Abstract
AbstractThis essay joins in the international controversy about the nature and sustainability of the economic system in China. While official ideology continues to stick to the concept of ‘socialist market economy,’ albeit with changing contents, international observers are split. One group considers China as a de facto market economy, which is in line with the top-down tradition of ruling in the region. Others consider it as a sui generis system. And a third line takes it as yet another case of hybrid regime which proliferated globally in the new millennium. I try to create a link between these readings and the empirics of Chinese growth. This may help interpret the slowdown, exacerbated by the COVID-19 epidemics on Chinese output.
Highlights
China has always been something of a puzzle for outsiders owing to its impressively distinct ancient culture, vast size, large number of complex characters in its writing, and peculiar mindset, very dissimilar to the Euro–American way of thinking
Piketty et al 2019; Gang et al 2019), since this is one of the major explanatory factor of the fact how the number of persons living under absolute poverty – currently defined by the World Bank as being below 1.95 USD a day – has come down by 1 billion, or halved in the 2000 to 2015 period of the Millennium Development Goals of the UN
I attempt to understand the economic system that allowed for this stellar growth performance, which – unlike in the US and Sub-Saharan Africa – did trickle down
Summary
I attempt to understand the economic system that allowed for this stellar growth performance, which – unlike in the US and Sub-Saharan Africa – did trickle down. The main driver of growth in the first two decades of the current millennium continued to be the exorbitant rate of fixed capital formation, accounting to 41–49% of GDP by the year While this is indicative of a generally low level of efficiency in resource allocation (if we compare it to the OECD average of about 20%), China is definitely not a Soviet-style centrally planned economy. The impressive development of many cities, especially in the coastal areas, the continuous expansion of export industries, the wide use of information and communications technologies render China to be one of the shop-windows of the Asian Century The latter, the broad and aggressive use of artificial intelligence renders the challenge of Chinese state capitalism to a much more formidable challenge to the US capitalism than the Soviet Union could ever marshal (Lee 2019). We may ask if this option is sustainable or not? If we just consider that the fundamental criticism of state socialism by Ludwig von Mises and Friedrich August von Hayek from the 20s and 30s holds, still the Soviet system existed for over 70 years, this final question is becoming more than of abstract academic interest
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