Chinese economic model?
Red flags of Tiananmen. Photo by the author.
During Perestroika, and even after it, both learned men and journalists of all stripes began to search for a “cure for all diseases” or the best economic model for Russia.
Everyone needed a “miracle.” All sorts of models were proposed: the “German miracle,” the “Japanese model of governance,” the successes of the “three dragons,” the fascist model of Chile… and so on.
And the Russian economy, within the framework of the reforms of the young reformers, first sideways, and then forcefully and brazenly began to “return to the family of civilized nations.” Returning, however, in the form of a raw materials appendage of developed countries, while simultaneously carrying out deindustrialization of the country.
At exactly the same rate as Russia's nominal GDP fell, the GDP of its eastern neighbor, the People's Republic of China, grew.
And after some time, our learned men, publicists and journalists began to be very surprised at first, like Gogol’s heroes, discussing where this wheel would go, and then… write about the “Chinese miracle” as a new role model.
So what happened to China and what should we emulate?
Within the framework of this short article, including on the basis of my personal many years of experience interacting with Chinese business, I will try to answer this question.
At the time of the economic reforms, China was an economically underdeveloped agricultural country, trying, like many countries of the second world, to enter the path of social development with the help of communist ideology. At the same time, the PRC was a heavily militarized country with an atomic bomb.
In the 40s, after the communists came to power, the national bourgeoisie remained in China, and the majority of the land (70%) belonged to landowners and the new agricultural bourgeoisie (in Russian, kulaks), which formed after the anti-Manchu revolution of 1912.
The transfer of land to the peasants took place between 1948 and 1952, and the commercial and industrial bourgeoisie was eliminated during the Cultural Revolution.
China's development could not have taken place without outside support. It is quite natural that the Soviet Union provided such support to the Chinese communists.
But after the death of I.V. Stalin, these relations began to crack.
Reducing the conflict between the two largest communist-ruled states to a personal clash between the “pseudo-communist” Khrushchev and the “leftist” Mao Zedong is pure idealism, as Marxists have always taught.
Underneath the ideological and interpersonal contradictions were hidden economic contradictions.
To develop its economy, China needed investments that the USSR could not provide on such a huge scale. Moreover, Mao saw the further development of the USSR and China on the path of militarization and active military confrontation with the West. Something the USSR, whose position Mao and the CPC as a whole called revisionist, could not afford. The first socialist state paid a terrible price in preparation for and during the bloodiest in its history. stories wars against fascism.
The sacrifices made by the Soviet, Russian people demanded compensation: people needed a peaceful life. External security was already devouring 20% of everything produced in the country.
The USSR was ready to help the brotherly Chinese people, but not in the volumes and for the purposes. Mao, among other things, demanded the technology of the atomic bomb.
And no genius or spirit of Stalin could have corrected this situation, because economics dominates everything else.
But the Chinese Republic could not receive this assistance anywhere else. The attempt to compete with the USSR in the international labor movement led to the fact that the leftist position of the CPC scared off Western countries as well.
Despite the real growth of the PRC economy, which had embarked on the path of socialist transformation, the country remained extremely poor, and the pace of its development (it must be said, quite high) still did not give reason for real optimism.
Criticizing the "Soviet revisionists", China did not take into account the specific historical features of the development of the Russian revolution, with its collectivization, industrialization and repressions of the 30s. Mao repeated everything, but these changes took on a caricatured appearance. The enthusiasm of the Great Leap Forward petered out, without bringing China closer to its economic goal: production growth in 1958 was 31%, in 1959 - 26%, in 1960 - 4%.
It was obvious that without external assistance or external borrowing of technologies there would be no development, just as the USSR would not have had any in the 30s. Instead, Mao continued his leftist adventure, using the enthusiasm of the young, and directed the hooligan terror of the Red Guard schoolchildren and the zaofan — young workers — against those who already understood that the path of “great leaps” without borrowing management and technical technologies was futile. During the reprisals against the “Chinese Khrushchevs,” the main blow fell on the leaders who adhered to this path of development, among whom was Deng Xiaoping, whose son was thrown out of a third-floor window in a zaofan. Moreover, in fighting “Soviet revisionism,” Mao Zedong rejected the helping hand of the Soviet people, going so far as to attack Soviet diplomats, beat them up, and, finally, carry out military border provocations.
This is how the West saw the relationship between proletarian states.
Instability and manifestations of leftist aggression in foreign policy made China an unstable and unpredictable partner in the eyes of both the West and the USSR. The pronounced anti-Soviet policy of the CPC leadership since the mid-60s, nationalist in essence, but with leftist quirks, was cleverly used by the United States, which was experiencing difficulties in the international arena (the Vietnamese adventure). The visit of US President R. Nixon in 1972 contributed to the PRC moving into the anti-Soviet camp, where it was firmly retained by subsequent American presidents.
Thus, opening a “second front” on the border of the Union, which had to spend even more money on defense, strengthening the Far Eastern border.
As for economic development, an important prerequisite that contributed to the beginning of the development of the PRC was the announcement of the most favored nation trade regime in the United States in 1979.
The father of reform, Deng Xiaoping, took advantage of this situation. What Mao "fought" in the USSR became the reality of China: it went down the path of capitalism under the control of the party bureaucracy.
It is necessary to take into account that all this was happening against the backdrop of recession and crises in Western economies. Since 1970, the crisis has been growing. It was caused by the same three factors that contribute to development under capitalism, but here we are witnessing “negative growth”: a problem with resources: the Arab-Israeli and then the Iran-Iraq war contributed significantly to it. The growth of post-war prosperity led to an increase in the cost of labor. Hence the search for it everywhere: the import of Turks and Yugoslavs to Germany, Africans to France. The third factor is the limitation of the sales market and its oversaturation in Western Europe and the USA. This abundance in Europe or the USA at that time seemed like a paradise to most tourists or business travelers from the USSR.
Which sharply aggravated the competition. Thus, the Germans and Japanese flooded the US market with high-quality or high-quality products of the automobile and electronics industries, using the factor of cheaper labor than in America and favorable exchange rates of their currencies. And without having such a burden of military expenses as the US. This situation was called the "German" and especially the "Japanese economic miracle."
These "miracles" were put to an end by the so-called Plaza Accord of 1985 in New York. The Americans, using their dominance, forced the countries of the "economic miracle" to change their monetary policy, thereby nullifying their superiority over American producers.
But all this did not resolve the fundamental issues within which the crisis continued.
As usual, there could be only one way out: searching for cheap raw materials, cheap labor and new markets.
On the other hand, countries like India and China realized that social development was only possible with the help of external investment, which the West had. So the stars aligned.
In search of cheap labor, the West began to move production to these countries. At first with production processes that polluted the environment, like the plant of the American company Union Carbide in Bhopal, India, where more than 1984 people died in 5000.
And then everything in a row. And in such conditions, China became a reliable partner that guaranteed investment protection.
This decision was made in 1978 by Deng Xiaoping. China became an ideal platform for investment, having a mass of disciplined and poor population, strict control by the CPC and state bodies. But a significantly more educated and cultured population, unlike India: years of socialist reforms did their job.
An important component was the climatic conditions, which did not require much effort for capital construction, development was concentrated in such areas. And logistical accessibility, unlike, for example, the Russian Federation, China is a real modern coastal country.
Economic development zones were created, starting with Shenzhen, where foreign investors were given most-favored-nation treatment, where full-fledged Western-style capitalist relations were permitted, under the control of the CPC "dictatorship" and political "pluralism" was not allowed.
At the same time, China forced manufacturers to export industrial goods, not raw materials, as much as possible. Control over foreign economic activity became absolute, and violations in this area were punishable by death. If in 1988 exports constituted 14% of China's GDP, then in 2003 it was 60%.
The Chinese Communist Party, while controlling key parameters, withdrew from detailed economic planning because, under the prevailing conditions, this could be transferred to the power of the “market forces,” which were controlled by professional foreign investors who possessed both production technologies and management technologies.
An important factor in China's development was the absence of aggressive neighbors, which significantly reduced military spending.
In China, when there is a leader of the state, key people participate in decision-making, and leadership changes occur constantly, which ensures that the government is not "blown away" and is realistic in management. During the period of galloping economic growth, China was led by Deng Xiaoping, Jiang Zemin, Hu Jintao, and Xi Jinping. Today, rumors persist about upcoming changes in leadership.
China's goal at the first stage was to develop production to create jobs and improve their skills. At the same time, it was necessary to simply feed the people and begin saturating the market with necessary goods and services.
The events in Tiananmen Square in 1989 demonstrated that Western companies' investments were reliably protected, and the CPC leadership, headed by Deng Xiaoping, as holders of a "controlling stake" in the emerging capitalist Chinese economy, vigilantly protected their property.
In Tiananmen Square. Photo by the author.
While in Europe and America the transfer of industrial facilities was formalized ideologically. It so happened that it was the time of the introduction of computer technologies. Another myth about a post-industrial society, a “smart and information economy”, etc. arose. Its meaning was that the offices of companies in Europe and the USA “generate” “brilliant ideas”, create “unusual products” and designs, while the hard-working Chinese obediently implement all this for two or three cups of rice a day.
When the Chinese in the mid-10s of the 21st century realized that they could do without the “brilliant ideas” that creators sitting in ottomans “generate,” a serious crisis began in the old economies.
On the other hand, already back then, in the 90s, there was an understanding that the “smart and information economy” was leading to the destruction of industry in their own countries.
All this tinsel of neoliberalism, Reaganomics and Thatcherism would have had no effect if it were not for China, which has become a cheap production factory for Western countries.
At the same time and very opportunely, a new sales market opened up, as well as cheap raw materials. All the CMEA countries found themselves drawn into the orbit of the Western economy's sales market, and with the collapse of the USSR, the former Soviet republics, with Russia at the head, became suppliers of cheap raw materials and even unique technologies.
Thus, the transfer of production to China, with the simultaneous fall of the USSR and the destruction of the socialist camp, ensured the rapid growth of the Chinese economy, completely oriented towards the West.
At the time of the collapse of the USSR in 1989, the nominal GDP of the PRC was 6 times less than that of the USSR, and 4 times less than that of the RSFSR. Today, the nominal GDP of the Russian Federation is 8,5 times less than that of the PRC.
To put it very roughly, the USSR's place in the global division of labor was eventually taken by the PRC, and then it began to challenge the USA for first place.
While attracting investment from almost the entire Western economy, the Chinese government and companies are actively acquiring and even stealing technology.
Without Soviet technology sold to China during the "sale" period, there would be no Shenzhou spacecraft, no Tiangong space station, and no huge amount of military equipment that China successfully sells around the world today.
In the 90s of the XNUMXth century, the situation developed in which they tried to prevent the Chinese from attending industrial exhibitions, where they actively photographed machine tools. China, simultaneously with being a factory for foreign brands and companies, turned into a factory of counterfeits. At the same time, the Chinese were actively studying at the most advanced technological universities in the world, primarily in the USA and Europe. This contributed to the development of their own higher education, with the involvement of foreign teachers. This, of course, ensured a high growth in the level of Chinese engineers and specialists in the field of production.
On the created base, China finally "fed the people". The last famine of the early 60s took several million lives. Despite the fact that the official date is considered to be 1985, this, most likely, according to my personal observations, happened by the beginning of the XNUMXst century.
By the way, China continues to import food today, including rice.
Soon quantity began to turn into quality, the growth of China's economy, its share in the world GDP turns it into a powerful economic power-producer.
The planned approach, which has become increasingly widespread, is leading to China beginning to dominate many sectors of the global economy.
The presence of a developed modern industry gives China, like England in the 19th century, a significant advantage in the area of arms production: because simply creating a military-industrial complex or creating it on a stable civilian base involves different costs.
At the same time, the Chinese leadership seriously controls and adjusts the development of the army, maintaining military spending within the limits possible.
China, like any country operating within the framework of capitalist relations, is actively capturing sales and services markets, fighting for cheap raw materials (for example, the Siberian forests of Russia), and exporting capital. Chinese companies themselves have begun to enter the market with their own brands in the field of electronics, automobile manufacturing, machine tool manufacturing, etc.
Today, China is the world leader in green energy - 80%, and holds a dominant position in development and production drones, a world leader in the production of pharmaceutical substances (treats the whole world), a leader in the production of graphene, a monopoly on the production of carbon fiber, etc.
At the same time, processes are beginning to develop in China that lead to a crisis in any developed capitalist country.
First, China is no longer a place of cheap labor compared to our country, and the median and average wages in China are higher than ours.
The second factor is overproduction. As always under capitalism, every boom in one industry or another in China ends with the mass ruin of some companies and the strengthening of the survivors. And there are not enough markets for everything that China's factories and plants can produce.
This is one of the reasons why the CPC leadership is paying close attention to the development of the domestic market, which is the subject of the “Special Action Plan to Stimulate Consumption” of March 2025.
Thirdly, the most advanced technologies remain the prerogative of the West; they make up a significant share of China’s production.
Fourthly, in the conditions when in the capitalist world economy we are witnessing a turn towards protectionism and the protection of one’s own markets, exactly as in the period from the mid-80s until the First World War, for China this is a question of survival and existence.
In this article I briefly described the "Chinese economic miracle". It is obvious that it happened under certain historical conditions, "the stars aligned", it is necessary to study and understand this experience, but it is impossible to repeat or copy it, for example, in our country.
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