US$1.4 trillion in the US Treasury in 2009. In the early 2000s, China's foreign reserves were nearly US$3 trillion – the largest in the world (Lin 2011).

Influenced by these promising economic indicators, both the mass media and policy circles have been using terms like “the rise of China” or “the China Model” to discuss China's rapid economic development. Since 2004, these two terms have been upgraded to “the Beijing Consensus,” representing the alternative non-Western economic development model to the Western advanced countries’ model of “the Washington Consensus,” which is a US-led plan for reforming and developing the economics of small third world countries (Ramo 2004).

Since the mass media and policy studies reports have not spelled out systematically the nature of the China Model, we have taken the liberty of bringing together key arguments in the literature for a reconstruction of the distinctive pattern of China's development:

• Rapid economic growth. From 1979 to 1990, China's annual average growth rate was 9.0 percent. At the end of that period and even up to the early 2000s, many scholars still believed that China could not sustain that growth rate much longer owing to the lack of fundamental reforms. But the country's annual growth rate between 1990 and 2010 increased to 10.4 percent. On the global economic scene, China's growth over the last few decades has been unprecedented (Lin 2011). This has been a dramatic contrast with the depressing performance of other transitional economies in Eastern Europe and the former Soviet Union. In a short span of forty years, China's GDP rose 18.6 times (Kiely 2008, p. 355) and the country has been suddenly transformed from a poor, backward third world nation to a global economic powerhouse.
• Export-led industrialization. Since the turn of the century, China has become the factory and the workshop of the world. The country's exports grew from US$18.1 billion in 1978 to US$266 billion in 2001, reflecting an annual average growth rate of 12 percent. By 2001, manufacturing exports accounted for 90 percent of total exports (Nolan 2004, p. 9).
• Innovation and technological upgrading. Despite the assumption that China is trapped in labor-intensive, low-tech, sweatshop export production, It has modernized its educational system, upgraded its science and research capabilities, and participated in high-tech production. From the 1990s on, foreign corporations began to transfer a significant amount of their research and development activity into China. Microsoft, Oracle, Motorola, Siemens, IBM, and Intel have all set up research laboratories in China because of its “growing importance and sophistication as a market for technology” and “its large reservoir of skilled but inexperienced scientists, and its consumers, still relatively poor but growing richer and eager for new technology” (Buckley 2004). In the first decade of the new century, China began to move up the value-added ladder of production and to compete with South Korea, Japan, Taiwan, and Singapore in spheres such as electronics and machine tools.
• Poverty reduction. China managed to reduce the share of the population living on less than US$1 per day from 64 percent in 1981 to 16 percent by 2006; in effect lifting 400 million people out of absolute poverty (China CSR 2006). Thus, the China Model has worked more effectively than the IMF-designated Structural Adjustment Program in the Washington Consensus model for sub-Saharan Africa and the “shock therapy” for Russia (W. Zhang 2006).
• Independent and autonomous development. According to Joshua Cooper Ramo (2004, pp. 3–4), China shows “how to fit into the international order in such a way that allows [developing countries to be] truly independent, to protect their way of life and political choices in a world with a single powerful center of gravity.” As such, the Beijing Consensus can be interpreted as “a theory of self-determination, one that stresses using leverage to move big, hegemonic powers that may be tempted to tread on your toes” (Dirlik 2004, p.3).

In short, the major characteristics of the China Model are rapid economic growth, export-led industrialization, innovation and technological upgrading, poverty reduction, and independent and autonomous development.

Although China's remarkable economic development has been labeled “the China Model” and “the Beijing Consensus,” there is simply no consensus concerning the major ingredients of the Chinese path of development since 1978. While the proponents of the China Model want to highlight its positive features, its critics debate the extent to which China is autonomous and whether it is able to achieve genuine technological upgrading. There are also serious disputes as to whether China has contributed to poverty reduction or to rising social inequality, rural bankruptcy, and social conflict on a scale hitherto unknown (Dirlik 2004; Hung 2009; J. Y. Lin 2011; Nolan 2004).

Although we agree with the critics that China is not without its developmental problems, they seem to have gone overboard by defining away the remarkable achievement of Chinese development over the past forty years. We argue that if researchers want to make any advance in understanding the remarkable development of China, they need to move beyond the ideological lens to capture the complexity and ambiguity of the country's development and to explain why this has worked while other development packages like neoliberalism and state socialism have failed.

In other words, why was it possible for China to achieve such remarkable economic growth over the past forty years? What explains China's successful transition from a backward socialist state in the 1970s to a global economic powerhouse in the 2010s?

Explanations of China's Remarkable Economic Development

In the literature, there are three competing explanations of China's remarkable development, namely, the world-systems explanation, the neoliberal explanation, and the social explanation.

The World-Systems Explanation

Ho-fung Hung (2009) has contributed to this debate by spelling out the macro-historical context for the dazzling economic expansion of China. Hung, in particular, identifies the following three transformations of the capitalist world-system in the late twentieth century as the most important background factors for understanding the rise of China.

First, there was a new international division of labor in the 1970s. The Fordist–Keynesian regime of capital accumulation, which accounted for the more than two decades of postwar prosperity in most advanced capitalist countries, ran into deep crisis. Fordist corporations became ailing dinosaurs, simply too big and too bureaucratic to adapt to the increasingly volatile and competitive world economy. Fiscal deterioration of advanced capitalist states curtailed their capacity to continue the Keynesian strategy of stimulating the economy through ever-enlarging public expenditure (Harvey 1990).

Starting in the late 1970s, Western corporations shifted from a Fordist, vertically integrated mode of organization to a more flexible form of organization based on multi-layered subcontracting to cope with falling profits and to cut costs. This network of subcontracting soon transcended national borders when labor-intensive segments of production were outsourced to manufacturers in low-wage developing countries in the South. Replacing the old core–periphery division of labor based on the periphery's export of raw materials in exchange for manufactured products from the core, the new international division of labor turned part of the periphery into new manufacturing bases of the global system.

In the 1970s, the original East Asian tigers – South Korea, Taiwan, Hong Kong, and Singapore – became the prime destination of these shifting manufacturing activities. The scale and scope of this new international division of labor expanded dramatically in the 1980s and 1990s in the wake of the collapse of most import-substitution regimes in other parts of the developing world, in addition to the world trade liberalization that had been aggressively promoted by the United States since the Reagan administration. In the 1980s and 1990s, China became the most important destination of transnational relocation of manufacturing activities as it receives manufacturing relocation not just from the Western advanced countries but from the newly industrializing countries (like South Korea) as well.

Second, concurrent with the advent of the new international division of labor was the erosion of the legitimate leadership of the United States in the capitalist world economy and the decline of the Cold War. When economic competition among the United States, Europe, and Japan intensified in the 1970s amidst protracted economic woes, the struggle for export markets spiraled into trade wars, and the ideological homogeneity within this triple alliance against the Soviet bloc began to unravel. The intra-core rivalry escalated in the 1980s, when the common enemy that had bound the Western core powers together – the Eastern communist world – weakened dramatically. When it became all too clear that the socialist bloc no longer constituted a threat to the capitalist core, the socialist states (including China) were welcomed back to reintegrate with the capitalist world economy because the Western capitalist states could benefit immensely from the socialist states’ cheap labor, abundant raw materials, and potential market and investment opportunities.

Third, there was the implosion of most working-class-based, state-power-oriented social movements that had once effectively constrained the class power of capital across the capitalist world-system. In the 1980s, when the Reagan government and the Thatcher government moved in concert to dismantle the Keynesian welfare state, to revise state protection of stable employment, and to promote free trade globally, they met considerable initial resistance from organized labor and the social movement sector in general at home and abroad. But when Thatcher later famously declared that “there is no alternative,” she seemed to realize the dissipation of resistance to her neoliberal onslaught. The labor movement and the so-called “New Left” were too tamed to resist neoliberal reforms. In the 1990s, under the banner of the neoliberal globalization project, capital was freed from the past constraints of the Fordist–Keynesian regime of capital accumulation, and the class power of capital vis-à-vis labor was substantially elevated by the energetic neoliberal states in the name of the free market; outsourcing, deindustrialization, and casualization of work swept through major cities in advanced capitalist states. Developing countries, too, opened their gates voluntarily or involuntarily to the influx of transnational capital. Export-processing zones populated by unregulated despotic regimes of factory production proliferated throughout the developing world (Harvey 2005).

In short, Ho-fung Hung contends that the triple transformations of the capitalist world-system in the late twentieth century – the rise of the new international division of labor, the decline of US hegemony and the Cold War order, and the general retreat of antisystemic movements – made the rapid economic expansion of China possible.

Delineating the macro-historical forces in the late twentieth century certainly helps us to understand the important underlying background which possibly explains the rise of China. However, as Hung (2009, p. 13) himself points out, “possibility differs from inevitability, and it still cannot fully explain the rise of China.” That's why we need to bring in the other two explanations.

The Neoliberal Explanation

The second explanation may be characterized as neoliberal in that pertinent scholars emphasiz...

Table of contents

• Cover
• Series page
• Title page
• Copyright page
• Dedication
• Map
• Chronology
• Preface
• 1: Introduction
• Part I: The Chinese Development Miracle
• Part II: The Challenges Of China's Global Rise
• References
• Index
• End User License Agreement