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The “China Puzzle”: China is a huge puzzle for American
businessmen, investors, politicians, journalists as well as researchers,
students, consumers, and tourists. To some China observers, the puzzle is:
A global scale business gold-rush on top of a deep-rooted corrupt
government, an unprecedented economic mega-boom coupled with a stiff-necked
authoritarian regime; a barefaced empire ambition underscored by a troubled
civic culture; and a richly brew cultural tradition carried with an
intractable non-democratic ideology. The
focal point of the puzzle is: with all the social
and political crisis in its economic rise, why the Chinese government is
not collapsing as has been touted by so many observers?
China’s “Perfect Storm”: China
is undergoing a triple transition from a planned economy to a market economy,
from a traditional agricultural society to a modern industrial society, and
from an autocratic “family rulership” to an authoritarian “party
rulership”. China’s
triple transition also happens at a time when globalization goes into a new
wave, industrial revolution enters an informational stage, and various
civilizations become more culturally distinct in the process of an
unprecedented worldwide integration. These two pairs of triple mega-trends
come together to form a “perfect storm” in China, causing drastic changes
domestically and in turn producing eye-popping impacts on almost every
corner of the world, especially on the most dynamic American economy.
China’s “Trading Scheme”:
China
imports technology, exports labor. China imports jobs, exports deflation.
China
imports inspiration, and exports ambition. This is the most captivating
trading scheme in China’s
tsunami-style industrialization.
The New “China Syndrome”: More and more U.S.
businesses are talking about having a “China
plan”, being sensitive to the "China
effect",
developing a “China
first” strategy, being “China
ready”, knowing the “China
price”, and getting China
right. Americans are also arguing if China is a “must play” and if the new
century is really a “Chinese Century” following the past “American
Century”, and if all the “China talks” surrounding the “China fever” are
just a “China fad” or “China hype” after the 1980s “Japan hype”.
China’s “Miraculous Growth”:
China
is one of the very few countries in the modern history of the world that
takes about 8 years to double its GDP three times in a row, and is the only
one that manages to do so after 1970…. In Walt Rostow’s historical model of economic
growth, traditional society, preconditions for take-off, take-off, drive to
maturity, and high mass consumption are the five basic stages. In China,
these five stages seem to happen all at once across its vast and
heterogeneous land. Never before in all history of mankind has seen any
economic development happening in such a massive scale.
The “Big 10 American Businesses in China”: Component sourcing,
service outsourcing, manufacture offshoring, R&D offshoring, M&A
in-sourcing, venture investing, property investing, security investing,
product marketing, and regular import-export trade. Not to be left out,
companies from almost every industry in the U.S.
muscle their way into China
in spite of a flooded market and razor-thin profit margins in some sectors. As the record of
China’s growth has repeatedly proved pessimists wrong and optimists not
optimistic enough, American investors willingly gloss over its
imperfections and turn to hail China’s strong economic fundamentals,
notably a healthy catching-up psychology, high savings rates, a cultural
commitment of massive education investment, a huge labor pool, powerful
work ethic, and the government’s improved management.
The “Chinese Culture Fever”: The
Chinese language learning fever in the U.S. is also accompanied by
interests in Chinese cuisine, Dim Sum, Qigong, Tai Chi, Fengshui,
Face Reading, Acupuncture, Chinese character tattoos, and the
Game of Go.
Chinese “Cult of Face”: Chinese “cult of face” is a distinctive
manifestation of high self esteem, a personal or collective emphasis on
fame, image, dignity, and
pride, and a unique appreciation over reciprocity, trust, connections,
obligation, reputation, and credit at a specific social setting. It is the
“art of relationships” with a dual focuses on honorable pride (mian zi) and
social connections (guan xi).
Chinese “face” points to both “fame” (honor, mianzi), “favor”
(connections, guanxi) and “faith”
(trust and credit), just like Chinese “fear” points to both “fate”
(Heaven’s arrangement, tianmin) and “force” (official power, shili).
Chinese “cult of face” suggests a combination of
“fame-favor-faith-fate-force” in the context of its shame-based and
fear-based culture. With “faith” (trust and credit) at the center,
“fame-favor-faith-fate-force” is Chinese “Magic Chain” that dictates every
aspect of their daily life, especially in the economic and political
domains.
The China Market: As the world's fastest growing economy with the
largest consumer population of 1.3 billion, the largest mobile phone
population of over 430 million users, the second largest Internet
population of over 137 million users, and the largest TV audience of more
than 1.1 billion viewers (350 million television households), the potential
for China’s future growth is immense. Currently, China
is the world’s largest market for refrigerators and mobile
telephones, second largest market for PCs (the first by 2010), third
largest for electronics, fourth largest for chemicals, and fifth largest
for automobiles.
“China’s
Institutional Innovation”: Chinese farmers’ bold act exemplifies China’s
“adventurous institutional innovation” in political sense and a separation
of “use rights” from collectively-owned property rights in operation sense.
This “use rights model” later spread to state-owned enterprises (SOEs) and
became an “internal institutional innovation” approach within the
collective-state ownership structure, which runs side by side with the
“external institutional innovation” approach that involves the
establishment of township, private, and foreign-funded enterprises.
The “Effort-Based Institutional Analysis”: Economic growth is not just
about incentives, not just about institutions that favor reducing the gap
between social and private rates of return (the conformity between
individual return and individual efforts), not just about achieving
“organizational efficiency” (efficiency from incentive-sensitive
organizational re-arrangement), “allocative efficiency” (efficiency from
free market resource allocation) and “adaptive efficiency” (efficiency from
intentional learning of how institutions affect growth), it is also about
how institutions and their enforcement direct individual incentives towards
more productive efforts, and at the same time channel individual incentives
towards less destructive and distributional e fforts
(“inducive efficiency”). This “effort-based institutional analysis” not
only looks at the conformity between individual return and individual
efforts, it also examines directions of individual efforts under specific
institutional settings. This structural analysis of “conformity and
directions of individual efforts” more adequately explains China’s
economic success. It is also useful in explaining China’s “dynastic cycle” and helping foresee
if China’s booming
economy is sustainable and if Chinese economy is to surpass U.S.
economy in the next 30 years.
“The Top 10 Problems in China”:
Corruption, banking-SOE inefficiency, budget-driven overheating, piracy,
degenerate social mores, environmental degradation, unemployment and income
disparity, healthcare crisis, crime and social unrest, and vulnerability to
international economic shock.
China’s
“Dynastic Cycle”: Chinese
“Heavenly Mandate” legitimated “family rulership” through both power
and merit. Merit had to base upon power. But power couldn’t last long
without merit. When being used to account for the “dynastic cycle”, “Heavenly Mandate”
provides at best an ad hoc explanation that is only after-the-fact and fails to apply to all
situations. An institutional explanation for the “dynastic cycle” puts the royal family in
the center of the “dynastic game” surrounded by peasants, bureaucrats, soldiers, bandits,
and invaders. The royal family, peasants,
and bureaucrats were the key
blocks in the “pyramid social structure”. Based on the tradition of
polygyny and hereditary
succession, “family
rulership” set the institutional stage for constant struggles over the lure
of the emperor’s supremacy. Favoritism won over ability and merit when
tactical or biological manipulation was involved. Over time, the small
family “gene pool” eventually failed both the harshness on the ruler’s
“skill test” and the faith on the “dragon seed”. The advantage of “genetic diversity” put the myth to an end,
even though the religious belief on “fate” might light it up again. The “tiger fight” political culture moved
on. But the royal family was not the only block that was crumbling. Under the
state’s predation and the
customs of early marriage and partible inheritance, peasants or even landlords were doomed by
technological stagnation and population pressure. State elites’
meritocracy degraded into “Greedy officials and corrupt bureaucrats” by
patronage and nepotism as the principal-agent relations were in gradual
decay. Peasants became bandits, soldiers turned into rebels, bandits joined
rebels, and invaders showed up for the hunt. With all the “Natural
disasters and human devastations”, Dynasty’s productive rise gave way to
distributional prey and ultimately to destructive fall.
China’s
“Quiet Revolution”: The
importance of institutional change from “Family Rulership” to “Party
Rulership” cannot be emphasized enough. If contesting for power is in fact
human nature, then the nature of contestation could determine the stability
of a regime. The contested factors in “hereditary succession” are generic
purity, favoritism, forces, and merit. The contested factors in the current
“meritocratic succession” are merit and favoritism. There are clearly less
factors and therefore much less uncertainty under the “meritocratic
succession”. What passed from “Family Rulership” to “Party Rulership”,
however, are the non-contested nature of the ruling entity (contestation
only made possible by external forces) and the meritocratic tradition based
on a strict selection process. The contested factors in the “electoral succession”
of Western democracy are money and skills. One other key difference between
“meritocratic succession” and “electoral succession” is, “meritocratic
succession” explicitly forbids multi-party contested election for
government and so citizen’s freedom is subject to this restriction. Taking
this perspective, if democracy means “contested election” and “equal
liberty”, the Chinese government has actually been doing a great job in
spreading “equal liberty” within less than 30 years.
The 12 Arguments for “Why China
Won’t Adopt Western Democracy”:
1. “Political
Culture Argument”
2. “Path
Dependence Argument”
3. “Logic
of Collective Action Argument”
4. “Performance
Argument”
5. “Rational
Choice Argument”
6. “Negative Demonstration Argument”
7. “Positive
Demonstration Argument”
8. “Harmonious
Egalitarian Argument”
9. “Nationalism Argument”
10. “Subjective Morality
Argument”
11. “Rule of Law Argument”
12. “Cultural Morality
Argument”
The “China Challenge”: Contrary to the Western belief that only liberal
institutions will sustain great power, China’s meritocratic institutions
have evolved into a stable modern stage that is now served as a different
“state model” that can sustain rapid economic growth with reasonable
political stability; the challenge of this reality is not how to contain it
with military muscle or engage it with one-sided faith, the challenge of
this reality lies in how to leverage this first-and-the-largest-of-its-kind
superpower in international politics and benefit from it through economic
globalization; with its double digit economic growth that can soon overtake
Germany and Japan in GDP, China may still not be able to effectively
challenge the economic supremacy of the U.S. in 30 years; nevertheless, “A
hegemon may have his own self-destructive element”, the United States can
lose its own economic dominance by its own fault if it continues to
overstretch its military, economic and ideological power in the decades to
come. The "China Rise" is not an economic rise, it is a cultural
rise.
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