The capi-communist State of China is more capitalist than you would think

This post is based on the book, “Maonomics: Why Chinese communists make better capitalists then we do” by the economist, and author Loretta Napoleoni.

The book is about cutting through the perceptions the West holds about the Chinese way of life and the economy, and revealing the realities.  After reading this book, I have become a bigger fan of the Chinese work ethic, economic management and their remarkable journey to date.

Politics

• The political apparatus of China is more democratic than the West would have us believe. In China, towns, districts and villages are actively engaging in dialogue with their administrators and exercising their right of choice in a continuous manner, rather than once every 4-5 years during election. Politics is part of daily life there, and people interact regularly on important matters that affect them – their voices are heard.
• The membership of China’s Communist Party (CCP) is open to the common man, including business owners, and an increasing number of private business owners are joining the Party, which shows China’s lack of aversion to private sector and ownership.
• Rising the ranks within CCP is based on a very strict system of meritocracy. It is not an exclusive or elitist party. Anyone can stand for office if they are a strong candidate, but they will only rise to the top ranks if they are a competent politician and administrator. 
• In China, no one who has been sentenced, who has a pending prosecution, or who has been investigated by the judicial authorities can hold public office, unlike in many Western countries.

While there may be episodes of violent clashes on the streets of China, these uprisings do not mean that the Chinese have a desire to replicate the Western model of economy or politics in China. The nature and dynamics of the Chinese social, cultural and economic set up do not sit well with a western model of democracy. China’s popular communism is working far better than any system of elite democracy would.   

Economy

• The economic transformation of China has been guided by the State, which has a social vision for the long-term, as opposed to the market in the West, which is often corrupt and lacking a vision for the future.
• China’s journey to capitalism began in Deng Xiaoping’s time when he prepared China to make the great leap by introducing a series of economic reforms and growth incentives, such as:
  

1. Private property, where now farmers were allowed to sell part of their crop for personal income
2. Labour mobility allowed farmers to move from one village to another to sell their crop, and work in the special economic zones (SEZ)
3. Open Door Policy for foreign investors to invest in China’s SEZs. This, by far, was the single most powerful and transformative measure implemented by Deng Xiaoping, as it catapulted China out of poverty an into a state on a journey to economic freedom.
   

• Chinese labour’s cost, but more importantly, their work ethic and quality of work made China the main destination for “global labour arbitrage”, where international corporations moved their production arms to take advantage of the cheap labour. While other countries, such as Laos, and Vietnam were also attracting foreign investors, the assembly lines remained in China (because the half-finished products would go back to China for reassembling and final production).
• The engine of growth in China, and the rest of Asian economies, remains the real “productive” sector while in the West, the finance sector has been increasing in its share of GDP.  This is not great for the economy because of the way the financial sector works, which is to mainly to trade financial products and not really to help the real sector.
• Renewables Energy Belt: China is making great strides in renewables, and has ambitious targets for all kinds of renewable energy, incl. nuclear, solar, hydro, wind, etc.  The “Sun City” in Dezhou has helped solar energy to grow at 20-30 percent a year.

Recession

The Chinese stimulus package contained infrastructure spending of about 4B renminbi, and another 10B renminbi to banks to make “non-performing” loans, which do not generate interest but are used for economic development projects.  The Chinese stimulus package was more effective than the American one because instead of inflating the reserves of banks, the Government gave money to the people to spend on the economy.  

Other

• China is a State that engages in self-reflection and improvement.  Communist China learnt from the mistakes of Mao’s era, and corrected them in Deng Xiaoping’s.  For instance, Deng Xiaoping abolished the collective farm system, which was the corner stone of Maoism, and rented it out to foreigners; China put the Gang of Four on trial for corruption charges, which included Mao’s wife.
• In China, and elsewhere in the developing world, the question of economic freedom always trumps that of political freedom and rightly so. Because of its steady economic progress, China has lifted millions of people out of poverty, given them the right to own and run businesses, and enjoy a better quality of life. Many believe this would not have been possible without CCP’s singular vision of the future, and a commitment to delivering it.
   

I want to close this blog post with an excerpt from the book on the East’s perception of the West, who have constantly used propaganda to alter the image of China. For the East, the West is “…an army that fights but does not want to leave too many bodies on the battlefield; a bankrupt financial system, which pays for the war by getting into debt with China and other Asian nations; an imbalance between rich and poor that impoverishes the nations; an oligarchic democracy run by a privileged elite that thinks only of its own interests; and a propaganda machine that alters the perception of reality.”

It is now the West’s turn to counter this perception.