The Chinese economic model is nothing for Westerners to envy— or emulate. Its successes have come from emulating the West.
Feb 20, 2012, Vol. 17, No. 22 • By YING MA
Meanwhile, SOEs, taking advantage of their size and government largesse, have made a dramatic push into the private sector. Notably, in 2009, state-owned China National Cereals Group invested in Mengniu Dairy, a private company, in the largest-ever deal in the Chinese food industry. An essay on the website of the government organ that oversees centrally owned SOEs has described the transaction as an example of “the big helping the small” and “free love” between the two companies involved. To critics fearful of the unfair advantages enjoyed by the state sector, the transaction appeared more like an example of “the big eating the small” and of the state advancing at the cost of the private sector.
Many Chinese citizens—from investigative journalists who care about clean government, to small and medium enterprises squeezed for credit, to liberal economists concerned about long-term growth—have loudly criticized the outsized role of the state and its encroachments on the economy. Technically, the expanding wealth of large state firms in China belongs to the people, but no Chinese citizen would mistake the high-flying valuations of these companies for their personal financial portfolio. As prominent Americans use the China example to call for higher U.S. government spending or more swift government action, Chinese citizens have offered a distinctly different view.
For instance, Caixin Media, a premier source of financial and business news, has repeatedly zeroed in on the inefficiencies, corruption, and injustice of the state’s power and interference in the economy. Most notably, Caixin has tirelessly covered the debacles that plague China’s high-speed rail system, once the very emblem of the authoritarian regime’s ability to plan long-term and act quickly. Yet even before two high-speed trains shattered that myth by colliding last July, killing 40 passengers and injuring 191, Caixin reporters were busy exposing the Railway Ministry’s cost overruns, astronomical debt, railcar quality issues, corruption among top officials, and opaque practices for contract bidding and tendering. Early last year, Caixin reported that government spending on high-speed rail grew from $33 billion in 2007 to more than $111 billion in just four years. Yet with all that money sloshing around, the Railway Ministry in 2010 oversaw the awarding of up to 80 percent of all high-speed rail projects to just two state-owned contractors.
Wang Shuo, managing editor of Caixin, remarked at a recent panel discussion that he was a bit baffled by Americans’ eagerness to trash their own model of market capitalism to admire a much more state-centric approach. After all, Wang later added, state capitalism is merely a step on the way to crony capitalism.
Wang might be right, but the Chinese state isn’t about to relinquish its control of the state sector. As a Shanghai-based economics professor explained, the levers of economic control are fundamentally tied to the Communist party’s political control. Even in the economic realm, which has become much more freewheeling than the political realm, the prominence of the state reflects the party’s excessive concentration of power and imposes severe costs, undermines public welfare, and prevents further liberalization.
By contrast, the free market has delivered breathtaking success to China’s economy, and the battle for its continued expansion rages on. China’s admirers in America can continue to envy—and panic about—China’s rise while complaining that the United States has no plan and cannot act quickly, but they should remember that the U.S. political process, playing out this year in Iowa, New Hampshire, South Carolina, Florida, and the rest, offers a ready solution of its own: Make Barack Obama a one-term president and replace him with a pro-growth, free-market believer in November 2012. Most likely, big-government types would rather rail against political gridlock than support this plan.
Ying Ma is a policy adviser at the Heartland Institute and the author of Chinese Girl in the Ghetto.