From the outset, foreign direct investment was encouraged, as was the education abroad of young Chinese at foreign universities, particularly in science and technology. These thousands of students put to good use their acquired knowledge back in China.
Successive generations of leaders have been able to ensure continued public support for modernization and, at the same time, macroeconomic stability.
Beijing has succeeded in adapting its institutions and managing huge and fast chang-es.
The Chinese model has delivered several hundred million people out of poverty. This model, despite its shortcomings, has been more effective than, say, the exported American model based on ideology and democratization, with scant attention to local circumstances.
Without the rule of law, a better-educated people and a substantial middle class, premature democratization can have adverse consequences.
The Chinese development model now faces three major challenges: correcting its uneven development, coping with the unsustainability of export-led growth, and handling the value of the yuan.
The 10th National People's Congress in 2004 recognized that too great an emphasis was placed on GDP growth and a more "people-oriented" approach was needed. However, the difference in economic development since then has not been noticeable.
Regarding the second challenge, China relies massively on exports to achieve its growth. The U.S.trade deficit has continued to rise ($378 billion in 2009 while the EU deficit was $169), as do the Chinese currency reserves ($2.273 trillion at the end of February 2010). Thus, China is lending the U.S. money to buy its exports. This situation is not sustainable and indeed is dangerous.
There is broad agreement that it is in China's own interests to promote consumer spending so as to produce domestic demand-led growth.
The huge incentive package is being spent mainly by State-owned enterprises and on infrastructure projects. While spending has increased, in the absence of a comprehensive welfare system, the Chinese remain big savers.
Calls for a revaluation of the yuan are again getting louder. The continued pegging of the yuan to the dollar upsets both the Americans and the Europeans
Discussions of "models'" is somewhat artificial.
Historically a model marked by clear goals and ruthless pragmatism usually succeeds because of the determination of political leadership.
Examples are Charles de Gaulle in France after 1958, the Ministry of International Trade and Industry in post-war Japan and, of course, Deng Xiaoping 30 years ago.
Success generates domestic legitimacy and external challenge, but at the potential cost of both corruption and excessive reliance on exports.
The author is a senior fellow of the Brussels Institute of Contemporary China Studies. forum@globaltimes.com.cn
(Source: Global Times)
