Rethinking the Beijing Consensus: how China responds to crises

Abstract

This paper discusses the role of the Beijing Consensus type of foreign and economic policymaking in China's development since the Asian financial crisis and in its response to the global crisis, and argues that it has been a double-edged sword, as reflected in several aspects. First, the lesson that China learned from the Asian financial crisis was not the importance of liberalisation but prudence or conservativeness, which despite serving as a shield this time sustains problems in the long term. Second, an obsession with foreign reserves accumulation and the pursuit of political influence have for a long time overshadowed the increasing dependence on the US market, putting China in a dilemma now in both development and diplomatic strategies. Third, centralised decision-making may be faster than democratic processes, but it may also go against the principle of ‘scientific decision’ as proposed by the Chinese leadership. A prominent feature of China's responses to the crisis is a bias towards state-owned enterprises and the public sector, which exacerbates the existing problems of monopoly, over-capacity, inequality, the regulators being ‘captured’ by industrial interests and protectionism. Given limited economic resources, domestic political contentions and the questionable credibility of the China Model, it would be difficult for China to practice ‘responsible great power’ diplomacy or assume leadership in the region or globally.