Abstract
Th e micro-foundations of the Chinese growth model are analysed within a comprehensive monetary theory of economic development, based on Schumpeter, Keynes, and the contemporary monetary Keynesians. Th e Confucian traditions and the Leninist party power structure are identifi ed as the main specifi c traits of the social formation in contemporary China. In the capitalist mode of production, money sets the stage, and the interplay between private creditors and debtors is bundled into a coherent, dynamic whole by the central bank in the economic sphere and by more or less democratic institutions in the political arena. Combining the reproductive, care-taking traits of socialism with the entrepreneurial dynamism of private property and, above all, with the design and enforcement of overall social and economic coherence through the »vanguard« Communist Party makes an unique and ingenious institutional Chinese set-up. Th e constitutive character of Guânxi – the magic word for trust, confi dence, reliability, righteousness, mutual benefi t and cosmic order – for the working of the whole Chinese economic system is identifi ed and described.
Highlights
The recent economic growth story of the People’s Republic of China is not yet fully understood
As the main visualising instrument for explaining, step by step, the implicit growth model of Schumpeter’s theory of economic development (1912-34), the balance sheets of the economic agents involved are used, which consist of stocks with assets on the left hand side, and liabilities on the right, showing net wealth or equity as a balance
This point needs to be emphasised, too: it is very important to understand that its discount credit to the banks, as well as its money issue, is created ex nihilo, and that they are solely based on the trustful relationship with the bankers and with the public, which must be willing to hold cash from that central bank, and not other ones, in its portfolio
Summary
The recent economic growth story of the People’s Republic of China is not yet fully understood. The micro-foundations of the Chinese growth model are analysed, much in the same vein as Priewe and Herr, namely within a comprehensive monetary theory of economic development, based on Schumpeter, Keynes, and the contemporary monetary Keynesians such as Hajo Riese, but adapted to the Confucian traditions and the contemporary Leninist party power structure in China. A phenomenon like spectacular growth in China, where many of the much-invoked ‘preconditions’ of development in a functioning capitalist market economy are conspicuously absent, presents a formidable challenge to economic theory-building, for developing and transition countries. Scenarios for future developments and some theoretical lessons learned conclude the article
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