Why the West should not fear China

PUBLISHED : Wednesday, 11 August, 2010, 12:00am
UPDATED : Wednesday, 11 August, 2010, 12:00am

The multi-faceted story of China growth has been told in many ways.

Some see it as China Inc, the world's most successful mercantilist state, expanding at the rest of the world's expense. Another version features a rising revisionist power seeking to remake the global system in its own image. Yet another casts it as a retrograde political outsider, emboldened by economic steroids, that is doomed to suffer a systemic implosion.

None of them gets it exactly right, argues Massachusetts Institute of Technology political science professor Edward Steinfeld.

The China story he tells is bold, counterintuitive and has an unfashionably rosy tinge. Here is a country that 20 years ago took a great leap of faith by hitching its fate to a global economic system designed and dominated by the advanced Western countries. Then it grew up, not by conjuring up its own rules, but instead by absorbing - and even embracing as its own - norms, practices, values and aspirations of the West.

'In essence, China today - a country at the peak of its modernisation revolution - is doing something it historically never really did before. It is playing our game,' says Steinfeld, who directs the MIT Sloan China Management Project.

In his new book Playing Our Game: Why China's Rise Doesn't Threaten the West, Steinfeld sets out to challenge two views expressed by nearly all China worriers, China bashers and China doomsayers: that a rising China poses a global threat and that growth abnormalities - in the form of a dangerous disconnect between political and economic transformation - have become grossly manifest.

'The US and western European countries perceive China as an economic threat because they don't fundamentally understand how modern production works,' Steinfeld says.

China has been growing mainly by 'aggressively embracing globalised production', and by doing so, it has fostered the global division of labour which has permitted the advanced economies, particularly the US, to surge forward in technological innovation and commercial creativity.

The role China has played might be termed as 'best supporting actor', he says. By serving as a low-cost provider of mass manufactured goods, China has created opportunities for wealthier nations, the lead actors, to specialise in something far more difficult to replicate: knowledge creation and invention.

'Economics-wise, China has been a facilitator for growth of a number of other countries, including the US,' says Steinfeld, who is also director of the National Committee on US-China Relations.

So, here is the alternative China story that Steinfeld puts on the table: the real transformation of the Chinese economy took place in the early 1990s, and it was not a well thought-out, carefully crafted, long-term plan to start with.

China, hit by economic setbacks and political shocks, opened up its industrial base to foreign players out of pure desperation, and an urgent need to stimulate growth and create jobs.

This was anything but the standard growth model. Rather than fixing up the institutions - private property rights, commercial legal codes, the currency exchange mechanism, etc - to prompt economic activity, China did the opposite. Chinese reformers left in place a bunch of institutions that were wrong but ploughed ahead and opened the country up to foreign investment anyway.

'The textbook approach would have had China first getting its house in order and then joining the global economy. In reality, China first joined the global economy and only subsequently scrambled to get its house cleaned up. A kind of order would ultimately be achieved but one as much of the global commercial world's choosing as China's own,' Steinfeld says.

At the heart of the matter is what he calls 'institutional outsourcing' - China handing outsiders the power to design the rules by which its internal market operates. In this process, foreign players selectively upgraded Chinese domestic industry and reshaped it to meet specific global needs. For example, the self-induced competitive threat following the country's WTO accession forced the restructuring of thousands of domestic firms and the elimination of the 'iron rice bowl' of lifetime employment. The integration of producers into global production chains subjected them to global quality standards and foreign media scrutiny. The listing of companies on overseas stock exchanges exposed those firms to stringent monitoring by overseas watchdog agencies.

In the broadest sense, he says, China's revolution is about a nation that has rescued itself from existential crisis by tying itself to a particular kind of global economic order. So far, China has done well through this division of labour. The leading market economies, with their higher levels of wealth and in more specialised areas, have done equally well or even better.

'It does not mean triumph of any one nation or the capitulation of any other. It does not by definition entail selling out or caving in. Indeed, given the growth record China has achieved, particularly compared with that of many other developing countries during the same period, it may very well constitute an optimal strategy,' Steinfeld says.

More contentiously, the MIT professor challenges what he calls 'a truism today' that 'China is transforming economically but frozen politically'. The 'binary' view that, if there's no full democratisation, political change does not happen, is categorically wrong.

'There's no way the current level of economic growth could have been achieved without comparable political transformation. Growth up to today would have never been maintained in the absence of dramatic social, political changes,' he says.

There is some kind of 'organic, interlinked' relationship between economic and political progress. By participating deeply in globalised production, China is subjecting its existing political and social order to stress. Chinese growth has involved the yoking together of economic and political forces.

'I can say for sure there's been political liberalisation going on,' says Steinfeld, a close observer of China for more than 20 years.

The single-party, authoritarian state obviously survives. However, the party's omnipresence has been diluted over the past two decades. The nature of the state, its relationship to its citizenry and its sources of legitimacy have all been fundamentally changed. In the process of scrambling to keep up with rapid political and social changes, Communist Party leaders carried out many reform policies which Steinfeld says are 'gutsier than many of us gave them credit for' because they could undercut party power.

Take the 'Open Government Initiative', which obliges government to make public information that is of public interest, as one example. On one level, he says, you may doubt whether it would be fully enforced, but on another level, it's a daring move because once made it cannot be withdrawn, and that makes the party vulnerable.

'It's like tossing a hand grenade and saying, all right, let's see where it explodes. Maybe it [the Communist Party leadership] is under the idea or illusion that the blast can always be contained, or the blast can at least release some pressure. But so far, it hasn't been fully contained and actually leads to other pressure the government has to catch up to,' Steinfeld says.

Another example is the Central Party School - the party's top training ground for high-level officials - which Steinfeld describes as 'the most interesting organisation in the country'. Its curriculum now includes courses on comparative democratic systems and the role of civil society in effective governance. It also invites liberal scholars with technical expertise - including Steinfeld - to give lectures and sends its students to top universities abroad to study courses such as public affairs, public finance and environmental regulation.

In this sense, the government's reform programme - rule of law, political accountability and increasing popular participation - has become something more than cynical rhetoric. 'We can argue that the government has become a believer of its rhetoric, an advocate,' he says.

Moving to the future, it's the same game - growth can't be sustained without political change. And here, Steinfeld makes an intriguing comparison between the Communist Party and Taiwan's Kuomintang.

Neither party ever set out to dismantle authoritarian rule. Both, arguably for reasons of survival, came to legitimise themselves through commitments to concrete development goals. As a result, each party's relationship with its own elites and society at large changed irrevocably.

Steinfeld says that perhaps the most important lesson from Taiwan's democratisation experience is that right up to the moment one-party rule disappeared, real political change appeared unlikely, if not impossible. Right up to the very end, the KMT was suppressing dissidents and throwing political prisoners in jail. And right up to the very end, it was insisting that while democratisation was a long-term goal, one-party rule was a national necessity for the time being.

In other words, virtually anything the party did - from admitting outsiders to pushing new laws - could be dismissed by observers as avoidance of change rather than change itself.

But in reality, the end of authoritarianism came not as a single, bolt-out-of-the-blue break from the past. Instead, it was an accumulation of changes that each in and of itself would have appeared insignificant.

China's authoritarian rule, Steinfeld says, is 'self-obsolescing' in ways that roughly mirror what transpired two decades ago in Taiwan. Real changes - including social and political - have actually been under way for years.

'I don't think it's a huge mystery. It's only a question of what the time frame is,' Steinfeld says. 'And I'm certainly more optimistic than I was.'